<PAGE> 1
FORM 10-K
Securities and Exchange Commission
Washington, D.C. 20549
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Fiscal Year Ended December 31, 1995
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from _____________ to
____________.
Commission File Number 0-10421
CORNERSTONE PROPERTIES INC.
(Exact name of Registrant as specified in its Charter)
Nevada 74-2170858
(State or other jurisdiction of (I.R.S. Employer
incorporation and organization) Identification No.)
126 East 56th Street 10022
New York, New York (Zip Code)
(Address of principal
executive offices)
(212) 605-7100
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
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 the registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. /X/
Aggregate market value of registrant's voting Common Stock held by
non-affiliates as of March 18, 1996: $284,328,000.
Number of shares of Common Stock outstanding as of March 18, 1996:
20,309,165.
DOCUMENTS INCORPORATED BY REFERENCE:
<TABLE>
<CAPTION>
Part of Form 10-K
into which incorporated
-----------------------
<S> <C>
Proxy Statement for Annual Meeting of Stockholders Part III
to be held June 20, 1996
Total Number of Pages: 63
Exhibit Index: Page 60
</TABLE>
<PAGE> 2
PART I
Item 1. Business.
General
Cornerstone Properties Inc. (formerly ARICO America Realestate Investment
Company) ("Cornerstone" or the "Company") was incorporated under the laws of
the State of Nevada in May, 1981. The Company's principal place of business is
located at 126 East 56th Street, New York, New York 10022. The Company was
organized initially to invest in and finance development of One Norwest Center,
an office complex in downtown Denver, Colorado. See "Properties - One Norwest
Center". In 1986, the Company invested in two additional office towers, one in
Minneapolis, Minnesota and the other in Seattle, Washington. See "Properties -
Norwest Center" and "Properties - Washington Mutual Tower". In 1995, the
Company invested in an additional office tower in Boston, Massachusetts. See
"Properties - 125 Summer Street".
Tax Status
The Company has elected to be taxed as a real estate investment trust
("REIT") under Sections 856-860 of the United States federal income tax laws,
commencing in calendar year 1982. In order to qualify as a REIT, the Company
must, among other things (i) distribute at least 95 percent of its annual
taxable income, (ii) derive at least 75 percent of its annual gross income from
passive real estate or real estate mortgage investments, (iii) derive an
additional 20 percent of its income from passive real estate or mortgage
investments plus dividends or interest from any source, or gain from the sale
or other disposition of stocks and securities, (iv) derive less than 30 percent
of gross income from the sale of stock and securities held less than six
months, the sale of inventory-type property and the sale of real property held
for less than four years, and (v) at least 75 percent of the value of the
REIT's total assets must be represented by real estate assets, cash and
government securities at the close of each quarter of its taxable year. Of the
remaining 25 percent of total assets, not more than 5 percent of the value of
the REIT's assets may consist of the securities of any one issue, and not more
than 10 percent of the outstanding voting securities of any particular issue
may be owned by the REIT. With certain limited exceptions, the Company is not
subject to United States federal income taxes at the corporate level on the net
income that is currently distributed to its shareholders. Each shareholder,
however, is subject to United States federal taxation on that net income to the
extent it is distributed to him.
Investment Policies of the Company
The following information concerning the investment policies of the
Company represents the current policies of the Board of Directors of the
Company. In general, the Company intends to structure its investments so as to
maintain its treatment as a REIT under the United States federal income tax
laws.
Investment Properties Prior to 1995, the Company's principal investments
consisted of interests in three partnerships, each primarily owning a downtown
office building. The
<PAGE> 3
buildings are located in Denver, Colorado, Minneapolis, Minnesota and Seattle,
Washington. See "Properties." During 1995, the Company made an additional
direct investment in one downtown office building located in Boston,
Massachusetts. See "Properties." Other investments, including debt or equity
(or both) investments in other real estate properties may be made in the future
if attractive opportunities arise. In such case, the Company would acquire or
invest primarily in the ownership, development, and equity and/or debt
financing or refinancing of income-producing real estate properties (directly
or through partnerships, joint ventures, or other entities) in the United
States and Canada. In considering and selecting real estate investments, the
executive officers and directors of the Company will consider such matters as
the safety of principal, cash flow expectations, quality of tenancy, long-term
appreciation potential, future financing and refinancing prospects, and the
current value of the properties. The Company's objectives are to generate
current cash flow and to provide capital appreciation.
Interim Investment Funds that the Company may obtain from time to time,
including taxable income earned and held prior to distribution to the
shareholders, will be placed in investments, including but not limited to
certificates of deposit, interest-bearing accounts, United States government
obligations, money market funds and mortgages or investments secured by
mortgages on real property.
Sales of Securities The Company may finance or refinance its investments by
additional issues and sales of its debt or equity securities. The Company may
also issue its securities in exchange for property or property interests. Such
issues and sales may not be on the same terms as, or may have rights senior to
those of the common stock of the Company. In addition, such issues and sales
may have the result of diluting the relative interests of holders of common
stock and may result in changes in distributable income per share of common
stock.
Mortgage and Trust Deeds The Company may finance or refinance its investments
through borrowings collateralized by first or subordinate mortgages or deeds of
trust. The extent to which the Company's borrowing capabilities are utilized
at any time will be determined by the executive officers and directors of the
Company after considering such factors as the availability of suitable
investments, the cost of borrowed funds, the tax effects of such borrowing and
the Company's projected cash flow.
Sale of Investments Generally, the Company does not currently intend to sell
its real estate investments and any such sales will likely be made, if at all,
at least four years after acquisition of the investment. Managerial judgment,
however, will be applied on a continuing basis, and, accordingly, specific
investments may be disposed of, if and when, in the opinion of the Company and
its shareholders, it is a prudent time to do so. When the Company sells an
equity investment, it may take back from the buyer, as whole or partial payment
for the investment, a purchase money obligation under which the buyer may not
have personal liability. The Company may sell its debt investments as
management deems appropriate. Sales of Company investments will be structured
so as to maintain the Company's status as a REIT.
Investment in Real Estate Mortgages The Company may, from time to time, invest
in real estate mortgages or securities collateralized by such mortgages. Such
investments may be short-term or long-term investments collateralized by
mortgages on income-producing
<PAGE> 4
properties to be developed and will generally not be guaranteed by the United
States Federal Housing Administration or the United States Veterans'
Administration. The Company may also invest in long-term convertible mortgages
that may be converted into equity interests in the mortgaged properties.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities The Company may invest in securities or interests in other persons
primarily engaged in real estate activities, but only to the extent the Company
is permitted by law to maintain its status as a REIT. Such securities or
interests may include partnership or joint venture interests or direct
interests in real estate. Generally, the Company will invest in or with the
parties whose primary activities are the ownership, development, and/or
financing of income-producing real estate. The criteria by which investments
in such securities and interests will be made will be the same as those for the
Company's own real property investments.
Property Management
Independent contractors manage and operate the Company's properties and
furnish or render services to the tenants of such properties. Certain adverse
United States federal income tax consequences regarding the Company's
qualification as a REIT could result if the Company or any joint venture or
partnership of which the Company is a member earned fees from or performed
services for tenants which are not considered ordinary and customary in the
markets in which they are performed.
Hines Interests Limited Partnership ("HILP") acts as manager of One
Norwest Center pursuant to a management agreement. The term of the management
agreement is for ten years, expiring on December 31, 2005.
HILP also manages Norwest Center pursuant to a management agreement. The
initial term of this agreement expires December 31, 2001.
Wright Runstad Associates Limited Partnership ("WRALP") manages Washington
Mutual Tower pursuant to a management agreement. The initial term of this
agreement expires December 31, 1999.
HILP also manages 125 Summer Street pursuant to a management agreement.
The initial term of this agreement expires December 31, 1999.
Competition
There is significant competition in the Denver, Minneapolis, Seattle, and
Boston office markets from a wide variety of institutions and other investors,
who may have greater financial resources than the Company and/or the
partnerships that own the properties.
The Denver Class "A" office market has approximately 16,087,000 square
feet of office space, of which approximately 2,300,000 square feet
(approximately 14.3%) were vacant at December 31, 1995.
<PAGE> 5
The amount of space in Class "A" properties in downtown Minneapolis was
estimated to be approximately 12,677,000 square feet, of which approximately
574,000 square feet (approximately 4.5%) were vacant at December 31, 1995.
The amount of space in Class "A" properties in downtown Seattle was
estimated to be approximately 13,803,851 square feet, of which approximately
1,091,807 square feet (approximately 7.9%) were vacant at December 31, 1995.
The amount of space in Class "A" properties in the Boston Financial
District was estimated to be approximately 9,837,000 square feet, of which
approximately 761,000 square feet (approximately 7.7%) were vacant at December
31, 1995.
As a result of the available space, projects under construction and
announced projects, market rental rates may decline or tenant concessions may
increase. There can be no assurance that these market conditions will not have
an adverse affect upon future leasing activities of the Company's properties.
Employees
The Company currently has 16 employees, its principal executive offices
are located at 126 East 56th Street, New York, New York 10022, and its phone
number is 212-605-7100.
Item 2. Properties.
ONE NORWEST CENTER
General
The Company owns, through its wholly-owned subsidiary, ARICO-Denver, Inc.,
("ARICO-Denver") a 90% general partnership interest in 1700 Lincoln Limited
("Lincoln"), which has a fee interest in One Norwest Center. Hines Colorado
Limited ("HCL") holds a 9% managing general partnership interest and a 1%
limited partnership interest in Lincoln. The Company is entitled to 100% of
the cash flow (after payment of $1,620,000 per year to HCL) from Lincoln
through 1998 and (after the Company receives a certain preference related to
capital investments) 90% of such cash flow thereafter. The Company has the
right, at its sole discretion, to elect to become the managing general partner
of Lincoln.
Effective January 1, 1996, Cornerstone, through its wholly-owned qualified
REIT subsidiary 1700 Lincoln Inc., purchased HCL's General and Limited
partnership interests in Lincoln. In exchange for its interests, HCL received
a $12,925,976 convertible promissory note and 349,650 newly-issued shares of
common stock of Cornerstone.
The Company also owns a $10,000,000 promissory note, which it purchased in
1988 at par. The promissory note is the non-recourse obligation of HCL and is
for indebtedness incurred under the original ground lease for the land
underlying One Norwest Center. The promissory note bears interest at the rate
of 10.5116% per annum and is payable in monthly installments of principal and
interest in the amount of $135,000 from February 1, 1989 to January 1, 1999.
The outstanding principal amount of the note is approximately $4,153,000
<PAGE> 6
at December 31, 1995. HCL has pledged its priority distribution and 10 percent
partnership interest under the amended partnership agreement from Lincoln to
collateralize payment of this promissory note.
Location and Description
One Norwest Center is located near the center of Denver's central business
district - the major business, financial, government and cultural center for
the Rocky Mountain region. The central business district contains
approximately 100 city blocks and covers just over one square mile. The
compact central core area of offices, financial institutions, retail stores,
and hotels is bordered by adjacent districts of public buildings. One Norwest
Center is located at 17th Street and Lincoln Street on the east boundary of the
financial district, which is an eleven block strip concentrated between 17th
Street and 19th Street from Market Street to Lincoln Street. Historically,
this financial district has been the major hub of Denver's financial
institutions.
Completed in 1983, One Norwest Center is a 50-story, granite and glass
office tower containing approximately 1,188,000 square feet of net rentable
area and a 12-level, 1004-vehicle parking facility.
Leases and Tenants
NORWEST BANK DENVER NATIONAL ASSOCIATION LEASE. Lincoln entered into a
lease agreement dated February 5, 1981, with the United Bank of Denver (the
"United Bank of Denver Lease"). The United Bank of Denver Lease commenced on
July 5, 1983 and expires July, 2013. During 1992, this lease was assumed by
Norwest Bank Denver National Association as part of the acquisition of United
Bank of Denver by Norwest Corporation. The net rental rate until July, 1998 is
$14.89 per square foot. The net rental rate from July, 1998 through 2003 will
be $16.00 per square foot. The net rental rate from July, 2003 through 2008
will be the sum of (i) $16.00 per square foot and (ii) 50% of the excess of the
market rental rate for a single floor office tenant located between floors 1
and 20 in the building as of July, 2003 over $15.00 per square foot. The net
rental rate from July, 2008 through July, 2013 will be the greater of (i) the
rental rate in the prior five-year period or (ii) the rental rate for such
five-year period plus 50% of the excess of the market net rental rate for a
single floor office tenant located between floors 1 and 20 in the building as
of July, 2008 over the rate for the prior five-year period minus $1.00 per
square foot. Norwest Bank Denver National Association has three five-year
renewal options beginning in July, 2013.
In addition, Norwest Bank Denver National Association pays variable rent
to Lincoln, as lessor, equal to Norwest Bank Denver National Association's
proportionate share of operating expenses incurred in connection with the
operation of One Norwest Center. Basic and variable rent are payable monthly.
<PAGE> 7
Principal Tenants The following table lists tenants of One Norwest Center
who leased approximately 5% or more of its net rentable area as of December 31,
1995:
<TABLE>
<CAPTION>
Net Rentable Percentage of
Area Leased Total Net
Tenant Principal Business Activity (Sq. Ft.) Rentable Area
------ --------------------------- ---------- -------------
<S> <C> <C> <C>
Norwest Bank Denver N.A. Banking 562,000 47.3%
Apache Corporation Oil and Gas 160,000 13.5%
Newmont Mining Mining 118,000 9.9%
------- ----
Total 840,000 70.7%
======= =====
</TABLE>
Historical Occupancy Rates
As of December 31, for the noted years, the following percentage of the
net rentable area in One Norwest Center was leased at the average effective
annual rental per square foot:
<TABLE>
<CAPTION>
Avg. Effective
Year % Leased Annual Rental
---- -------- -------------
<S> <C> <C>
1995 98% $11.70
1994 96% $11.61
1993 96% $11.98
1992 95% $12.30
1991 97% $12.05
</TABLE>
Lease Expirations
<TABLE>
<CAPTION>
Total % of
Year # of Tenants Sq. Ft. Annual Rental Gross Rent
---- ------------ ------- ------------- ----------
<S> <C> <C> <C> <C>
1996 12 20,000 $958,000 9.61%
1997 6 172,000 $749,000 5.40%
1998 9 46,000 $1,584,000 11.42%
1999 10 201,000 $932,000 6.72%
2000 7 105,000 $523,000 3.77%
2001 3 32,000 $286,000 2.06%
2002 1 19,000 $1,070,000 7.71%
2003 2 157,000 $1,297,000 9.35%
2004 0 0 0 0.00%
2005 0 0 0 0.00%
</TABLE>
<PAGE> 8
Long-Term Collateralized Debt
On February 17, 1987, Cornerstone, through its wholly-owned, consolidated
subsidiary One United Realty Corporation ("OURC"), issued notes under a
private placement offering and received $107,000,000 in proceeds, as follows:
<TABLE>
<S> <C>
Interest-bearing notes $ 98,000,000
Zero coupon notes 9,000,000
------------
$107,000,000
============
</TABLE>
The interest-bearing notes will mature on February 17, 1997, and bear
interest from February 17, 1987, at 8.893 percent, payable semi-annually,
commencing August 17, 1987.
On November 4, 1994, the Company entered into an amending agreement with
the holders of the above mentioned notes in order to prepay the outstanding
balance of the zero coupon notes. The total payment of approximately
$18,529,000 was composed of approximately $17,948,000 of accreted principal on
the notes and approximately $581,000 in prepayment penalties. The zero coupon
notes had a yield to maturity of 9.141 percent, compounded semi-annually, and
such yield was recognized as interest expense and accreted to the balance of
the zero coupon notes.
All the notes are collateralized by a non-recourse mortgage on One Norwest
Center and an assignment of all leases and rents, and certain other property,
rights and interests related to One Norwest Center.
In order to facilitate the above mentioned prepayment of the zero coupon
debt, the Company increased the principal on its term loan with Deutsche Bank
New York Branch ("DBNY") and Deutsche Bank Cayman Island Branch ("DBCI") from
$27,000,000 to $33,000,000. On August 8, 1995, the term loan in the amount of
$32,500,000 was extended by Deutsche Bank AG London through December 31, 2003,
at an interest rate of 5.00 percent. The term loan is collateralized by the
Company's pledge of its partnership interest in 1700 Lincoln Limited and all of
its stock in ARICO-Denver, Inc. The loan must be prepaid at par upon the sale
of either Norwest Center or Washington Mutual Tower. The balance of the term
loan at December 31, 1995 was $32,500,000.
Additionally, Cornerstone pays to DBNY, for an interest rate swap
agreement used to fix the interest rates on the notes, an amount equal to 0.752
percent on a notional amount of $107,000,000 throughout the term of the notes.
This amount has been treated as a yield adjustment on the long-term debt and
has been included in interest expense. Payments on the swap are due January 30
and July 30 each year until the termination date of July 30, 1998.
As protection against market interest rates rising prior to the maturity
of the above stated program, on September 29, 1993, the Company entered into an
interest rate swap agreement with Deutsche Bank AG with an effective date of
February 18, 1997. The interest rate swap agreement is for a fixed rate of
7.14 percent on a notional amount of $98,000,000 for a period of ten years.
The swap agreement contains a mutual termination clause by
<PAGE> 9
which either party may terminate the swap on February 18, 1997 at its then
current market value.
Real Estate Taxes
Real property tax expense for 1995 was approximately $1,846,000. The
tenant leases for One Norwest Center generally contain provisions passing
through to tenants the cost of real estate taxes, and therefore, such taxes
should not have a material effect on net operating income from One Norwest
Center (assuming that One Norwest Center is fully leased), although an
assessment exceeding that of similar properties could affect occupancy or
absorption.
NORWEST CENTER
General
The Company owns, through its wholly-owned subsidiary, ARICO-Minneapolis,
Inc. ("ARICO-Minneapolis") a 50% general partnership interest in NWC Limited
Partnership ("NWC"), which was formed on August 5, 1986 for the purposes of (i)
acquiring certain land in downtown Minneapolis, Minnesota and (ii) constructing
and operating Norwest Center and related parking facilities and other
improvements on such land. Sixth & Marquette Limited Partnership ("S & M"),
holds a 49% managing general partnership interest and a 1% limited partnership
interest in NWC. Effective December 31, 1993, the Company has the right, at
its sole discretion, to elect to become the managing general partner of NWC.
NWC's principal place of business is located at 5400 Norwest Center, 90 S.
Seventh Street, Minneapolis, Minnesota 55402-3902. Norwest Center is a
55-story, granite and glass office tower containing approximately 1,118,000
square feet of net rentable area and a 340-vehicle underground parking
facility.
The Partnership Agreement
NWC is a Minnesota limited partnership formed for the purpose of
acquiring, constructing and operating Norwest Center. The managing general
partner has the right to manage and operate NWC's business. During construction
and the Preference Period (defined below), the managing general partner and the
Company each hold a 50% interest in NWC, and after the Preference Period the
Company will hold a 60% interest (subject to increases in the Company's
interest that may result from early termination of the Preference Period) and S
& M a 40% interest.
The managing general partner of NWC is currently S & M, a Minnesota
limited partnership formed on August 5, 1986. The limited partners of S & M
are Norwest Center, Inc., a Minnesota corporation and affiliate of Norwest
Corporation, and Faegre & Benson, a Minnesota partnership, as nominee for a
Minnesota partnership comprised of persons who were partners in Faegre & Benson
as of August 5, 1986. The general partner of S & M is itself a Minnesota
limited partnership in which Gerald D. Hines, individually, and entities
<PAGE> 10
affiliated with Gerald D. Hines are directly or indirectly the sole general
partners. Gerald D. Hines and related or affiliated persons or entities are
herein collectively called "Hines".
The Company received distributions equal to 9.0% per annum of the
Company's Capital Base until August 7, 1989, which was the end of the
construction period. This 9.0% return paid to the Company during the
construction period constituted a project cost.
During the Preference Period (which commenced on August 8, 1989 at the end
of the construction period and continues until certain cash flow levels have
been achieved for two consecutive years), the Company is entitled to receive an
annual Preference Return equal to 7.0% of its Capital Base (which is
$92,300,000 as of December 31, 1995.) The Preference Return is cumulative, and
if operating revenues (after payment of operating costs, capital expenditures
and debt service) are not sufficient to fund the distribution of any Preference
Return then due, the amount of such deficiency shall accumulate and shall bear
interest at the rate of 7.0% per annum, compounded annually.
Subject to the preferential distributions to the Company described above,
all of NWC's operating revenues remaining after making payments required for
the operations of NWC and Norwest Center and the payment of debt service will
be distributed 50% to the Company and 50% to S & M during the Preference Period
and 60% to the Company and 40% to S & M thereafter (or in such other
percentages as may be equivalent to their respective post-Preference Period
interests in NWC). Refinancing funds and sales proceeds relating to Norwest
Center, if any, remaining after payment of indebtedness of NWC and distribution
to the Company of any Cumulative Preference Deficits and the unpaid Preference
Return shall be distributed (i) first to the Company in reduction of its
Capital Base, (ii) then to the Company 1/10 of the amount distributed in (i),
(iii) then to the Company $1,000,000, (iv) then to S & M until S & M has
received an amount (the "Equalizing Payment") equal to the sum of all
distributions received by the Company in reduction of its Capital Base
multiplied by a fraction based in general on the ratio of S & M's and the
Company's respective post-Preference Period interest in NWC, and (v) finally to
S & M and the Company pro rata in accordance with their then-applicable
interests in NWC.
Leases and Tenants
Norwest Corporation Lease. NWC has leased to Norwest Corporation
approximately 452,000 square feet of office space, which is approximately 40%
of the net rentable area in the building. The initial term of the lease is for
30 years beginning in August 1988. Upon the expiration of the initial term,
the tenant has seven successive ten-year renewal options, subject to the right
of NWC, as landlord, to terminate the lease and demolish the building after
forty years from the commencement date. Net rent was payable monthly to NWC at
the annual rate of $18.25 per square foot of net rentable area for the first
five-year period of the initial term, $20.00 per square foot of net rentable
area for the second five-year period of the initial term, $23.00 per square
foot of net rentable area for the third five-year period of the initial term,
$27.00 per square foot of net rentable area for the fourth five-year period of
the initial term, $32.00 per square foot of net rentable area for the fifth
five-year period of the initial term, and $38.00 per square foot of net
rentable area for the sixth five-year period of the initial term. Basic rent
for each of the renewal option periods shall be at the then prevailing market
rate. In addition, Norwest Corporation pays variable rent to NWC equal to the
sum of Norwest Corporation's proportionate share of operating
<PAGE> 11
expenses incurred in connection with the operation of Norwest Center, Norwest
Corporation's proportionate share of all real property taxes, assessments and
governmental charges, and any other taxes and assessments attributable to
Norwest Center.
FAEGRE & BENSON LEASE. NWC leased to the law firm of Faegre & Benson a
total of approximately 197,000 square feet of office space, which is
approximately 18% of the net rentable area in the building. The initial term
of the lease is for 10 years beginning in September 1988. Upon the expiration
of the initial term, the tenant has four successive five year extension
options. Base rent which is payable monthly to NWC is $19.00 per square foot
of net rentable area for the first five years of the initial term and an annual
rate of $20.75 per square foot of net rentable area for the remaining five
years of the initial term. Base rent during the extension option periods shall
be at either 95%, 92-1/2%, or 90% of the prevailing market rate, the percentage
depending upon the number of full floors being leased by Faegre & Benson at the
time of exercising the option. In addition, Faegre & Benson pays variable
rent to NWC, as landlord, equal to the sum of Faegre & Benson's proportionate
share of operating expenses incurred in connection with the operation of
Norwest Center, and Faegre & Benson's proportionate share of all real property
taxes, assessments and governmental charges, and any other taxes and
assessments attributable to Norwest Center. By the terms of the Faegre &
Benson lease, the individual partners of Faegre & Benson bear no personal
liability for defaults of the Faegre & Benson partnership under the lease.
Principal Tenants The following table lists those tenants of Norwest
Center who leased approximately 5% or more of its net rentable area as of
December 31, 1995:
<TABLE>
<CAPTION>
Net Rentable Percentage of
Area Leased Total Net
Tenant Principal Business Activity (Sq. Ft.) Rentable Area
------ --------------------------- ---------- -------------
<S> <C> <C> <C>
Norwest Corporation Banking 452,000 40.4%
Faegre & Benson Legal 197,000 17.6%
KPMG Peat Marwick Accounting 76,000 6.8%
Merchant & Gould Legal 58,000 5.2%
------- -----
Total 783,000 70.0%
======= =====
</TABLE>
Historical Occupancy Rates
As of December 31, for the noted years, the following percentage of the
net rentable area in Norwest Center was leased at the average effective annual
rental per square foot:
<TABLE>
<CAPTION>
Avg. Effective
Year % Leased Annual Rental
---- -------- -------------
<S> <C> <C>
1995 100% $18.04
1994 100% $17.67
1993 100% $17.05
1992 100% $16.44
1991 98% $15.73
</TABLE>
<PAGE> 12
Lease Expirations
<TABLE>
<CAPTION>
Total % of
Year # of Tenants Sq. Ft. Annual Rental Gross Rent
---- ------------ ------- ------------- ----------
<S> <C> <C> <C> <C>
1996 1 6,000 ($89,000) -0.45%
1997 4 20,000 $762,000 3.83%
1998 13 253,000 $2,530,000 12.70%
1999 5 62,000 $984,000 4.94%
2000 3 104,000 $1,392,000 6.99%
2001 1 2,000 $289,000 1.45%
2002 1 47,000 ($540,000) -2.71%
2003 0 0 ($21,000) -0.11%
2004 2 98,000 $203,000 1.02%
2005 0 0 0 0.00%
</TABLE>
Long-Term Collateralized Debt
NWC has borrowed $110 million ("NWC Project Loan") from NWC Funding
Corporation, a Delaware close corporation wholly-owned by the Company ("NWC
Funding"), to pay certain project costs. The NWC Project Loan bears interest
at a fixed rate of 8.74% per annum, payable monthly in arrears. The NWC
Project Loan shall mature and be due and payable on December 31, 2005. The NWC
Project Loan is collateralized by a first lien mortgage and security agreement
covering Norwest Center and assignment of leases and certain other contract
rights of NWC in Norwest Center.
On April 7, 1995, the Third Amended and Restated Promissory Note, dated as
of August 5, 1986, made by NWC Limited Partnership payable to the order of NWC
Funding Corporation in the original principal amount of $110,000,000 was sold
to Norwest Corporation.
Real Estate Taxes
Real property tax expense for 1995 was approximately $8,177,000. The
tenant leases for Norwest Center generally contain provisions passing through
to tenants increases in the cost of real estate taxes, and therefore, increases
in such taxes should not have a material effect on net operating income from
Norwest Center (assuming that Norwest Center remains fully leased), although an
assessment exceeding that of similar properties could affect occupancy or
absorption.
WASHINGTON MUTUAL TOWER
General
The Company owns, through its wholly-owned subsidiary ARICO-Seattle, Inc.
("ARICO-Seattle") a 50% general partnership interest in Third and University
Limited Partnership ("Third Partnership"), which was formed for the purposes of
(i) acquiring the
<PAGE> 13
block ("Block 5") in downtown Seattle, Washington, bounded by Third Avenue,
University Street, Second Avenue, and Seneca Street, (ii) constructing and
operating Washington Mutual Tower and the related parking facilities and other
improvements on Block 5, and (iii) obtaining certain rights and undertaking
certain obligations with respect to existing improvements on the east half of
the block ("Galland and Seneca Buildings" or "Block 6") in downtown Seattle,
Washington, bounded by Second Avenue, University Street, First Avenue, and
Seneca Street.
Washington Mutual Tower is a 55-story, granite and glass office tower
containing approximately 1,066,000 square feet of net rentable area. The
building is primarily commercial office space but also provides underground
parking for approximately 820 vehicles and has a retail shopping arcade around
an outdoor plaza.
Third Partnership is the successor in interest as lessee under a thirteen
year lease, expiring in 2005, of the improvements on Block 6. The Block 6
improvements have been substantially renovated and were 97% leased at December
31, 1995. Third Partnership leases the improvements on Block 6 to protect the
views of Puget Sound from Washington Mutual Tower located on Block 5. Block
6's location, immediately to the west of Block 5 between Puget Sound and
Washington Mutual Tower, and the relatively low height of the improvements on
Block 6 is perceived by the Company as a possible benefit to the marketing of
commercial office space in Washington Mutual Tower. Third Partnership had
provided $8,000,000 to an affiliate for construction of leasehold improvements
in the form of a note receivable bearing interest at 11.5% collateralized by
the leasehold improvements and assignments of rents. In 1992, due to the
failure of the affiliate to meet scheduled payments, the carrying value of the
note and interest receivable was decreased $600,000 to the estimated
recoverable amount. On December 30, 1993 Third Partnership accepted a deed and
assignment of leases and rents in lieu of foreclosure and assumed ownership of
the Galland and Seneca Buildings. The difference between the recorded value of
the note at the time of foreclosure and the estimated fair market value of the
collateral and net assets assumed was recorded as a loss during 1993 in the
amount of approximately $1,502,000. The Company intends to hold the Galland &
Seneca Buildings as income-producing property.
The Partnership Agreement
Third Partnership, a Washington limited partnership, was formed as of
October 3, 1986 for the purpose of acquiring, developing, leasing and operating
Washington Mutual Tower. The Company was admitted to, and the initial limited
partner withdrew from, Third Partnership effective October 14, 1986. 1212
Second Avenue Limited Partnership, a Washington limited partnership ("1212
Partnership") was originally the only general partner and is now the managing
general partner with the obligation to manage and operate Third Partnership's
business. Perkins Building Partnership, a Washington general partnership
comprised of partners in the Seattle law firm of Perkins Coie, a Washington
general partnership, is the sole limited partner of 1212 Partnership. 1201
Third Avenue Limited Partnership, a Washington limited partnership ("1201"), is
the sole general partner of 1212 Partnership. Wright Runstad Associates
Limited Partnership ("WRALP") is the sole general partner of 1201, and Wright
Runstad is the sole general partner of WRALP. The majority of
<PAGE> 14
the limited partners of 1201 and WRALP are employees or other affiliates of
Wright Runstad & Co.
The Partnership Agreement was amended and restated to reflect the
additional $47 million equity contribution made by Cornerstone effective
September 27, 1995. The Agreement had been previously amended effective
December 31, 1992 to allow the Company the right, at its sole discretion, to
elect to become the managing general partner of Third Partnership. The Company
currently holds a 50% general partnership interest and 1212 Partnership
currently holds a 49% managing general partnership interest and a 1% limited
partnership interest.
During the Preliminary Period (from commencement of construction until
October 14, 1989), the Company received distributions equal to 9% per annum on
the amount of the Company's Capital Base. Amounts distributed to the Company
during the Preliminary Period constituted a project cost.
The Preference Period commenced on October 15, 1989 and is expected to
continue for the foreseeable future. During the Preference Period, the Company
is entitled to receive an annual Preference Return equal to 8% of its Capital
Base. The Preference Return is cumulative, and if operating revenues (after
payment of operating costs, capital expenditures and debt service) plus amounts
1212 Partnership is obligated to contribute in respect of the Preference
Return, plus amounts funded by TULP Funding as Special Costs, are insufficient
to fund the distribution of any Preference Return then due, the amount of such
deficiency shall accumulate and shall bear interest at the rate of 8% per
annum, compounded annually. As of December 31, 1995, the Company is due a
cumulative preference deficit, including accrued interest, of $7,121,000 which
will be reduced as cash flow becomes available. The Preference Period ends when
certain performance levels have been achieved for two consecutive years.
Subject to the preferences in favor of the Company described above, all of
Third Partnership's operating revenues remaining, after making payments
required for (i) the operations of Third Partnership and Washington Mutual
Tower, (ii) net Block 6 costs, and (iii) the payment of debt service, will be
distributed 50% to the Company and 50% to 1212 Partnership during the
Preference Period and 60% to the Company and 40% to 1212 Partnership
thereafter.
Leases and Tenants
PERKINS COIE LEASE. 1212 Partnership originally leased to Perkins Coie
("Perkins Lease") a total of 176,000 square feet of space, which is
approximately 17% of the net rentable area in Washington Mutual Tower. The
Perkins Lease was assigned by 1212 Partnership to Third Partnership on October
14, 1986. The Perkins Lease commenced in July 1988 with an initial term of 16
years, followed by five successive five-year renewal options. Perkins Coie has
the right to terminate the Perkins Lease after ten years upon payment of a
certain termination fee. Gross rent will be payable monthly to Third
Partnership, as lessor, at the annual net rate of $26.25 per square foot of net
rentable area for the initial term. In addition, Perkins Coie pays its
proportionate share of the increases (over a specified base year amount) in
real property taxes and the operating expenses incurred in connection with the
operation of
<PAGE> 15
Washington Mutual Tower. By the terms of the Perkins Lease, individual
partners of Perkins Coie are released from liability upon their withdrawal,
retirement or expulsion from the Perkins Coie partnership.
WASHINGTON MUTUAL SAVINGS BANK LEASE. Third Partnership originally leased to
Washington Mutual Savings Bank ("Washington Mutual") approximately 138,000
square feet of space in Washington Mutual Tower, which is approximately 13% of
the net rentable area of the building. The lease is for a primary term of 18
years, commencing December 1, 1988. There was no rent payable prior to April
30, 1989. Thereafter, gross rent was payable at the rate of $23.25 per square
foot, per year for the first five years, $26.25 per square foot, per year for
the second five years, and $28.25 per square foot, per year for the last eight
years. On July 11, 1994, the lease was amended, thereby reducing the rent by
$95,000 per month for the period August 1, 1994 through April 30, 2007. The
lease to Washington Mutual provides for the tenant to pay variable rent for its
share of increases in operating expenses above 1989 operating expenses and for
its share of increases in property taxes above $1.50 per square foot per year.
Washington Mutual has three renewal options of five years each, at a rental
rate equal to 90% of the then fair market rate. If Washington Mutual renews,
it must renew for at least 50% of its space. Washington Mutual has expansion
options for approximately 143,000 square feet of space, to be made available in
varying increments between December 1, 1990 and December 1, 2002. Base rent
for expansion space is 90% of the then fair market rental rate.
Principal Tenants The following table lists those tenants of Washington
Mutual Tower who leased approximately 5% or more of its net rentable area as of
December 31, 1995:
<TABLE>
<CAPTION>
Net Rentable Percentage of
Area Leased Total Net
Tenant Principal Business Activity (Sq. Ft.) Rentable Area
------ --------------------------- ------------- -------------
<S> <C> <C> <C>
Perkins Coie Legal 182,000 17.1%
Washington Mutual Banking 159,000 14.9%
Karr Tuttle Campbell Legal 51,000 5.2%
------- -----
Total 392,000 37.2%
======= =====
</TABLE>
Historical Occupancy Rates
As of December 31, for the noted years, the following percentage of the
net rentable area in Washington Mutual Tower was leased at the average
effective annual rental per square foot:
<TABLE>
<CAPTION>
Avg. Effective
Year % Leased Annual Rental
---- -------- -------------
<S> <C> <C>
1995 97% $22.79
1994 97% $21.80
1993 96% $21.90
1992 94% $22.73
1991 91% $22.03
</TABLE>
<PAGE> 16
Lease Expirations
<TABLE>
<CAPTION>
Total % of
Year # of Tenants Sq. Ft. Annual Rental Gross Rent
---- ------------ ------- ------------- ----------
<S> <C> <C> <C> <C>
1996 34 65,000 $932,000 4.0%
1997 19 85,000 $3,388,000 14.6%
1998 28 212,000 $4,492,000 19.4%
1999 26 201,000 $535,000 2.3%
2000 7 19,000 $2,159,000 9.3%
2001 4 20,000 $724,000 3.1%
2002 3 52,000 $1,109,000 4.8%
2003 2 60,000 $3,411,000 14.7%
2004 4 247,000 $3,602,000 15.5%
2005 1 13,000 $323,000 1.4%
</TABLE>
Long-Term Collateralized Debt
On September 28, 1995, Third Partnership, refinanced the credit facility
provided by TULP Funding Corporation, a subsidiary of Cornerstone. The amount
outstanding, $126,100,000, was refinanced with a $79,100,000 mortgage note to
Teachers Insurance Annuity Association ("Teachers") and a $47,000,000 capital
contribution from Cornerstone. The loan matures September 30, 2005 and bears
interest at the rate of 7.53 percent with the outstanding principal due at
maturity. The loan is collateralized by a first mortgage on Washington Mutual
Tower and assignment of all leases and rents. The mortgage debt agreement
stipulates that all prepayments of rent in excess of one month are to be held
in escrow by Third Partnership until due as rental income.
Real Estate Taxes
Real property tax expense for 1995 was approximately $1,790,000. The tenant
leases for Washington Mutual Tower generally contain provisions passing through
to tenants increases in the cost of real estate taxes above their base year
amounts, and therefore, increases in such taxes should not have a material
effect on net operating income from Washington Mutual Tower (assuming that
Washington Mutual Tower is fully leased), although an assessment exceeding that
of similar properties could affect occupancy or absorption.
125 SUMMER STREET
General
The Company acquired, through its wholly-owned subsidiary, CStone-Boston
Inc., ("CStone-Boston") the fee interest in 125 Summer Street in Boston,
Massachusetts on November 1, 1995.
<PAGE> 17
Location and Description
125 Summer Street is located on the edge of the financial district in the
Central Business District of Boston, one block from Boston's busiest train
station (South Station).
Completed in 1989, 125 Summer Street is a 22-story, granite and glass
office tower containing approximately 464,000 square feet of net rentable area
and a 292-vehicle underground parking facility.
Leases and Tenants
DELOITTE & TOUCHE LEASE. CStone-Boston leases office space at 125 Summer
Street to Deloitte & Touche, as successor in interest to Touche Ross & Co.,
under the terms of a lease dated February 5, 1988. The Deloitte & Touche net
rent payment is based on a total of approximately 106,000 square feet and is
calculated as follows: (i) $37.50 per rentable square foot for tenant's area on
the 5th floor; (ii) $32.00 per rentable square foot for tenant's area on the
17th floor; (iii) $55.80 per rentable square foot for tenant's area on floors
19 and 20; and (iv) $62.40 per rentable square foot for tenant's area on floors
21 and 22. Tenant is not obligated to pay the installments of rent applicable
to the first two months for each of the remaining lease years with respect to
the 93,485 square feet on floors 19 through 22. The Deloitte & Touche lease
term expires on October 31, 1999. Deloitte & Touche pays its proportionate
share of operating costs and taxes, respectively, in excess of $5.00 per
rentable square foot for each item exclusive of the 17th floor. Deloitte pays
its proportionate share of these variable costs for the 17th floor in excess of
the following: (i) actual tax expense per rentable square foot for the fiscal
tax year 1994; and (ii) actual operating expense per rentable square foot for
the calendar year 1993. Deloitte and Touche has two (2) options to renew its
lease for a period of five (5) years each.
BOT FINANCIAL CORPORATION LEASE. CStone-Boston currently leases 68,182 square
feet at a net rental rate of $37.50 per square foot to BOT Financial
Corporation (the "BOT Lease"). The net rental rate remains fixed until the
expiration of the original term on January 14, 1997. BOT Financial Corporation
pays to CStone-Boston, as additional rent, its proportionate share of operating
expenses and taxes, respectively, in excess of $5.00 per rentable square foot.
BOT Financial Corporation has the option to renew the BOT Lease for a period of
three years. Upon the terms of a separate lease agreement dated June 5, 1989,
BOT Financial Corporation assumed additional premises comprising a total of
23,099 square feet (expanding its total premises to approximately 91,000 square
feet on floors 2 through 5). The rental rate for the added area is $26.50 per
square foot for the entire lease term. The additional area lease term is
coterminous with the BOT Lease. As additional rent for the added area, BOT
Financial Corporation pays its proportionate share of operating costs and taxes
in excess of the building's actual operating expense and taxes per square foot.
BURNS & LEVINSON LEASE. CStone-Boston leases 85,169 square feet of office
space at 125 Summer Street to Burns & Levinson ("B & L") under the terms of a
lease dated December 16, 1987. The net rental rate for the lease term, which
expires on April 3, 2000, is $34.00 per rentable square foot. B & L is liable
for its proportionate share of operating costs and
<PAGE> 18
taxes in excess of the total sum of $10.00 per rentable square foot.
Additionally, through calendar year 1997, B & L pays to CStone-Boston 33% of
the amount by which its income from operations exceeds its adjusted base income
(i.e. B & L's income from 1992 as adjusted to reflect any change in the number
of partners), up to an aggregate of $2.5 million over the five years.
Principal Tenants The following table lists those tenants of 125 Summer
Street who leased approximately 5% or more of its net rentable area as of
December 31, 1995:
<TABLE>
<CAPTION>
Net Rentable Percentage of
Area Leased Total Net
Tenant Principal Business Activity (Sq. Ft.) Rentable Area
------ --------------------------- ---------- -------------
<S> <C> <C> <C>
Deloitte & Touche Accounting 106,000 22.8%
BOT Financial Corporation Finance 91,000 19.6%
Burns & Levinson Legal 85,000 18.3%
Gadsby & Hannah Legal 42,000 9.1%
------- -----
Total 324,000 69.8%
======= =====
</TABLE>
Historical Occupancy Rates
As of December 31, for the noted years, the following percentage of the
net rentable area in 125 Summer Street was leased at the average effective
annual rental per square foot:
<TABLE>
<CAPTION>
Avg. Effective
Year % Leased Annual Rental
---- -------- -------------
<S> <C> <C>
1995 94% $36.11
1994 93% $34.41
1993 97% $27.28
1992 96% $25.63
</TABLE>
<PAGE> 19
Lease Expirations
<TABLE>
<CAPTION>
Total % of
Year # of Tenants Sq. Ft. Annual Rental Gross Rent
---- ------------ ------- ------------- ----------
<S> <C> <C> <C> <C>
1996 3 2,000 $4,639,000 31.10%
1997 2 95,000 $667,000 4.47%
1998 5 60,000 $249,000 1.67%
1999 2 10,000 $7,393,000 49.56%
2000 9 116,000 $1,280,000 8.58%
2001 0 119,000 $102,000 0.68%
2002 0 0 $283,000 1.90%
2003 1 7,000 $8,000 0.05%
2004 1 7,000 $74,000 0.50%
2005 1 10,000 0 0.00%
</TABLE>
Long-Term Collateralized Debt
On December 20, 1995, the Company, through its wholly-owned subsidiary
CStone-Boston, executed a promissory note with Northwestern Mutual Life
Insurance Company and received proceeds of $50,000,000. The loan is
collateralized by 125 Summer Street and matures on January 1, 2003. The loan
pays interest only at the rate of 7.20 percent until February 1, 2001 at which
time interest and principal (calculated on a 25 year level amortization period)
is payable.
Real Estate Taxes
Real property tax for 1995 was approximately $2,600,000 of which $483,000
was expensed by CStone-Boston. The tenant leases for 125 Summer Street
generally contain provisions passing through to tenants increases in the cost
of real estate taxes, and therefore, increases in such taxes should not have a
material effect on net operating income from 125 Summer Street (assuming that
125 Summer Street is fully leased), although an assessment exceeding that of
similar properties could affect occupancy or absorption.
ITEM 3. Legal Proceedings.
There are no material legal proceedings involving the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE> 20
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The shares of common stock of the Company are traded on the Luxembourg,
Frankfurt and Duesseldorf Stock Exchanges. Quotations of the common stock in
Luxembourg are made in United States Dollars. Quotations in Duesseldorf and
Frankfurt are made in Deutsche Marks. The high and low sales prices (in United
States Dollars) on the Luxembourg Stock Exchange for each quarter of 1994 and
1995 were as follows:
<TABLE>
<CAPTION>
Sales Price
-----------
High Low
---- ---
<S> <C> <C>
1994
----
1st Quarter $17.38 $16.00
2nd Quarter $17.25 $16.00
3rd Quarter $17.00 $15.40
4th Quarter $15.75 $15.00
1995
----
1st Quarter $16.00 $13.88
2nd Quarter $16.30 $14.50
3rd Quarter $18.25 $14.40
4th Quarter $14.88 $13.75
</TABLE>
The high and low sales prices (in Deutsche Marks) on the Frankfurt Stock
Exchange for each quarter of 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
Sales Price
- -----------
High Low
---- ---
<S> <C> <C>
1994
----
1st Quarter DM30.00 DM27.60
2nd Quarter DM28.70 DM25.60
3rd Quarter DM26.60 DM24.10
4th Quarter DM24.80 DM22.70
1995
----
1st Quarter DM23.50 DM21.60
2nd Quarter DM22.20 DM20.30
3rd Quarter DM24.80 DM20.90
4th Quarter DM21.40 DM19.45
</TABLE>
<PAGE> 21
The high and low sales prices (in Deutsche Marks) on the Duesseldorf Stock
Exchange for each quarter of 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
Sales Price
- -----------
High Low
---- ---
<S> <C> <C>
1994
----
1st Quarter DM30.10 DM27.20
2nd Quarter DM28.60 DM25.50
3rd Quarter DM26.80 DM24.00
4th Quarter DM24.50 DM22.80
1995
----
1st Quarter DM23.40 DM21.60
2nd Quarter DM22.30 DM20.00
3rd Quarter DM24.60 DM20.90
4th Quarter DM21.40 DM19.45
</TABLE>
The closing quotation of the Company's common stock on March 18, 1996 was
U.S. $14.00 on the Luxembourg Stock Exchange, DM20.80 on the Frankfurt Stock
Exchange and DM 20.50 on the Duesseldorf Stock Exchange.
Trading in the common stock of the Company has been conducted only outside
the United States under laws that prevent disclosure of the number of
beneficial owners of the common stock, most of whom hold their shares through
banks or other fiduciaries. The company estimates, however, that the number of
beneficial owners of its common stock as of March 18, 1996 exceeds 13,000.
Return of capital distributions of U.S. $0.57 per share was paid on August
31, 1993 and $0.58 per share was paid on January 31, 1994 for the year 1993;
$0.58 per share was paid on August 31, 1994, $0.29 per share was paid on
October 17, 1994 and $0.29 per share was paid on January 31, 1995 for the year
1994; $0.68 per share was paid on August 31, 1995 and $0.48 per share was paid
on December 27, 1995 for the year 1995.
The Company intends to continue to declare semi-annual distributions on its
shares. However, no assurance can be made as to the amounts of future
distributions since such distributions are subject to the Company's funds from
operations, earnings, financial condition, and such other factors as the Board
of Directors deem relevant.
<PAGE> 22
ITEM 6. Selected Financial Data.
The selected financial data has been derived from, and should be read in
conjunction with, the related audited consolidated financial statements.
<TABLE>
<CAPTION>
1995 1994 1993(1) 1992(2) 1991
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Total assets $586,089 $477,996 $515,792 $527,326 $531,712
Long-term debt 369,600 130,500 141,638 140,215 138,911
Credit facility debt - 236,467 235,677 236,713 235,490
Revenues 92,387 85,574 65,827 35,702 36,829
Expenses 98,099 88,084 70,361 41,581 42,743
Minority interest 3,417 3,899 1,214 - -
Extraordinary loss 4,445 581
Net loss (13,574) (6,990) (5,748) (5,879) (5,914)
Per share information -
Loss ($0.94) ($0.53) ($0.43) ($0.44) ($0.45)
Payments to shareholders:
From earnings - - - - -
From return of
contributed capital 1.16 1.16 1.15 1.10 1.00
----- ----- ----- ----- -----
$1.16 $1.16 $1.15 $1.10 $1.00
===== ===== ===== ===== =====
</TABLE>
(1) Effective December 31, 1993, the financial statements of NWC have been
consolidated with the financial statements of the Company (See Note 1 of the
Notes to Consolidated Financial Statements).
(2) Effective December 31, 1992, the financial statements of Lincoln and
Third Partnership have been consolidated with the financial statements of the
Company (See Note 1 of the Notes to Consolidated Financial Statements).
See Item 7 below for a discussion of the selected financial data.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
CONSOLIDATION. Cornerstone's principal source of income is rental
revenues received through its investment in three real estate partnerships and
one fee simple investment held by four wholly-owned subsidiaries: 1700 Lincoln
Limited owned by ARICO-Denver, Inc., NWC Limited Partnership owned by
ARICO-Minneapolis, Inc., Third and University Limited Partnership owned by
ARICO-Seattle, Inc. and 125 Summer Street owned by CStone-Boston, Inc.,
respectively. As of December 31, 1993, NWC Limited Partnership has been
consolidated since Cornerstone has a majority interest in the economic benefits
and has the right to become managing general partner at its sole discretion;
the results of operations of NWC Limited Partnership are consolidated for 1994
and reflected on the equity method of accounting prior to January 1, 1994.
Effective December 31, 1992, investments in 1700
<PAGE> 23
Lincoln Limited and Third and University Limited Partnership have been
accounted for using the consolidation method of accounting.
NET EARNINGS AND LOSSES. On a consolidated basis, Cornerstone's share in
net earnings and losses of its real estate investments increased to $12,400,000
in 1995 from $7,883,000 in 1994. Cornerstone's share in net earnings and
losses decreased to $7,883,000 in 1994 from $9,806,000 in 1993. The increase
in 1995 is primarily attributable to the debt refinancing at Third and
University Limited Partnership resulting in lower debt service costs, the
completion of garage repairs at One Norwest Center in 1994 and the earnings
from 125 Summer Street acquired November 1, 1995. The decrease in 1994 was
primarily attributable to the sale of the Atrium and garage repairs at One
Norwest Center and the participation of our partner in the income of NWC
Limited Partnership.
PROPERTY RESULTS. For the year ended December 31, 1995, the increase in
office and parking rentals from 1994 of $4,991,000 is due to the purchase of
125 Summer Street, higher expense recoveries due to higher real estate taxes,
and increasing occupancy and rental rates. The $1,371,000 increase in real
estate taxes is due to the purchase of 125 Summer Street and an approximately
12 percent increase in taxes at Norwest Center in Minneapolis. For the year
ended December 31, 1994, the increases in office and parking rentals of
$35,464,000, building operating expenses of $6,023,000, and real estate taxes
of $7,185,000 were due to the consolidation of NWC Limited Partnership.
Included in building operating expenses for 1993 is a loss of approximately
$1,502,000 which was recorded when Third and University Limited Partnership
accepted a deed and assignment of leases and rents in lieu of foreclosure
resulting from an affiliate's failure to repay a loan to Third and University
Limited Partnership, and assumed ownership in commercial property (the Galland
and Seneca Buildings) that is adjacent to Washington Mutual Tower. The loss
represents the difference between the recorded value of the loan at the time of
foreclosure and the estimated fair market value of the collateral and net
assets assumed.
INTEREST AND OTHER INCOME. Interest and other income was $3,839,000 in
1995, $2,017,000 in 1994 and $11,548,000 in 1993. These amounts primarily
consist of interest earned from short-term investments, notes receivable from
partners, interest income on the mortgage note to NWC Limited Partnership in
1993 and income from the advisory contracts in 1995. Also included in interest
and other income is interest earned on notes receivable from Hines Colorado
Limited (HCL) in the amount of $501,000, $612,000 and $713,000 for 1995, 1994
and 1993, respectively. The 1995 increase in interest and other income of
$1,822,000 from 1994 is due to the stock placement proceeds being held in short
term investments from the date of placement (August 4) until the date of
investment (November 1) when the Company purchased 125 Summer Street. The
decrease in interest and other income for 1994 was due to the consolidation of
NWC Limited Partnership.
INTEREST EXPENSE. Interest expense incurred by Cornerstone relating to
its financing activities was $29,467,000, $30,792,000, and $31,652,000 for
1995, 1994 and 1993, respectively. The decrease in 1995 is primarily due to
the refinancing and partial prepayment of the Washington Mutual Tower debt and
the interest rate reduction on the $32,500,000 term loan from approximately
9.66% to 5.00%. The decrease in 1994 primarily resulted from the prepayment of
the zero coupon debt. The restructuring of certain debt agreements during the
year resulted in a decrease in interest expense of NWC Funding Corporation and
TULP Funding Corporation which amounted to $17,491,000 in 1994 and
<PAGE> 24
$18,172,000 in 1993. In addition to the interest expense for the two funding
corporations, interest on the One United Realty Corporation (OURC) notes,
including accrued interest on the zero coupon portion, amounted to $9,520,000,
$11,411,000 and $10,942,000 in 1995, 1994 and 1993, respectively. The
remaining amount of interest expense represents interest on Cornerstone's
borrowings under its lines of credit.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $23,877,000 in 1995 from $23,432,000 in 1994 due to the purchase
and depreciation of 125 Summer Street. The increase to $23,432,000 in 1994
from $17,454,000 in 1993 was due to the consolidation of NWC Limited
Partnership.
ADMINISTRATIVE EXPENSES. The aggregate amount of Cornerstone
administrative expenses has increased to $5,553,000 in 1995 from $3,869,000 in
1994 and $3,728,000 in 1993. The increase in 1995 of $1,684,000 was due to the
change to self-administration on July 1; however, when considered with the
advisory income from third party contracts of $813,000 and the savings of
transaction fees relating to property acquisitions of approximately $1,360,000
which would have been due under the prior advisory contract, the net overall
savings from the change to self-administration was approximately $489,000. The
increase from 1993 to 1994 was primarily as a result of increased non-recurring
legal and professional fees. The largest component of administrative expenses
prior to 1995 was advisory fee expense which amounted to $2,100,000 in 1994 and
$2,133,000 in 1993.
UNREALIZED LOSS ON INTEREST RATE SWAP. The Company does not trade in
derivative instruments, but uses interest rate swap agreements to hedge the
interest rate risk on its financings with the intention of obtaining the lowest
effective interest cost on its indebtedness. The unrealized loss of $7,672,000
represents the estimated amount, at December 31, 1995, that the Company would
pay to terminate the $98,000,000 notional amount forward interest rate swap
with a maturity date of February 17, 2007. The Company has not terminated this
swap agreement and intends to structure its future financings in accordance
with the policy stated above. The future unrealized mark to market adjustment
on this swap agreement will fluctuate with market interest rates.
Liquidity and Capital Resources
CAPITAL STOCK TRANSACTIONS. On June 19, 1995, the Company increased the
number of authorized shares from 40,000,000 shares of common stock, without par
value, to 115,000,000 shares of capital stock, without par value, of which
15,000,000 shares are preferred stock and 100,000,000 shares are common stock.
On August 4, 1995, the Company received $90,447,500 gross proceeds from the
placement of 6,325,000 new shares of common stock at a price of $14.30 per
share with retail investors in Germany through underwriters led by Deutsche
Bank. The net proceeds were used for the purchase of 125 Summer Street and the
Tower 56 mortgage note.
Also on August 4, 1995, 3,030,303 preferred shares were issued to Deutsche
Bank for gross proceeds of $50,000,000. The preferred shares are 7.0 percent
cumulative and convertible into common stock at $16.50 per share any time
after August 4, 2000. At December 31, 1995 there was approximately $1,449,000
or $0.48 per share in dividends in arrears on these preferred shares. The net
proceeds from the preferred share issuance were used to retire existing
indebtedness.
<PAGE> 25
On December 27, 1995, through a dividend reinvestment plan available to all
shareholders, Cornerstone received proceeds of approximately $2,840,000 and
issued an additional 207,302 shares of common stock to shareholders.
FUNDS FROM OPERATIONS. The Company calculates Funds from Operations (FFO)
based upon guidance from the National Association of Real Estate Investment
Trusts. FFO is defined as net income, excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated joint ventures. The Company has adjusted
FFO by the unrealized loss on interest rate swap previously discussed due to
the unrealized, non-cash nature of this charge. Due to the unique nature of
Cornerstone's leases, a further adjustment to the standard definition of FFO is
made to reduce FFO by the amount of free and deferred rental revenue which has
been recognized in the financial statements. In the opinion of management,
these amounts relate to benefits which will not be realized, in the form of
increased cash flow, until future periods and would distort the FFO
calculation.
Industry analysts generally consider FFO to be an appropriate measure of
performance of an equity Real Estate Investment Trust (REIT) such as
Cornerstone. FFO does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and, therefore,
should not be considered a substitute for net income as a measure of
performance or for cash flow from operations as a measure of liquidity
calculated in accordance with generally accepted accounting principles.
The table below illustrates the adjustments which were made to the net
loss of Cornerstone for the last three years in the calculation of FFO (in
thousands):
<TABLE>
<CAPTION>
Funds From Operations
---------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net loss (13,574) ($6,990) ($5,748)
Plus:
Depreciation and amortization 23,831 23,582 24,785
Amortization on rent notes 1,119 1,008 907
Unrealized losses 7,672 - -
Extraordinary losses 4,445 581 -
Capital loss (reserves) - - 2,697
Norwest Center tax adjustment 807 - -
Less:
Minority interest adjustments (591) (932) (404)
Free rent and deferred rents (3,084) (2,865) (3,157)
------- ------- -------
Funds From Operations $20,625 $14,384 $19,080
======= ======= =======
</TABLE>
The increase in FFO from 1994 to 1995 was primarily due to the completion
in 1994 of the garage repair and increased rents from One Norwest Center, the
purchase of 125 Summer Street, the repayment of the zero coupon debt in 1994,
increased advisory income,
<PAGE> 26
and the reduction of the outstanding debt and the end of the priority
distribution at Washington Mutual Tower.
The FFO for 1994 and 1993 represents an exceptional low and high,
respectively. This was anticipated by management and arose from certain
non-recurring events. The non-recurring events were the following: (i) the
receipt of certain non-recurring income in 1993, (ii) the elimination of the
Atrium rental payments in 1994 and (iii) the one-time expense for the repair of
the Denver parking structure in 1994. The non-recurring income received in
1993 related to (i) the final guarantee period contribution in 1993 by
Cornerstone's partner in Third and University Limited Partnership which was
triggered upon successfully attaining 98 percent leasing levels at Washington
Mutual Tower, and (ii) the reallocation of partnership income triggered at NWC
Limited Partnership due to the achievement of increased property cash flow.
The sale of the Atrium in September 1993 was consummated in order to reduce
leverage. The elimination of income from the Atrium resulted in an offsetting
elimination of interest expense as the zero coupon notes collateralized by One
Norwest Center in Denver were retired. The one-time costs related to the
repair of the Denver parking structure are consistent with first-class
portfolio management. These one-time events had no impact on the underlying
operations or tenancy of the Company's properties. After adjusting for these
one-time events, FFO for 1994 is substantially consistent with the 1993 amount.
MORTGAGE NOTE RECEIVABLE. On December 19, 1995, the Company purchased two
mortgage notes collateralized by Tower 56 in New York City with a face value of
$54,000,000 and accrued interest of approximately $11,000,000 for a purchase
price of $30,150,000. The carrying amount of the mortgage note receivable at
December 31, 1995 includes the purchase price, closing adjustments and related
acquisition costs. The existing owner, Tower 56 Partners, has agreed to a
"pre-packaged" bankruptcy plan through which it will transfer title of Tower 56
to Cornerstone during the second quarter of 1996. At the time of the transfer,
Cornerstone will make a payment of $2,125,000 to two of the partners of Tower
56 Partners. Additionally, HRO International, an affiliate of Tower 56
Partners, will manage the building under a five year management agreement for a
fee of 3 percent of gross revenues and will receive one-third of the cash flow
above that which provides Cornerstone a 9 percent return on its Capital Base.
HRO International will also receive one-third of the property sale proceeds
above that which provides Cornerstone with a 12 percent cumulative internal
rate of return.
MORTGAGE INDEBTEDNESS. The Company, through OURC, had $98,000,000 in
long-term debt outstanding at December 31, 1995. Interest only is due on these
notes, which mature on February 17, 1997, at a rate of 8.893 percent. The
notes are collateralized by a non-recourse mortgage on One Norwest Center and
an assignment of all leases and rents, and certain other property, rights and
interests related to One Norwest Center. The Company is currently in
negotiations with prospective lenders regarding a refinancing of this
indebtedness.
As protection against market interest rates rising prior to the maturity
of the above stated notes, on September 29, 1993, Cornerstone entered into an
interest rate swap with Deutsche Bank AG with an effective date of February 18,
1997. The interest rate swap is at a fixed rate of 7.14 percent per annum on a
notional amount of $98,000,000 for a period of ten years. The swap contains a
mutual termination clause by which either party may terminate the swap on
February 18, 1997 at its then current market value.
<PAGE> 27
On April 7, 1995, the Third Amended and Restated Promissory Note, dated as
of August 5, 1986, made by NWC Limited Partnership payable to the order of NWC
Funding Corporation in the original principal amount of $110,000,000 was sold
to Norwest Corporation. The loan matures December 31, 2005 and bears interest
at the rate of 8.74 percent. The loan is collateralized by a first mortgage on
Norwest Center and assignment of all leases and rents.
On September 28, 1995, Third and University Limited Partnership, through
Teachers Insurance and Annuity Association, refinanced $79,100,000 of
outstanding debt collateralized by Washington Mutual Tower. The loan matures
September 30, 2005 and bears interest at the rate of 7.53 percent with the
principal due at maturity. The loan is collateralized by a first mortgage on
Washington Mutual Tower and assignment of all leases and rents.
On December 20, 1995, the Company, through its wholly-owned subsidiary
CStone-Boston, Inc., executed a promissory note with Northwestern Mutual Life
Insurance Company and received proceeds of $50,000,000. The loan is
collateralized by 125 Summer Street and matures on January 1, 2003. The loan
pays interest only at the rate of 7.20 percent until February 1, 2001 at which
time interest and principal (calculated on a 25 year level amortization period)
is payable.
OTHER INDEBTEDNESS. On August 8, 1995, the existing $32,500,000 term loan
was extended through December 31, 2003 and assigned to Deutsche Bank AG London
at an interest rate of 5.00 percent. The loan must be repaid at par upon the
sale of either Norwest Center or Washington Mutual Tower. The term loan had a
$32,500,000 balance at December 31, 1995.
At December 31, 1995, Cornerstone had a $12,000,000 revolving line of
credit with DBNY. The line is available for general corporate purposes at a
rate equivalent to LIBOR plus 0.625 percent or, at Cornerstone's option, the
then prime interest rate. The line is also available for standby letters of
credit at a rate of 0.375 percent and expires in June, 1996. At December 31,
1995, none of the credit line had been drawn upon.
OTHER MATTERS. The Company is not aware of any environmental issues at
any of its properties. The Company does not believe inflation will have a
significant effect on its results. The Company believes it has sufficient
insurance coverage at each of its properties.
SHAREHOLDERS' DISTRIBUTIONS. Cornerstone intends to distribute at least
95 percent of its taxable income to maintain its qualification as a REIT.
Currently, Cornerstone has no taxable income and anticipates that FFO will
exceed taxable income for the foreseeable future. Cornerstone's distribution
policy is to pay distributions based upon FFO, less prudent reserves. For
1995, Cornerstone paid distributions from its contributed capital to its
shareholders of $0.68 per share on August 31, 1995 (to shareholders of record
on July 31, 1995), and $0.48 per share on December 27, 1995 (to shareholders of
record as of November 29, 1995).
LIQUIDITY. At December 31, 1995, the Company had $7,740,000 in cash and
cash equivalents and $4,393,000 in restricted cash. Restricted cash is being
held by the trustee for
<PAGE> 28
the OURC notes, representing credit support payments to be used for interest
payments on the long-term debt. In addition, Cornerstone anticipates it will
receive distributions from real estate partnerships and rents under tenant
leases on a monthly basis which will be used to cover normal operating expenses
and pay distributions to its shareholders. Based upon its cash reserves and
other sources of funds, Cornerstone has sufficient liquidity to meet its cash
requirements for the foreseeable future.
IMPACT OF NEW ACCOUNTING STANDARDS. During 1995, the Financial Accounting
Standards Board issued SFAS #121, "Accounting for Impairment of Long Lived
Assets and Long Lived Assets to be Disposed of" and SFAS #123, "Accounting for
Stock Based Compensation." During 1995, Cornerstone adopted SFAS #121 and is
currently assessing the impact of SFAS #123 which will be effective for fiscal
years beginning on or after December 15, 1995.
ITEM 8. Financial Statements and Supplementary Data.
See the Financial Statements included as a part hereof.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
The information required to be included in Form 10-K in response to the
following items is to be included in the Company's Proxy Statement for its
Annual Meeting to be held on June 20, 1996, to be filed pursuant to Regulation
14A, and pursuant to applicable rules is incorporated herein by reference.
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
<PAGE> 29
<TABLE>
<CAPTION>
The following documents are filed as part of this annual report: PAGE NUMBER
-----------
<S> <C> <C>
(a) Financial Statements and Financial Statement Schedules:
(i) The Company: F-1
The following financial statements and report of independent
accountants are filed herewith at the pages indicated:
Report of Independent Accountants F-2
Consolidated Balance Sheets -
December 31, 1995 and 1994 F-3
Consolidated Statements of
Operations for the years ended
December 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Shareholders'
Investment for the years ended
December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Cash
Flows for the years ended
December 31, 1995, 1994 and 1993 F-6
Notes to Consolidated Financial Statements F-7 to F-22
Schedule III F-23 to F-24
Schedule IV F-25
(ii) NWC Limited Partnership financial statements for 1993 and 1992,
incorporated herein by reference, to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
(b) Reports on Form 8-K:
1. Form 8-K dated October 11, 1995
Item 5 - Other Events.
Board of Directors approval to acquire 125
Summer Street in Boston, Massachusetts for
approximately $105 million.
</TABLE>
<PAGE> 30
<TABLE>
<S> <C> <C>
2. Form 8-K dated November 6, 1995
Item 2 - Acquisition or Disposition of Assets.
Completion of the acquisition of 125 Summer
Street in Boston, Massachusetts for
approximately $105 million.
(c) Exhibits:
*3.1 Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of the Company's
Amendment No. 1 to form 10-Q for the quarter ended June 30, 1987.
*3.1(a) Certificate of voting powers, designations, preferences, limitaitons, restrictions and relative
rights of 7% cumulative convertible preferred stock of ARICO America Realestate Investment
Company.
*3.5 Bylaws, as amended as of December 8, 1995.
4.1 Specimen Common Stock Certificates, incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form 10.
4.2 Indenture, dated as of February 17, 1987, between Manufacturers Hanover Trust Company and One
United Realty Corporation, a wholly owned subsidiary of the Company, incorporated by reference to
Exhibit 4.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1987.
4.3 Forms of Interest Bearing and Zero Coupon Notes (included in Exhibit 4.2).
*4.4 Letter Agreement, dated July 10, 1996, with Deutsche Bank AG.
10.1 Lease Agreement dated February 5, 1981 between Lincoln Building corporation, Lessor, and 1700
Lincoln Limited, Lessee dated May 5, 1981, incorporated by reference to exhibit 10.1 of the
Company's Registration Statement on Form 10.
10.7 Letter dated December 15, 1986 to NWC Limited Partnership from the Company, incorporated by
reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the year ended December
31, 1986.
10.8 Note Purchase Agreement, dated as of February 17, 1987, between seven financial institutions and
One United Realty Corporation, a wholly owned subsidiary of the Company,
</TABLE>
<PAGE> 31
<TABLE>
<S> <C>
incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1987.
10.9 Deed of Trust, Mortgage, Security Agreement, Financing Statement and Assignment of Leases and
Rents, dated as of February 17, 1987, made by 1700 Lincoln Limited Partnership to the Company,
incorporated by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1987.
10.10 Mortgage Assignment and Pledge Agreement, dated as of February 17, 1987, by One United Realty
Corporation, a wholly-owned subsidiary of the Company, to Manufacturers Hanover Trust Company, as
Trustee, incorporated by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1987.
10.11 Financing Consent Agreement, dated as of August 5, 1986, by and among the Company, Gerald D.
Hines, Hines Ltd., Hines Colorado Corp. and 1700 Lincoln Limited Partnership, incorporated by
reference to exhibit 10.11 of the Company's Annual Report on Form 10-K for the year ended December
31, 1987.
10.21 Note Purchase Agreement executed as of December 30, 1988 among the Company, Lincoln Building
Corporation, Hines Colorado Limited, 1700 Lincoln Limited and Lincoln Atrium Limited, incorporated
by reference to exhibit 10.21 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1988.
10.36 Amended and Restated Advisory Agreement effective as of December 3, 1993, between the Company and
Deutsche Bank Realty Advisors, Inc.
10.37 Third Amended and Restated Articles of Limited Partnership of 1700 Lincoln Limited effective as of
April 20, 1989.
10.38 First Amendment to Third Amended and Restated Articles of Limited Partnership of 1700 Lincoln
Limited dated as of September 28, 1993.
10.39 Atrium Purchase and Sale Agreement dated September 28, 1993 between Lincoln Atrium Limited and
Lincoln Building Corporation.
10.40 Amended and Restated Articles of Limited Partnership of NWC Limited Partnership effective as of
September 29, 1993.
</TABLE>
<PAGE> 32
<TABLE>
<S> <C>
10.41 Third Amended and Restated Promissory Note between NWC Limited Partnership and NWC Funding
Corporation dated as of September 29, 1993.
10.43 Second Amendment to Credit Facility Agreement dated as of September 29, 1993 between NWC Funding
Corporation and NWC Limited Partnership.
10.47 Deed-In-Lieu Agreement dated as of December 29, 1993 between Block Six Limited Partnership and
Third and University Limited Partnership.
10.49 Amended and Restated Agreement dated November 4, 1994, by and among 1700 Lincoln Limited, One
United Realty Corporation, Chemical Bank and the Company, incorporated by reference to the Note
Purchase Agreement of Exhibit 10.8, the Deed of Trust, Mortgage, Security Agreement, Financing
Statement and Assignment of Leases and Rents of Exhibit 10.9 and the Mortgage Assignment and
Pledge Agreement of Exhibit 10.10.
*10.50 Deed of Trust Note, dated September 27, 1995, made by Third and University Limited Partnership to
Teachers Insurance and Annuity Association of America.
*10.51 Third Amended and Restated Articles of Limited Partnership of Third and University Limited
Partnership, dated as of September 27, 1995
*10.52 Assignment of Recorded Documents, dated as of April 7, 1995, by NWC Funding Corporation to Norwest
Corporation
*10.53 Assignment of Documents, dated as of April 7, 1995, by NWC Funding Corporation to Norwest
Corporation
*10.54 Purchase and Sale Agreement of 125 Summer Street, dated as of September 27, 1995, between Michael
C. Fong, Osama El Haddad, and Mark S. James as Trustees of Lincoln Summer Realty Trust, and
Cornerstone Properties Inc.
*10.55 Mortgage and Security Agreement, dated as of December 20, 1995, between CStone-Boston and The
Northwestern Mutual Life Insurance Company.
*10.56 Loan Sale Agreement, dated as of November 21, 1995, between The Sakura Bank, LTD. and Cornerstone
Properties Inc.
</TABLE>
<PAGE> 33
<TABLE>
<S> <C>
*10.59 Credit Agreement, dated as of August 8, 1995, between ARICO America Realestate Investment Company
and Deutsche Bank AG London.
*11.1 Statement of Computation of Earnings Per Share.
21 List of Subsidiaries, incorporated by reference to Exhibit 22.1 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1988.
*24.1 Powers of Attorney.
*27 For EDGAR filing purposes only, this report contains Exhibit 27, Financial Data Schedule.
</TABLE>
- -----------------------
* Filed herewith.
<PAGE> 34
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.
CORNERSTONE PROPERTIES INC.
(Registrant)
/s/ John S. Moody
--------------------
John S. Moody, President & CEO
DATED: March 27, 1996
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 dates indicated.
/s/ John S. Moody
- ------------------------------------------------------------------
John S. Moody, President and Director
(Principal Executive Officer)
/s/ Thomas P. Loftus
- ------------------------------------------------------------------
Thomas P. Loftus, Vice President and Controller
(Principal Financial and Accounting Officer)
*/s/ Dr. Rolf-E. Breuer
- ------------------------------------------------------------------
Dr. Rolf-E. Breuer, Director and Chairman
*/s/ Blake Eagle
- ------------------------------------------------------------------
Blake Eagle, Director
*/s/ Dr. Karl-Ludwig Hermann
- ------------------------------------------------------------------
Dr. Karl-Ludwig Hermann, Director
*/s/ Hans C. Mautner
- ------------------------------------------------------------------
Hans C. Mautner, Director
*/s/ Berthold T. Wetteskind
- ------------------------------------------------------------------
Berthold T. Wetteskind, Director
*By /s/John S. Moody
- ------------------------------------------------------------------
John S. Moody, as Attorney-in-Fact for the persons indicated
DATED: March 27, 1996
<PAGE> 35
CORNERSTONE PROPERTIES INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
AND FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
F-1
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Cornerstone Properties Inc.
We have audited the consolidated financial statements and financial statement
schedules of Cornerstone Properties Inc. and Subsidiaries (the "Company") as of
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, listed in item 14(a)(i) of this Form 10-K. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules 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.
As disclosed in Note 1, prior to December 31, 1993, the Company used the equity
method of accounting for its investment in NWC Limited Partnership. As of
December 31, 1993, the Company began using the consolidation method of
accounting since the Company has a majority interest in the economic benefits
and acquired the right to become the managing general partner at its sole
discretion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cornerstone
Properties Inc. and Subsidiaries as of December 31, 1995 and 1994 and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. In addition, in our opinion,
the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, NY
March 5, 1996
F-2
<PAGE> 37
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994
(Dollar amounts in thousands)
(Note 1)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Investments, at cost: (Notes 2, 3, 4, 5 and 6)
Land $ 57,823 $ 42,073
Buildings and improvements 546,357 458,090
Mortgage note receivable 30,731 -
Deferred lease costs 72,077 71,668
------------ ------------
706,988 571,831
Less: Accumulated depreciation and amortization 175,167 154,228
------------ ------------
Total investments 531,821 417,603
Cash and cash equivalents (Note 1) 7,740 12,506
Restricted cash (Note 8) 4,393 4,732
Other deferred costs, net of accumulated amortization of $5,301 and $15,129 2,895 5,659
Deferred tenant receivables (Note 1) 32,695 29,524
Tenant and other receivables 1,585 955
Notes receivable (Note 7) 4,153 6,029
Other assets 807 916
------------ ------------
TOTAL ASSETS $ 586,089 $ 477,924
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Long-term debt (Note 8) $ 369,600 $ 130,500
Borrowings under lines of credit (Note 9) - 236,467
Accrued interest payable 4,327 7,469
Accrued real estate taxes payable 10,045 9,027
Shareholders' distribution payable - 3,840
Accounts payable and accrued expenses 3,456 3,219
Unearned revenue and other liabilities 16,499 10,118
------------ ------------
TOTAL LIABILITIES 403,927 400,640
------------ ------------
Minority Interest (7,194) (6,642)
------------ ------------
Commitments and Contingencies (Notes 2, 3, 4, 5, 6, 8, 12 and 15)
SHAREHOLDERS' INVESTMENT
Preferred Stock, $16.50 stated value, 15,000,000 shares authorized;
3,030,303 shares issued and outstanding (Note 10) 50,000 -
Common stock, authorized shares (1995-100,000,000; 1994-40,000,000);
shares issued and outstanding (1995-19,959,515; 1994-13,240,500) (Note 10)
Paid-in capital 181,477 110,237
Accumulated deficit (39,885) (26,311)
Deferred compensation (Note 12) (2,236) -
------------ ------------
TOTAL SHAREHOLDERS' INVESTMENT 189,356 83,926
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 586,089 $ 477,924
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-3
<PAGE> 38
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollar amounts in thousands, except per share amounts)
(Note 1)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Office and parking rentals $ 88,548 $ 83,557 $ 47,405
Equity in earnings:
1700 Lincoln Limited (Note 2) - - 478
NWC Limited Partnership (Note 3) - - 6,396
Interest and other income 3,839 2,017 11,548
----------- ----------- -----------
TOTAL REVENUES 92,387 85,574 65,827
----------- ----------- -----------
EXPENSES
Building operating expenses 19,233 19,065 13,845
Real estate taxes 12,297 10,926 3,682
Interest expense 29,467 30,792 31,652
Depreciation and amortization 23,877 23,432 17,454
Advisory fee (Note 11) 1,050 2,100 2,133
Professional fees 1,215 643 516
General and administrative 3,200 1,015 968
Directors' fees 88 111 111
Unrealized loss on interest rate swap (Note 13) 7,672 - -
----------- ----------- -----------
TOTAL EXPENSES 98,099 88,084 70,361
----------- ----------- -----------
Minority Interest 3,417 3,899 1,214
----------- ----------- -----------
Loss before extraordinary item (9,129) (6,409) (5,748)
Extraordinary loss (Note 9) (4,445) (581) -
----------- ----------- -----------
NET LOSS $ (13,574) $ (6,990) $ (5,748)
=========== =========== ===========
LOSS BEFORE EXTRAORDINARY ITEM PER SHARE (NOTE 1) $ (0.67) $ (0.48) $ (0.43)
=========== =========== ===========
NET LOSS PER SHARE (NOTE 1) $ (0.94) $ (0.53) $ (0.43)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-4
<PAGE> 39
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollar amounts in thousands)
(Notes 1 and 10)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
----------------------- ------------------------
Outstanding Paid-In Outstanding Paid-In Accumulated Deferred
Shares Capital Shares Capital Deficit Compensation Total
------------ ---------- ------------ ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 13,240,500 $ 140,823 - $ - $ (13,573) $ - $127,250
Net Loss - - - - (5,748) - (5,748)
Distributions to Shareholders:
Return of contributed capital of
of $1.15 per share - (15,227) - - - - (15,227)
------------ ---------- ------------ ---------- ----------- ------------ ----------
BALANCE, DECEMBER 31, 1993 13,240,500 125,596 - - (19,321) - 106,275
Net Loss - - - - (6,990) - (6,990)
Distributions to Shareholders:
Return of contributed capital of
of $1.16 per share - (15,359) - - - - (15,359)
------------ ---------- ------------ ---------- ----------- ------------ ----------
-
BALANCE, DECEMBER 31, 1994 13,240,500 110,237 - - (26,311) - 83,926
Common Stock Proceeds,
net of $6,083 in stock issuance costs 6,325,000 84,365 - - - - 84,365
Preferred Stock Proceeds - - 3,030,303 50,000 - - 50,000
Restricted Stock Grants 186,713 2,670 - - - (2,670) -
Restricted Stock Grant Vesting - - - - - 434 434
Net Loss - - - - (13,574) - (13,574)
Dividend Reinvestment, -
net of $150 in stock issuance costs 207,302 2,690 - - - - 2,690
Distributions to Common Shareholders:
Return of contributed capital of
of $1.16 per share - (18,485) - - - - (18,485)
------------ ---------- ------------ ---------- ----------- ------------ ----------
BALANCE, DECEMBER 31, 1995 19,959,515 $181,477 3,030,303 $ 50,000 $ (39,885) $ (2,236) $189,356
============ ========== ============ ========== =========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-5
<PAGE> 40
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollar amounts in thousands)
(Notes 1 and 17)
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (13,574) $ (6,990) $ (5,748)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 23,877 23,432 17,454
Deferred compensation amortization 434 - -
Unrealized loss on interest rate swap 7,672 - -
Extraordinary loss 4,446 581 -
Unbilled rental revenue (3,088) (2,380) (273)
Equity in earnings of real estate partnerships - - (6,874)
Distributions from real estate partnerships - - 10,042
Loss on Galland and Seneca Buildings - - 1,502
(Recoveries) provisions for doubtful accounts - (98) 604
Interest accretion on zero coupon notes - 1,310 1,423
Decrease in accrued interest payable (3,142) (744) (13)
Minority interest share of income 3,417 3,899 1,214
(Increase) decrease in tenant and other receivables and other assets (564) 1,272 105
Increase in accounts payable, accrued expenses and other liabilities 558 8,686 641
------------ ------------ ------------
Total adjustments 33,610 35,958 25,825
------------ ------------ ------------
Net cash provided by operating activities 20,036 28,968 20,077
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property, net of $66, $76 and $645 in
accounts payable in 1995, 1994 and 1933, respectively (137,370) (2,417) (3,195)
Cash balances of consolidated partnerships - - 1,125
Lincoln Atrium Limited - sales proceeds - - 14,250
Deferred costs incurred on investments (33) (3) (143)
Repayment of notes receivable from related parties 2,068 1,008 1,610
Loan to a related party (192) (350) (407)
------------ ------------ ------------
Net cash (used in) provided by investing activities (135,527) (1,762) 13,240
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under mortgage loans 239,100 - -
Net (repayments) borrowings under lines of credit (236,467) 790 (1,036)
Debt issue costs (555) - -
Repayment of zero coupon notes - (18,529) -
Repayment of term loan - (500) -
Borrowings under term loan - 6,000 -
Proceeds from preferred stock offering 50,000 - -
Proceeds from common stock offering, net of $6,083 in stock issuance costs 84,365 - -
Proceeds from dividend reinvestment plan, net of $150 in stock issuance costs 2,690 - -
Net payments for swap terminations (2,453) - -
(Contributions returned to) contributions from minority partners - (181) 1,525
Decrease (increase) in restricted cash 339 10,391 (13,670)
Distribution to minority partners (3,970) (11,913) (3,409)
Distributions to shareholders (22,324) (19,199) (7,547)
------------ ------------ ------------
Net cash provided by (used in) financing activities 110,725 (33,141) (24,137)
------------ ------------ ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,766) (5,935) 9,180
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 12,506 18,441 9,261
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,740 $ 12,506 $ 18,441
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-6
<PAGE> 41
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. NATURE OF THE COMPANY'S BUSINESS
AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE COMPANY'S BUSINESS
Cornerstone Properties Inc. (formerly known as ARICO America Realestate
Investment Company, prior to September 18, 1995), a Nevada corporation
(Cornerstone or the Company), was formed on May 5, 1981, to invest in major
commercial real estate projects in North America. At December 31, 1995,
Cornerstone has, through its wholly-owned subsidiary ARICO-Denver, Inc.
(ARICO-Denver), a 90 percent general partnership interest in 1700 Lincoln
Limited (Lincoln) (Note 2), which operates One Norwest Center in Denver,
Colorado and owned (until September 29, 1993 when it was sold) an
approximately 48 percent undivided interest in the Atrium adjacent to One
Norwest Center (the Atrium); through its wholly-owned subsidiary
ARICO-Minneapolis, Inc. (ARICO-Minneapolis), a 50 percent general
partnership interest in NWC Limited Partnership (NWC) (Note 3), which
operates Norwest Center in Minneapolis, Minnesota; through its wholly-owned
subsidiary ARICO-Seattle, Inc. (ARICO-Seattle), a 50 percent general
partnership interest in Third and University Limited Partnership (Third
Partnership) (Note 4), which operates Washington Mutual Tower in Seattle,
Washington; through its wholly-owned subsidiary CStone-Boston, Inc.
(CStone-Boston), 100 percent ownership of 125 Summer Street in Boston,
Massachusetts (Note 5); and through its wholly-owned subsidiary CStone-New
York, Inc., the first mortgage on Tower 56 in New York (Note 6). Certain
wholly-owned subsidiaries, One United Realty Corporation (OURC), NWC
Funding Corporation (NWC Funding) and TULP Funding Corporation (TULP
Funding) were organized to provide financing for Cornerstone's investments
in Lincoln, NWC and Third Partnership.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Cornerstone,
its wholly-owned qualified REIT subsidiaries and controlled partnerships.
As of December 31, 1993, NWC has been consolidated since Cornerstone has a
majority interest in the economic benefits and has the right to become
managing general partner at its sole discretion; the results of operations
of NWC are consolidated for 1994 and reflected on the equity method of
accounting prior to January 1, 1994. Lincoln and Third Partnership balance
sheet accounts were consolidated as of December 31, 1992; the results of
operations of such partnerships have been consolidated since 1993. All
significant intercompany balances and transactions have been eliminated in
consolidation.
INVESTMENT PROPERTY
The costs of the buildings, garages and improvements are being depreciated
on the straight-line method over their estimated useful lives, ranging from
20 years for electrical and mechanical installations to 40 years for
structural components. Tenant improvements are being amortized over the
terms of the related leases.
The balances of accumulated depreciation and amortization of $175,167,000
and $154,228,000 at December 31, 1995 and 1994, respectively, are the
result of consolidating the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Lincoln $ 59,405,000 $ 54,247,000
NWC 56,685,000 48,624,000
Third Partnership 58,703,000 51,357,000
CStone-Boston 374,000 -
-
------------ ------------
$175,167,000 $154,228,000
============ ============
</TABLE>
F-7
<PAGE> 42
Lincoln's investment in Lincoln Atrium Limited (Note 2), which was sold on
September 29, 1993, had been accounted for using the equity method of
accounting.
Cornerstone and the real estate partnerships hold the real estate projects
for long-term investment and such investments are carried at cost less
accumulated depreciation. Management continuously monitors and considers
the effect of local and regional economic conditions on the operations and
realizable values of such projects. In the event management were to make a
determination that the carrying value of the real estate projects had been
impaired, the decline in value would be reported as a charge to earnings
when such determination is made.
DEFERRED LEASE COSTS
As an inducement to execute a lease, incentives are sometimes offered which
may include cash and/or other allowances. These incentives and other lease
costs, such as commissions, which are directly related to specific leases,
are deferred and amortized over the terms of the related leases. Other
marketing costs (which include sales facility costs, model office costs,
building models, etc.) and other lease costs not related to specific
leases, which were incurred during the buildings' development stage, were
deferred and are being amortized over their expected benefit period of 10
years.
OTHER DEFERRED COSTS
Costs incurred in the underwriting and issuance of long-term debt, in
arranging financing for Cornerstone's real estate partnerships and in
investigating investments in real estate partnerships have been deferred.
The costs incurred in connection with the long-term debt are being
amortized over the term of the debt. The costs incurred in connection with
the financing for the real estate partnership investments are being
amortized over the respective financing periods. Deferred organization and
start-up costs related to investments in real estate partnerships are being
amortized over a period of 60 months, beginning with the formation of the
partnerships.
TENANT RECEIVABLES
Rental revenue is recognized ratably as earned over the terms of the
leases. Deferred tenant receivables result from rental revenues which have
been earned but will be received in future periods as a result of rent
concessions provided to tenants and scheduled future rent increases. These
account balances are the result of consolidating the following balance
sheet accounts:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Lincoln $ 155,000 $ 137,000
NWC 29,471,000 26,718,000
Third Partnership 2,400,000 2,669,000
CStone-Boston 669,000 -
----------- -----------
$32,695,000 $29,524,000
=========== ===========
</TABLE>
An allowance for doubtful accounts of approximately $65,000 and $35,000,
respectively, has been recorded at December 31, 1995 and 1994, relating to
tenant and other receivables. Included in building operating expenses for
the year ended December 31, 1993 is a provision for bad debts totaling
approximately $604,000. Included in the provision is approximately
$486,000 relating to deferred rent receivable from a tenant at Norwest
Center. Bad debt write-offs totaled approximately $30,000 and $564,000
during 1995 and 1994, respectively.
INTEREST RATE SWAP AGREEMENTS
Cornerstone and/or its subsidiaries are parties to several interest rate
swap agreements used to hedge its interest rate exposure on floating rate
debt (Notes 13 and 16). The differential to be paid or received is
recognized in the period incurred and included net in interest expense.
Cornerstone and/or its subsidiaries may be exposed to loss in the event of
non-performance by the other party to the interest rate swap agreements.
However, Cornerstone does not anticipate non-performance by the
counterparty.
F-8
<PAGE> 43
FEDERAL INCOME TAXES
No provision for United States Federal income taxes has been made in the
accompanying financial statements. Cornerstone has elected to be taxed as
a real estate investment trust under Sections 856-860 of the United States
Internal Revenue Code. Under these sections of the Internal Revenue Code,
Cornerstone is permitted to deduct dividends paid to shareholders in
computing its taxable income.
All taxable earnings and profits of Cornerstone since inception have been
distributed to the shareholders. For each of the three years ended
December 31, 1995, there were no earnings and profits.
RECLASSIFICATIONS
Certain 1994 amounts have been reclassified to conform to the 1995
financial statement presentation.
LOSS PER SHARE
Loss per share is computed based on the weighted average number of common
shares outstanding of 15,909,805 for 1995 and 13,240,500 for 1994 and 1993.
For 1995, the dividends in arrears applicable to the preferred stock have
been deducted from the net loss in computing loss per share. (Note 10)
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
investments with original maturities of three months or less from the date
of purchase. At December 31, 1995 and 1994, Cornerstone had on deposit
with Deutsche Bank AG New York Branch (DBNY) substantially all of its cash
and cash equivalents. In addition, Lincoln, NWC, Third Partnership and
CStone-Boston had on deposit with major financial institutions
substantially all of their cash and cash equivalents. Cornerstone believes
it mitigates its risk by investing in or through major financial
institutions. Recoverability of investments is dependent upon the
performance of the issuer.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant estimates and
assumptions are related to the unrealized loss on an interest rate swap
agreement, recoverability and depreciable lives of investment property, the
recoverability of deferred tenant receivables and contingencies. Actual
results could differ from those estimates.
2. 1700 LINCOLN LIMITED
PARTNERSHIP MATTERS AND OPERATIONS: Cornerstone, through ARICO-Denver,
holds a 90 percent general partnership interest in Lincoln while Hines
Colorado Limited (HCL) holds a 9 percent managing general partnership
interest and a 1 percent limited partnership interest. Lincoln was formed
on February 5, 1981, and is the owner of the fee interest in the land
located in Denver, Colorado, upon which it constructed One Norwest Center,
a 50-story office tower with related improvements. One Norwest Center was
designated as operational for financial reporting purposes as of January 1,
1984.
For the period commencing December 29, 1988 to September 29, 1993, Lincoln
was the owner of a 48 percent undivided interest in a steel and glass
structure and related lands commonly known as the Atrium, which is adjacent
to One Norwest Center. This 48 percent undivided interest was effected
through the ownership of a 99 percent interest in a partnership known as
Lincoln Atrium Limited (LAL), which owned in total, a 48.4848 percent
undivided interest in the Atrium. On September 29, 1993, LAL sold its
undivided interest for approximately $14,394,000 which resulted in a loss
of approximately $472,000. Lincoln received its 99 percent share of the
proceeds or $14,250,000.
F-9
<PAGE> 44
At December 31, 1995, approximately 1,168,000 square feet representing
approximately 99 percent of the project's net rentable space (including
garage retail) was committed under operating leases to tenants. Tenant
leases expire in various years to 2003, except for leases for 47 percent of
the building's net rentable space with Norwest Bank Denver National
Association which expire during 2003 and 2013. The tenant leases provide
for annual rentals, which generally include the tenants' proportionate
shares of certain building operating expenses. Included in revenues for the
year ended December 31, 1995 is approximately $2,844,000 and $11,155,000
from two major tenants who lease approximately 14 percent and 47 percent of
the building, respectively.
Fixed minimum future rental receipts and square feet expiring in various
years are as follows:
<TABLE>
<CAPTION>
Fixed Minimum Square
Rentals Feet
------- ----
<S> <C> <C>
1996 $13,871,000 20,000
1997 $12,913,000 172,000
1998 $12,164,000 46,000
1999 $10,580,000 201,000
2000 $9,648,000 105,000
2001 $9,125,000 32,000
2002 $8,839,000 19,000
2003 $7,769,000 157,000
2004 $6,472,000 -
2005 $6,472,000 -
Thereafter $49,081,000 416,000
</TABLE>
Norwest Bank Denver National Association had leased LAL's entire interest
in the Atrium under an operating lease for the period which began on
January 1, 1989 and ended September 29, 1993. All operating expenses,
including taxes, have been the responsibility of Norwest Bank Denver
National Association.
FINANCING: In 1987, Cornerstone, through OURC, placed a non-recourse
mortgage on One Norwest Center to collateralize the refinancing of its
equity interest in Lincoln through a loan with a face amount of
$120,000,178. This loan consisted of current coupon notes in the amount of
$98,000,000 and zero coupon notes with a face amount of $22,000,178. On
November 4, 1994, Cornerstone, based upon an agreement with its lenders,
prepaid the zero coupon notes and the mortgage lien related to such zero
coupon notes was released (Note 8).
RESTRUCTURING OF PARTNERSHIP: On December 30, 1988, Lincoln was
restructured whereby Cornerstone purchased an additional partnership
interest of 29 percent from HCL for $2,500,000 and acquired the tract of
land upon which One Norwest Center was developed for $2,900,000 and an
effective 48 percent interest in the Atrium for $17,100,000, both of which
were simultaneously contributed to Lincoln. In conjunction with the
partnership restructuring, Cornerstone is obligated to fund all capital
investment costs (as defined), which include the cost of leasehold
improvements, brokers fees, tenant inducements and other tenant leasing
costs incurred by Lincoln until December 31, 1998. During 1995, 1994, and
1993, Cornerstone contributed approximately $176,000, $601,000, and
$813,000, respectively, in leasing costs under this agreement.
For the period beginning with January 1, 1989, through December 31, 1998,
Cornerstone receives 100 percent of all earnings and cash flow, after a
preference payment of $1,620,000 per annum to HCL. Subsequent to December
31, 1998, such earnings and cash flow will be allocated 90 percent to
Cornerstone and 10 percent to HCL. For the years ended December 31, 1995,
1994 and 1993, Cornerstone received distributions from Lincoln of
approximately $12,715,000, $10,171,000 and $27,040,000, respectively. The
1993 distribution includes approximately $13,601,000 from the sale of the
Atrium.
F-10
<PAGE> 45
RELATED PARTY TRANSACTIONS: Hines Interests Limited Partnership (HILP), an
affiliate of HCL, manages the operations and maintenance of One Norwest
Center pursuant to a management agreement entered into between HILP and
Lincoln. As compensation for its services, HILP receives a monthly
management fee equal to 3 percent of the gross rents billed to tenants
during the month, plus 1.5 percent of the gross rents collected from the
garage operations. Lincoln paid a management fee of approximately $609,000
in 1995, $578,000 in 1994, and $594,000 in 1993. The initial term of this
management agreement expires December 31, 1998. In addition, HILP charged
Lincoln for other services rendered in the amounts of approximately
$1,152,000 for 1995, $1,070,000 for 1994 and $1,158,000 for 1993.
Condensed income statements for Lincoln for the years ended December 31,
1995, 1994 and 1993, respectively, were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
REVENUES
Revenues $ 21,652 $ 20,768 $ 21,107
Equity in earnings of LAL - - 478
--------- -------- --------
21,652 20,768 21,585
-------- -------- --------
EXPENSES
Operating expenses 7,271 8,208 7,809
Depreciation and amortization 5,054 5,282 5,321
Other expenses 213 198 353
-------- -------- --------
TOTAL EXPENSES 12,538 13,688 13,483
-------- -------- --------
NET INCOME $ 9,114 $ 7,080 $ 8,102
======== ======== ========
</TABLE>
Included in revenues are tenants' proportionate shares of certain building
operating expenses of approximately $6,644,000, $6,331,000 and $6,333,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
3. NWC LIMITED PARTNERSHIP
PARTNERSHIP MATTERS AND OPERATIONS: NWC was formed effective August 5,
1986. Cornerstone, through ARICO-Minneapolis, holds a 50 percent general
partnership interest and Sixth & Marquette Limited Partnership (S & M)
holds a 49 percent managing general partnership interest and a 1 percent
limited partnership interest. NWC is the owner of the fee interest in a
tract of land and a 55-story office tower, garage and improvements located
in Minneapolis, Minnesota, known as Norwest Center. Norwest Center was
designated as operational for financial reporting purposes as of April 1,
1989.
At December 31, 1995, approximately 1,118,000 square feet representing
approximately 100 percent of the project's net rentable space was committed
under operating leases to tenants. Tenant leases expire in various years
to 2009, except for a lease for 41 percent of the project's net rentable
space with Norwest Corporation expiring in 2018.
The tenant leases provide for annual rentals, which generally include the
tenants' proportionate share of certain building operating expenses.
Included in operating revenue for the year ended December 31, 1995 is
approximately $5,832,000 and $17,604,000 from two affiliates of S & M, who
lease approximately 18 percent and 41 percent of the building,
respectively.
F-11
<PAGE> 46
Fixed minimum future rental receipts and square feet expiring in various
years are as follows:
<TABLE>
<CAPTION>
Fixed Minimum Square
Rentals Feet
------- ----
<S> <C> <C>
1996 $19,917,000 6,000
1997 $20,006,000 20,000
1998 $19,244,000 253,000
1999 $16,714,000 62,000
2000 $15,730,000 104,000
2001 $14,338,000 2,000
2002 $14,049,000 47,000
2003 $14,589,000 -
2004 $14,610,000 98,000
2005 $14,407,000 -
Thereafter $198,556,000 526,000
</TABLE>
PREFERENCE RETURN TO CORNERSTONE: Cornerstone is currently entitled to an
annual preference return equal to 7 percent of its capital base
($92,300,000 at December 31, 1995), plus 50 percent of any remaining cash
flow. The preference period ends when certain performance levels have been
achieved for two consecutive years. At the end of the preference period,
Cornerstone will become a 60 percent general partner and will be entitled
to 60 percent of the cash flow of NWC after debt service. If operating
revenues (as defined) of NWC are insufficient in any calendar month to
distribute to Cornerstone an amount equal to the preference return accrued
to Cornerstone on a year-to-date basis, the amount of the deficiency is
accumulated and bears interest at the rate of 7 percent beginning on the
first day of the next succeeding calendar month, such interest compounds
each December 31. For the years ended December 31, 1995, 1994 and 1993,
Cornerstone received distributions from NWC of approximately $8,811,000,
$8,584,000 and $8,719,000, respectively. As of December 31, 1995,
Cornerstone is not due any cumulative preference deficit.
RELATED PARTY TRANSACTIONS: HILP, an affiliate of S & M, acts as manager
of Norwest Center pursuant to a management agreement entered into between
HILP and NWC, the form, terms and provisions of which shall be subject to
the reasonable approval of Cornerstone. As compensation for its services,
HILP receives a management fee equal to 3 percent of the Management Fee
Base (as defined), except for the Management Fee Base derived from the
Faegre & Benson lease and the Norwest Corporation lease for which it
receives 2.5 percent. The total management fee paid to HILP under this
agreement was approximately $905,000, $881,000 and $869,000 in 1995, 1994
and 1993, respectively. The initial term of this agreement expires
December 31, 2001.
In addition, HILP charged NWC approximately $1,055,000 in 1995, $990,000 in
1994 and $1,027,000 in 1993, for other services rendered. Included in
accounts payable, accrued expenses and other liabilities at December 31,
1995 and 1994, is approximately $5,000 and $500, respectively, related to
these other services rendered.
NWC incurred legal fees of approximately $19,000 in 1995, $20,000 in 1994
and $45,000 in 1993, to Faegre & Benson, an affiliate of S & M. NWC paid
approximately $54,000 in 1995 and $14,000 in 1993 to HILP for tenant
inducement costs for the building management office.
Included in deferred tenant receivables and tenant and other receivables
are amounts due from two affiliates of S & M of approximately $416,000 and
$25,143,000 at December 31, 1995 and $601,000 and $22,324,000 at December
31, 1994, respectively.
F-12
<PAGE> 47
Condensed income statements of NWC for the years ended December 31, 1995,
1994 and 1993, respectively, were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES $ 36,685 $ 35,798 $ 37,173
-------- --------- --------
Operating expenses 14,315 13,208 13,213
Interest expense 9,754 9,754 9,754
Depreciation and amortization 6,876 6,844 7,171
-------- --------- --------
TOTAL EXPENSES 30,945 29,806 30,138
-------- --------- --------
NET INCOME $ 5,740 $ 5,992 $ 7,035
======== ========= ========
</TABLE>
Included in revenues are tenants' proportionate shares of certain building
operating expenses of approximately $13,235,000, $12,821,000 and
$13,664,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
4. THIRD AND UNIVERSITY
LIMITED PARTNERSHIP
PARTNERSHIP MATTERS AND OPERATIONS: Cornerstone, through ARICO-Seattle,
holds a 50 percent general partnership interest in Third Partnership with
1212 Second Avenue Limited Partnership (1212 Partnership), the limited
partner and the managing general partner. Third Partnership was formed in
October 1986, and owns, leases and operates a 55-story office building and
related improvements known as Washington Mutual Tower located in Seattle,
Washington. Washington Mutual Tower was designated as operational for
financial reporting purposes as of April 1, 1989.
Effective December 30, 1993, Third Partnership accepted a deed and
assignment of leases and rents in lieu of foreclosure resulting from an
affiliate's failure to repay a loan to Third Partnership and assumed
ownership in commercial property (the Galland and Seneca Buildings) that is
adjacent to Washington Mutual Tower. Third Partnership also assumed the
tenant lease arrangements for the Galland and Seneca Buildings. The
Galland and Seneca Buildings have approximately 98,000 square feet of net
rentable space, of which approximately 98 percent was committed under
operating leases to tenants at December 31, 1995. The difference between
the recorded value of the note at the time of foreclosure and the estimated
fair market value of the collateral and net assets assumed has been
recorded as a loss of approximately $1,502,000 which was included in the
property's operating expenses for 1993. The estimated fair value of the
buildings was based on projected cash flows using a discount rate of 12
percent.
At December 31, 1995, Washington Mutual Tower has approximately 1,066,000
square feet of rentable space, of which approximately 97 percent was
committed under operating leases to tenants. The tenant leases provide for
annual rentals, which generally include the tenants' proportionate share of
certain building operating expenses. Base lease terms, excluding options
to renew leases, range from 1 to 17 years.
F-13
<PAGE> 48
Fixed minimum future rental receipts and square feet expiring for
Washington Mutual Tower and the Galland and Seneca Buildings in various
years are as follows:
<TABLE>
<CAPTION>
Fixed Minimum Square
Rentals Feet
------- ----
<S> <C> <C>
1996 $23,169,000 65,000
1997 $22,237,000 85,000
1998 $18,849,000 212,000
1999 $14,357,000 201,000
2000 $13,822,000 19,000
2001 $11,663,000 20,000
2002 $10,939,000 52,000
2003 $9,830,000 60,000
2004 $6,419,000 247,000
2005 $2,817,000 13,000
Thereafter $3,681,000 138,000
</TABLE>
Third Partnership leases office space to two affiliates of 1212
Partnership. The total rental income received from the affiliates was
$5,788,000, $6,085,000 and $5,888,000 in 1995, 1994 and 1993, respectively.
Future rental receipts include approximately $38,307,000 from these two
affiliates which aggregate approximately 18 percent of the net rentable
space of the project. This balance is net of a prepayment by one of these
affiliates of $2,500,000 for six months of rent.
Third Partnership also leases office space to a tenant which occupies
approximately 14 percent of the project's net rentable space. The total
rental income received from this tenant was $2,806,000, $3,563,000 and
$3,472,000 in 1995, 1994 and 1993, respectively. Future rental receipts
include approximately $32,778,000 from this tenant. This balance is net of
a prepayment by this tenant of $7,505,000 for approximately 13 years of
rent for one of its leased spaces in Washington Mutual Tower.
RESTRUCTURING OF THIRD PARTNERSHIP: On January 30, 1990, by agreement of
its partners, Third Partnership was restructured, primarily as a result of
cost overruns on Washington Mutual Tower project costs. In conjunction
with the restructuring, Cornerstone (1) converted its 50 percent limited
partnership interest to a general partnership interest, (2) agreed to
increase the funding obligation of TULP Funding by up to $10,000,000 to
fund certain costs, (3) obtained certain collateral from the managing
general partner to collateralize its cost overrun contributions, and (4)
increased the limit of commercial paper to be issued by TULP Funding to
$130,000,000. The partners agreed that certain finance related cost
overruns (special costs) would be shared partnership costs and funded
through the increased TULP Funding financing arrangement.
The total project costs for Washington Mutual Tower were approximately
$236,900,000, including cost overruns of $16,900,000. The cost overruns
are being funded from the TULP Funding financing arrangement and from
contributions by 1212 Partnership. As of December 31, 1995, 1212
Partnership had funded $10,800,000 of such overruns and $6,100,000 has been
funded under the TULP Funding financing arrangement.
PREFERENCE RETURN TO CORNERSTONE: During the construction period of the
Washington Mutual Tower, which ended on October 14, 1989, Cornerstone was
entitled to an annual preference return equal to 9 percent of its capital
base. After completion, the annual preference return equals 8 percent of
the capital base of $100,000,000, plus 50 percent of any remaining cash
flow. The preference return is payable on a current basis until the
earlier of (i) 5 years (April 27, 1995) after 1212 Partnership has made its
first capital contribution or (ii) net rental offsets (as defined) is
sufficient to meet debt service and current preference for 12 consecutive
months. After either of these tests are met, until the end of the
preference period, preference returns will accumulate and accrue interest
at 8 percent to the extent not funded by cash flow after debt service. As
of
F-14
<PAGE> 49
December 31, 1995, Cornerstone is due a cumulative preference deficit,
including accrued interest, of approximately $7,121,000 which will be
reduced as cash flow becomes available. The preference period ends when
certain performance levels have been achieved for two consecutive years.
At the end of the preference period, Cornerstone will become a 60 percent
general partner and will be entitled to 60 percent of the cash flow of the
partnership after debt service. For the years ended December 31, 1995, 1994
and 1993, Cornerstone received distributions from Third Partnership of
approximately $8,606,000, $5,331,000, and $5,367,000, respectively.
In 1995, Cornerstone contributed an additional $47,000,000 to the
Partnership as part of the debt refinancing (Note 8). According to the
Third Amended and Restated Articles of Limited Partnership, Cornerstone,
through ARICO-Seattle, receives a preferred return equal to 9.53 percent on
the additional equity contribution through December 31, 2003. Thereafter
the preference return will equal a rate to be determined. To the extent to
which ARICO-Seattle does not receive a preferred return equal to the
preferred return rate, the amount of the deficiency will accumulate and
earn interest at 8.74 percent. As of December 31, 1995, there is no
preferred return deficit on the additional equity contribution.
1212 Partnership receives priority distributions which are payable only
from the rentals received from a specified tenant and, accordingly, 1212
Partnership receives a special allocation of the related rental income. In
August 1994, this tenant renegotiated its lease and prepaid rent through
April 2007 in the amount of $7,505,000, which was distributed to 1212 as a
priority distribution, as noted above. Also, 1212 Partnership is obligated
to fund cash flow deficits of Third Partnership in an amount sufficient to
ensure that Cornerstone receives its preferred return. To the extent 1212
Partnership funds such deficits, it receives a special allocation of
interest expense.
RELATED PARTY TRANSACTIONS: Third Partnership has entered into a
management agreement with Wright Runstad Associates Limited Partnership
(WRALP), an affiliated entity, to provide building leasing and management
services. Third Partnership paid $1,901,000, $1,831,000 and $1,614,000
under this agreement during the years ended December 31, 1995, 1994 and
1993, respectively.
Third Partnership has also entered into an agreement with WRALP to perform
services related to the design, construction, development and leasing of
the project. The development agreement provided for a fixed fee of
$3,600,000, plus reimbursement of certain salaries and out-of-pocket
expenses. The final payment of $600,000 was paid during 1993 upon
achievement of certain project milestones as defined in the agreement.
Included in tenant and other receivables are amounts due from two
affiliates of 1212 Partnership totaling approximately $39,000 and $215,000
at December 31, 1995 and 1994, respectively. Included in accounts payable,
accrued expenses and unearned revenue at December 31, 1995 and 1994 is
approximately $2,761,000 and $3,511,000, respectively, of which
$2,500,000 and $3,279,000 represents prepaid rentals received from an
affiliate of 1212 Partnership for 1995 and 1994, respectively.
Condensed statements of operations of Third Partnership for the years ended
December 31, 1995, 1994 and 1993, respectively, were as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES $28,021 $27,566 $26,603
------- ------- -------
Operating expenses 8,624 8,905 9,126
Interest expense 9,726 10,909 10,897
Depreciation and amortization 9,040 8,848 9,297
Extraordinary loss 204 - -
------- ------- -------
TOTAL EXPENSES 27,594 28,662 29,320
------- ------- -------
NET INCOME (LOSS) $ 427 $(1,096) $(2,717)
======= ======== ========
</TABLE>
F-15
<PAGE> 50
Included in revenues are tenants' proportionate shares of certain building
operating expenses of approximately $1,288,000 and $1,322,000 for the years
ended December 31, 1995 and 1994, respectively.
5. 125 SUMMER STREET
On November 1, 1995, Cornerstone, through CStone-Boston, purchased 125
Summer Street in Boston, Massachusetts for a purchase price of
approximately $105 million of which $50 million was permanently financed
through Northwestern Mutual Life Insurance Company (Note 8). 125 Summer
Street is a twenty-two story, 93 percent leased Class A office building
located in the Central Business District of Boston, containing
approximately 450,000 square feet of office space, 13,000 square feet of
first floor retail space, and five levels of underground parking for
approximately 290 vehicles.
Fixed minimum future rental receipts and square feet expiring for 125
Summer Street in various years are as follows:
<TABLE>
<CAPTION>
Fixed Minimum Square
Rentals Feet
------- ----
<S> <C> <C>
1996 $14,916,000 2,000
1997 $10,277,000 95,000
1998 $9,610,000 60,000
1999 $9,361,000 10,000
2000 $1,968,000 116,000
2001 $688,000 119,000
2002 $586,000 0
2003 $303,000 7,000
2004 $295,000 7,000
2005 $221,000 10,000
Thereafter $0 0
</TABLE>
Pro forma Financial Information (Unaudited)
The pro forma financial information shown below is based on the
consolidated historical statements of Cornerstone after giving effect to
the acquisition of 125 Summer Street as if such acquisition took place on
January 1, 1994. The pro forma financial information is presented for
informational purposes only and may not be indicative of results that would
have actually occurred if the acquisition had been in effect at January 1,
1994. Also, they may not be indicative of the results that may be achieved
in the future.
<TABLE>
<CAPTION>
December 31, 1995 1994
------------------------------------------ ------------------- ---------------
<S> <C> <C>
Pro forma total revenue $105,084,000 $98,804,000
Pro forma loss before extraordinary items $ (5,488,000) $(2,640,000)
Pro forma net loss $ (9,933,000) $(3,221,000)
Pro forma net loss per share $ (0.58) $ (0.16)
</TABLE>
6. MORTGAGE NOTE RECEIVABLE
On December 19, 1995, the Company purchased two mortgage notes
collateralized by Tower 56 in New York City with a face value of
$54,000,000 and accrued interest of approximately $11,000,000 for a
purchase price of $30,150,000. The carrying amount of the mortgage note
receivable at December 31, 1995 includes the purchase price, closing
adjustments and related acquisition costs. The existing owner, Tower 56
Partners, has agreed to a "pre-packaged" bankruptcy plan through which it
will transfer title of Tower 56 to Cornerstone during the second quarter of
1996. At the time of the transfer, Cornerstone will make a payment of
$2,125,000 to two of the partners of Tower 56 Partners. Additionally, HRO
International, an affiliate of Tower 56
F-16
<PAGE> 51
Partners, will manage the building under a five year management agreement
for a fee of 3 percent of gross revenues and will receive one-third of the
cash flow above that which provides Cornerstone a 9 percent return on its
Capital Base. HRO International will also receive one-third of the
property sale proceeds above that which provides Cornerstone with a 12
percent cumulative internal rate of return.
7. NOTES RECEIVABLE
During the December 30, 1988 restructuring of Lincoln, Cornerstone
purchased $10,000,000 of ground rent notes from Lincoln Building
Corporation, the prior ground lessor. These notes receivable, which bear
interest at approximately 10.5 percent, are payable in 120 equal monthly
installments of $135,000 through December 1998 by HCL. HCL has pledged its
priority distribution and 10 percent partnership interest under the amended
partnership agreement of Lincoln to collateralize payment of these
promissory notes. The balances of the notes receivable at December 31,
1995 and 1994 were approximately $4,153,000 and $5,272,000, respectively.
On December 31, 1992, Cornerstone completed a loan agreement committing to
loan WRALP $1,000,000 for a term of 10 years. The loan bears interest at 8
percent and is collateralized by first priority pledges of the interests of
WRALP in 1201 Third Avenue Limited Partnership (a Washington limited
partnership and the sole general partner of 1212 Partnership) and any other
interests WRALP held which directly or indirectly related to Third
Partnership. During 1993 and 1994 interest accreted on the funding at 8
percent, compounded monthly. During 1995, interest accreted on the funding
until the principal balance became equal to $1,000,000, at which time,
interest became payable monthly. During December, 1995, the loan was
repaid in full by WRALP and associated liens were released. The balance of
the loan receivable at December 31, 1994 was approximately $757,000.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
PROPERTY DESCRIPTION 12/31/95 12/31/94
------------------------ ---------------------- -------------------------------
<S> <C> <C> <C>
One Norwest Center Interest Bearing Notes $ 98,000,000 $ 98,000,000
Norwest Center Mortgage Loan 110,000,000 -
Washington Mutual Tower Mortgage Loan 79,100,000 -
125 Summer Street Mortgage Loan 50,000,000 -
Corporate Term Loan 32,500,000 32,500,000
------------------------------
Total $369,600,000 $130,500,000
==============================
</TABLE>
INTEREST BEARING NOTES: On February 17, 1987, Cornerstone, through its
wholly-owned subsidiary OURC, issued notes under a private placement
offering and received $107,000,000 in proceeds, as follows:
<TABLE>
<S> <C>
Interest-bearing notes $ 98,000,000
Zero coupon notes 9,000,000
-------------
$ 107,000,000
=============
</TABLE>
The interest-bearing notes mature on February 17, 1997, and bear interest
from February 17, 1987, at 8.893 percent, payable semi-annually.
On November 4, 1994, Cornerstone entered into an amending agreement with
the holders of the above mentioned notes in order to prepay the outstanding
balance of the zero coupon notes. The total payment of approximately
$18,529,000 was composed of approximately $17,948,000 of accreted principal
on the notes and approximately $581,000 in prepayment penalties, which was
recorded as an extraordinary loss in the fourth quarter of 1994. The zero
coupon notes had a yield to maturity of 9.141 percent, compounded
semi-annually, and such yield was recognized as interest expense and
accreted to the balance of the zero coupon notes.
F-17
<PAGE> 52
All the notes are collateralized by a non-recourse mortgage on One Norwest
Center and an assignment of all leases and rents, and certain other
property, rights and interests related to One Norwest Center (Note 2). In
addition, as of December 31, 1995, Cornerstone had $4,393,000, recorded as
restricted cash, on deposit with the trustee to meet interest payments on
the notes. As of December 31, 1994, Cornerstone had a $2,905,000 letter of
credit and $1,453,000, which is included in restricted cash, on deposit
with the trustee to meet interest payments on the notes.
Additionally, Cornerstone will pay to DBNY, for an interest rate swap
agreement used to fix the interest rates on the notes, an amount equal to
0.752 percent on a notional amount of $107,000,000 throughout the term of
the notes. This amount has been treated as a yield adjustment on the
long-term debt and has been included in interest expense. Payments on the
swap are due January 30 and July 30 each year until the termination date of
July 30, 1998.
As protection against market interest rates rising prior to the maturity of
the above stated notes, on September 29, 1993, Cornerstone entered into an
interest rate swap agreement with Deutsche Bank AG with an effective
starting date of February 18, 1997. The interest rate swap agreement is
for a fixed rate of 7.14 percent on a notional amount of $98,000,000 for a
period of ten years. The swap agreement contains a mutual termination
clause by which either party may terminate the swap on February 18, 1997 at
its then current market value.
TERM LOAN: On August 8, 1995, the $32,500,000 term loan was assigned to
Deutsche Bank AG London and extended through December 31, 2003, at an
interest rate of 5.00 percent. Prior to August 8, 1995 the term loan was
with DBNY and Deutsche Bank Cayman Islands Branch bearing interest at a
rate of LIBOR plus 1.50 percent, a portion of which had been fixed at a
rate of 9.66 percent through an interest rate swap agreement with DBNY. The
term loan is collateralized by the Company's pledge of its partnership
interest in Lincoln and all of its stock in ARICO-Denver. The loan must be
prepaid at par upon the sale of either Norwest Center or Washington Mutual
Tower. The balance of the term loan at December 31, 1995 and December 31,
1994 was $32,500,000.
MORTGAGE LOANS: On April 7, 1995, the Third Amended and Restated Promissory
Note, dated as of August 5, 1986, made by NWC Limited Partnership payable
to the order of NWC Funding Corporation in the original principal amount of
$110,000,000 was sold to Norwest Bank (Note 2). The proceeds from the sale
were used to prepay the outstanding credit facility NWC Funding Corporation
had with Deutsche Bank AG (Note 9). The loan matures December 31, 2005 and
bears interest at the rate of 8.74 percent. The loan is collateralized by
a first mortgage on Norwest Center and assignment of all leases and rents.
On September 28, 1995, Third Partnership, through Teacher's Insurance and
Annuity Association, refinanced $79,100,000 of outstanding debt
collateralized by Washington Mutual Tower. These proceeds, in addition to
the preferred stock proceeds (Note 10), were used to prepay the outstanding
credit facility TULP Funding Corporation had with Deutsche Bank AG (Note
9). The loan matures September 30, 2005 and bears interest at the rate of
7.53 percent with the outstanding principal due at maturity. The loan is
collateralized by a first mortgage on Washington Mutual Tower and
assignment of all leases and rents.
The acquisition of 125 Summer Street (Note 5) was permanently financed with
a $50,000,000 mortgage loan from Northwestern Mutual Life Insurance
Company. The loan bears interest at the rate of 7.20 percent and matures
on January 1, 2003. Payment terms on the loan call for interest only
payments for the first 5 years and a 25 year principal amortization
thereafter. The loan is collateralized by a first mortgage on 125 Summer
Street and assignment of all leases and rents.
F-18
<PAGE> 53
9. LINES OF CREDIT
CORNERSTONE
DBNY has provided Cornerstone with a $12,000,000 revolving credit line
which is available for general corporate purposes at a rate equivalent to
LIBOR, plus 0.625 percent, or, at Cornerstone's option, the then prime
interest rate, as well as for the issuance of standby letters of credit at
a rate of 0.375 percent. At December 31, 1995, none of the credit line had
been drawn. The revolving credit line was renewed for a one year term on
June 30, 1995.
NWC FUNDING
On April 7, 1995 NWC Funding's letter of credit agreement with Deutsche
Bank AG was terminated and the lien on Norwest Center was released. The
outstanding balance was paid in full from the sale of NWC's Promissory Note
payable to the order of NWC Funding (Note 8). The unamortized deferred
costs related to the formation of the letter of credit agreement were
written-off and the associated interest rate swap agreement was terminated
and included in the net $184,000 extraordinary loss. The interest rates
charged on the loans were current commercial paper rates plus 0.125
percent, but through an interest rate swap agreement had been effectively
set at 8.095 percent for 1995, 1994 and from July 9, 1993 to December 31,
1993. The effective rate for the period January 1, 1993 through July 8,
1993 was 8.11 percent. At December 31, 1994, loans in the amount of
$109,956,000 were outstanding under the letter of credit agreement.
TULP FUNDING
On September 28, 1995 TULP Funding's letter of credit agreement with
Deutsche Bank AG was terminated and the lien on Washington Mutual Tower was
released. The outstanding balance was paid in full from the Third
Partnership refinancing (Note 8) and preferred stock proceeds (Note 10).
An extraordinary loss of approximately $4,261,000 was recorded on the
transaction resulting from the write-off of the unamortized deferred costs
related to the formation of the letter of credit agreement and the
termination of the associated interest rate swap agreement. The interest
rates charged on the loans were current commercial paper rates plus 0.125
percent, but through an interest rate swap agreement had been effectively
set at 7.19 percent for 1995, 1994 and from August 19, 1993 to December 31,
1993. The effective interest rate for the period January 1, 1993 through
August 18, 1993 was 7.05 percent. At December 31, 1994, loans in the
amount of $126,511,000 were outstanding under the letter of credit
agreement.
10. CAPITAL STOCK
On June 19, 1995, the Company increased the number of authorized shares
from 40,000,000 shares of common stock, without par value, to 115,000,000
shares of capital stock, without par value, of which 15,000,000 shares are
preferred stock and 100,000,000 shares are common stock.
On August 4, 1995, the Company received $90,447,500 gross proceeds from the
placement of 6,325,000 new shares of common stock at a price of $14.30 per
share with retail investors in Germany through underwriters led by Deutsche
Bank. The net proceeds were used for the purchase of 125 Summer Street and
the Tower 56 mortgage note.
On August 4, 1995, 3,030,303 preferred shares were issued to Deutsche Bank
for gross proceeds of $50,000,000. The preferred shares are 7.0 percent
cumulative and convertible into common stock at $16.50 per share any time
after August 4, 2000. At December 31, 1995 there was approximately
$1,449,000 or $0.48 per share in dividends in arrears on these preferred
shares. The net proceeds from the preferred share issuance were used to
retire existing indebtedness.
On December 27, 1995, through a dividend reinvestment plan available to all
shareholders, Cornerstone received proceeds of approximately $2,840,000 and
issued an additional 207,302 shares of common stock to shareholders.
F-19
<PAGE> 54
11. ADVISORY AGREEMENT
Effective July 1, 1995, Cornerstone became self managed and terminated its
advisory agreement dated June 30, 1991 with Deutsche Bank Realty Advisors,
Inc. (DBRA) under which DBRA acted as Cornerstone's investment advisor and
provided assistance in various administrative functions. The original term
of the agreement was for one year but was automatically renewed for
additional one year terms. In return for its services, DBRA was entitled
to a quarterly fee of up to 0.0875 percent of Cornerstone's total asset
value (with real estate assets based on the most recent appraised values)
as of the end of the respective quarter. DBRA was also entitled to an
incentive fee based on annual distributions to shareholders greater than
$1.15 per share. DBRA was entitled to a transaction fee equal to 1 percent
of the total value of any investments, refinancings or sales. In addition,
DBRA was entitled to receive reimbursement for out-of-pocket expenses in
connection with providing these services. During 1995, 1994 and 1993, DBRA
earned $1,050,000, $2,334,000 and $2,307,000, respectively, relating to
this agreement. As of December 31, 1994, accounts payable, accrued
expenses and other liabilities included approximately $609,000 relating to
this agreement.
12. LONG-TERM INCENTIVE COMPENSATION
During 1995, the Board of Directors approved the issuance of stock options
to certain officers, covering 1,000,000 shares of common stock. The
purchase price of shares subject to each option granted equal their fair
market value at the date of grant. The options have a ten-year term and
are exercisable after one year from the date of grant, at the rate of 20%
per year. At December 31, 1995, 137,500 shares were available for granting
further options and options for 862,500 shares were outstanding at $14.30
per share, of which none were exercisable.
During 1995, 186,713 restricted stock grants were awarded to officers. The
grants vest over a five year period, 13.333% on June 30 of 1996, 1997,
1998, and 1999; with the balance of 46.668% vesting on June 30, 2000.
Deferred compensation of $2,670,000, or $14.30 per grant share, is being
amortized according to the respective amortization schedule for each
vesting period noted above, with the unamortized balance shown as a
deduction from shareholders' equity.
13. UNREALIZED LOSS ON INTEREST RATE SWAP
The Company does not trade in derivative instruments but rather uses
interest rate swap agreements to hedge the interest rate risk on its
financings with the intention of obtaining the lowest effective interest
cost on its indebtedness. The unrealized loss of $7,672,000 represents the
estimated amount, at December 31, 1995, that the Company would pay to
terminate the $98,000,000 notional amount forward interest rate swap with a
maturity date of February 17, 2007. The Company has not terminated this
swap agreement and intends to structure its future financings in accordance
with the policy stated above. The future unrealized mark to market
adjustment on this swap agreement will fluctuate with market interest
rates.
14. RELATED PARTY TRANSACTIONS
Interest earned by Deutsche Bank as creditor to Cornerstone for the years
ended December 31, 1995, 1994 and 1993 was approximately $11,816,000,
$22,077,000 and $22,937,000, respectively. Deutsche Bank also earned
approximately $4,522,000 in underwriting fees for the year ended December
31, 1995.
For the year ended December 31, 1995, an affiliate of Deutsche Bank earned
$175,000 in marketing fees and approximately $452,000 in underwriting fees.
15. RETIREMENT PLANS
The eligible employees of the Company participate in a noncontributory
age-weighted profit sharing plan. The Company's contribution to such plan
was approximately $76,000 for the year ending December 31, 1995.
F-20
<PAGE> 55
The eligible employees of the Company also participate in a contributory
savings plan (401K). Under the plan, the Company matches contributions
made by eligible employees based on a percentage of the employee's salary.
The Company will match 100 percent of contributions up to 5 percent of such
employee's salary with an annual maximum matching contribution of $4,000
per employee. The Company's matching contribution was approximately
$13,000 for the year ending December 31, 1995.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board has issued Statement of Accounting
Standards No. 107, Disclosures About Fair Value of Financial Instruments
(SFAS 107) which became effective in 1992. Under SFAS 107, Cornerstone is
required to disclose the fair value of financial instruments for which it
is practicable to estimate that value.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments at December 31, 1995:
MORTGAGE NOTE RECEIVABLE
The carrying amount of the mortgage note receivable at December 31, 1995
approximates its fair market value at December 31, 1995.
NOTES RECEIVABLE
The fair value of the note receivable at December 31, 1995 from HCL is
approximately $4,394,000 based on the present value of expected future note
payments using a market discount rate of 6.67 percent (Note 7). The fair
value of the note receivable at December 31, 1994 from HCL was
approximately $5,402,000 based on the present value of expected future note
payments using a market discount rate of 9.22 percent (Note 7).
LONG-TERM DEBT (NOTE 8)
The fair value of Cornerstone's long-term debt at December 31, 1994 was not
significantly different than the carrying amount at December 31, 1994 since
the interest rates on the existing debt represented rates that management
believed were currently offered for long-term financing. The fair value of
the $32,500,000 term loan at December 31, 1994 approximated its carrying
value at December 31, 1994 as the interest rate on the loan adjusted with
changes in the market. The fair values of the following debt instruments
for December 31, 1995 were calculated based on the present value of
expected future cash payments and market discount rates:
<TABLE>
<CAPTION>
12/31/95
Fair Value
------------
<S> <C>
One Norwest Center-Interest Bearing Notes $100,292,000
Norwest Center-Mortgage Loan $126,205,000
Washington Mutual Tower-Mortgage Loan $79,100,000
125 Summer Street-Mortgage Loan $50,000,000
Corporate-Term Loan $28,805,000
</TABLE>
BORROWINGS UNDER LINES OF CREDIT
The carrying amount of the borrowings under lines of credit at December 31,
1994 approximated market at December 31, 1994 as the interest rate on the
lines adjusted with changes in the market.
F-21
<PAGE> 56
UNRECOGNIZED FINANCIAL INSTRUMENTS
The fair value of interest rate swaps, used for hedging purposes, is the
estimated amount that the Company would (pay) or receive to terminate the
swap agreements at December 31, 1995 and 1994 taking into account current
interest rates and the creditworthiness of the counterparty. The following
fair values have been obtained from the swap dealer as of December 31, 1995
and 1994 (Note 1):
<TABLE>
<CAPTION>
12/31/95 12/31/94
Notional Amount Maturity Date Fair Value Fair Value
--------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
$107,000,000 July 30, 1998 $ (2,252,000) $ (2,617,000) (Note 8)
$ 98,000,000 February 17, 2007 $ 5,401,000 (Note 8)
$ 21,000,000 February 18, 1997 $ (751,000) (Note 8)
$120,000,000 December 31, 2003 $ 6,218,000 (Note 9)
$110,000,000 December 31, 2004 $ 404,000 (Note 9)
</TABLE>
All of the above swaps are considered to be operating hedges for federal
income tax purposes.
17. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was approximately $32,609,000, $32,075,000 and
$30,363,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
NON-CASH INVESTING AND FINANCING ACTIVITIES: Effective December 30, 1993,
Third Partnership accepted a deed and assignment of leases and rents in
lieu of foreclosure on a loan due from an affiliate, and assumed ownership
in commercial property adjacent to Washington Mutual Tower. The estimated
fair market value of the collateral and net assets assumed was deemed to be
approximately $5,800,000.
18. SUBSEQUENT EVENTS
Effective January 1, 1996, Cornerstone, through its wholly-owned qualified
REIT subsidiary 1700 Lincoln Inc., purchased HCL's General and Limited
partnership interests in Lincoln. In exchange for its interests, HCL
received a $12,925,976 convertible promissory note and 349,650
newly-issued shares of common stock of the Company. Additionally, the
management agreement between Lincoln and HILP was extended through
December 31, 2005.
19. IMPACT OF NEW ACCOUNTING STANDARDS
During 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("SFAS #121"). Cornerstone's
policy is to assess any impairment in value by making a comparison of the
current and projected cash flows of the property over its remaining useful
life, on an undiscounted basis, to the carrying amount of the property.
Such carrying amounts would be adjusted, if necessary, to reflect the
fair value of the assets in accordance with the provisions of SFAS #121.
During 1995, the Financial Accounting Standards Board issued SFAS #123,
"Accounting for Stock-Based Compensation." Cornerstone is currently
assessing the impact of this statement which will be effective for fiscal
years beginning on or after December 15, 1995.
F-22
<PAGE> 57
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D
- ------------------------------------------------------------------------------------------------------------------
Cost capitalized
subsequent to
Initial cost to company acquisition
------------------------------------------------
Buildings &
Description Encumbrances Land Improvements Improvements
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land One Norwest Center $ 2,900,000
Buildings & Imp. One Norwest Center $ 98,000,000 12,903,000 116,269,579
Def. Lease Costs One Norwest Center 2,583,000 16,742,421
--------------------------------------------
2,900,000 15,486,000 133,012,000
--------------------------------------------
Land Norwest Center 18,000,000
Buildings & Imp. Norwest Center 110,000,000 32,620,255 108,406,611
Def. Lease Costs Norwest Center 992,691 45,190,609
--------------------------------------------
18,000,000 33,612,946 153,597,220
--------------------------------------------
Land Washington Mutual Tower 21,166,947 6,108
Buildings & Imp. Washington Mutual Tower 79,100,000 38,851,336 147,599,029
Def. Lease Costs Washington Mutual Tower 4,301,522 2,267,214
--------------------------------------------
21,166,947 43,152,858 149,872,351
--------------------------------------------
Land 125 Summer Street 15,750,000
Buildings & Imp. 125 Summer Street 50,000,000 89,250,000 457,296
--------------------------------------------
15,750,000 89,250,000 457,296
- ------------------------------------------------------------------------------------------------------------------
Grand Total $337,100,000 $57,816,947 $181,501,804 $436,938,867
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Column A Column E Column F
- -------------------------------------------------------------------------------------------------------------------
Gross amount at which carried at close of period
------------------------------------------------
Buildings & Accumulated
Description Land Improvements Total depreciation
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land One Norwest Center $ 2,900,000 $ 2,900,000
Buildings & Imp. One Norwest Center 129,172,579 $129,172,579 43,838,251
Def. Lease Costs One Norwest Center 19,325,421 $ 19,325,421 15,567,290
---------------------------------------------------------------
2,900,000 148,498,000 151,398,000 59,405,541
---------------------------------------------------------------
Land Norwest Center 18,000,000 $ 18,000,000
Buildings & Imp. Norwest Center 141,026,866 $141,026,866 31,991,739
Def. Lease Costs Norwest Center 46,183,300 $ 46,183,300 24,693,528
---------------------------------------------------------------
18,000,000 187,210,166 205,210,166 56,685,267
---------------------------------------------------------------
Land Washington Mutual Tower 21,173,055 $ 21,173,055
Buildings & Imp. Washington Mutual Tower 186,450,365 $186,450,365 54,706,705
Def. Lease Costs Washington Mutual Tower 6,568,736 $ 6,568,736 3,996,187
---------------------------------------------------------------
21,173,055 193,019,101 214,192,156 58,702,892
---------------------------------------------------------------
Land 125 Summer Street 15,750,000 $ 15,750,000
Buildings & Imp. 125 Summer Street 89,707,296 $ 89,707,296 373,780
---------------------------------------------------------------
15,750,000 89,707,296 105,457,296 373,780
- -------------------------------------------------------------------------------------------------------------------
Grand Total $57,823,055 $618,434,563 $676,257,618 $175,167,480
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Column A Column G Column H Column I
- ----------------------------------------------------------------------------------------------------
Life on which
depreciation in
latest income
Date of statements is
Description Construction Date acquired computed
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land One Norwest Center 1988
Buildings & Imp. One Norwest Center 1981 1981-1995 20-35 Years
Def. Lease Costs One Norwest Center 1981-1995 05-10 Years
Land Norwest Center 1986
Buildings & Imp. Norwest Center 1986 1986-1995 20-35 Years
Def. Lease Costs Norwest Center 1986-1995 10-20 Years
Land Washington Mutual Tower 1986-1987
Buildings & Imp. Washington Mutual Tower 1986 1986-1995 08-40 Years
Def. Lease Costs Washington Mutual Tower 1986-1995 01-18 Years
Land 125 Summer Street 1989 1995
Buildings & Imp. 125 Summer Street 1995 35 Years
- ----------------------------------------------------------------------------------------------------
Grand Total
====================================================================================================
</TABLE>
F-23
<PAGE> 58
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
December 31, 1995
(continued)
Reconciliation of "Real Estate and Accumulated Depreciation"
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
INVESTMENT IN REAL ESTATE
Balance at beginning of period $ 571,831,104 $ 571,462,068 $ 357,315,798
Additions resulting from consolidation
of real estate partnerships:
Land - - 18,000,000
Buildings and Improvements - - 187,350,989
----------------------------------------------
- - 205,350,989
Additions during the period:
Galland and Seneca Buildings (1) 5,700,000
Land 15,750,000
Deferred lease costs 409,693
Buildings and improvements 90,469,121 1,847,705 3,095,281
Deductions during the period:
Retirements and writeoffs 2,202,300 1,478,669 -
----------------------------------------------
Balance at end of period $ 676,257,618 $ 571,831,104 $ 571,462,068
==============================================
ACCUMULATED DEPRECIATION
Balance at beginning of period $ 154,227,950 $ 132,930,479 $ 77,593,719
Additions resulting from consolidation
of real estate partnerships: - 40,712,266
Additions charged to operating expenses 23,141,830 22,776,140 14,624,494
Deductions due to retirements and writeoffs 2,202,300 1,478,669 -
----------------------------------------------
Balance at end of period $ 175,167,480 $ 154,227,950 $ 132,930,479
==============================================
</TABLE>
(1) Deed in lieu of foreclosure on a loan receivable from an affiliate of Third
and University Limited Partnership.
F-24
<PAGE> 59
CORNERSTONE PROPERTIES INC.
MORTGAGE LOANS ON REAL ESTATE
SCHEDULE IV
December 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------------------------------------------------------------------------------
Final maturity Periodic Payment Face amount
Description Interest rate date Terms Prior Liens of mortgages
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tower 56
First Mortgage 8.8% 03/24/97 Semi-Annual N/A $54,000,000
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Column A Column G Column H
- ----------------------------------------------------------------------
Principal amount of
Carrying amount loans subject to delinquent
Description of mortgages principal or interest
- ----------------------------------------------------------------------
<S> <C> <C>
Tower 56
First Mortgage $30,731,000.00 SEE NOTE (6)
</TABLE>
<TABLE>
Reconciliation of Mortgage loans on real estate.
- ---------------------------------------------------------------------------------------
<S> <C>
Balance at beginning of period $ -
Additions during period:
New mortgage loans 30,731,000
Deductions during period: -
----------------
Balance at close of period $ 30,731,000
================
</TABLE>
F-25
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<S> <C>
*3.1 Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of the Company's
Amendment No. 1 to form 10-Q for the quarter ended June 30, 1987.
*3.1(a) Certificate of voting powers, designations, preferences, limitaitons, restrictions and relative
rights of 7% cumulative convertible preferred stock of ARICO America Realestate Investment
Company.
*3.5 Bylaws, as amended as of December 8, 1995.
4.1 Specimen Common Stock Certificates, incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form 10.
4.2 Indenture, dated as of February 17, 1987, between Manufacturers Hanover Trust Company and One
United Realty Corporation, a wholly owned subsidiary of the Company, incorporated by reference to
Exhibit 4.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1987.
4.3 Forms of Interest Bearing and Zero Coupon Notes (included in Exhibit 4.2).
*4.4 Letter Agreement, dated July 10, 1996, with Deutsche Bank AG.
10.1 Lease Agreement dated February 5, 1981 between Lincoln Building corporation, Lessor, and 1700
Lincoln Limited, Lessee dated May 5, 1981, incorporated by reference to exhibit 10.1 of the
Company's Registration Statement on Form 10.
10.7 Letter dated December 15, 1986 to NWC Limited Partnership from the Company, incorporated by
reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the year ended December
31, 1986.
10.8 Note Purchase Agreement, dated as of February 17, 1987, between seven financial institutions and
One United Realty Corporation, a wholly owned subsidiary of the Company,
</TABLE>
<PAGE> 61
<TABLE>
<S> <C>
incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1987.
10.9 Deed of Trust, Mortgage, Security Agreement, Financing Statement and Assignment of Leases and
Rents, dated as of February 17, 1987, made by 1700 Lincoln Limited Partnership to the Company,
incorporated by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1987.
10.10 Mortgage Assignment and Pledge Agreement, dated as of February 17, 1987, by One United Realty
Corporation, a wholly-owned subsidiary of the Company, to Manufacturers Hanover Trust Company, as
Trustee, incorporated by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1987.
10.11 Financing Consent Agreement, dated as of August 5, 1986, by and among the Company, Gerald D.
Hines, Hines Ltd., Hines Colorado Corp. and 1700 Lincoln Limited Partnership, incorporated by
reference to exhibit 10.11 of the Company's Annual Report on Form 10-K for the year ended December
31, 1987.
10.21 Note Purchase Agreement executed as of December 30, 1988 among the Company, Lincoln Building
Corporation, Hines Colorado Limited, 1700 Lincoln Limited and Lincoln Atrium Limited, incorporated
by reference to exhibit 10.21 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1988.
10.36 Amended and Restated Advisory Agreement effective as of December 3, 1993, between the Company and
Deutsche Bank Realty Advisors, Inc.
10.37 Third Amended and Restated Articles of Limited Partnership of 1700 Lincoln Limited effective as of
April 20, 1989.
10.38 First Amendment to Third Amended and Restated Articles of Limited Partnership of 1700 Lincoln
Limited dated as of September 28, 1993.
10.39 Atrium Purchase and Sale Agreement dated September 28, 1993 between Lincoln Atrium Limited and
Lincoln Building Corporation.
10.40 Amended and Restated Articles of Limited Partnership of NWC Limited Partnership effective as of
September 29, 1993.
</TABLE>
<PAGE> 62
<TABLE>
<S> <C>
10.41 Third Amended and Restated Promissory Note between NWC Limited Partnership and NWC Funding
Corporation dated as of September 29, 1993.
10.43 Second Amendment to Credit Facility Agreement dated as of September 29, 1993 between NWC Funding
Corporation and NWC Limited Partnership.
10.47 Deed-In-Lieu Agreement dated as of December 29, 1993 between Block Six Limited Partnership and
Third and University Limited Partnership.
10.49 Amended and Restated Agreement dated November 4, 1994, by and among 1700 Lincoln Limited, One
United Realty Corporation, Chemical Bank and the Company, incorporated by reference to the Note
Purchase Agreement of Exhibit 10.8, the Deed of Trust, Mortgage, Security Agreement, Financing
Statement and Assignment of Leases and Rents of Exhibit 10.9 and the Mortgage Assignment and
Pledge Agreement of Exhibit 10.10.
*10.50 Deed of Trust Note, dated September 27, 1995, made by Third and University Limited Partnership to
Teachers Insurance and Annuity Association of America.
*10.51 Third Amended and Restated Articles of Limited Partnership of Third and University Limited
Partnership, dated as of September 27, 1995
*10.52 Assignment of Recorded Documents, dated as of April 7, 1995, by NWC Funding Corporation to Norwest
Corporation
*10.53 Assignment of Documents, dated as of April 7, 1995, by NWC Funding Corporation to Norwest
Corporation
*10.54 Purchase and Sale Agreement of 125 Summer Street, dated as of September 27, 1995, between Michael
C. Fong, Osama El Haddad, and Mark S. James as Trustees of Lincoln Summer Realty Trust, and
Cornerstone Properties Inc.
*10.55 Mortgage and Security Agreement, dated as of December 20, 1995, between CStone-Boston and The
Northwestern Mutual Life Insurance Company.
*10.56 Loan Sale Agreement, dated as of November 21, 1995, between The Sakura Bank, LTD. and Cornerstone
Properties Inc.
</TABLE>
<PAGE> 63
<TABLE>
<S> <C>
*10.59 Credit Agreement, dated as of August 8, 1995, between ARICO America Realestate Investment Company
and Deutsche Bank AG London.
*11.1 Statement of Computation of Earnings Per Share.
21 List of Subsidiaries, incorporated by reference to Exhibit 22.1 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1988.
*24.1 Powers of Attorney.
*27 For EDGAR filing purposes only, this report contains Exhibit 27, Financial Data Schedule.
</TABLE>
- -----------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
CORNERSTONE PROPERTIES INC.
Pursuant to the provisions of Section 78.403 of the Nevada
Revised Statutes, the Articles of Incorporation of Cornerstone Properties Inc.,
as amended to the date of this certificate, are hereby restated as follows:
ARTICLE 1
NAME
Effective at 12:01 a.m. on September 18, 1995, the name of the
Corporation is CORNERSTONE PROPERTIES INC.
ARTICLE 2
PERIOD OF DURATION
The period of duration of the Corporation is perpetual.
ARTICLE 3
PURPOSE
The purpose for which the Corporation is organized is to
engage in the business of making real estate investments (directly or as a
partner), including, without limitation, the acquisition, development,
encumbrance and disposal of real estate or interests in real estate and all
activities related thereto, either on the Corporation's own behalf or on behalf
of other persons or entities, to do all acts and things in furtherance of such
purposes and to engage in any lawful activity.
ARTICLE 4
DATA RESPECTING SHARES
Section 4.01 Authorized Shares. The aggregate number of
shares that the Corporation shall have the authority to issue is One Hundred
Fifteen Million (115,000,000)
<PAGE> 2
shares of Capital Stock consisting of Fifteen Million (15,000,000) shares of
Preferred Stock with no par value per share and One Hundred Million
(100,000,000) shares of Common Stock with no par value per share.
The designations and powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the shares of each
class are as follows:
1. The Preferred Stock is to be issued in one or more
series, from time to time, with each such series to have such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the creation of such
series adopted by the Board of Directors of the Corporation, subject to the
limitations prescribed by law and in accordance with the provisions hereof, the
Board of Directors being hereby expressly vested with authority to adopt any
such resolution or resolutions. The authority of the Board of Directors with
respect to each series shall include, but not be limited to, the determination
or fixing of the following:
(i) The number of shares to constitute the series and the
distinctive designation thereof;
(ii) The dividend rate on the shares of the series,
whether dividends shall be cumulative, and, if so, from what date or
dates;
(iii) Whether or not the shares of the series shall be
redeemable and, if redeemable, the terms and provisions upon which the
shares of the series may be redeemed and the premium, if any, and any
dividends accrued thereon which the shares of the series shall be
entitled to receive upon redemption thereof;
(iv) Whether or not the shares of the series shall be
subject to the operation of a retirement or sinking fund to be applied
to the purchase or redemption of such shares for retirement and, if
such retirement or sinking fund be established, the annual amount
thereof and the terms and provisions relative to the operation
thereof;
(v) Whether or not the shares of the series shall be
convertible into shares of any class or classes, with or without par
value, or of any other series of the same class, and, if convertible,
the terms of conversion, the conversion price or prices or the rate at
which such conversion may be made and the method, if any, of adjusting
the same;
(vi) The rights of the shares of the series in the event
of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation;
(vii) The restrictions, if any, on the payment of dividends
upon, and the making of distributions to, any class of stock ranking
junior to the shares of the
2
<PAGE> 3
series, and the restrictions, if any, on the purchase or redemption of
the shares of any such junior class;
(viii) Whether the series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms
of such voting rights; and
(ix) Any other relative rights, preferences and
limitations of that series.
2. Holders of Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at the rates fixed by the
Board of Directors for the respective series, before any dividends shall be
declared and paid, or set apart for payment, on the Common Stock with respect
to the same dividend period.
3. Any shares of any series of Preferred Stock which
shall at any time have been redeemed or purchased or otherwise retired pursuant
to law by the Corporation, upon compliance with the applicable provisions of
law, and any such shares surrendered to the Corporation for conversion or
exchange into or for other shares of the Corporation, shall have the status of
authorized and unissued shares of Preferred Stock.
4. Whenever, at any time, dividends on the then
outstanding Preferred Stock as may be required with respect to any series
outstanding shall have been paid or declared and set apart for payment on the
then outstanding Preferred Stock, and after complying with respect to any
retirement or sinking fund or funds for any series of Preferred Stock, the
Board of Directors may, subject to the provisions of the resolution or
resolutions creating any series of Preferred Stock with respect to the payment
of dividends on any series of Preferred Stock, declare and pay dividends on the
Common Stock, and the Preferred Stock shall not be entitled to share therein.
5. The holders of Common Stock shall have the right to
vote on all questions to the exclusion of the Preferred Stock except as by law
expressly provided or as otherwise provided in the resolution or resolutions
creating any series of Preferred Stock. At all meetings of the stockholders of
the Corporation the holders of shares of Common Stock shall be entitled to one
vote for each share of Common Stock held by them, respectively.
Section 4.02 Assessment of Shares. The Capital Stock of the
Corporation, after the amount of subscription price has been paid, shall not be
subject to pay the debts of the Corporation, and no Capital Stock issued as
fully paid up shall ever be assessable or assessed.
Section 4.03 Denial of Preemptive Rights. No shareholder of
the Corporation shall have any preemptive or other right, by reason of his
status as a shareholder, to acquire any unissued shares, treasury shares, or
securities convertible into shares of the Capital Stock of the Corporation.
This denial of preemptive rights shall, and is intended to, negate any
3
<PAGE> 4
rights which would otherwise be given to shareholders pursuant to NRS 78.265 or
any successor statute.
Section 4.04 Treasury Shares. Capital Stock issued and
thereafter acquired by the Corporation shall not carry voting or dividend
rights and shall not be counted as outstanding shares for any purpose.
ARTICLE 5
PRINCIPAL OFFICE AND INITIAL RESIDENT AGENT
Section 5.01 Principal Office. The address of the principal
office of the Corporation is One East First Street, Reno, Washoe County, Nevada
89501.
Section 5.02 Initial Resident Agent. The name of the initial
resident agent of the Corporation, a corporate resident of the State of Nevada,
whose business address is at the above address, is THE CORPORATION TRUST
COMPANY OF NEVADA.
ARTICLE 6
DATA RESPECTING DIRECTORS
Section 6.01 Style of Governing Board. The members of the
governing board of the Corporation shall be styled Directors.
Section 6.02 Initial Board of Directors. The initial Board
of Directors shall consist of four (4) members, who need not be residents of
the State of Nevada or shareholders of the Corporation.
Section 6.03 Names and Addresses. The names and post office
addresses of the persons who are to serve as Directors until the next annual
meeting of the shareholders, or until their successors shall have been elected
and qualified, are as follows:
<TABLE>
<CAPTION>
Name Post Office Address
---- -------------------
<S> <C>
Dr. Rolf-E. Breuer Deutsche Bank AG
Taunusanlage 12
60325 Frankfurt am Main
Blake Eagle M.I.T. Center for Real Estate
Building W31 - 310
Cambridge, MA 02139
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
Dr. Karl-Ludwig Hermann 93 Doubling Road
Greenwich, CT 06830
Gerhard A. Koning Commerzbank AG
Neue Mainzer Strasse 32 -36
D-60261 Frankfurt am Main
Hans C. Mautner Corporate Property Investors, Inc.
3 Dag Hammarskjold Plaza
305 East 47th Street
New York, NY 10017
John S. Moody Cornerstone Properties Inc.
31 West 52nd Street, Suite 1600
New York, NY 10019
Gerald Rauenhorst Opus Corporation
800 Opus Center
9900 Bren Road East
Minneapolis, MN 55440
Dr. Walter Schorr Bankhaus Gebrueder Bethmann
Bethmannstrasse 7 - 9
60311 Frankfurt am Main
Michael J.G. Topham Hines
#1 Hans Street
London SW1 XOJD
England
Berthold T. Wetteskind Deutsche Immobilien Anlagegesellschaft mbH
Bockenheimer Landstrasse 42
60323 Frankfurt am Main
</TABLE>
Section 6.04 Vacancies. All vacancies, including without
limitation those caused by an increase in the number of Directors, may be
filled by a majority of the remaining Directors, even though less than a
quorum.
5
<PAGE> 6
ARTICLE 7
DATA RESPECTING INCORPORATORS
The names and post office addresses of the incorporators of
the Corporation are as follows:
<TABLE>
<CAPTION>
Name Post Office Address
---- -------------------
<S> <C>
August E. Shouse First City National Bank Bldg.
Houston, Texas 77002
Glendon E. Johnson, Jr. First City National Bank Bldg.
Houston, Texas 77002
Robert J. Bachman First City National Bank Bldg.
Houston, Texas 77002
</TABLE>
ARTICLE 8
PROTECTION OF REIT STATUS
Section 8.01 So long as the Corporation has two or more
stockholders and subject to the terms and provisions of this Article,
(a) Shares of stock of the Corporation shall not be
transferred to any Person (as defined in Section 8.03, below) if such
transfer would cause such Person to be the Owner (as defined in
Section 8.03, below) of more than 6% of the value of the outstanding
shares of capital stock (the "Limit") of the Corporation, and any
intended transferee of such shares shall acquire no rights in such
shares.
(b) No Person shall at any time be or become the Owner
of shares in excess of the Limit. If, notwithstanding the provisions
of (a) above, at any time a Person shall be or become an Owner of
shares of the Corporation in excess of the Limit, those shares of the
Corporation most recently acquired by such Person which are in excess
of the Limit, including for this purpose shares deemed Owned through
attribution, shall constitute "Excess Shares." Excess Shares shall
have the following characteristics:
(1) The Owner of Excess Shares shall be deemed to
have transferred those shares to the Corporation as trustee
(the "Trustee') for the benefit of such Person to whom such
Owner shall later transfer such shares provided that such
shares shall not be Excess Shares in the hands of such Person;
6
<PAGE> 7
(2) An interest in the trust holding such Excess
Shares shall be freely transferable by the Owner thereof at a
price not in excess of the price paid by such Owner for the
Excess Shares;
(3) Holders of Excess Shares shall not be
entitled to exercise any voting rights with respect to such
Excess Shares;
(4) Excess Shares shall not be deemed to be
outstanding for the purpose of determining a quorum at the
annual meeting or any special meeting of stockholders;
(5) Any dividends or other distributions with
respect to Excess Shares which would have been payable in
respect of shares of the Corporation had they not constituted
"Excess Shares" shall be accumulated by the Trustee and
deposited in a savings account in a New York bank (which may
be the Corporation's dividend disbursing agent) for the
benefit of, and be payable to, the holder or holders of such
shares of the Corporation at such time as such Excess Shares
shall cease to be Excess Shares; and
(6) Excess Shares shall be deemed to have been
offered for sale to the Corporation or its designee at their
fair market value for a period of ninety (90) days from the
date of (i) the transfer of stock which made the shares Excess
Shares if the Corporation has actual knowledge that such
transfer creates Excess Shares as of the date of transfer or
(ii) if such transfer is not actually known to the
Corporation, the determination by the Board of Directors in
good faith by resolution duly adopted that a transfer creating
Excess Shares has taken place. Fair market value shall be
determined as of the date of (i) or (ii) above, as
appropriate, and shall be the closing price on the Frankfurt,
Luxembourg or Dusseldorf stock exchanges; but if the shares
are not listed on the Frankfurt, Luxembourg or Dusseldorf
stock exchanges or on any national stock exchange in the
United States, then the bid price in the over-the-counter
market; but if the shares are not traded in the
over-the-counter market, then the price as determined in good
faith by the Board of Directors.
(c) If, notwithstanding the provisions of (a) above, any
Person shall knowingly own shares in excess of the Limit and the
Corporation would have qualified as a real estate investment trust
("REIT"), or would not have been a personal holding company but for
the fact that more than 50% of the value of its shares are held by
five or fewer individuals in the last half of the taxable year in
violation of the requirements of the Internal Revenue Code (the
"Code"), then that Person, and all legal entities which constitute
that Person, shall be jointly and severally liable for and shall pay
to the Corporation and each shareholder of the Corporation other than
such Person, on demand, such amounts as will, after taking
7
<PAGE> 8
account of all taxes imposed with respect to the receipt or accrual of
such amount and all costs incurred by the Corporation and each such
shareholder of the Corporation as a result of the Corporation losing
its REIT qualification or being deemed a personal holding company, put
the Corporation and each such shareholder of the Corporation in the
same financial position as it would have been in had it not lost such
REIT qualification or become a personal holding company (the
"Indemnity"). If more than one Person shall hold Excess Shares which
cause loss of REIT qualification, then all such Persons, together with
all legal entities which constitute any of them, shall be jointly and
severally liable, with right of contribution, for the Indemnity.
However, the foregoing sentences shall not require that the
Corporation proceed against any one or several of such Persons or the
legal entities which constitute them. Should the loss of REIT
qualification occur as described above, then the Corporation may seek
to have its qualification restored for the next taxable year, but
shall not be required to do so. If the Corporation either decides not
to attempt to requalify for the succeeding year, or is refused such
requalification, the Indemnity shall be applicable to all five taxable
years, or such longer or shorter period as successor provisions of the
Code shall require, until the Corporation is again permitted to
qualify as a REIT. Should the Corporation decide not to seek
requalification as a REIT at the end of such period, then the
Indemnity shall cease as of the end of the fifth taxable year
following loss of REIT qualification.
(d) All certificates evidencing ownership of shares of
the Corporation shall bear a conspicuous legend describing the
restrictions set forth in this Article.
Section 8.02 (a) If the Board of Directors shall at any
time determine in good faith, by resolution duly adopted, that a transfer has
taken place in violation of Section 8.01(a) or that a Person intends to acquire
or has acquired Ownership of any shares of the Corporation which, upon
acquisition, has or would become Excess Shares, the Board of Directors may, but
shall not be obligated to, take such action as it deems advisable to prevent or
to refuse to give effect to such transfer or acquisition, including but not
limited to refusing to give effect to such transfer or acquisition on the books
of the Corporation or instituting proceedings to enjoin such transfer or
acquisition.
(b) Each Person who enters into a transfer in violation
of Section 8.01(a), or is or becomes the Owner of Excess Shares, is obliged
immediately to give or cause to be given written notice thereof to the
Corporation and such other information as the Corporation may reasonably
require of such Person (1) with respect to identifying all Owners and amount of
Ownership of its outstanding shares held directly or by attribution by such
Person, and (2) such other information as may be necessary to determine the
Corporation's status under the Code.
Section 8.03 For the purpose of determinations to be made
under this Article,
8
<PAGE> 9
(a) A Person shall be considered to "Own," be the "Owner"
or have "Ownership" of shares if he is treated as owner of such shares
for purposes of Subchapter M, Part II of the Code, including ownership
by reason of the application of the ownership provisions of Sections
542 and 544 of the Code;
(b) "Person" includes an individual, corporation,
partnership, estate, trust, association, joint stock company or other
entity but does not include (i) any corporation, partnership,
association, joint stock company or other entity of which (A) the
principal voting securities are regularly traded on a national
securities exchange (including the Frankfurt, Luxembourg or Dusseldorf
stock exchanges) or quoted on an inter-broker quotation system and (B)
no more than the Applicable Percentage of the value of its capital
stock is owned beneficially, directly or indirectly (including all
shares deemed owned under Section 856(h) of the Code), by any
individual; or (ii) any other person whose ownership of Excess Shares
the Board of Directors shall determine in good faith would not
jeopardize the Company's REIT status under Section 856 of the Code;
(c) "Applicable Percentage," for any corporation,
partnership, association, joint stock company or other entity referred
to in Section 8.03(b)(i), shall be 12% for any such entity that owns
less than 50% of the value of the capital stock of the Company and,
for all other such entities, shall be 6%; and
(d) In the case of an ambiguity in the application of any
of the provisions of (a), (b) and (c) above, the Board of Directors
shall have the power to determine for the purposes of this Article on
the basis of information known to it (i) whether any Person Owns
shares, (ii) whether any two or more individuals, corporations,
partnerships, estates, trusts, associations or joint stock companies
or other entities constitute a Person, and (iii) whether any of the
entities of (ii) above constitute a group.
Section 8.04 If any provision of this Article or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
Section 8.05 Nothing contained in this Article shall limit
the authority of the Board of Directors to take such other action as they deem
necessary or advisable to protect the Corporation and the interests of its
stockholders by preservation of the Corporation's status as a REIT under the
Code.
Section 8.06 Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80% of the outstanding shares of common stock of the
Corporation then entitled to vote shall be required
9
<PAGE> 10
to alter, amend, adopt any provision inconsistent with, or repeal, this Article
8 or any provision hereof.
10
<PAGE> 1
EXHIBIT 3.1(a)
1. Designation and Amount: Fractional Shares. The designation for
such series of the Preferred Stock authorized by this resolution shall be the
7% Cumulative Convertible Preferred Stock, without par value, with a stated
value of $16.50 per share (the "7% Preferred Stock"). The stated value per
share of 7% Preferred Stock shall not for any purpose be considered to be a
determination by the Board of Directors with respect to the capital and
surplus of the Corporation. The maximum number of shares of 7% Preferred Stock
shall be 3,030,303. The 7% Preferred Stock is issuable in whole shares only.
2. Dividends. Holders of shares of 7% Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors out of
assets of the Corporation legally available for payment, cash dividends payable
annually at the rate of 7% per annum. Dividends on the 7% Preferred Stock
will be payable annually on August 4 (the "dividend payment date"). Dividends
on shares of the 7% Preferred Stock will be cumulative from the date of initial
issuance of such shares of 7% Preferred Stock. Dividends will be payable, in
arrears, to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors. The amount of dividends payable for the initial dividend period or
any period shorter or longer than a full dividend period shall be calculated on
the basis of a 360-day year of twelve 30-day months. No dividends may be
declared or paid or set apart for payment on any Parity Preferred Stock (as
defined in paragraph 8(b) below) with regard to the payment of dividends unless
there shall also be or have been declared and paid or set apart for payment on
the 7% Preferred Stock, like dividends for all dividend payment periods of the
7% Preferred Stock ending on or before the dividend payment date of such Parity
Preferred Stock, ratably in proportion to the respective amounts of dividends
(x) accumulated and unpaid or payable on such Parity Preferred Stock, on the
one hand, and (y) accumulated and unpaid through the dividend payment period or
periods of the 7% Preferred Stock next preceding such dividend payment date,
on the other hand.
Except as set forth in the preceding sentence, unless full cumulative
dividends on the 7% Preferred Stock have been paid, no dividends (other than in
Common Stock of the Corporation) may be paid or declared and set aside for
payment or other distribution made upon the Common Stock or on any other stock
of the Corporation ranking junior to or on a parity with 7% Preferred Stock as
to dividends, nor may any Common Stock or any other stock of the Corporation
ranking junior to or on a parity with 7% Preferred Stock as to dividends to be
redeemed, purchased or otherwise acquired for any consideration (or any
<PAGE> 2
2
payment be made to or available for a sinking fund for the redemption of any
shares of such stock; provided, however, that any moneys theretofore deposited
in any sinking fund with respect to any Preferred Stock of the Corporation in
compliance with the provisions of such sinking fund may thereafter be applied
to the purchase or redemption of such Preferred Stock in accordance with the
terms of such sinking fund, regardless of whether at the time of such
application full cumulative dividends upon shares of the 7% Preferred Stock
outstanding to the last dividend payment date shall have been paid or declared
and set apart for payment) by the Corporation; provided that any such junior
stock or Parity Preferred Stock or the Common Stock may be converted into or
exchanged for stock of the Corporation ranking junior to the 7% Preferred
Stock as to dividends, and, provided, further, that any such junior stock or
Parity Preferred Stock or the Common Stock may be purchased by the Corporation
pursuant to Article 8 of the Articles of Incorporation to preserve the
Corporation's status as a real estate investment trust.
3. Liquidation Preference. The shares of 7% Preferred Stock shall
rank, as to liquidation, dissolution or winding up of the Corporation, prior to
the shares of Common Stock and any other class of stock of the Corporation
ranking junior to the 7% Preferred Stock as to rights upon liquidation,
dissolution or winding up of the Corporation, so that in the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the 7% Preferred Stock shall be entitled to receive
out of the assets of the Corporation available for distribution to its
stockholders, whether from capital, surplus or earnings, before any
distribution is made to holders of shares of Common Stock or any other such
junior stock, an amount equal to $16.50 per share (the "Liquidation Preference"
of a share of 7% Preferred Stock) plus an amount equal to all dividends
(whether or not earned or declared) accrued and accumulated and unpaid on the
shares of 7% Preferred Stock to the date of distribution. The holders of
the 7% Preferred Stock will not be entitled to receive the Liquidation
Preference until the liquidation preference of any other class of stock of the
Corporation ranking senior to the 7% Preferred Stock as to rights upon
liquidation, dissolution or winding up shall have been paid (or a sum set aside
therefor sufficient to provide for payment) in full. After payment of the full
amount of the Liquidation Preference and such dividends, the holders of shares
of 7% Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of shares of Parity Preferred
Stock shall be insufficient to pay in full the preferential amount aforesaid,
then such assets, or the proceeds thereof, shall be distributable among such
holders ratably in accordance with the respective amounts which would be
payable on such shares if all amounts payable thereon were paid in full. For
the purposes hereof, neither a consolidation or merger of the Corporation with
or into any other corporation, nor a merger of any other corporation with or
into the Corporation, nor a sale or transfer of all or any part of the
Corporation's assets for cash or securities shall be considered a liquidation,
dissolution or winding up of the Corporation.
<PAGE> 3
3
4. Conversion. The holders of shares of 7% Preferred Stock
shall have the right, at their option, to convert shares of 7% Preferred Stock
into shares of Common Stock at any time after the fifth anniversary of the date
of initial issuance of the 7% Preferred Stock, on and subject to the following
terms and conditions:
(a) The shares of 7% Preferred Stock shall be convertible at the
office of any transfer agent for the 7% Preferred Stock, and at such
other office or offices, if any as the Board of Directors may designate,
into fully paid and nonassessable' shares (calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock. at the
conversion price, determined as hereafter provided, in effect at the time
of conversion, each share of 7% Preferred Stock being taken at $16.50 for
the purpose of such conversion. The price at which shares of Common Stock
shall be delivered upon conversion (the "conversion price") shall be
initially $16.50 per share of Common Stock. The conversion price shall be
adjusted as provided in paragraph (d) below.
(b) In order to convert shares of the 7 % Preferred Stock into
Common Stock, the holder thereof shall surrender at any office hereinabove
mentioned the certificate or certificates therefor, duly endorsed to the
Corporation or in blank, and give written notice to the Corporation at
said office that such holder elects 10 convert such shares. No payment or
adjustment shall be made upon any conversion on account of any dividends
accrued on the shares of 7% Preferred Stock surrendered for conversion or
on account of any dividends on the Common Stock issued upon such
conversion. Shares of the 7% Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day of the
surrender of such shares for conversion in accordance with the foregoing.
provisions (the "conversion date"), and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated
for all purposes as the "record holder or holders of such Common Stock at
such time. As promptly as practicable on or after the conversion date, the
Corporation shall issue and shall deliver at said office a certificate or
certificates for the number of full shares of Common Stock issuable upon
such conversion, together with a cash payment in lieu of any fraction of
any share, as hereinafter provided, to the person or persons entitled to
receive the same.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of 7% Preferred Stock, but, in lieu of any fraction
of a share of Common Stock which would otherwise be issuable in respect of
the aggregate number of shares of 7% Preferred Stock surrendered for
conversion at one time by the same holder, the Corporation shall pay in
cash as an adjustment of such fraction an amount equal to the same
fraction of the Closing Price (as defined below) on the date on which such
shares of the 7% Preferred Stock were duly surrendered for conversion, or,
if such date is not a Trading Date (as defined below), on the next Trading
Date.
<PAGE> 4
4
(d) The conversion price shall be adjusted from time to time as
follows:
(1) In case the Corporation shall (i) pay a dividend or make a
distribution on its outstanding shares of Common Stock in Common
Stock, (ii) subdivide or split its outstanding shares of Common Stock
into a larger number of shares by reclassification or otherwise,
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares by reclassification or otherwise, or (iv) issue any
shares of Common Stock by reclassification, the conversion price in
effect at the time of the record date for such dividend or
distribution or other effective date of such subdivision, combination
or reclassification shall be adjusted so that the holder of any
shares of 7% Preferred Stock surrendered for conversion after such
time shall be entitled to receive the number of shares of Common Stock
which he would have owned or been entitled to receive had such shares
of the 7% Preferred Stock been converted immediately prior to such
time (assuming, for this purpose, convertibility regardless of
whether five years have elapsed since the date of initial issuance of
the 7% Preferred Stock).
(2) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the
current market price per share (determined as provided in clause (4)
below) on the record date mentioned below, the conversion price shall
be adjusted upon the exercise of such warrants or rights (such
adjustment to be computed as of the close of business on the last
Trading Date of each week) so that the same shall equal the price
determined by multiplying the conversion price then in effect by a
fraction, of which the numerator shall be the number of shares of
Common Stock then outstanding plus the number of shares of Common
Stock which the aggregate exercise price of such warrants or rights
exercised would purchase at such current market price and of which
the denominator shall be the number of shares of Common Stock then
outstanding plus the number of additional shares of Common Stock
issued upon the exercise of such warrants or rights. Such adjustment
shall become effective at the opening of business on the business day
next following the computation thereof.
(3) In case the Corporation shall distribute to all holders of
its Common Stock evidences of its indebtedness or assets (excluding
any cash or stock dividends or distributions and dividends referred
to in clause (1) above) or rights or warrants to subscribe for or
purchase securities of the Corporation or any of its subsidiaries
(other than shares of Common Stock referred to in clause (2) above),
then in each such case the conversion price shall be adjusted so that
the same shall equal the price determined by multiplying the
conversion
<PAGE> 5
5
price in effect immediately prior to the date of such distribution by
a fraction of which the numerator shall be the current market price
per share (determined as provided in clause (4) below) of the Common
Stock on the record date mentioned below less the then fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive) of the portion of the assets or evidences of
indebtedness or rights or warrants so distributed applicable to one
share of Common Stock, and the denominator shall be such current
market price per share of the Common Stock. Such adjustment shall
become effective on the opening of business on the business day next
following the record date for the determination of stockholders
entitled to receive such distribution.
(4) For the purpose of any computation under clause (1), (2) or
(3) above, the current market price per share of Common Stock on any
date shall be deemed to be the average of the daily Closing Prices
for the 30 consecutive Trading Dates commencing not more than 45
Trading Dates before the day in question, such 30 consecutive Trading
Date period to be specified by the Board of Directors prior to the
commencement of 45 Trading Dates before the day in question, or in
the event the Board of Directors fails to specify such 30 consecutive
Trading Dates, such 30 consecutive Trading Dates shall be deemed to
have commenced on the 40th Trading Date before the day in question.
(5) No adjustment in the conversion price pursuant to this
Section 4 shall be required unless (i) such adjustment would require
an increase or decrease of at least 1% in such price; provided that
any adjustment which by reason of this paragraph (d)(5) is not
required to be made shall be carried forward and taken into account
in any subsequent adjustment and will be made not more than three
years after the time it would have been made but for the provisions
of this paragraph (d)(5); provided, further, that, at the time of any
adjustment, such adjustment shall include all adjustments to the date
thereof then being carried forward. All calculations under this
Section 4 shall be made to the nearest 1/100 of a cent or to the
nearest 1/100 of a share, as the case may be.
(e) In case of any consolidation or merger of the Corporation with
or into another corporation or in the case of any sale or conveyance to
another corporation (other than a wholly-owned subsidiary of the
Corporation) of all or substantially all of the property and assets of the
Corporation, the holder of a share of the 7% Preferred Stock shall have
the right thereafter, subject to the first sentence of this Section 4, to
convert such share into the kind and amount of shares of stock and other
securities and properties receivable upon such consolidation, merger, sale
or conveyance by a holder of the number of shares of Common Stock into
which such share of 7%
<PAGE> 6
6
Preferred Stock might have been converted immediately prior to such
consolidation, merger, sale or conveyance (assuming, for this purpose,
convertibility regardless of whether five years have elapsed since the
date of initial issuance of the 7% Preferred Stock) and shall have no
other conversion rights with regard to such share of 7% Preferred Stock.
In the event of such a consolidation, merger, sale or conveyance,
effective provision shall be made in the certificate of incorporation of
the resulting or surviving corporation or otherwise for the protection of
the conversion rights of the shares of the 7% Preferred Stock which shall
be applicable, as nearly as reasonably may be, to any such other shares of
stock and other securities and property deliverable upon conversion of
shares of the 7% Preferred Stock. In case securities or properties other
than Common Stock shall be issuable or deliverable upon conversion as
aforesaid, then all references in this Section 4 shall be deemed to apply,
so far as appropriate and as nearly as may be, to such other securities
or properties.
(f) Whenever the conversion price is adjusted as herein provided:
(1) the Corporation shall compute the adjusted conversion price
in accordance with this Section 4 and shall prepare a certificate
signed by the President or one of the Vice Presidents and the
Treasurer or one of the Assistant Treasurers of the Corporation
setting forth the adjusted conversion price. and such certificate
shall forthwith be filed with the transfer agent or agents for the 7%
Preferred Stock; and
(2) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall, as
soon as practicable, be mailed to the holders of record of the
outstanding shares of 7% Preferred Stock.
(g) In case at any time after the fifth anniversary of the date of
initial issuance of the 7% Preferred Stock:
(1) the corporation shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out
of profits or surplus; or
(2) the Corporation shall authorize the granting to the holders
of its Common Stock of rights to subscribe for or purchase any shares
of capital stock of any class or series or of any other rights; or
(3) of any reclassification of the capital stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation or
merger to which the Corporation is a party
<PAGE> 7
7
and for which approval of any stockholders of the Corporation is
required, or of the sale or transfer of all or substantially all of
the property and assets of the Corporation, or of the voluntary or
involuntary dissolution, liquidation or winding up of the
Corporation;
then the Corporation shall cause to be mailed to the transfer agent or
agents for the 7% Preferred Stock and to the holders of record of the
outstanding shares of 7% Preferred Stock, at least 20 days (or 10 days in
any case specified in clause (1) or (2) above) prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution or
rights, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution or rights are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as
of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up.
(h) The Corporation shall at times reserve and keep available, free
from preemptive rights, out of its authorized but issued Common Stock, for
the purpose of effecting the conversion of the shares of the 7% Preferred
Stock. the full number of shares of Common Stock then deliverable upon the
conversion of all shares of 7% Preferred Stock then outstanding.
(i) The Corporation will pay any and all taxes that may be payable
in respect of the issuance or delivery of shares of Common Stock on
conversion of shares of 7% Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the shares of 7%
Preferred Stock so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue
has paid to the Corporation the amount of any such tax, or has
established, to the satisfaction of the Corporation, that such tax has
been paid.
(j) For the purpose of this Section 4 the term "Common Stock" shall
include any stock of any class of the Corporation which has no preference
in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and which is not subject to redemption by the Corporation.
However, shares issuable on conversion of shares of the 7% Preferred Stock
shall include only shares of Common Stock as such Common Stock exists on
the date of this Certificate or shares of any class or classes resulting
<PAGE> 8
8
from any reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and which are not subject to redemption by the Corporation,
provided that if at any time there shall be more than one such resulting
class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bear to total number of
shares of all such classes resulting from all such reclassifications.
(k) As used in this Section 4, the term "Closing Price" on any day
shall mean the reported last sales price on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and
asked prices, in each case on the Frankfurt Stock Exchange, or, if the
Common Stock is not listed or admitted to trading on such Exchange, on the
principal securities exchange on which the Common Stock is listed or
admitted to trading on which prices are quoted in U.S. dollars, or, if
not listed or admitted to trading on any such securities exchange, the
average of the closing bid and asked prices as furnished in U.S. dollars
by any broker/dealer selected from time to time by the file Board of
Directors for that purpose; and the term "Trading Date" shall mean a date
on which the Frankfurt Stock Exchange or other applicable securities
market used for determining the Closing Price is open for the transaction
of business.
5. Voting Rights. The holders of shares of Cumulative Preferred
Stock shall have no voting rights whatsoever, except for any voting rights to
which they may be entitled under the laws of the State of Nevada, and except as
follows:
(a) Whenever, at any time or times, dividends payable on the shares
of 7% Preferred Stock or on any Parity Preferred Stock with respect to
payment of dividends, shall be in arrears for an aggregate number of days
equal to six calendar quarters or more, whether or not consecutive, the
holders of the outstanding shares of 7% Preferred Stock shall have the
right, with holders of shares of any one or more other classes or series
of stock upon which like voting rights have been conferred and are
exercisable (voting together as a class), to elect two of the authorized
number of members of the Board of Directors at the Corporation's next
annual meeting of stockholders and at each subsequent annual meeting of
stockholders until such arrearages have been paid or set apart for payment,
at which time such right shall terminate, except as herein or by law
expressly provided, subject to reinvesting in the event of each and every
subsequent default of the character above mentioned. Upon any termination
of the right of the holders of shares of 7% Preferred Stock as a class to
vote for directors as herein provided, the term of office of all directors
then in office elected by the holders of shares of 7% Preferred Stock
shall terminate immediately.
<PAGE> 9
9
Any director who shall have been elected pursuant to this paragraph may be
removed at any time, either with or without cause. Any vacancy thereby
created may be filed only by the affirmative vote of the holders of shares
of 7% Preferred Stock voting separately as a class (together with the
holders of shares of any other class or series of stock upon which like
voting rights have been conferred and are exercisable). If the office of
any director elected by the holders of shares of 7% Preferred Stock
voting as a class becomes vacant for any reason other than removal from
office as aforesaid, the remaining director elected pursuant to this
paragraph may choose a successor who shall hold office for the unexpired
term in respect of which such vacancy occurred. At elections for such
directors, each holder of shares of 7% Preferred Stock shall be entitled
to one vote for each share held (the holders of shares of any other class
or series of preferred stock having like voting rights being entitled to
such number of votes, if any, for each share of such stock held as may be
granted to
(b) So long as any shares of 7% Preferred Stock remain outstanding,
tile consent of the holders of at least two-thirds of the shares of 7%
Preferred Stock outstanding at the time and all other classes or series of
stock upon which like voting fights have been conferred and are
exercisable (voting together as a class) given in person or by proxy,
either in writing or at any meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the following:
(i) the issuance or increase of the authorized amount of any
class or series of shares ranging prior (as that term is defined in
paragraph 8(a) hereof") to the shares of the 7% Preferred Stock; or
(ii) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Articles
of Incorporation, (including axis resolution or any provision hereof)
that would materially and adversely affect any power, preference, or
special right of the shares of 7% Preferred Stock or of the holders
thereof;
provided, however, that any increase in the amount of authorized
Common Stock or authorized Preferred Stock or any increase or
decrease in the number of shares of any series of Preferred Stock
or the creation and issuance of other series of Common Stock or
Preferred Stock, in each case ranking on a parity with or junior to
the shares of 7% Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and
adversely affect such powers, preferences or special rights.
<PAGE> 10
10
6. Authorization and Issuance of Other Securities. No consent of the
holders of the 7% Preferred Stock shall be required for (a) the creation of any
indebtedness of any kind of the Corporation (b) the creation, or increase or
decrease in the amount, of any class or series of stock of the Corporation not
ranking prior as to dividends or upon liquidation, dissolution or winding up to
the 7% Preferred Stock or (c) any increase or decrease in the amount of
authorized Common Stock or any increase, decrease or change in the par value
thereof or in any other terms thereof.
7. Amendment of Resolution. The Board of Directors reserves the right by
subsequent amendment of this resolution from time to time to increase or
decrease the number of share that constitute the 7% Preferred Stock (but not
below the number of shares thereof then outstanding) and in other respects to
amend this resolution within the limitations provided by law, this resolution
and the Articles of Incorporation.
8. Rank. For the purposes of this resolution, any stock of any class
or classes of the Corporation shall be deemed to rank:
(a) prior to shares of the 7% Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or both, if the
holders of stock of such class or classes shall be entitled by the terms
thereof to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference
or priority to the holders of shares of the 7% Preferred Stock;
(b) on a parity with shares of the 7% Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or both, whether
or not the dividend payment dates, or redemption or liquidation prices per
share thereof, be different from those of the 7% Preferred Stock, if the
holders of stock of such class or classes shall be entitled by the
terms thereof to the receipt of dividends or of amounts distributed upon
liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or liquidation prices, without
preference or priority of one over the other as between the holders of
such stock and the holders of shares of 7% Preferred Stock (the term
"Parity Preferred Stock" being used to refer to any stock on a parity
with the shares of 7% Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, as the context may
require); and
(c) junior to shares of the 7% Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or both, if such
class shall be Common Stock or if the holders of the 7% Preferred Stock
shall be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of stock of such class or classes.
<PAGE> 1
EXHIBIT 3.5
As of December 8, 1995
================================================================================
BYLAWS
OF
CORNERSTONE PROPERTIES INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ARTICLE I
OFFICES
1.01. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------------
1.02. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.01. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------------
2.02. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
2.03. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------------
2.04. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
----------------
2.05. Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------
2.06. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------
2.07. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------
2.08. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------
2.09. Stockholders' Consent in Lieu of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------------------------------
ARTICLE III
BOARD OF DIRECTORS
3.01. General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------
3.02. Number and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------------------------
3.03 The Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
3.04. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------
3.05. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------
3.06. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------
3.07. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------
3.08. Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------------------
3.09. Directors' Consent in Lieu of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------------------------
3.10. Action by Means of Telephone or Similar Communications Equipment . . . . . . . . . . . . . . . . . . . . 6
----------------------------------------------------------------
3.11. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ARTICLE IV
OFFICERS
4.01. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------
4.02. Authority and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------------
4.03. Term of Office, Resignation and Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------------------------------
4.04. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------
4.05 The President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------------
4.06. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------
4.07. The Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------------
4.08. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
---------------------
4.09. The Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------
4.10. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------------
4.11. The Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
5.01. Checks, Drafts and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------------
5.02. Execution of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------------
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
6.01. Certificates Evidencing Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------------------
6.02. Stock Ledger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------
6.03. Transfers of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------
6.04. Addresses of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------------
6.05. Lost, Destroyed and Mutilated Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------------------------------
6.06. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-----------
6.07. Fixing Date for Determination of Stockholders of Record . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------------------------------------------
ARTICLE VII
SEAL
7.01. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----
ARTICLE VIII
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
FISCAL YEAR
8.01. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-----------
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------
9.02. Insurance for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-----------------------------
ARTICLE X
AMENDMENTS
10.01. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------
</TABLE>
(iii)
<PAGE> 5
BYLAWS
OF
CORNERSTONE PROPERTIES INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of
Cornerstone Properties Inc. (the "Corporation") in the State of Nevada shall be
at the principal office of The Corporation Trust Company of Nevada in the City
of Reno, County of Washoe, and the registered agent in charge thereof shall be
The Corporation Trust Company of Nevada.
SECTION 1.02. Other Offices. The Corporation may also have
an office or offices at any other place or places within or without the State
of Nevada as the Board of Directors of the Corporation (the "Board") may from
time to time determine or the business of the Corporation may from time to time
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of
stockholders of the Corporation for the election of directors of the
Corporation ("Directors"), and for the transaction of such other business as
may properly come before such meeting, shall be held at such place, date and
time as shall be fixed by the Board and designated in the notice or waiver of
notice of such annual meeting; provided, however, that no annual meeting of
stockholders need be held if all actions, including the election of Directors,
required by the General Corporation Law of the State of Nevada (the "General
Corporation Law") to be taken at such annual meeting are taken by written
consent in lieu of meeting pursuant to Section 2.09 hereof.
SECTION 2.02. Special Meetings. Special meetings of
stockholders for any purpose or purposes may be called by the Board or the
Chairman of the Board, the President or the Secretary of the Corporation or by
the recordholders of at least a majority of the shares of common stock of the
Corporation issued and outstanding ("Shares") and entitled to vote thereat, to
be held at such place, date and time as shall be designated in the notice or
waiver of notice thereof.
<PAGE> 6
2
SECTION 2.03. Notice of Meetings. (a) Except as otherwise
provided by law, written notice of each annual or special meeting of
stockholders stating the purpose, place, date and time of such meeting shall be
given personally or by first-class mail to each recordholder of Shares (a
"Stockholder") entitled to vote thereat, not less than 10 nor more than 60 days
before the date of such meeting. If mailed, such notice shall be deemed to be
given when deposited in the mail, postage prepaid, directed to the Stockholder
at such Stockholder's address as it appears on the records of the Corporation.
If, prior to the time of mailing, the Secretary of the Corporation (the
"Secretary") shall have received from any Stockholder a written request that
notices intended for such Stockholder are to be mailed to some address other
than the address that appears on the records of the Corporation, notices
intended for such Stockholder shall be mailed to the address designated in such
request.
(b) Notice of a special meeting of Stockholders may be
given by the person or persons calling the meeting, or, upon the written
request of such person or persons, such notice shall be given by the Secretary
on behalf of such person or persons. If the person or persons calling a
special meeting of Stockholders give notice thereof, such person or persons
shall deliver a copy of such notice to the Secretary. Each request to the
Secretary for the giving of notice of a special meeting of Stockholders shall
state the purpose or purposes of such meeting.
SECTION 2.04. Waiver of Notice. Notice of any annual or
special meeting of Stockholders need not be given to any Stockholder who files
a written waiver of notice with the Secretary, signed by the person entitled to
notice, whether before or after such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of Stockholders need be
specified in any written waiver of notice thereof. Attendance of a Stockholder
at a meeting, in person or by proxy, shall constitute a waiver of notice of
such meeting, except when such Stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business on the grounds that the notice of such meeting was inadequate or
improperly given.
SECTION 2.05. Adjournments. Whenever a meeting of
Stockholders, annual or special, is adjourned to another date, time or place,
notice need not be given of the adjourned meeting if the date, time and place
thereof are announced at the meeting at which the adjournment is taken. If
the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder entitled to vote thereat. At the
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or
the Articles of Incorporation of the Corporation (the "Articles of
Incorporation"), the recordholders of 20% of the Shares entitled to vote
thereat, present in person or by proxy, shall constitute a quorum for the
transaction of business at all meetings of Stockholders,
<PAGE> 7
3
whether annual or special. If, however, such quorum shall not be present in
person or by proxy at any meeting of Stockholders, the Stockholders entitled to
vote thereat may adjourn the meeting from time to time in accordance with
Section 2.05 hereof until a quorum shall be present in person or by proxy.
SECTION 2.07. Voting. Each Stockholder shall be entitled to
one vote for each Share held of record by such Stockholder. Except as
otherwise provided by law or the Articles of Incorporation, when a quorum is
present at any meeting of Stockholders, the vote of the recordholders of a
majority of the Shares constituting such quorum shall decide any question
brought before such meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at
a meeting of Stockholders or to express, in writing, consent to or dissent from
any action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with
the Secretary before such meeting of Stockholders or such action of
Stockholders without a meeting, at such time as the Board may require. No
proxy shall be voted or acted upon more than six months from its date, unless
the proxy provides for a longer period, which may not exceed seven years.
SECTION 2.09. Stockholders' Consent in Lieu of Meeting. Any
action required by the General Corporation Law to be taken at any annual or
special meeting of Stockholders, and any action which may be taken at any
annual or special meeting of Stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the recordholders of a majority of the
Shares, except that if a different number of votes is required to authorize or
take such action at a meeting, then that proportion of written consents is
required.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of
the Corporation shall be managed by the Board, which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
law, the Articles of Incorporation or these Bylaws directed or required to be
exercised or done by Stockholders.
SECTION 3.02. Number and Term of Office. The number of
Directors shall be such number as shall be fixed from time to time by the
Board, but not less than three nor more than 18. Directors need not be
Stockholders. Directors shall be elected at the annual meeting of Stockholders
or, if, in accordance with Section 2.01 hereof, no such annual meeting is held,
by written consent in lieu of meeting pursuant to Section 2.09 hereof, and
<PAGE> 8
4
each Director shall hold office until his successor is elected and qualified,
or until his earlier death or resignation or removal in the manner hereinafter
provided.
SECTION 3.03. The Chairman of the Board. The Board may
select a Chairman of the Board of the Corporation (the "Chairman") who shall
have the power to call special meetings of Stockholders, to call special
meetings of the Board and, if present, to preside at all meetings of
Stockholders and all meetings of the Board. The Chairman shall perform all
duties incident to the office of Chairman of the Board and all such other
duties as may from time to time be assigned to him by the Board or these
Bylaws. The provisions of Section 4.03 hereof shall apply to the Chairman.
SECTION 3.04. Resignation. Any Director may resign at any
time by giving written notice to the Board, the Chairman or the Secretary.
Such resignation shall take effect at the time specified in such notice or, if
the time be not specified, upon receipt thereof by the Board, the Chairman or
the Secretary, as the case may be. Unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.05. Removal. Any or all of the Directors may be
removed, with or without cause, at any time by vote of the recordholders of
two-thirds of the Shares then entitled to vote at an election of Directors, or
by written consent of the recordholders of Shares pursuant to Section 2.09
hereof.
SECTION 3.06. Vacancies. Vacancies occurring on the Board
for any reason, including, without limitation, vacancies occurring as a result
of the creation of new directorships that increase the number of Directors, may
be filled by vote of the recordholders of a majority of the Shares then
entitled to vote at an election of Directors, or by written consent of such
recordholders pursuant to Section 2.09 hereof or by vote of the Board or by
written consent of the Directors pursuant to Section 3.09 hereof. If the
number of Directors then in office is less than a quorum, such vacancies may be
filled by vote of a majority of the Directors then in office or by written
consent of all such Directors pursuant to Section 3.09 hereof. Unless earlier
removed pursuant to Section 3.05 hereof, each Director chosen in accordance
with this Section 3.06 shall hold office until the next annual election of
Directors by the Stockholders and until his successor shall be elected and
qualified.
SECTION 3.07. Meetings. (a) Annual Meetings. As soon as
practicable after each annual election of Directors by the Stockholders, the
Board shall meet for the purpose of organization and the transaction of other
business, unless it shall have transacted all such business by written consent
pursuant to Section 3.09 hereof.
(b) Other Meetings. Other meetings of the Board shall be
held at such times as the Chairman, the President, the Secretary or a majority
of the Board shall from time to time determine.
<PAGE> 9
5
(c) Notice of Meetings. The Secretary shall give written
notice to each Director of each meeting of the Board, which notice shall state
the place, date, time and purpose of such meeting. Notice of each such meeting
shall be given to each Director, if by mail, addressed to him at his residence
or usual place of business, at least two days before the day on which such
meeting is to be held, or shall be sent to him at such place by telecopy,
telegraph, cable, or other form of recorded communication, or be delivered
personally or by telephone not later than the day before the day on which such
meeting is to be held. A written waiver of notice, signed by the Director
entitled to notice, whether before or after the time of the meeting referred to
in such waiver, shall be deemed equivalent to notice. Neither the business to
be transacted at, nor the purpose of any meeting of the Board need be specified
in any written waiver of notice thereof. Attendance of a Director at a meeting
of the Board shall constitute a waiver of notice of such meeting, except as
provided by law.
(d) Place of Meetings. The Board may hold its meetings
at such place or places within or without the State of Nevada as the Board or
the Chairman may from time to time determine, or as shall be designated in the
respective notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. A majority of the total
number of Directors then in office shall be present in person at any meeting of
the Board in order to constitute a quorum for the transaction of business at
such meeting, and the vote of a majority of those Directors present at any such
meeting at which a quorum is present shall be necessary for the passage of any
resolution or act of the Board, except as otherwise expressly required by law,
the Articles of Incorporation or these Bylaws. In the absence of a quorum for
any such meeting, a majority of the Directors present thereat may adjourn such
meeting from time to time until a quorum shall be present.
(f) Organization. At each meeting of the Board, one of
the following shall act as chairman of the meeting and preside, in the
following order of precedence:
(i) the Chairman;
(ii) the President;
(iii) any Director chosen by a majority of
the Directors present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman of
the meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 3.08. Committees of the Board. The Board may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee
<PAGE> 10
6
to consist of one or more Directors. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act at
the meeting in the place of any such absent or disqualified member. Any
committee of the Board, to the extent provided in the resolution of the Board
designating such committee, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Each committee of the Board shall keep regular
minutes of its proceedings and report the same to the Board when so requested
by the Board.
SECTION 3.09. Directors' Consent in Lieu of Meeting. Any
action required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by all the members of the Board or such committee and such
consent is filed with the minutes of the proceedings of the Board or such
committee.
SECTION 3.10. Action by Means of Telephone or Similar
Communications Equipment. Any one or more members of the Board, or of any
committee thereof, may participate in a meeting of the Board or such committee
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person at
such meeting.
SECTION 3.11. Compensation. Unless otherwise restricted by
the Articles of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be
reimbursed by the Corporation for their expenses, if any, in the performance of
their duties as Directors. No such compensation or reimbursement shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation
shall be the President, the Secretary and a Treasurer and may include one or
more Vice Presidents (one or more of whom may be designated an Executive Vice
President and one or more of whom
<PAGE> 11
7
may be designated a Senior Vice President) and one or more Assistant
Secretaries and one or more Assistant Treasurers. Any two or more offices may
be held by the same person.
SECTION 4.02. Authority and Duties. All officers shall have
such authority and perform such duties in the management of the Corporation as
may be provided in these Bylaws or, to the extent not so provided, by
resolution of the Board.
SECTION 4.03. Term of Office, Resignation and Removal. (a)
Each officer shall be appointed by the Board and shall hold office for such
term as may be determined by the Board. Each officer shall hold office until
his successor has been appointed and qualified or his earlier death or
resignation or removal in the manner hereinafter provided. The Board may
require any officer to give security for the faithful performance of his
duties.
(b) Any officer may resign at any time by giving written
notice to the Board, the Chairman, the President or the Secretary. Such
resignation shall take effect at the time specified in such notice or, if the
time be not specified, upon receipt thereof by the Board, the Chairman, the
President or the Secretary, as the case may be. Unless otherwise specified
therein, acceptance of such resignation shall not be necessary to make it
effective.
(c) All officers and agents appointed by the Board shall
be subject to removal, with or without cause, at any time by the Board or by
the action of the recordholders of a majority of the Shares entitled to vote
thereon.
SECTION 4.04. Vacancies. Any vacancy occurring in any office
of the Corporation, for any reason, shall be filled by action of the Board.
Unless earlier removed pursuant to Section 4.03 hereof, any officer appointed
by the Board to fill any such vacancy shall serve only until such time as the
unexpired term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The President. The President shall be the
chief executive officer of the Corporation and shall have general and active
management and control of the business and affairs of the Corporation, subject
to the control of the Board, and shall see that all orders and resolutions of
the Board are carried into effect. The President shall perform all duties
incident to the office of President and all such other duties as may from time
to time be assigned to him by the Board or these Bylaws.
SECTION 4.06. Vice Presidents. Vice Presidents, if any, in
order of their seniority or in any other order determined by the Board, shall
generally assist the President and perform such other duties as the Board or
the President shall prescribe, and in the absence or disability of the
President, shall perform the duties and exercise the powers of the President.
<PAGE> 12
8
SECTION 4.07. The Secretary. The Secretary shall, to the
extent practicable, attend all meetings of the Board and all meetings of
Stockholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose, and shall perform the same duties for any
committee of the Board when so requested by such committee. He shall give or
cause to be given notice of all meetings of Stockholders and of the Board,
shall perform such other duties as may be prescribed by the Board or the
President and shall act under the supervision of the President. He shall keep
in safe custody the seal of the Corporation and affix the same to any
instrument that requires that the seal be affixed to it and which shall have
been duly authorized for signature in the name of the Corporation and, when so
affixed, the seal shall be attested by his signature or by the signature of the
Treasurer of the Corporation or an Assistant Secretary or Assistant Treasurer
of the Corporation. He shall keep in safe custody the certificate books and
stockholder records and such other books and records of the Corporation as the
Board or the President may direct and shall perform all other duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him by the Board or the President.
SECTION 4.08. Assistant Secretaries. Assistant Secretaries
of the Corporation, if any, in order of their seniority or in any other order
determined by the Board, shall generally assist the Secretary and perform such
other duties as the Board or the Secretary shall prescribe, and, in the absence
or disability of the Secretary, shall perform the duties and exercise the
powers of the Secretary.
SECTION 4.09. The Treasurer. The Treasurer shall have the
care and custody of all the funds of the Corporation and shall deposit such
funds in such banks or other depositories as the Board, or any officer or
officers, or any officer and agent jointly, duly authorized by the Board,
shall, from time to time, direct or approve. He shall disburse the funds of
the Corporation under the direction of the Board and the President. He shall
keep a full and accurate account of all moneys received and paid on account of
the Corporation and shall render a statement of his accounts whenever the Board
or the President shall so request. He shall perform all other necessary
actions and duties in connection with the administration of the financial
affairs of the Corporation and shall generally perform all the duties usually
appertaining to the office of Treasurer. When required by the Board, he shall
give bonds for the faithful discharge of his duties in such sums and with such
sureties as the Board shall approve.
SECTION 4.10. Assistant Treasurers. Assistant Treasurers of
the Corporation, if any, in order of their seniority or in any other order
determined by the Board, shall generally assist the Treasurer and perform such
other duties as the Board or the Treasurer shall prescribe, and, in the absence
or disability of the Treasurer, shall perform the duties and exercise the
powers of the Treasurer.
SECTION 4.11. The Controller. The Controller shall keep
complete and accurate books of account relating to the business of the
Corporation, including records of all
<PAGE> 13
9
assets, liabilities, commitments, receipts, disbursements and other financial
transactions of the Corporation and its subsidiaries. He shall render a
statement of the Corporation's financial condition whenever required to do so
by the Board or the President and shall generally perform all the duties
usually appertaining to the office of Controller.
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts
and other orders for the payment of money, notes and other evidences of
indebtedness issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents of the Corporation and in such manner as
shall be determined, from time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The President, or, in
his absence, any Vice President, may authorize, from time to time, the
execution and issuance of proxies to vote shares of stock or other securities
of other corporations held of record by the Corporation and the execution of
consents to action taken or to be taken by any such corporation. All such
proxies and consents, unless otherwise authorized by the Board, shall be signed
in the name of the Corporation by the President or any Vice President.
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
SECTION 6.01. Certificates Evidencing Shares. Shares shall
be evidenced by certificates in such form or forms as shall be approved by the
Board or they may be uncertificated. Certificates shall be issued in
consecutive order and shall be numbered in the order of their issue, and shall
be signed by the President or any Vice President and by the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer. If such a
certificate is manually signed by a transfer agent or registrar, any other
signature on the certificate may be a facsimile. In the event any such officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to hold such office or to be employed by the Corporation
before such certificate is delivered, such certificate may be issued and
delivered by the Corporation with the same effect as if such officer had held
such office on the date of delivery.
SECTION 6.02. Stock Ledger. A stock ledger in one or more
counterparts shall be kept by the Secretary, in which shall be recorded the
name and address of each
<PAGE> 14
10
person, firm or corporation owning the Shares evidenced by each certificate
evidencing Shares issued by the Corporation, the number of Shares evidenced by
each such certificate, the date of issuance thereof and, in the case of
cancellation, the date of cancellation. Except as otherwise expressly required
by law, the person in whose name Shares stand on the stock ledger of the
Corporation shall be deemed the owner and recordholder thereof for all
purposes.
SECTION 6.03. Transfers of Shares. Registration of transfers
of Shares shall be made only in the stock ledger of the Corporation upon
request of the registered holder of such Shares, or of his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary, and
upon the surrender of the certificate or certificates evidencing such Shares
properly endorsed or accompanied by a stock power duly executed, together with
such proof of the authenticity of signatures as the Corporation may reasonably
require.
SECTION 6.04. Addresses of Stockholders. Each Stockholder
shall designate to the Secretary an address at which notices of meetings and
all other corporate notices may be served or mailed to such Stockholder, and,
if any Stockholder shall fail to so designate such an address, corporate
notices may be served upon such Stockholder by mail directed to the mailing
address, if any, as the same appears in the stock ledger of the Corporation or
at the last known mailing address of such Stockholder.
SECTION 6.05. Lost, Destroyed and Mutilated Certificates.
Each recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost,
stolen or destroyed, upon the surrender of the mutilated certificate or, in the
case of loss, theft or destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction, and the Board may, in its discretion,
require the recordholder of the Shares evidenced by the lost, stolen or
destroyed certificate or his legal representative to give the Corporation a
bond sufficient to indemnify the Corporation against any claim made against it
on account of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate.
SECTION 6.06. Regulations. The Board may make such other
rules and regulations as it may deem expedient, not inconsistent with these
Bylaws, concerning the issue, transfer and registration of certificates
evidencing Shares.
SECTION 6.07. Fixing Date for Determination of Stockholders
of Record. In order that the Corporation may determine the Stockholders
entitled to notice of or to vote at any meeting of Stockholders or any
adjournment thereof, or to express consent to, or to dissent from, corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights
<PAGE> 15
11
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board may fix, in advance, a record date, which
shall not be more than 60 nor less than 10 days before the date of such
meeting, nor more than 60 days prior to any other such action. A determination
of the Stockholders entitled to notice of or to vote at a meeting of
Stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
ARTICLE VII
SEAL
SECTION 7.01. Seal. The Board may approve and adopt a
corporate seal, which shall be in the form of a circle and shall bear the full
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Nevada".
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the
Corporation shall end on the thirty-first day of December of each year unless
changed by resolution of the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 9.01. Indemnification. (a) The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
<PAGE> 16
12
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including amounts paid in settlement and attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
Corporation or for amounts paid in settlement to the Corporation, unless and
only to the extent that the court in which such action or suit was brought or
other court of competent jurisdiction shall determine upon application that, in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses or amounts as the court shall deem
proper.
(c) To the extent that a director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 9.01(a) and
(b) of these Bylaws, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under Section 9.01(a) and (b) of
these Bylaws (unless ordered by a court or advanced pursuant to Section
9.01(e)) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. Such determination shall be
made (i) by the Board by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the Stockholders of the Corporation.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation as
they are incurred and in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount unless it shall ultimately be determined that
he is
<PAGE> 17
13
entitled to be indemnified by the Corporation pursuant to this Article IX.
Such expenses (including attorneys' fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board
deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may lawfully be entitled under any law, bylaw,
agreement, vote of Stockholders or disinterested directors or otherwise, both
as to action in an official capacity and as to action in another capacity while
holding such office.
(g) For purposes of this Article IX, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees or agents so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article IX with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(h) For purposes of this Article IX, references to "other
enterprise" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
(i) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article IX shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 9.02. Insurance for Indemnification. The Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture,
<PAGE> 18
14
trust or other enterprise, against any liability asserted against him and
liability and expenses incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of Section 751 of the
General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. Any Bylaw may be adopted, amended
or repealed by the vote of the recordholders of a majority of the Shares then
entitled to vote at an election of Directors or by written consent of
Stockholders pursuant to Section 2.09 hereof, or by vote of the Board or by
written consent of Directors pursuant to Section 3.09 hereof.
<PAGE> 1
EXHIBIT 4.4
ARICO AMERICA REALESTATE INVESTMENT COMPANY
July 10, 1995
Deutsche Bank AG
Taunusanlage 12
60325 Frankfurt am Main
7% Cumulative Convertible Preferred Stock
Dear Sirs,
In connection with the proposed purchase by you of $50,000,000 of
our newly issued 7% Cumulative Convertible Preferred Stock, we confirm our
understanding with you as follows:
1. We agree to issue and you agree to purchase 3,030,303 shares of
the 7% Preferred Stock at a price of US$ 16.50 per share. The settlement
date for such purchase shall be on August 4, 1995, or on such date as we
may agree, and the settlement shall take place at such place as we may
agree.
2. You confirm that you understand that neither the 7% Preferred
Stock nor the Common Stock issuable upon conversion thereof has been
registered under the U.S. Securities Act of 1933 and thus any subsequent
transfers thereof may be subject to certain restrictions and conditions and
that share certificates which you receive may bear an appropriate legend.
You agree that prior to any sale of any shares of the 7% Preferred
Stock or any shares of Common Stock issued upon conversion thereof, you
will give written notice to the Company of your intentions.
3. If at any time after one year following a registered initial
public offering in the U.S. by the Company, you shall notify the Company in
writing that you intend to offer or cause to be offered for sale your
shares of the 7% Preferred Stock and/or shares of Common Stock issued upon
conversion of the 7% Preferred Stock and shall request the Company to cause
such securities to be registered under the U.S. Securities Act 1933, the
Company will use its best efforts to cause such securities to be so
registered if counsel for the Company shall deem such registration
necessary or advisable; all provided that you hold and intend to offer
<PAGE> 2
2
for public sale not less than a total of 1,500,000 shares of 7% Preferred
Stock and/or shares of Common Stock issued upon conversion thereof in any
combination. In no event shall the Company be obligated to make more than
one registration pursuant to this paragraph.
4. So long as you hold at least 1,000,000 shares of the 7% Preferred
Stock and notwithstanding anything to the contrary in the Company's
Articles of Incorporation, the Company will not, without your prior written
consent, issue any shares of Preferred Stock ranking on a parity with the
7% Preferred Stock.
5. On or about the settlement date, we will deliver to you an
opinion of our United States counsel regarding the 7% Preferred Stock
purchased by you, in form and substance satisfactory to you.
If the foregoing is in accordance with your understanding, kindly
confirm your acceptance and agreement by signing and returning one of the
enclosed duplicates of this letter, which will thereupon constitute an
agreement between you and us.
Very truly,
ARICO AMERICA REALESTATE
INVESTMENT COMPANY
By /s/ KEVIN P. MAHONEY
----------------------------------
By /s/ SCOTT M. DALRYMPLE
----------------------------------
Enclosure: Articles
Accepted and Agreed to as of the
date of this letter
Deutsche Bank AG
By /s/ HANS-PETER FERSLEV
----------------------------------
By /s/ DR. DIRK KREKELER
----------------------------------
<PAGE> 1
EXHIBIT 10.50
DEED OF TRUST NOTE
U.S. $79,100,000.00 New York, New York
September 27, 1995
1. FOR VALUE RECEIVED, THIRD AND UNIVERSITY LIMITED PARTNERSHIP,
a Washington limited partnership, having an address at 1191 Second Avenue,
Seattle, Washington 98101, ("Maker"), promises to pay to the order of TEACHERS
INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, or its successors or assigns
(Teachers Insurance and Annuity Association of America and its successors and
assigns being hereinafter collectively referred to as "Payee"), the principal
sum of SEVENTY NINE MILLION ONE HUNDRED THOUSAND DOLLARS ($79,100,000.00), in
lawful money of the United States of America with interest thereon from the
date of this Note as set forth in Paragraphs 2 and 3 below.
2. The term "Interest Rate" as used in this Note shall mean from
the date of this Note through and including the Maturity Date (hereinafter
defined), a rate of SEVEN AND 53/100THS (7.53%) percent per annum. Interest on
the principal sum of this Note which is payable in monthly installments as set
forth in Paragraph 3 below shall be calculated on the basis of a three hundred
sixty (360) day year consisting of twelve (12) months of thirty (30) days each.
However, interest due and payable for a period of less than a full calendar
month shall be calculated by multiplying the actual number of days elapsed in
such period by a daily rate based on a three hundred sixty five (365) day year.
3. Maker shall make monthly payments of interest only on the
unpaid principal balance in the amount of FOUR HUNDRED NINETY SIX THOUSAND
THREE HUNDRED FIFTY-TWO AND 50/100 DOLLARS ($496,352.50), payable in arrears,
on the first day of November, 1995 and on the first day of each calendar month
thereafter up to and including the first day of October, 2005 (each of such
monthly payment dates being referred to herein as a "Monthly Due Date"). In
addition to interest payable at the Interest Rate as provided in the preceding
sentence, on October 1, 1995 Maker shall also make a payment of accrued
interest only for the period from the date hereof to and including September
30, 1995. The unpaid principal sum and all interest thereon and all other sums
and fees due under this Note and the other Loan Documents (as defined in the
Deed of Trust (hereinafter defined)) shall be due and payable on the first day
of November, 2005 (the "Maturity Date"). All payments under this Note shall be
paid by wire transfer of immediately available funds to Morgan Guaranty Trust
Company, New York, New York, Account #2184968, ABA Routing #021000238, for the
account of Teachers Insurance and Annuity Association of America Re: WA-187; M#
000396400 or to such other designated bank or place, or in such other manner,
as Payee may
<PAGE> 2
from time to time specify in writing. If the first day of any month shall fall
on a non-business day, the Monthly Due Date for such month shall be deferred to
the next business day.
4. The whole of the principal sum of this Note, together with all
interest accrued and unpaid thereon, and all other sums and fees payable
hereunder, under the Deed of Trust , and under the other Loan Documents (such
amounts hereinafter collectively referred to as the "Indebtedness") shall
without notice become immediately due and payable at the option of Payee on the
happening of any Event of Default (as defined in the Deed of Trust), provided
that if an event described in paragraph 55 of the Deed of Trust shall occur,
the entire Indebtedness shall automatically become immediately due and payable.
Failure to exercise this option by Payee shall not constitute a waiver of the
right to exercise same thereafter with respect to such Event of Default in the
case of any subsequent Event of Default.
5. (a) The Indebtedness may not be prepaid prior to October 1,
1998. From and after October 1, 1998, such Indebtedness may be prepaid, in
whole, but not in part, on a Monthly Due Date, upon not less than ninety (90)
days prior written notice to the Payee and upon simultaneous payment of the
greater of (a) an amount equal to one percent (1%) of the then outstanding
principal balance of this Note, or (b) the amount by which the sum of the
Discounted Values (hereinafter defined) of all Note Payments (hereinafter
defined) from the date of prepayment to and including the Maturity Date,
calculated at the Discount Rate (hereinafter defined) , exceeds the amount of
the prepaid principal (the "Prepayment Fee"). The Indebtedness may be prepaid
without premium on or after the date that is the one hundred and eightieth
(180th) day immediately preceding the Maturity Date. As used herein, the
following terms shall have the respective meanings set forth below:
"Discount Rate" shall mean the sum of (a) the yield on a U.S. Treasury
issue selected by Payee, as published in the Wall Street Journal, two weeks
prior to prepayment, having a maturity date corresponding (or most closely
corresponding, if not identical) to the Maturity Date, and a coupon rate
corresponding (or most closely corresponding, if not identical) to seven and
53/100ths percent (7.53%) per annum plus (b) 50/-100ths percent (.50%).
"Default Discount Rate" shall mean the Discount Rate minus three
hundred basis points.
"Discounted Value" shall mean the discounted value of a Note Payment
based on the following formula:
NP = Discounted Value
----------
n
(1 + R/12)
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<PAGE> 3
NP = Amount of Note Payment
R = Discount Rate or Default Discount Rate, as the case may be
n = the number of months between the date of prepayment and the
scheduled date of the Note Payment in question, rounded to
the nearest integer
"Note Payments" shall mean (i) any scheduled payment of interest on
the principal Indebtedness (but excluding all other payments under this Note,
the Deed of Trust (hereinafter defined), and the other Loan Documents) for the
period between the date of prepayment and the Maturity Date and (ii) the
scheduled repayment of the principal balance of this Note at the Maturity Date.
(b) After default and acceleration of maturity under this Note,
the Deed of Trust, or the other Loan Documents, or upon any other prepayment
not permitted by the Loan Documents, any tender of payment of the amount
necessary to satisfy the entire Indebtedness, any judgment of foreclosure, any
sum due at foreclosure (including sale under power of sale) and any tender of
payment during any redemption period after foreclosure, to the extent permitted
by law, shall include an evasion of prepayment premium which is the greater of
(a) an amount equal to four (4%) percent of the then outstanding principal
balance@ of this Note, or (b) the amount by which the sum of the Discounted
Values of Note Payments, calculated at the Default Discount Rate, exceeds the
then outstanding principal balance of this Note. Such tender of payment shall
be deemed to be a voluntary prepayment hereunder and such prepayment, to the
extent permitted by law, will therefore include the Prepayment Fee.
(c) Maker acknowledges that the Prepayment Fee is
bargained-for-consideration and not a penalty, and Maker recognizes that Payee
would incur substantial additional costs and expense in the event of any
prepayment of the principal balance of this Note.
6. Maker agrees that upon the occurrence of any Event of Default,
whether or not the entire Indebtedness is accelerated, interest on all amounts
past due hereunder shall accrue thereafter at a rate (the "Default Rate") equal
to twelve and 53/100ths (12.53%) percent per annum until paid. This charge
shall be secured by the Deed of Trust. This clause, however, shall not be
construed as an agreement or privilege to extend the date of any part of the
payment of the Indebtedness, nor as a waiver of any other right or remedy
accruing to Payee by reason of the occurrence of an Event of Default. Payee
shall have the right to exercise any and all rights and remedies available at
law and in equity.
-3-
<PAGE> 4
7 . This Note is secured by, among other things, that certain Deed of
Trust, Assignment of Leases and Rents and Security Agreement (the "Deed of
Trust") and that certain Assignment of Leases and Rents (the "Assignment of
Leases"), each dated the date hereof given by Third and University Limited
Partnership to or for the benefit of Payee covering certain premises located in
King County, State of Washington, as more particularly described therein and
intended to be duly recorded in said county.
8. (a) Notwithstanding anything herein, in the Deed of Trust or
in any other Loan Document to the contrary, it is not the intention of Payee to
charge or collect any interest (whether fixed, contingent or otherwise) which
would result in a rate of interest being charged which is in excess of the
maximum rate, if any, now permitted by law for this transaction to be charged;
and in the event that any sum in excess of such maximum rate of interest is
paid or charged, the same shall be deemed to have been a prepayment of
principal when paid, without premium or penalty, and all payments made
thereafter shall be appropriately applied to interest and principal to give
effect to such maximum rate.
(b) If during the term of this Note the maximum rate of interest,
if any, now permitted by law for this transaction to be charged should be
increased, then for so long as such increase is in effect, the applicable
maximum rate permitted to be charged referred to in the paragraph immediately
preceding shall be deemed to be such increased rate. If such maximum rate of
interest, if any, now permitted by law to be charged for this transaction
should be deleted so that there would be no such maximum rate, then for
purposes of this Note there shall thereafter be no maximum rate limiting the
amount that can be charged.
9. In addition to any other payment which Maker may be required
to make pursuant to this Note, any Deed of Trust or any other Loan Document,
including, without limitation, interest at the Default Rate, if Maker shall
fail to timely make any payment of interest or principal or any other payment
required under the Loan Documents within five days of the due date, a late
charge by way of damages shall be immediately due and payable. Maker
recognizes that default by Maker in making the payments herein, in any Deed of
Trust or in any other Loan Document when due will result in Payee incurring
additional expense in servicing the Loan (hereinafter defined), in loss to
Payee of the use of the money due and in frustration to Payee in meeting its
other commitments. Maker agrees that, if f or any reason Maker fails to pay
the amounts due hereunder, under any Deed of Trust or under any other Loan
Document when due, Payee shall be entitled to damages for the detriment caused
thereby, but that it is extremely difficult and impractical to ascertain the
extent of such damages. Maker therefore agrees that a sum equal to five
-4-
<PAGE> 5
cents ($.05) for each one dollar ($1.00) of each payment which becomes
delinquent is a reasonable estimate of the said damages to Payee, which sum
Maker agrees to pay on demand and shall be secured by the Deed of Trust.
10. (a) Notwithstanding any provisions in this Note, the Deed of
Trust, the Assignment of Leases or in any other security documents (the "Other
Security Documents") executed or delivered in connection with the loan
evidenced by this Note (the "Loan") to the contrary (except as hereinafter
provided in this Paragraph 10), it is expressly understood and agreed that if
Payee at any time takes action to enforce the collection of the Indebtedness,
Payee will proceed to foreclose the Deed of Trust (including, without
limitation, foreclosure pursuant to the exercise of the power of sale in the
Deed of Trust), and to realize on any other collateral now or hereafter given
to secure the Loan, instead of instituting suit upon this Note. If a lesser
sum is realized from the foreclosure of the Deed of Trust and sale of the Trust
Property (as defined in the Deed of Trust) (and realization on such other
collateral) than the amount then due and owing under this Note, the Deed of
Trust and the Other Security Documents, Payee will never (except as hereinafter
provided in this Paragraph 10 or in accordance with the Deed of Trust)
institute any action, suit, claim or demand in law or in equity against Maker
or any partner or principal of Maker for or on account of the deficiency.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) , nothing contained in this Paragraph will in any way affect
or impair (i) the validity of the Indebtedness, the lien of the Deed of Trust,
Assignment of Leases or the Other Security Documents or any representation or
warranty of title made in the Deed of Trust or in any other Loan Document which
will remain in full force and effect and shall inure to the benefit of Payee
and to the benefit of any insurer of title to the Trust Property; (ii) the
right which Payee may have under any bankruptcy or similar law of the United
States or the States of New York and Washington to file a claim for the full
amount of the Loan or to require that all of the collateral securing the Loan
shall continue to secure all of the Indebtedness; (iii) the right of Payee as
beneficiary or secured party to commence an action to foreclose any lien or
security interest; (iv) Payee's rights under any master lease, indemnity or
guarantee given in connection with the Indebtedness; (v) Payee's right to
present and collect on any letter of credit given in connection with the
Indebtedness; or (vi) Payee's rights under the Environmental Indemnity dated
the date hereof executed by Maker, 1212 Second Avenue Limited Partnership and
ARICO-Seattle, Inc. in favor of Payee, with respect to the Trust Property.
(c) Further, notwithstanding anything to the contrary contained
herein, the following are excluded and excepted from the provisions of
subparagraph (a) and Payee may recover
-5-
<PAGE> 6
personally against Maker and any partner or principal of Maker for the
following:
(i) all losses, damages or liabilities suffered by Payee arising out
of any fraud or willful misrepresentation by Maker or any of Maker's partners
or principals;
(ii) all rents and other revenues, payments or reimbursements of
any kind whatsoever (including, without limitation, all payments and
contributions from tenants for taxes, insurance, operating expenses and common
area maintenance charges) (A) derived from the Trust Property or any part
thereof after an Event of Default by Maker under any of the Loan Documents or
(B) on deposit on the date such default occurs in one or more accounts used by
Maker or Maker's agents, representatives or property manager in connection with
the operation of the Trust Property or any part thereof, except to the extent
properly applied (as documented by evidence reasonably satisfactory to Payee)
to the normal and customary expenses and operation of such Trust Property;
(iii) all security deposits collected by Maker (or any of Maker's
predecessors) and not properly refunded to tenants and all advance rents
collected by Maker (or any of Maker's predecessors) and not properly applied in
due course, such proper refunding or application to be documented in accordance
with generally accepted accounting principles consistently applied, which
documentation must be reasonably satisfactory to Payee;
(iv) the replacement cost of any items of personalty or any
fixtures removed from the Trust Property or any part thereof by Maker after
Maker defaults under any of the Loan Documents;
(v) all losses, damages or liabilities suffered by Payee arising
from any acts of commission or omission by Maker that result in waste upon the
Trust Property or any part thereof as determined by a court of competent
jurisdiction;
(vi) all mechanic's liens, materialmen's liens or any other liens
arising from work performed on or materials delivered to the Trust Property or
any part thereof prior to foreclosure of the Deed of Trust and sale of such
Trust,Property or any part thereof but only to the extent Payee had advanced
funds to pay for such work or materials;
(vii) any insurance proceeds, condemnation awards or trust funds
attributable to the Trust Property or any part .thereof that are not applied in
accordance with the terms of the Deed of Trust or any other Loan Document and
any insurance proceeds, condemnation awards or trust funds attributable to the
Trust Property or any part thereof that were not paid to Payee when required
under the terms of the Deed of Trust or any other Loan Document;
-6-
<PAGE> 7
(viii) all losses, damages or liabilities suffered by Payee arising
out of any event or occurrence which causes a misrepresentation or breach of
warranty or covenant made by Maker or any partner or principal of Maker
contained in any Loan Document with respect to the existence of any hazardous
or toxic waste, waste product or substance at the Trust Property or any part
thereof, but only to the extent of the reduction in value of the Trust Property
therefrom;
(ix) Maker's failure to pay after demand any costs and expenses in
connection with the existence of any hazardous or toxic waste, waste product or
substance at the Trust Property or any part thereof, incurred by Payee in
connection with any order, consent, decree, settlement, judgment or verdict
arising from the deposit, storage, disposal, dumping, injecting, spilling,
leaking or other placement or release upon or in such Trust Property or any
part thereof of a hazardous or toxic waste, waste product or substance as
defined in 42 U.S.C. Section 9601 or as defined in any other law, statute,
order, rule or regulation of any governmental authority; or
(x) all losses, damages or liabilities suffered by Payee arising
out of any misappropriation or misapplication of Loan proceeds by Maker or any
of Maker's partners or principals.
Any reference to Maker in this subparagraph (c) or in any other
provision of this Note for the benefit of Payee shall be deemed to refer to any
one or more Maker as well as to Maker collectively.
11. No failure to accelerate the Indebtedness by reason of any
Event of Default hereunder, acceptance of a past due installment or indulgence
or forbearance granted from time to time shall be construed (i) as a novation
of this Note or as a reinstatement of the Indebtedness or as a waiver of such
right of acceleration or of the right of Payee thereafter to insist upon strict
compliance with the terms of this Note, or (ii) to prevent the exercise of such
right of acceleration or any other right granted hereunder or by the laws of
the State of New York. Maker hereby expressly waives the benefit of any
statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing. No extension of the time for the payment of this Note or any
installment due hereunder, made by agreement with any person now or hereafter
liable for the payment of this Note shall operate to release, discharge,
modify, change or affect the original liability of Maker under this Note,
either in whole or in part, unless Payee agrees otherwise in writing. This
Note may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Maker or
Payee, but only by an agreement in writing signed by the party against whom
enforcement of any modification,
-7-
<PAGE> 8
amendment, waiver, extension, change, discharge or termination is sought.
12. If Maker consists of more than one person or party, the
obligations and liabilities of each such person or party shall be joint and
several.
13. Maker and all other persons or parties who may become liable
for the payment of all or any part of the Indebtedness do hereby jointly and
severally (a) waive and renounce any and all exemption and homestead rights and
the benefit of all valuation and appraisement privileges, any statute of
limitations, moratorium, stay, reinstatement, redemption or marshalling as
against the Indebtedness or any renewal or extension thereof and (b) waive
presentment and demand for payment, notice of dishonor, protest and notice of
protest and non-payment. No release of any security for the Indebtedness or
extension of time for payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note or any Deed of
Trust, or any other Loan Document made by agreement between Payee and any such
other person or party shall release, discharge, modify, change or affect the
liability of Maker, and any other person who may become liable for the payment
of all or any part of the Indebtedness, under any other provision of this Note
or any Deed of Trust. TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW,
MAKER WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND
ARISING OUT OF OR RELATING TO THIS NOTE OR THE INTERPRETATION, BREACH OR
ENFORCEMENT HEREOF.
14. In the event that it should become necessary to employ counsel
to collect the Indebtedness or to protect or foreclose the security hereof,
Maker agrees to pay the attorneys' fee for the services and disbursements of
such counsel whether or not suit be brought together with all costs actually
incurred in connection with the collection or attempted collection of the
Indebtedness.
15. All of the terms, covenants and conditions contained in the
Deed of Trust and all other Loan Documents are hereby made part of this Note to
the same extent and with the same force as if they were fully set forth herein.
16. (a) THIS NOTE WAS NEGOTIATED IN NEW YORK, AND MADE, BY MAKER
AND ACCEPTED BY PAYEE IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THIS NOTE
DELIVERED PURSUANT HERETO WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES
AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING
TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE
-8-
<PAGE> 9
AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO THE
DEED OF TRUST, ASSIGNMENT OF LEASES AND THE OTHER SECURITY DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE TRUST
PROPERTY (AS DEFINED IN THE DEED OF TRUST) IS LOCATED, IT BEING UNDERSTOOD
THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE
STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF THIS
NOTE, AND THE INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER. TO THE FULLEST
EXTENT PERMITTED BY LAW, MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS NOTE
AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK PURSUANT TO Section 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR ANY
MAKER OR PAYEE ARISING OUT OF OR RELATING TO THIS NOTE SHALL BE INSTITUTED IN
ANY FEDERAL OR STATE COURT IN- NEW YORK OR WASHINGTON AND MAKER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MAKER DOES
HEREBY DESIGNATE AND APPOINT WRIGHT RUNSTAD & COMPANY, HAVING AN OFFICE AT 1191
SECOND AVENUE, SEATTLE, WASHINGTON 98101 AS ITS AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN
ANY SUCH SUIT, ACTION OR PROCEEDING AND AGREE THAT SERVICE OF PROCESS UPON SAID
AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF MAKER MAILED OR
DELIVERED TO MAKER IN THE MANNER PROVIDED IN THIS NOTE, SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON MAKER AND EACH MAKER, IN ANY
SUCH SUIT, ACTION OR PROCEEDING. MAKER (i) SHALL GIVE PROMPT NOTICE TO PAYEE
OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (ii) MAY AT ANY TIME
AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN
EITHER NEW YORK OR WASHINGTON (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS
FOR SERVICE OF PROCESS), PROVIDED THAT MAKER SHALL HAVE THE SAME AUTHORIZED
AGENT WITH THE SAME ADDRESS AND (iii) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK OR
WASHINGTON OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
17. Except as otherwise specified herein, any notice or other
communication under this Note shall be effective and valid only if in writing,
referring to this Note, signed by the party giving such notice, and delivered
either by nationally recognized overnight courier delivery service or by
certified mail of the United States Postal Service, postage prepaid, return
receipt requested,.addressed to the other party as follows (or to
-9-
<PAGE> 10
each other address or person as either party or person entitled to notice may
by notice to the other party specify):
To Payee:
---------
Teacher's Insurance and Annuity Association
730 Third Avenue
New York, New York 10017
Attn: Managing Director
Mortgage and Real Estate
Division
Region: West/Northwest
TIAA Appl. # WA-187
M-000396400
with a copy concurrently to:
Teacher's Insurance and Annuity Association
730 Third Avenue
New York, New York 10017
Attn: Vice President and Chief
Counsel in charge of Mortgage
and Real Estate Law
TIAA Appl. # WA-187
M-000396400
To Maker:
---------
Third and University Limited Partnership
c/o Wright Runstad & Co.
Suite 2000
1191 Second Avenue
Seattle, Washington 98101
Attn: Douglas Norberg
with a courtesy copy to:
Third and University Limited Partnership
c/o ARICO-Seattle, Inc.
31 West 52nd Street
New York, New York 10019
Attn: President
with a courtesy copy to:
Jerome D. Whalen, Esq.
Whalen & Firestone
1221 Second Avenue
-10-
<PAGE> 11
Suite 410
Seattle, Washington 98101
provided, however, that notice to either general partner of Maker shall be and
be deemed to constitute notice to Maker and to the other general partner of
Maker.
Unless otherwise specified, notices shall be deemed given as follows:
(i) if delivered by nationally recognized overnight courier delivery service,
on the day following the day such notice is sent, or (ii) if delivered by
certified mail, on the third day after the same is deposited with the United
States Postal Service as provided above.
18. If any term, covenant or condition of this Note is held to be
invalid, illegal or unenforceable in any respect, this Note shall be construed
without such provision.
19. Maker represents that Maker and the representatives of Maker
subscribing below have full power, authority and legal right to execute and
deliver this Note and that the Indebtedness hereunder constitutes a valid and
binding obligation of Maker.
20. PLEASE NOTE THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
-11-
<PAGE> 12
IN WITNESS WHEREOF, Maker has duly executed this Note the day and year
first above written.
THIRD AND UNIVERSITY LIMITED
PARTNERSHIP, a Washington limited
partnership
BY: 1212 SECOND AVENUE LIMITED
PARTNERSHIP, a Washington limited
partnership, its general partner
By: 1201 Third Avenue Limited
Partnership, a Washington limited
partnership, its general partner
By: Wright Runstad Associates
Limited Partnership, a
Washington limited partnership,
its general partner
By: Wright Runstad & Company, a
Washington corporation, its
general partner
By: /s/ DOUGLAS E. NORBERG
------------------------
Douglas E. Norberg,
President
BY: ARICO-SEATTLE, INC., a Delaware
corporation, its general partner
By: /s/ SCOTT M. DALRYMPLE
------------------------
Scott M. Dalrymple,
Vice President
By: /s/ KEVIN P. MAHONEY
------------------------
Kevin P. Mahoney,
Vice President and
Treasurer
-12-
<PAGE> 1
EXHIBIT 10.51
THIRD AMENDED AND RESTATED
ARTICLES OF LIMITED PARTNERSHIP
OF
THIRD AND UNIVERSITY LIMITED PARTNERSHIP
THIS AGREEMENT (this "AGREEMENT"), is made as of this 27th day
of September, 1995, by and between ARICO-SEATTLE, INC., a Delaware corporation
("ARICO"), as a general partner, and 1212 SECOND AVENUE LIMITED PARTNERSHIP, a
Washington limited partnership ("1212"), as a general partner and a limited
partner.
W I T N E S S E T H:
WHEREAS, Third and University Limited Partnership (the
"PARTNERSHIP") was formed pursuant to that certain limited partnership
agreement dated as of October 1, 1986 (the "ORIGINAL PARTNERSHIP AGREEMENT") by
and among ARICO Parent, 1212 and Stevens U. Trainer, and a certificate in
respect of the Original Partnership Agreement was filed with the office of the
Secretary of State of the State of Washington on October 3, 1986 (the "ORIGINAL
CERTIFICATE");
WHEREAS, the Original Partnership Agreement was amended and
restated in its entirety by those certain Amended and Restated Articles of
Limited Partnership of Third and University Limited Partnership, dated as of
October 14, 1986 (the "FIRST RESTATED ARTICLES"), a certificate in respect of
which was filed with the office of the Secretary of State of Washington on
October 28, 1986;
WHEREAS, the First Restated Articles were amended by that
certain Partnership Amendment Agreement, dated September 1, 1988, among the
Partnership, 1212, Third Avenue Limited Partnership ("1201"), Wright Runstad
Associates Limited Partnership ("WRALP"), ARICO Parent, 1101 Second Avenue
Limited Partnership, Howard S. Wright, H. Jon Runstad, and Douglas E. Norberg;
WHEREAS, the First Restated Articles were further amended and
restated in their entirety by those certain Second Amended and Restated
Articles of Limited Partnership of Third and University Limited Partnership,
dated as of January 30, 1990 (the "SECOND RESTATED ARTICLES") between ARICO
Parent and 1212, which Second Restated Articles provided, inter alia, for (i)
conversion of ARICO Parent's interest in the Partnership from that of limited
partner to that of a general partner and (ii) conversion of two percent (2%) of
1212's interest as a general partner to a limited partner interest, and a
certificate in respect of which Second Restated Articles was filed with the
office of Secretary of State of the State of Washington on June 7, 1990;
<PAGE> 2
WHEREAS, the Second Restated Articles were amended by (i) that
certain First Amendment to Second Amended and Restated Articles of Limited
Partnership of Third and University Limited Partnership, dated as of August 28,
1992 between ARICO Parent and 1212, (ii) that certain Second Amendment to
Second Amended and Restated Articles of Limited Partnership of Third and
University Limited Partnership, dated as of December 31, 1992 between ARICO
Parent and 1212, and (iii) that certain Third Amendment to Second Amended and
Restated Articles of Limited Partnership of Third and University Limited
Partnership, dated as of April 29, 1994 between ARICO, ARICO Parent and 1212,
whereby (x) ARICO Parent assigned its interest in the Partnership to ARICO and
(y) the parties acknowledged that 1212 had satisfied its obligations to make
contributions to pay the Preference Return and to fund Cost Overrun
Contributions (as such terms are defined in the Second Restated Articles) and
all of the guaranties by 1201, WRALP, Howard S. Wright, H. Jon Runstad, Douglas
E. Norberg and Matthew J. Griffin in respect of such obligations of 1212 had
been satisfied; and
WHEREAS, ARICO and 1212 desire, by this Agreement, to amend
and restate the Second Restated Articles, as amended, in their entirety.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto do hereby amend and
restate the Second Restated Articles, as amended, in the entirety as follows:
ARTICLE I
THE PARTNERSHIP; DEFINITIONS
SECTION 1.01. CONTINUATION. (a) The parties hereto do
hereby confirm the formation of the Partnership on October 3, 1986 and agree to
the continuation of the Partnership pursuant to the Washington Uniform Limited
Partnership Act, Section 25.10 of the Revised Code of the State of Washington
(as the same is amended from time to time, the "PARTNERSHIP LAW"), and all
other pertinent laws of the State of Washington, for the purposes and upon the
terms and conditions hereinafter set forth.
(b) Contemporaneously with the execution of this
Agreement, each Partner shall execute and the Managing General Partner shall
promptly file and record in the office of the Secretary of State of the State
of Washington (or cause to be filed and recorded) on behalf of the Partnership
an appropriate amendment to the amended certificate of limited partnership of
the Partnership (as amended, and as further amended from time to time, the
"CERTIFICATE"). The Managing General Partner shall take any and all other
actions reasonably necessary to perfect and maintain the status of the
Partnership as a limited partnership under the laws of the State of Washington,
including executing and filing amendments to the Certificate whenever required
by the Partnership Law.
SECTION 1.02. NAME AND OFFICE; AGENT FOR SERVICE OF
PROCESS. (a) The name of the Partnership shall continue to be "THIRD AND
UNIVERSITY LIMITED PARTNERSHIP". All business of the Partnership shall be
conducted under such
<PAGE> 3
3
name and title to all property, real, personal, or mixed, owned by or leased to
the Partnership shall be held in such name. The Managing General Partner shall
cause to be filed from time to time such assumed name certificates as are
necessary or desirable in order to permit the Partnership to conduct its
business under such name.
(b) The principal place of business and office of the
Partnership shall be located at 1191 Second Avenue, Suite 2000, Seattle,
Washington 98101, or at such other place in Seattle, Washington as the Managing
General Partner may from time to time designate. The Partnership may have such
additional offices and places of business as may be established at such other
locations as may be determined from time to time by the Managing General
Partner. In the event that the Managing General Partner shall elect to change
the principal place of business of the Partnership or to establish any
additional offices or places of business of the Partnership the Managing
General Partner shall give written notice of such election to each other
Partner as soon as reasonably practicable, and in any event not later than ten
(10) Business Days after such change of principal place of business or opening
of such additional offices or places of business, as the case may be.
(c) The Partnership's agent for service of process shall
be Wright Runstad & Company, whose address is 1191 Second Avenue, Suite 2000,
Seattle, Washington 98101, or such other Person as the Managing General Partner
shall appoint by (i) giving written notice to each other Partner and (ii)
causing the appropriate filings to be made with the Secretary of State of the
State of Washington and any other governmental authority required by the
Partnership Law or other applicable law.
SECTION 1.03. PURPOSE. (a) The purpose of the Partnership
shall be to:
(i) own, hold, manage, operate, lease, alter, improve and
maintain certain land located in the City of Seattle, King County,
Washington, as more particularly described as Parcel A in Exhibit A
attached hereto and made a part hereof (the "LAND") and the buildings
and other improvements located from time to time thereon
(collectively, the "BUILDING" and, together with the Land and all
contracts, easements, rights, and interests appurtenant to the Land
and the interest of subtenant under the Block Six Sublease, the
"PROJECT"), to finance, refinance and mortgage the Project or any
portion thereof or interest therein and to sell the Project, in whole
or in part;
(ii) to acquire and construct additional property (real
and personal) necessary or useful in the operation of the Land and
Building, including, without limitation, the fee interest to the Block
Six Land;
(iii) to undertake the obligation to reimburse 1212 for the
amount (the "BLOCK SIX SHORTFALL") by which all rent payable by 1212
to Samis Land Company ("SAMIS") under that certain lease (the "LEASE")
between Samis, as landlord, and Old WR & Co., as tenant, dated
February 24, 1985, as amended by letter dated March 6, 1985, and by
<PAGE> 4
4
amendments dated June 27, 1985, and November 3, 1985, covering the
Block Six Land and improvements, which Lease was assigned to 1212
pursuant to that certain Assignment of Samis Lease dated October 8,
1985, exceeds all rental and other consideration payable by the tenant
under the Block Six sublease to 1212 pursuant to the terms of the
Block Six Sublease; and
(iv) and to act in all other respects as the owner of the
Project, including, without limitation, the performance of such other
activities as may be necessary to or desirable in connection with the
foregoing, all on the terms and conditions herein set forth and
provided the same shall not be prohibited hereunder.
(b) The Partnership shall not engage in any other
business or activity without the prior written consent of all the Partners.
SECTION 1.04. TERM. The term of the Partnership commenced
on October 3, 1986 and shall continue until December 31, 2100, unless sooner
terminated pursuant to the provisions hereof.
SECTION 1.05. GENERAL PARTNERS AND LIMITED PARTNERS. ARICO
and 1212 shall be the general partners (the "GENERAL PARTNERS") and 1212 shall
be the limited partner (the "LIMITED PARTNER") (as such terms are used in the
Partnership Law) of the Partnership. Notwithstanding any rights of approval or
consent the Limited Partner may have hereunder but without restricting or
limiting the same as between the Limited Partner and the General Partners inter
se, the Limited Partner shall not hold itself out, nor shall the General
Partners hold the Limited Partner out, in respect of any third parties having
dealings with the Partnership as having any rights, powers or privileges in
connection with the management or control of the business of the Partnership
inconsistent with the status of the Limited Partner as limited partner.
SECTION 1.06. DEFINITIONS. As used in the Agreement,
capitalized terms, unless otherwise defined herein, shall have the meanings
ascribed to such terms in Appendix A attached hereto.
ARTICLE II
CAPITAL
SECTION 2.01. INITIAL CAPITAL CONTRIBUTIONS. (a) ARICO
Parent has made (and ARICO has succeeded to the benefits of) an equity
contribution (the "EQUITY CONTRIBUTION") to the capital of the Partnership in
the amount of $100,000,000, which amount has been credited to ARICO's capital
account.
<PAGE> 5
5
(b) 1212 has contributed to the Partnership the Land, the
goodwill, plans, studies, commitments, leases, construction contracts, all
other contracts, assets, rights and properties relating to the acquisition,
ownership and development of the Project as well as certain interests with
respect to the Block Six Land and the Block Six Sublease.
SECTION 2.02. CERTAIN OTHER CONTRIBUTIONS. (a) Upon the
execution and delivery of this Agreement, ARICO shall contribute to the
Partnership an additional $47,000,000.00 (the "ADDITIONAL EQUITY CONTRIBUTION")
which amount shall be credited to ARICO's capital account.
(b) 1212 shall further contribute to the Partnership any
amounts required pursuant to Section 3.05 or Section 7.03(c) hereof.
SECTION 2.03. WITHDRAWAL OF CAPITAL; LIMITATION OF
DISTRIBUTIONS. No Partner shall be entitled to withdraw any part of its
capital contributions to, or to receive any distributions from, the Partnership
except as expressly provided in this Agreement. Except as expressly provided
in this Agreement, no Partner shall be entitled to demand or receive interest
on its capital contributions or any property from the Partnership other than
cash.
SECTION 2.04. NO FURTHER CAPITAL/LOANS. Except as
expressly provided in this Agreement or with the prior written consent of the
other Partners, no Partner shall be required or entitled to contribute any
other or further capital to the Partnership, nor shall any Partner be required
or entitled to loan any funds to the Partnership.
ARTICLE III
PARTNERSHIP INTERESTS; CAPITAL ACCOUNTS
SECTION 3.01. INTERESTS IN PARTNERSHIP. (a) The
"INTEREST" of a Partner shall mean all of the rights and interests of
whatsoever nature of such Partner in the Partnership, as set forth in this
Agreement, including without limitation, the right to approve or consent to
certain Partnership matters, the right to receive distributions out of
Operating Revenues, Sales Proceeds, and Refinancing Funds, and the right to
receive allocations of income, gain, loss, credits, and deductions.
(b) In the event that ARICO elects to become the Managing
General Partner pursuant to Section 7.07(a), 1212 shall have the right, subject
to Section 12.01(b), to convert all of its Interest into a Limited Partner
Interest at any time after such election by ARICO which right shall be
exercised by written notice to ARICO specifying the effective date of such
conversion.
SECTION 3.02. SHARING RATIO. Subject to adjustments
resulting from Transfers permitted under this Agreement (including Transfers
between the Partners), the ratios
<PAGE> 6
6
by which the Partners shall be entitled from time to time to share in certain
specific Partnership items (the "SHARING RATIOS") shall be as follows:
(i) During the Preference Period, the Sharing Ratios of
the Partners in the Partnership shall be as follows:
<TABLE>
<CAPTION>
PARTNERS SHARING RATIO
-------- -------------
<S> <C>
General Partners
----------------
1212 49%
ARICO 50%
Limited Partner
---------------
1212 1%
</TABLE>
(ii) Effective upon the expiration of the Preference
Period, and continuing thereafter, the Sharing Ratios of the Partners
in the Partnership shall be as follows:
<TABLE>
<CAPTION>
PARTNERS SHARING RATIO
-------- -------------
<S> <C>
General Partners
----------------
1212 39%
ARICO 60%
Limited Partner
---------------
1212 1%
</TABLE>
SECTION 3.03. CAPITAL ACCOUNTS. A separate capital account
shall be maintained in respect of each Partner in accordance with the following
provisions and Section 1.704-1(b)(2)(iv) of the Section 704(b) Regulations.
The capital accounts as so determined shall be thereafter adjusted as provided
in this Section 3.03 and Sections 3.04 and 3.05 hereof.
(a) INCREASES. There shall be credited to each Partner's
capital account (i) the amount of any contribution of cash, (ii) the Adjusted
Basis of any property contributed by that Partner other than Special Property,
(iii) the Carrying Value of any Special Property contributed
<PAGE> 7
7
by that Partner, (iv) that Partner's allocable share of Profits and any items
in the nature of income or gain that are specially allocated to that Partner
pursuant to Sections 6.03, 6.04 or 6.05 hereof, (v) the amount of any
Partnership liabilities assumed by that Partner or secured by any Partnership
property distributed to that Partner, and (vi) that Partner's allocable share
of any other item required by the Section 704(b) Regulations to increase a
partner's capital account.
(b) DECREASES. There shall be debited to each Partner's
capital account (i) the amount of all distributions of cash not treated
pursuant to the Agreement as a guaranteed payment under the Code, (ii) the
Carrying Value of Partnership property distributed to that Partner by the
Partnership, (iii) that Partner's allocable share of Losses and any items in
the nature of expenses or losses which are specially allocated pursuant to
Sections 6.03, 6.04 or 6.05 hereof, (iv) the amount of any liabilities of that
Partner assumed by the Partnership or which are secured by any property
contributed by that Partner to the Partnership, and (v) that Partner's
allocable share of any other item required by the Section 704(b) Regulations to
decrease a partner's capital account.
(c) CARRYOVER UPON TRANSFER OR CONVERSION. Upon the
transfer of any Interest in the Partnership or upon the conversion of any
Interest in the Partnership, the transferee shall succeed to the portion of the
transferor's capital account related to the Interest transferred. The
conversion of an Interest (or any portion thereof) from a general partner
Interest to a limited partner Interest, or vice versa, shall not result in the
creation of multiple capital accounts of a single Partner (albeit that such
Partner may have multiple Interests in the Partnership) or otherwise affect in
any way the capital account of the converting Partner.
SECTION 3.04. SPECIAL RULES. (a) COMPLIANCE WITH TREASURY
REGULATIONS. The provisions of this Article III relating to the establishment
and maintenance of capital accounts are intended to comply with the Section
704(b) Regulations and shall be interpreted and applied in a manner consistent
with such Treasury Regulations. Accordingly, notwithstanding any other
provisions of this Article III, the capital account of each Partner shall be
credited and debited in accordance with the principles set forth in the Section
704(b) Regulations. In the event that there are modifications to the Section
704(b) Regulations, or in the event that the Managing General Partner
determines that it is prudent to modify the manner in which the capital
accounts, or any debits or credits thereto, are computed in order to comply
with the Section 704(b) Regulations, the Managing General Partner may make such
modifications, provided that such modifications are not likely to have a
material effect on any Partner pursuant to this Agreement. If such
modifications are likely to have a material effect on the Partners under this
Agreement, the Managing General Partner shall, subject to the approval of the
other General Partner, make such modifications as may be necessary or
appropriate to maintain the validity of the allocations set forth in this
Article III.
(b) DETERMINATION OR REDETERMINATION OF CARRYING VALUE.
A Carrying Value shall be determined (or redetermined, if a Carrying Value has
been previously determined)
<PAGE> 8
8
and thereafter adjusted in the manner set forth in this Section 3.04(b) for one
or more assets of the Partnership in the circumstances and manner described in
this Section 3.04(b).
(i) CONTRIBUTED PROPERTY. If the gross fair market value
(determined without regard to Section 7701(g) of the Code) of any
asset contributed by a Partner to the Partnership differs from the
Adjusted Basis of such asset immediately preceding the contribution,
the Carrying Value of that asset shall be such fair market value, as
the same is determined by the contributing Partner and the other
Partners as of the date of contribution.
(ii) REVALUED PROPERTY. A Carrying Value for each
Partnership asset shall be determined or redetermined (taking Section
7701(g) of the Code into account) by unanimous agreement among the
Partners, as of the following times: (A) the acquisition of an
additional Interest in the Partnership after the date of the Agreement
by any new or existing Partner in exchange for more than a de minimis
contribution of capital; (B) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property as
consideration for an Interest in the Partnership if the Managing
General Partner reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic interests of
the Partners in the Partnership pursuant to the Agreement; and (C)
upon the liquidation (within the meaning of section
1.704-1(b)(2)(ii)(g) of the Section 704(b) Regulations) of the
Partnership or any Partner's Interest therein.
(iii) DISTRIBUTED PROPERTY. A Carrying Value for any
Partnership asset distributed to any Partner shall be established or
redetermined (without regard to Section 7701(g) of the Code) by that
Partner and the Partnership on the date of such distribution.
(iv) SECTION 754 ELECTION. If an election under Section
754 of the Code is in effect with respect to the Partnership, the
Carrying Value of all Partnership Special Property shall be increased
(or decreased) to reflect any adjustment to the Adjusted Basis of the
assets pursuant to Section 734(b) or Section 743(b) of the Code, but
only to the extent that those adjustments are taken into account in
determining capital accounts pursuant to Section 1.704-1(b)(2)(iv)(m)
of the Section 704(b) Regulations and Section 2.3(k) hereof; provided,
however, that the Carrying Value of Partnership Special Property shall
not be adjusted pursuant to this Section 3.04(b)(iv) to the extent
that the Managing General Partner determines that a determination or
redetermination of Carrying Value pursuant to Section 3.04(b)(ii)
hereof is necessary or appropriate in connection with the transaction
that would otherwise result in any adjustment pursuant to this Section
3.04(b)(iv).
(v) DEPRECIATION. If the Carrying Value of an asset of
the Partnership has been determined or redetermined pursuant to
Section 3.04(b)(i) or (ii) hereof, that
<PAGE> 9
9
Carrying Value shall thereafter be adjusted by the Depreciation, if
any, taken into account with respect to that asset for purposes of
computing Profits, Losses, and any items in the nature of income,
gain, loss or expense (including Property Gain or Property Loss) that
are specially allocated under this Agreement. Depreciation based on
the Carrying Value of Special Property shall be computed (A) while
such Special Property has a positive Adjusted Basis, in such a way
that such Depreciation for any year or other period is an amount that
bears the same relationship to the Carrying Value of the Special
Property as the depreciation, amortization or cost recovery deduction
computed with respect to such Special Property for federal income tax
purposes for such year or other period bears to the Adjusted Basis of
the Special Property, or (B) from and after the time such Special
Property has a zero Adjusted Basis, under any reasonable method
selected by the Managing General Partner.
(vi) FAIR MARKET VALUE DETERMINATION METHODOLOGY. The
fair market value of property utilized in determining Carrying Value
shall be determined by mutual agreement of the Partners. However, if
the Partners cannot agree on the fair market value of a particular
item within the (10) days after first meeting for such purpose, then
the fair market value shall be determined by the following appraisal
procedure:
(A) 1212 and ARICO shall mutually choose an
appraiser for such item, but if they should
fail to agree upon a mutually satisfactory
appraiser within fifteen (15) days after the
Commencement Date, then either 1212 or ARICO
shall provide written notice to the other,
appointing as its appraiser a disinterested
individual with a nationally recognized firm
or company, of recognized competence, and
with at least ten (10) years experience as an
appraiser of the item in question, and the
other party shall appoint its appraiser,
meeting the same standards, within five (5)
days of receipt of the notice from the first
party appointing its appraiser.
(B) The appraisers appointed in accordance with
paragraph (A) shall, within fifteen (15) days
of the appointment of the last such appraiser
appointed, mutually agree on the fair market
value of the item in question; provided,
however, that in the event they are unable to
so agree, they shall, within ten (10) days
thereafter appoint, by mutual agreement, a
third appraiser meeting the same standards as
are set forth in paragraph (A). Should the
appraisers appointed pursuant to paragraph
(A) fail to appoint a mutually agreed third
appraiser within such ten (10) day period,
then 1212 and ARICO may select by mutual
agreement such third appraiser, or may
request the appointment of such third
appraiser by the Chief Judge of the Federal
District court for the District in which the
<PAGE> 10
10
Project is located, acting in such judge's
individual, and not judicial, capacity.
(C) Both 1212 and ARICO shall be entitled to
present evidence and arguments to the
appraisers, or the sole appraiser, as the
case may be, and the appraisers, or the sole
appraiser, as the case may be, shall
determine the fair market value of the item
in question, and such determination shall be
binding on the Partners. Such determination
shall in no instance be made later than
fifteen (15) days after the appointment of
the last appraiser appointed pursuant to
paragraphs (A) and (B).
(D) The fair market value shall be (i) the
appraised fair market value of the item in
question, as agreed by the first two
appraisers, or (ii) if a third appraiser is
appointed, then either (A) the third
appraiser's appraised fair market value of
the item in question, if the same is between
the two appraised fair market value of the
first two appraisers, or (B) the one of the
first two appraisers' appraised fair market
values of the item in question that is
closest to the appraised fair market value
determined by the third appraiser, if such
appraised fair market value determined by the
third appraiser is (y) higher than the higher
of the first two appraised fair market values
or (z) lower than the lower of the first two
appraised fair market values.
(E) If two or more appraisers are appointed, 1212
and ARICO shall pay the fees and expenses of
the appraiser that they individually selected
and one-half of the fees and expenses of the
third appraiser, if any. If the parties
mutually agree on one appraiser, each party
shall pay one-half (1/2) of the fees and
expenses of such appraiser.
SECTION 3.05. BALANCING OF CAPITAL ACCOUNTS UPON
LIQUIDATION. Upon the liquidation of a Partner's Interest in the Partnership,
whether as a result of the liquidation of the Partnership or otherwise, the
Partners intend that any deficit capital account balance of such Partner
("LIQUIDATED PARTNER") will be eliminated and that the total of the amounts
distributed in such liquidation to any Liquidated Partner will in all cases be
in accordance with the positive capital account balances of such Liquidated
Partner. To accomplish this, upon any such liquidation, the capital accounts
of the Partners shall first be adjusted to reflect (i) all capital account
adjustments (including, without limitation, adjustments in respect of Property
Gain or Property Loss) pursuant to Section 3.03 hereof for the Fiscal Year
during which such liquidation occurs, and (ii) on a pro-forma basis, all
distributions contemplated by Section 12.03 of this Agreement. If, following
such adjustments, 1212 (but not ARICO) would have a negative or
<PAGE> 11
11
deficit balance in its capital account, 1212 shall contribute cash to the
Partnership in an amount equal to that necessary to bring the balance in its
capital account (following such pro-forma adjustments and the reflection of
such contribution) up to zero on or before the Capital Account Trigger Date.
If, following such adjustments, ARICO (but not 1212) would have a negative or
deficit balance in its capital account, the Partnership shall pay, as a
guaranteed payment within the meaning of Section 707(c) of the Code, an amount
equal to the amount of such negative or deficit balance to ARICO, and the
Partnership deduction in respect of such payment shall be allocated to the
Partner who would have, following the adjustments described in the preceding
sentence, a positive balance in its capital account. After application of
whichever of the foregoing sentences may be applicable, remaining Partnership
assets shall be distributed to the Partners pursuant to Section 12.03 of this
Agreement in satisfaction of the positive balances of their capital accounts.
For purposes of this Section 3.05, (a) the liquidation of a Partner's Interest
in the Partnership shall occur on the earliest of (i) the date of liquidation
of the Partnership or (ii) the date on which there is a liquidation of the
Partner's Interest in the Partnership under Section 1.761-1(d) of the Treasury
Regulations; (b) the liquidation of the Partnership occurs upon the earlier of
(i) the date of a Termination or (ii) the date upon which the Partnership
ceases to be a going concern (even though the Partnership may continue in
existence for the purposes of winding up its affairs, paying its debts and
distributing any remaining balance to the Partners); and (c) the term "CAPITAL
ACCOUNT TRIGGER DATE" shall mean the end of the taxable year of the Partnership
in which the liquidation of a Partner's Interest in the Partnership occurs or,
if later, within 90 days after the date of such liquidation.
ARTICLE IV
FINANCING
SECTION 4.01. PROJECT LOAN. Pursuant to that certain
Credit Facility Agreement dated as of September 1, 1987, as the same has been
amended (the "CREDIT FACILITY AGREEMENT"), the Partnership has obtained a loan
from TULP Funding, an Affiliate of ARICO, in the aggregate principal amount of
$130,000,000. The Credit Facility Agreement and all documents entered into in
connection contemplated thereby shall not be amended without the prior written
consent of each General Partner.
SECTION 4.02. REFINANCING. The Partnership has entered
into a Commitment Agreement dated July 22, 1995 (the "COMMITMENT") with
Teachers Insurance and Annuity Association of America ("TEACHERS") providing
for a loan (the "TEACHERS LOAN") in the principal amount of $79,100,000.00 to
refinance in part the loan made by TULP Funding. The Partners hereby approve
the Teachers Loan and shall cause the Partnership to negotiate, execute and
deliver loan documentation (including, without limitation, a mortgage on the
Project) and otherwise take all necessary actions in order to close the
Teachers Loan on terms and conditions consistent with those set forth in the
Commitment.
<PAGE> 12
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SECTION 4.03. OTHER FINANCINGS. The Managing General
Partner shall have the right and power to borrow money for the Partnership's
account and grant liens and security interests upon the Partnership's
properties as security therefor; provided, however, that if any borrowing,
other than the Teachers Loan, would involve any lien whatsoever on any
Partnership property, would violate or result in a breach of the terms and
conditions of the Teachers Loan or would result in total outstanding borrowings
and capitalized financing leases by the Partnership, in excess of $500,000.00,
then the prior written consent of each other General Partner shall first be
obtained, which consent shall not be unreasonably withheld.
ARTICLE V
DISTRIBUTIONS
SECTION 5.01. PREFERENCE RETURN. (a) During the
Preference Period, ARICO shall be entitled to receive an annual preference
return (the "PREFERENCE RETURN") equal to eight percent (8%) of its Capital
Base. The Preference Return shall be computed on an annual basis, and shall be
distributable on a monthly basis, with the Preference Return attributable to
each calendar month distributable on the first day of the immediately
succeeding calendar month. To the extent amounts distributable to ARICO
pursuant to Section 5.03(c) are insufficient in any calendar month to fully pay
the Preference Return for such month, the amount of the deficiency shall bear
interest until paid at the rate of eight percent (8%) per annum commencing on
the date such Preference Return would have been distributed if the amounts
distributable to ARICO pursuant to Section 5.03(c) had been sufficient. The
deficiency for each such month, together with accrued interest thereon, shall
accumulate (such accumulation, including interest, being herein called the
"CUMULATIVE PREFERENCE DEFICIT"). Accrued interest accumulated as part of the
Cumulative Preference Deficit during each Fiscal Year and remaining unpaid as
of each December 31 shall be compounded as of such date and shall thereafter
bear interest until paid at the rate of eight percent (8%) per annum compounded
annually.
(b) The "PREFERENCE PERIOD" commenced on October 15, 1989
and shall continue until the Preference Termination Date. The "PREFERENCE
TERMINATION DATE" means the last day of the Fiscal Year during which the
Preference Test has been satisfied. The "PREFERENCE TEST" shall be satisfied
when, but only when, both (i) the Cumulative Preference Deficit (including any
portion thereof attributable to the year in which the Preference Test is
satisfied) has been retired and (ii) on an accrual basis for two consecutive
full calendar years the following condition shall have been met: Preference
Test Cash Flow for the applicable year equals or exceeds an amount equal to
five times the Preference Return for such year. For purposes hereof,
"PREFERENCE TEST CASH FLOW" shall mean the positive difference, if any, between
(A) Operating Revenues (excluding extraordinary, non-recurring items) plus net
reductions in Reserves, and (B) the sum of (x) Operating Costs (excluding
extraordinary, non-recurring items) and (y) Capital Expenditures and net
increases in Reserves.
<PAGE> 13
13
(c) 1212 and ARICO acknowledge and agree that as of June
30, 1995, the Cumulative Preference Deficit of ARICO is equal to $6,658,277.53.
SECTION 5.02. ADDITIONAL EQUITY PREFERRED RETURN. In the
event that ARICO shall be required to make an Additional Equity Contribution
pursuant to Section 2.02(a) hereof, ARICO shall be entitled to receive an
annual preferred return (the "ADDITIONAL EQUITY PREFERRED RETURN") on ARICO's
Unpaid Additional Equity Contribution at a rate equal to the Additional Equity
Rate.
(a) For purposes of this Section 5.02:
(i) "UNPAID ADDITIONAL EQUITY CONTRIBUTION" shall mean for
the applicable Fiscal Year an amount equal to the Additional Equity
Contribution less the aggregate amount of distributions to ARICO
pursuant to Section 5.05(i) hereof;
(ii) "ADDITIONAL EQUITY RATE" shall mean an annual rate
equal to (A) 8.74% for the period commencing on the date hereof and
ending on the date of the closing of the Teachers Loan, (B) 9.53% from
the closing of the Teachers Loan through December 31, 2003 and (C),
thereafter, at the Equity Refinancing Determined Rate;
(iii) "EQUITY REFINANCING DETERMINED RATE" shall mean an
annual rate equal to the annual rate of interest on a loan, having a
principal amount of $47,000,000.00, that would result in the sum of
(i) the total annual interest charges under such $47,000,000.00 loan
plus (ii) the total annual interest charges on a loan having a
principal amount of $79,100,000.00 and bearing interest at the $79.1
Million Rate being equal to the total annual interest charges on a
loan having a principal amount of $126,100,000.00 and bearing interest
at the $126.1 Million Rate. The following is for illustration
purposes only:
Assuming that the $126.1 Million Rate equals 12.5%
per year and the $79.1 Million Rate equals 10% per year, the
annual interest charges for the $126.1 million loan and the
$79.1 million loan will be as follows:
<TABLE>
<CAPTION>
Principal Amount Interest Rate Total Annual Interest Charges
---------------- ------------- -----------------------------
<S> <C> <C>
$126.1 million 12.5% $15,762,500.00
$79.1 million 10% $7,910,000 .00
</TABLE>
The annual interest charges on the $47 million loan
that, when added to the annual interest charges on the $79.1
million loan would equal the annual interest charges on the
$126.1 million loan, is calculated by taking the difference
between the annual interest charges on the $126.1 million loan
($15,762,500.00) and the annual interest charges on the $79.1
million loan ($7,910,000.00) which
<PAGE> 14
14
difference equals $7,852,500.00. The annual rate on a $47
million loan required to yield $7,852,500.00 in annual
interest charges equals 16.7% per year, which is calculated by
dividing $7,852,500.00 by $47,100,000.00 and multiplying the
result by 100. Thus, the Equity Refinancing Determined Rate,
for purposes of this example, equals 16.7%;
(iv) "$126.1 MILLION RATE shall mean the annual rate at which
an Institutional Lender would commit to lend, on or about December 31,
2003, a principal amount of $126,100,000.00, secured by a first
mortgage on the Project, for a term of ten years on an interest-only
basis during said term with the entire principal amount being due and
payable at the end of said term;
(v) "$79.1 MILLION RATE" shall mean the annual rate at which
an Institutional Lender would commit to lend, on or about December 31,
2003, a principal amount of $79,100,000.00, secured by a first
mortgage on the Project, for a term of ten years on an interest-only
basis during said term with the entire principal amount being due and
payable at the end of said term; and
(vi) "INSTITUTIONAL LENDER" shall mean any bank, savings
bank, savings and loan association, trust company, credit union,
pension fund, insurance company or governmental entity which is duly
authorized to issue the loans contemplated under Section 5.02 hereof.
On or after June 30, 2003, any Partner may notify the other Partners in writing
that it desires to meet to attempt to agree on the $79.1 Million Rate and the
$126.1 Million Rate. Each Partner shall be entitled to have its consultants
and experts participate in the meetings and discussions among the parties at
such Partner's cost. If the Partners have not agreed on the $79.1 Million Rate
and the $126.1 Million Rate, and executed and delivered among them a supplement
to this Partnership Agreement setting forth the same within sixty (60) days
after the giving of such notice, then any Partner may notify the others that it
desires to invoke the arbitration procedure set forth in Section 5.09 to
determine such rates.
(b) The Additional Equity Preferred Return shall be
computed on an annual basis, and shall be distributable on a monthly basis,
with the Additional Equity Preferred Return attributable to each calendar month
distributable on the first day of the immediately succeeding calendar month.
To the extent that the amounts distributable to ARICO pursuant to Section
5.03(a) or Section 5.04(a), as the case may be, are insufficient in any
calendar month to fully pay the Additional Equity Preferred Return for such
month, the amount of the deficiency shall bear interest until paid, commencing
on the dates such Additional Equity Preferred Return would have been
distributed if the amounts distributable to ARICO pursuant to Section 5.03(a)
or Section 5.04(a), as the case may be, had been sufficient, at an annual rate
equal to 8.74% through December 31, 2003 and, thereafter, at an annual rate
equal to the Additional Equity Rate. The deficiency for each month, together
with accrued interest thereon, shall accumulate
<PAGE> 15
15
(such accumulation, including interest, being herein called the "CUMULATIVE
AEPR DEFICIT"). Accrued interest accumulated in the Cumulative AEPR Deficit
during each Fiscal Year and remaining unpaid as of each December 31 shall be
compounded as of such date and shall thereafter bear interest until paid at an
annual rate equal to 8.74% through December 31, 2003 and, thereafter, at an
annual rate equal to the Additional Equity Rate.
SECTION 5.03. DURING THE PREFERENCE PERIOD. Subject to
Section 5.05 hereof, Net Operating Cash Flow attributable to the Preference
Period shall be determined and adjusted on a Fiscal Year basis, and shall be
paid and distributed as follows and in the following order of priority:
(a) First: to ARICO in distribution of any Cumulative
AEPR Deficit.
(b) Second: to ARICO in distribution of the then
currently due Additional Equity Preferred Return.
(c) Third: to ARICO In distribution of any Cumulative
Preference Deficit to ARICO.
(d) Fourth: to ARICO in distribution of the then
currently due Preference Return.
(e) Fifth: to the Partners, pro rata, in accordance with
their then-applicable Sharing Ratios.
SECTION 5.04. AFTER THE PREFERENCE PERIOD. Subject to
Section 5.05 hereof, Net Operating Cash Flow attributable to the period of time
after the Preference Period shall be determined and adjusted on a Fiscal Year
basis and shall be paid and distributed as follows and in the following order
of priority:
(a) First: as provided in Section 5.03(a) above.
(b) Second: as provided in Section 5.03(b) above.
(c) Third: as provided in Section 5.03(e) above.
SECTION 5.05. REFINANCING FUNDS AND SALE PROCEEDS.
Refinancing Funds and Sale Proceeds shall be paid and distributed as follows
and in the following order of priority:
(a) First: any debts of the Partnership (but not the
separate debts of any Partner) secured by liens or security interests required
to be discharged in connection with the realization of such Refinancing Funds
or Sale Proceeds shall be paid.
<PAGE> 16
16
(b) Second: to the extent, if any, not paid pursuant to
Section 5.05(a), in payment of the remaining principal and unpaid interest and
other sums then due in respect of the Project Loan, if any, unless such payment
is waived in writing by the holder or holders of the Project Loan.
(c) Third: to the extent, if any, not paid pursuant to
Section 5.05(a), in payment of the remaining principal and accrued, unpaid
interest and other sums then due in respect of any Third Party Loan, unless
such payment is waived by the holder or holders of such Third Party Loan.
(d) Fourth: to ARICO in distribution of any Cumulative
AEPR Deficit.
(e) Fifth: to ARICO in the amount of the unpaid
Additional Equity Preferred Return, if any, payable for the Fiscal Year in
which such Refinancing Funds or Sale Proceeds are being distributed, computed
to the date of such distribution.
(f) Sixth: to ARICO in distribution of any Cumulative
Preference Deficit.
(g) Seventh: to ARICO in distribution, in the amount of
the unpaid Preference Return, if any, payable for the Fiscal Year in which such
Refinancing Funds or Sale Proceeds are being distributed, computed to the date
of such distribution.
(h) Eighth: to ARICO, an amount equal to $616,781.18
(previously funded as Block Six and other extra costs).
(i) Ninth: to ARICO, an amount equal to the Unpaid
Additional Equity Contribution, computed as of the date of such distribution.
(j) Tenth: to ARICO, in reduction of its Capital Base,
in an amount equal to the remaining amount of its Capital Base (determined
immediately prior to such distribution).
(k) Eleventh: to 1212, in an amount equal to the
Equalizing Payment.
(l) Twelfth: to the Partners, pro rata, in accordance
with their then-applicable Sharing Ratios.
SECTION 5.06. EQUALIZING PAYMENT. For purposes of Section
5.05 hereof, "EQUALIZING PAYMENT" means, as of any date for which it is
determined, an amount computed as follows:
(1) The amount of each distribution actually made to
ARICO pursuant to Section 5.05(j) shall be multiplied by a fraction,
the numerator of which is the total amount, if any, distributed to
1212 pursuant to Section 5.03 and 5.04 hereof for the four
<PAGE> 17
17
(4) complete calendar quarters immediately preceding the sale or
refinancing giving rise to such distribution to ARICO pursuant to
Section 5.05(j), and the denominator of which is the total amount, if
any, distributed to ARICO pursuant to Sections 5.03(c), 5.03(d),
5.03(e) and 5.04(c) hereof for the four (4) complete calendar quarters
immediately preceding the sale or refinancing giving rise to such
distribution to ARICO; provided that in no event shall such fraction
exceed 40/60 (being 2/3rds);
(2) If more than one sale or refinancing has occurred,
then each of the results obtained pursuant the preceding clause (1)
shall be added together; and
(3) The Equalizing Payment shall be the sum determined
pursuant to the preceding clauses (1) and (2), less the cumulative
amount of all prior distributions actually made to 1212 pursuant to
Section 5.05(k).
SECTION 5.07. DISTRIBUTIONS OF CASH IN EXCESS OF RESERVES.
(a) The Partnership shall distribute currently, in accordance with this
Article V, all cash available for distribution to the Partners in excess of the
reasonable Reserves to be retained by the Partnership in accordance with the
Annual Budget at the time in effect.
(b) To the extent of the cash so available for the
purpose, the Partnership shall pay to the Partners on a quarterly basis,
cumulative within the year, but not from year to year unless expressly set
forth herein to the contrary, advances on the respective amounts distributable
to them for the Fiscal Year pursuant to Sections 5.03(b) and 5.04(c) hereof.
(c) Within one hundred five (105) days after the end of
each Fiscal Year, the Managing General Partner shall prepare and cause to be
reviewed by the Partnership's Certified Public Accountant an accounting of the
respective amounts distributable to the Partners for such Fiscal Year pursuant
to this Article V. Any Partner who has received, in respect of such year, an
aggregate amount in excess of the amount to which it is entitled under such
accounting shall forthwith return such excess to the Partnership (provided that
no such refund shall be required from ARICO for distributions of the Additional
Equity Preferred Return or Preference Return actually accrued for such year or
in respect of Cumulative Preference Deficit or Cumulative AEPR Deficit actually
accumulated). If the Partnership has, in respect of such year, paid to any
Partner an aggregate amount which is less than the amount distributable to such
Partner pursuant to such accounting, the Partnership shall forthwith pay the
amount of such shortfall to such Partner.
SECTION 5.08. DISTRIBUTIONS IN KIND. Distributions in kind
may be made, proportionately according to their respective rights to cash
distributions under this Article V, but also subject to all the provisions of
this Agreement (including without limitation those provisions regarding future
distributions), at any time with the consent of both 1212 and ARICO.
<PAGE> 18
18
SECTION 5.09. RATE ARBITRATION. (a) In the event that any
Partner desires to invoke the arbitration procedure set forth in this Section
5.09, the Partner invoking the arbitration procedure shall give a notice (the
"ARBITRATION NOTICE") to the other Partners stating that the Partner sending
the Arbitration Notice desires to meet within ten (10) days to attempt to agree
on a single arbitrator (the "ARBITRATOR") to determine the $79.1 Million Rate
or $126.1 Million Rate or both, as the case may be. If the Partners have not
agreed on the Arbitrator within thirty (30) days after the giving of the
Arbitration Notice, then any Partner, on behalf of all Partners, may apply to
the local office of the American Arbitration Association or any organization
which is the successor thereof (the "AAA") for appointment of the Arbitrator,
or, if the AAA shall not then exist or shall fail, refuse or be unable to act
such that the Arbitrator is not appointed by the AAA within sixty (60) days
after application therefor, then any Partner, on behalf of all Partners, may
apply to the Superior Court of the State of Washington in and for King County
(the "COURT") for the appointment of the Arbitrator and the other Partners
shall not raise any question as to the Court's full power and jurisdiction to
entertain the application and make the appointment. The date on which the
Arbitrator is appointed, by the agreement of the Partners, by appointment by
the AAA or by appointment by the Court, is referred to herein as the
"APPOINTMENT DATE". If any Arbitrator appointed hereunder shall be unwilling
or unable, for any reason, to serve, or continue to serve, a replacement
arbitrator shall be appointed in the same manner as the original Arbitrator.
(b) The arbitration shall be conducted in accordance with
the then prevailing rules of the AAA, modified as follows:
(i) To the extent that the law of the State of Washington
imposes requirements different than those of the AAA in order for the
decision of the Arbitrator to be enforceable in the courts of the
State of Washington, such requirements shall be complied with in the
arbitration.
(ii) The Arbitrator shall be disinterested and impartial,
shall not be affiliated with any Partner and shall be a mortgage
broker or bank credit officer with at least ten (10) years experience
in the determination of fair market value of interest rates on
commercial loans.
(iii) Before hearing any testimony or receiving any
evidence, the Arbitrator shall be sworn to hear and decide the
controversy faithfully and fairly by an officer authorized to
administer an oath and a written copy thereof shall be delivered to
all Partners.
(iv) Within forty-five (45) days after the Appointment
Date, the Partners shall deliver to the Arbitrator two (2) copies of
their respective written determinations of any interest rate in
dispute (each, a "DETERMINATION") together with such affidavits,
appraisals, reports and other written evidence relating thereto as the
submitting Partner deems appropriate; provided, however, that if any
Partner is an Affiliate of any other
<PAGE> 19
19
Partner such affiliated Partners shall be entitled to submit among
them only one Determination with respect to any such interest rate.
After the submission of any Determination, the submitting Partner may
not make any additions to or deletions from, or otherwise change, such
Determination or the affidavits, appraisals, reports and other written
evidence delivered therewith. If any Partner fails to so deliver its
Determination within such time period, time being of the essence with
respect thereto, such Partner shall be deemed to have irrevocably
waived its right to deliver a Determination and the Arbitrator,
without holding a hearing, shall, in the event that there is only one
submitting Partner, accept the Determination of such submitting
Partner as to the applicable interest rate. If all Partners, or more
than one Partner, submits a Determination with respect to any interest
rate in dispute within the forty-five (45) day period described above,
the Arbitrator shall, promptly after its receipt of each
Determination, deliver a copy of such Determination to the other
Partners.
(v) If any interest rate has not been determined pursuant
to clause (iv) of this subparagraph, then not less than fifteen (15)
days nor more than thirty (30) days after the earlier to occur of (A)
the expiration of the forty-five (45) day period provided for in
clause (iv) of this subparagraph or the Arbitrator's receipt of the
Determinations from the Partners (such earlier date is referred to
herein as the "SUBMISSION DATE") and upon not less than ten (10) days
notice to the Partners, the Arbitrator shall hold one or more hearings
with respect to the determination of said interest rate. The hearings
shall be held in the City of Seattle at such location and time as
shall be specified by the Arbitrator. Each of the Partners shall be
entitled to present all relevant evidence and to cross-examine
witnesses at the hearings. The Arbitrator shall have the authority to
adjourn any hearing to such later date as the Arbitrator shall
specify, provided that in all events all hearings with respect to the
determination of said interest rate shall be concluded not later than
forty-five (45) days after the Submission Date.
(vi) As to any interest rate in dispute, except as
otherwise provided in clause (iv) of this subparagraph, the Arbitrator
shall be instructed, and shall be empowered only, to select as the
interest rate that one of the Determinations which the Arbitrator
believes is the more accurate determination of the $79.1 Million Rate
or the $126.1 Million Rate or both, as the case may be. Without
limiting the generality of the foregoing, in rendering his or her
decision, the Arbitrator shall not add to, subtract from or otherwise
modify the provisions of this Partnership Agreement or either of the
Determinations.
(vii) As to any interest rate in dispute, the Arbitrator
shall render his or her determination as to the selection of a
Determination in a signed and acknowledged written instrument,
original counterparts of which shall be sent simultaneously to all
Partners, within ten (10) days after the earlier to occur of (A) his
or her determination of such interest rate pursuant to clause (iv) of
this subparagraph or (B) the conclusion of the hearing(s) required by
clause (v) of this subparagraph.
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(c) This provision shall constitute a written agreement
to submit any dispute regarding the determination of the $79.1 Million Rate or
$126.1 Million Rate or both, as the case may be, to arbitration.
(d) The arbitration decision, determined as provided in
this Section 5.09, shall be conclusive and binding on the Partners, shall
constitute an "award" by the Arbitrator within the meaning of the AAA rules and
applicable law and judgment may be entered thereon in any court of competent
jurisdiction.
(e) Each Partner shall pay its own fees and expenses
relating to the arbitration (including, without limitation, the fees and
expenses of its counsel and of experts and witnesses retained or called by it).
Each Partner shall pay the fees and expenses of the AAA and of the Arbitrator
to the extent of its Sharing Ratio, provided that (i) the Arbitrator shall have
the authority to award such fees and expenses in favor of the prevailing
Partner and (ii) if either Partner fails to submit a Determination within the
period provided therefor, such non-submitting Partner shall pay all of such
fees and expenses.
ARTICLE VI
ALLOCATIONS; TAX MATTERS
SECTION 6.01. GENERAL ALLOCATION OF PROFITS. Except as
otherwise provided in this Article VI, Profits occurring in any Fiscal Year or
portion thereof shall be allocated to the Partners in the same proportion as
cash is distributed during such year or portion thereof pursuant to Sections
5.03 or 5.04 hereof, as appropriate, or, if no cash is so distributed, 99% to
ARICO and 1% to 1212.
SECTION 6.02. GENERAL ALLOCATION OF LOSSES. (a) Except as
otherwise provided in Section 6.02(b) hereof or elsewhere in this Article VI,
Losses occurring in any Fiscal Year or portion thereof shall be allocated to
the Partners in the same proportion as cash is distributed during such year or
portion thereof pursuant to Sections 5.03 or 5.04 hereof, as appropriate, or,
if no cash is so distributed, 99% to ARICO and 1% to 1212.
(b) The Losses and other items in the nature of expenses
or losses otherwise allocable to any Partner pursuant to Sections 6.02(a) and
6.03 hereof, respectively, shall not exceed the maximum amount of such items
that can be so allocated without causing such Partner to have an Adjusted
Capital Account Deficit at the end of any Fiscal Year. To the extent that
Losses or other items in the nature of expenses or losses to be allocated
pursuant to Sections 6.02(a) or 6.03 hereof, respectively, during any Fiscal
Year would cause a Partner to have an Adjusted Capital Account Deficit at the
end of that Fiscal Year, then such Losses and other items (or the portion
thereof which would cause such an Adjusted Capital Account Deficit) shall be
allocated 100% to the other Partner until such time as any further allocation
to such other Partner pursuant to this Section 6.02(b) would cause such other
Partner to have an Adjusted Capital Account Deficit.
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SECTION 6.03. SPECIAL ALLOCATIONS. (a) PARTNERSHIP
MINIMUM GAIN CHARGEBACK. Notwithstanding any provision in this Article VI to
the contrary, if there is a net decrease in Partnership Minimum Gain during any
Partnership taxable year, each General Partner shall be allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in proportion to, and to the extent of, an amount equal to the greater of (A)
the portion of such Partner's share of the net decrease in Partnership Minimum
Gain during such taxable period that is allocable (in accordance with the
principles set forth in Section 1.704-1T(b)(4)(iv)(e)(2) of the Section 704(b)
Regulations) to the disposition of Partnership property subject to one or more
Nonrecourse Liabilities of the Partnership, or (B) the deficit balance in such
Partner's Adjusted Capital Account at the end of such taxable period (modified,
as appropriate, by Section 1.704-IT(b)(4)(iv)(e)(2) of the Section 704(b)
Regulations). The items to be so allocated shall be determined in accordance
with Section 1.704-1T(b)(4)(iv)(e) of the Section 704(b) Regulations and, for
purposes of this Section 6.03(a), each Partner's Adjusted Capital Account
balance shall be determined, and the allocation of income or gain required
hereunder shall be effected, prior to the application of any other allocations
pursuant to Article VI hereof with respect to such taxable period. This
Section 6.03(a) is intended to comply with the partnership minimum gain
chargeback requirement in Section 1.704-1T(b)(4)(iv)(e) of the Section 704(b)
Regulations and shall be interpreted consistently therewith.
(b) CHARGEBACK OF MINIMUM GAIN ATTRIBUTABLE TO PARTNER
NONRECOURSE DEBT. Notwithstanding the other provisions of this Section 6.03
(other than Section 6.03(a)), if there is a net decrease in Minimum Gain
Attributable to Partner Nonrecourse Debt during any Partnership taxable year,
any Partner with a share of Minimum Gain Attributable to Partner Nonrecourse
Debt at the beginning of such year shall be allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in
proportion to and to the extent of, an amount equal to the greater of (A) the
portion of such Partner's share of the net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt that is allocable (in accordance with
the principles set forth in Section 1.704-1T(b)(4)(iv)(h)(4) of the Section
704(b) Regulations) to the disposition of Partnership property subject to such
Partner Nonrecourse Debt or (B) the deficit balance in such Partner's Adjusted
Capital Account at the end of such year (modified, as appropriate, by Section
1.704-1T(b)(4)(iv)(h)(4) of the Section 704(b) Regulations). The items to be
so allocated shall be determined in a manner consistent with the principles of
Section 1.704-1T(b)(4)(iv)(e) of the Section 704(b) Regulations and, for
purposes of this Section 6.03(b), each Partner's Adjusted Capital Account
balance shall be determined and the allocation of income or gain required
hereunder shall be effected, prior to the application of any other allocations
pursuant to this Article VI other than the allocations prescribed by Section
6.03(a), if applicable, with respect to such year. This Section 6.03(b) is
intended to comply with the chargeback of items of income and gain requirement
in Section 1.704-1T(b)(4)(iv)(h)(4) of the Section 704(b) Regulations and shall
be interpreted consistently therewith.
(c) QUALIFIED INCOME OFFSET. Except as provided in
Section 6.03(a) or 6.03(b) above, if any Partner unexpectedly receives an
adjustment, allocation, or distribution
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specified in Section 1.704-1(b)(2)(ii)(d)(4)-(6) of the Section 704(b)
Regulations which causes or increases an Adjusted Capital Account Deficit with
respect to such Partner, such Partner shall be allocated items of income and
gain in an amount and manner sufficient to eliminate, to the maximum extent
required by Section 1.704-1(b)(2)(ii)(d) of the Section 704(b) Regulations,
such Adjusted Capital Account Deficit as quickly as possible. This provision
is intended to constitute a "qualified income offset" within the meaning of
such section of the Section 704(b) Regulations and shall be interpreted
consistently therewith.
(d) DEPRECIATION. Depreciation in respect of the
Building shall be allocated 50% to 1212 and 50% to ARICO until 1212 has
received as a result of such allocation, for each Fiscal Year, aggregate
depreciation, cost recovery and amortization deductions for federal income tax
purposes equal to the amount of depreciation, cost recovery and amortization
allocable pursuant to Section 6.5 of the limited partnership agreement of 1212,
dated October 14, 1986, and amended on September 1, 1988. Any Depreciation not
specifically allocated in the preceding sentence of this Section 6.03(d) shall
be included in the computation of Profits or Losses.
(e) OPERATING GROSS INCOME. All items of Partnership
gross income other than that from the disposition of the Project shall be
allocated 50% to 1212 and 50% to ARICO until the amounts of such allocations
pursuant to this Section 6.03(e) shall equal the amounts of the Depreciation
deductions allocated pursuant to Section 6.03(d) above. Any items of
Partnership gross income described, but not specifically allocated, in the
preceding sentence or elsewhere in this Section 6.03 shall be included in the
computation of Profits or Losses.
(f) DEBT SERVICE EXPENSE. That portion of any
Partnership deduction, for federal income tax purposes, in respect of Debt
Service shall be included in the computation of Profits or Losses.
(g) PROPERTY GAIN. Property Gain occurring in any Fiscal
Year shall be allocated as follows (after giving effect to the other
allocations contained in this Article VI):
(i) If any Partner's capital account has a negative
balance (prior to giving effect to distributions under Section 5.05 or
12.03, as appropriate, then (A) if only one Partner's capital account
balance is negative, any Property Gain shall first be allocated to
such Partner until its capital account balance is zero, and (B) if
more than one Partner's capital account balance is negative, Property
Gain shall first be allocated among such Partners having negative
capital account balances in a manner and in the proportion that causes
their respective negative capital account balances to be (to the
extent possible) in the same ratio as their Sharing Ratios and shall
thereafter be allocated to such Partners in accordance with their
Sharing Ratios until the capital account balances of all such Partners
are zero.
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(ii) Thereafter, Property Gain in excess of that allocated
pursuant to Section 6.03(g)(i) hereof, if any, shall be allocated to
the Partners in the order and to the extent necessary to increase
their respective capital accounts, to the maximum extent possible, to
balances equal to the distributions to be made to them in connection
with the refinancing or sale (or dissolution) under Sections 5.05 or
12.03 hereof.
(h) PROPERTY LOSS. Any Property Loss shall be allocated
to the Partners in the order and to the extent necessary to decrease their
respective capital accounts, to the maximum extent possible, to balances equal
to the distributions to be made to them in connection with the refinancing or
sale (or dissolution) under Sections 5.05 or 12.03 hereof.
(i) IMPUTED INTEREST. To the extent the Partnership has
imputed interest income or expense pursuant to Section 483, Sections 1271
through 1288, or Section 7872 of the Code with respect to any deferred capital
contribution to or distribution from the Partnership, or with respect to any
loan or advance of funds to or from the Partnership, that imputed interest
income or expense shall be specially allocated to the Partner to whom such
capital contribution, distribution or loan relates.
(j) SECTION 754 ELECTION. To the extent an adjustment to
the Adjusted Basis of any Partnership asset pursuant to Section 734(b) or
Section 743(b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m) of the Section 704(b) Regulations, to be taken into
account in determining capital accounts, the amount of that adjustment to the
capital accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the
basis of the asset), and that gain or loss shall be specially allocated to the
Partners in the manner consistent with the manner in which their capital
accounts are required to be adjusted pursuant to that Treasury Regulation.
(k) GUARANTEED PAYMENTS. Any Partnership deduction or
loss in respect of a "guaranteed payment" (within the meaning of Section 707(c)
of the Code) shall be allocated in the manner specified in Section 3.05 hereof
if such provision is applicable; otherwise any such deduction or loss shall be
included in the computation of Profits or Losses.
(l) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for
any taxable period shall be allocated to the Partners in accordance with their
respective Sharing Ratios. If the Managing General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the "safe harbor" requirements of the
Section 704(b) Regulations, the Managing General Partner may, with the prior
consent of all other General Partners, revise the prescribed ratio to the
numerically closest ratio which does satisfy such requirements.
(m) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the Partner that
bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are
<PAGE> 24
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attributable in accordance with Section 1.704-1T(b)(4)(iv)(h) of the Section
704(b) Regulations. If more than one Partner bears the Economic Risk of Loss
with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions
attributable thereto shall be allocated between or among such Partners in
accordance with the ratios in which they share such Economic Risk of Loss.
(n) NONRECOURSE LIABILITIES. For purposes of Treasury
Regulation Section 1.752-1T(e)(3)(ii)(C), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (i) the amount of
Partnership Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain
shall be allocated among the Partners in accordance with their respective
Sharing Ratios.
(o) OTHER ITEMS. Except as otherwise provided in this
Section 6.03, all items of Partnership income, gain, loss, deduction, and any
other allocations not otherwise provided for shall be allocated among the
Partners in the same proportion as they share Profits or Losses, as the case
may be, for the applicable Fiscal Year or other period.
SECTION 6.04. CURATIVE ALLOCATIONS. (a) The allocations
(or limitations thereon) set forth in Sections 6.02(b), 6.03(a), 6.03(b),
6.03(c), 6.03(j), 6.03(l) and 6.03(m) hereof (the "REGULATORY ALLOCATIONS") are
intended to comply with certain requirements of the Section 704(b) Regulations.
The Regulatory Allocations may not be consistent with the manner in which the
Partners intend to divide Partnership distributions. Accordingly, the Managing
General Partner is hereby authorized to divide allocations of Profits, Losses
and other items of income, gain, deduction, and loss among the Partners so as
to prevent the Regulatory Allocations from altering the manner in which
Partnership distributions would be divided among the Partners pursuant to
Articles V or XII of the Agreement if Profits, Losses and all other items of
income, gain, loss and deduction had been allocated solely pursuant to Sections
6.01, 6.02 (excluding Section 6.02(b)) and Section 6.03 (excluding Section
6.03(a), (b), (c), (j), (l) and (m)) hereof. In general, the Partners
anticipate that this will be accomplished by specially allocating other
Profits, Losses, and items of income, gain, loss, and deduction among the
Partners so that the net amount of the Regulatory Allocations and of such
special allocations to each such Partner is zero.
(b) In the event that either (i) a disbursement to a
Partner characterized by the Agreement as a payment (in the nature of a
guaranteed payment, a fee or otherwise) to the recipient is ultimately
recharacterized (as the result of an audit of the Partnership's returns or
otherwise) as a distribution for federal income tax purposes, or (ii) a
disbursement to a Partner characterized as a distribution pursuant to Article V
is ultimately recharacterized as a payment (in the nature of a guaranteed
payment, a fee or otherwise) for federal income tax purposes, the provisions of
this Article VI shall be applied as if the payment had initially been
characterized in a manner consistent with its ultimate characterization;
provided, however, if any such recharacterization gives rise to a deduction not
theretofore claimed by the Partnership, such deduction shall, to the maximum
extent possible, be allocated to the recipient of such payment.
<PAGE> 25
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SECTION 6.05. ALLOCATIONS IN RESPECT OF TRANSFERRED
INTERESTS. If all or any portion of a Partner's Interest in the Partnership is
transferred in any Fiscal Year, all items of Profit, Loss, income, gain,
deduction and loss attributable to such Interest (or a portion thereof) in that
Fiscal Year shall be divided and allocated between the transferor and
transferee by taking into account their varying interests during the Fiscal
Year in accordance with Section 706(d) of the Code, using any conventions
permitted by law and selected by the transferor Partner.
SECTION 6.06. SPECIAL TAX ALLOCATIONS. (a) CONTRIBUTED
PROPERTY. In accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, if any asset or property contributed to the Partnership
is Special Property, income, gain, loss and deduction with respect to such
asset shall, solely for tax purposes, be allocated among the Partners so as to
take account of any variation between the Adjusted Basis of that property to
the Partnership and its Carrying Value (computed in accordance with Section
3.04(b)(i) hereof).
(b) REVALUED PROPERTY. In the event the Carrying Value
of any Partnership asset is determined (or redetermined) pursuant to Section
3.04(b) hereof, subsequent allocations of income, gain, loss and deduction for
federal income tax purposes with respect to that asset shall take into account
any variation between the Adjusted Basis (or prior Carrying Value) of that
asset and its newly determined (or redetermined) Carrying Value in the same
manner as the variation between Adjusted Basis and Carrying Value is taken into
account under Section 6.06(a) hereof with respect to contributed Special
Property.
(c) RECAPTURE OF DEDUCTIONS AND CREDITS. If any
"recapture" of deductions or credits previously claimed by the Partnership is
required under the Code upon the sale or other taxable disposition of any
Partnership property, those recaptured deductions or credits shall, to the
extent possible, be allocated to the Partners pro rata in the same manner that
the deductions and credits giving rise to the recapture items were originally
allocated using the "first-in, first-out" method of accounting; provided,
however, that this Section 6.06(c) shall affect the characterization but not
the amount of income allocated among the Partners for tax purposes.
(d) EFFECT OF SPECIAL TAX ALLOCATIONS. Allocations made
pursuant to this Section 6.06 are solely for purposes of federal, state and
local taxes and shall not affect or in any way be taken into account in
computing any Partner's capital account or share of Profits, Losses, gains,
losses, other items or distributions pursuant to any provision of the Agreement
including this Article VI.
SECTION 6.07. DEPRECIATION. Depreciation of each
depreciable asset of the Partnership shall be computed by the straight line
method. The selection of depreciable lives for the assets of the Partnership
for both accounting and tax purposes shall be acceptable to each General
Partner.
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SECTION 6.08. SPECIAL BASIS ADJUSTMENTS. In connection
with any sale or exchange of a Partner's Interest (or of an interest in any
Partner or in any partner in a Partner) permitted by the terms of this
Agreement, and in connection with any distribution to a Partner, the Managing
General Partner shall cause the Partnership, at the request of any Partner, and
at the time and in the manner provided in United States Treasury Regulations
Section 1.754-1(b) (or any like statute or regulation then in effect), to make
an election to adjust the basis of the Partnership's property in the manner
provided in Sections 734(b) and 743(b) of the Code, or any like statute or
regulation then in effect.
SECTION 6.09. PARTNERSHIP LEVEL TAX MATTERS. The Partners
hereby designate the Managing General Partner as the tax matters partner of the
Partnership pursuant to Section 6231(a)(7) of the Code. The Managing General
Partner shall keep the other Partners informed of any material matter which may
come to the attention of the Managing General Partner in its capacity as tax
matters partner by giving the other Partners notice thereof within 10 business
days after the Managing General Partner becomes aware of such matter. This
provision is not intended to authorize the Managing General Partner to take any
action which is left to the determination of an individual Partner under
Sections 6222 through 6233 of the Code, nor does it constitute a waiver by the
other Partners of any right provided in such sections.
SECTION 6.10. OTHER MATTERS. (a) The Partners intend and
agree that the Preference Return shall not be considered or treated as a
"guaranteed payment" within the meaning of such term in Section 707(c) of the
Code.
(b) At all times 1212 shall be, or have as its direct or
indirect General Partner, either an individual, corporation, or a partnership
having substantial assets (within the meaning of Treas. Reg. Section
301.7701-2(d) and excluding from such assets his or its interest in the
Partnership or 1212) which could be reached by a creditor of the Partnership.
WRALP hereby represents that, at the execution of this Agreement, its net worth
(computed based on the current fair market value of its assets [excluding any
direct or indirect interest in the Partnership], and assuming that WRALP is the
sole general partner of 1201) is sufficient to satisfy Section 4.07 of Rev.
Proc. 89-12, 1989-7 I.R.B. 22.
(c) Except as required pursuant to Section 6.06 hereof,
in no event shall the General Partners, as a group, be allocated less than one
percent (1%) of any material item of Partnership income, gain, loss, deduction,
or credit.
ARTICLE VII
MANAGEMENT
SECTION 7.01. MANAGEMENT. The initial Managing General
Partner shall be 1212 in its capacity as General Partner. Subject to the
limitations and restrictions set forth in this Agreement, the Managing General
Partner shall conduct the business and affairs of the
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Partnership. In so doing, the Managing General Partner shall act in good faith
in the performance of its obligations hereunder and in promoting the best
interests of the Partnership when dealing with Third Parties, including
Affiliates, and shall use at least the same degree of diligence in managing and
conducting the affairs of the Partnership that the Managing General Partner and
each Affiliate of the Managing General Partner uses in managing and conducting
its own affairs, but in no event less than the same degree of diligence that
first class operators of commercial projects comparable to the Building use in
managing and conducting their own affairs. Without limiting the foregoing, the
Managing General Partner shall (subject to the limitations and conditions
elsewhere provided in this Agreement, including, without limitation, the
limitations set forth in Section 7.05 hereof) have the following rights and
powers and shall perform the following duties:
(a) to hold, acquire or retain title to real, personal,
and mixed properties in the name of and on behalf of the Partnership;
(b) to execute in the name of the Partnership leases and
amendments thereto in accordance with Section 7.04 covering any
premises in the Project or any other property leased, owned or
acquired by the Partnership, and to perform, or have performed, the
obligations of the Partnership in said leases, and to attempt in good
faith to maintain said leases in effect;
(c) to (i) control and manage the Partnership's assets,
(ii) arrange for the maintenance and repair of the Project and any
other properties and projects in which the Partnership may acquire an
interest and (iii) handle collections and disbursements of the
Partnership's funds (including opening and maintaining bank accounts
on behalf of the Partnership);
(d) to take such actions as may be necessary or desirable
to cause the Partnership and its properties to comply with all
applicable laws, rules and regulations of governmental agencies having
jurisdiction over the Partnership or Project;
(e) to cause the Partnership to pay and perform its
obligations with respect to all indebtedness owing by the Partnership
or secured by any of the Partnership's assets, provided that the
Managing General Partner shall not be liable for any loss resulting
from any nonmonetary default under any such indebtedness unless such
nonmonetary default is the result of the Culpable Acts of the Managing
General Partner;
(f) to pay and discharge for the account of the
Partnership, as the same become due and payable, all taxes and
assessments levied and assessed against the Partnership or any of its
assets;
(g) to carry such insurance as the Managing General
Partner may deem necessary or appropriate, but in all events the
Managing General Partner shall cause the
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Partnership to maintain in force and effect throughout the term of
this Agreement all insurance (i) required by the terms of (A) any
indebtedness of the Partnership or any indebtedness which is secured
by liens or security interests on any of the Partnership's assets or
(B) any tenant lease or other agreement binding on the Partnership or
(ii) which is reasonably requested by any other General Partner;
(h) At the request of ARICO, to borrow funds sufficient
to pay certain Partnership expenditures in order to assist ARICO in
maintaining its status as a qualified REIT subsidiary and in
maintaining ARICO Parent's status as a REIT, in accordance with
Article XIV;
(i) To institute, prosecute and defend actions and
proceedings at law or in equity on behalf of the Partnership; and
(j) To maintain all records and other information and
items as are required by the Partnership Law.
SECTION 7.02. DISPOSITION OF PROJECT. (a) Notwithstanding
the provisions of Section 7.01 and except as expressly permitted in Section
4.03 or Section 7.02(b), the Managing General Partner shall not, without the
prior written consent of each other General Partner, which consent may be
withheld in the discretion of such other General Partner or General Partners,
as the case may be, transfer or otherwise dispose of all or any substantial
part of the Project or other properties of the Partnership, or pledge or
otherwise encumber all or any part of the Project, or any interest of the
Partnership therein, or other properties of the Partnership, as security for
indebtedness incurred on behalf of the Partnership.
(b) The following dispositions of Partnership property
may be made without the prior consent of each General Partner who is not the
Managing General Partner: (i) easements and other similar encumbrances
incidental to the construction, operation, maintenance and repair of the
Project in the ordinary course of business and (ii) dispositions of Partnership
property, the fair value of which at the time of the disposition thereof is
less than $25,000 for each individual item and the aggregate fair value of
which during each twelve (12) month period is less than $100,000, and which,
individually and in the aggregate with all other dispositions of the Project or
other properties of the Partnership, do not have a material adverse effect on
the operation, maintenance and management of the Project or the business and
assets of the Partnership,
SECTION 7.03. MANAGEMENT AGREEMENT. (a) The Partnership
has appointed WRALP as Manager pursuant to the Management Agreement to operate,
manage, and maintain the Project. Any amendment, modification or termination
of the Management Agreement from time to time shall be subject to the
reasonable approval of each of the General Partners, which approval, in the
case of ARICO may take into account ARICO's status as a qualified REIT
subsidiary and ARICO's Parent's status as a REIT. Any successor Manager
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shall be selected and appointed by the Managing General Partner, subject to the
approval of each General Partner; provided, however, that the approval of ARICO
to the selection and appointment of any successor Manager shall not be required
if such successor Manager is an Affiliate of WRALP, if (but only if) 1212 at
the time of the selection and appointment of the successor Manager is also an
Affiliate of WRALP. In all events the selection, appointment and identity of
the Manager and the Manager's relationship to any Partner, to any partner in or
shareholder of any Partner, and to any of their respective Affiliates shall in
all respects satisfy the requirements of Article XIV.
(b) Any Management Agreement between the Partnership and
a Manager who is an Affiliate of a General Partner or of any Person who,
directly or indirectly, is a partner in a General Partner, shall be terminable,
without penalty and without cause, by the Partnership at the request of any
General Partner who is not the Managing General Partner at and after any time
that such General Partner ceases to be a General Partner of the Partnership or
such Person ceases to be a partner in a General Partner, or such Manager ceases
to be an Affiliate of the then General Partner or of such partner in the
General Partner (whether because of changes in the constitution of the General
Partner or in the ownership of the Manager or otherwise).
(c) The Managing General Partner shall cause the
Management Agreement to provide that any portion of the management fees under
the Management Agreement not paid by tenants pursuant to their leases as a
component of operating expenses payable thereunder shall be payable by the
Partnership only after current distribution of the Additional Equity Preferred
Return and Preference Return for the applicable period and any resulting
deficit in the management fee shall not be cumulated or deferred to a later
period; provided, however, that unless otherwise agreed to by ARICO, in lieu of
any such portion of the management fee not being paid, 1212 shall contribute
the amount thereof to the Partnership in order for such to be paid. The
management fee payable to any such Affiliate Manager shall be in lieu of any
other payments in respect of the operations, maintenance and management of the
Project (including all salaries, benefits, overhead, general and administrative
costs and expenses and other costs and expenses incurred in connection with or
incidental to the operations, maintenance and management of the Project),
except such of the foregoing items as to (i) on-site personnel, or (ii) central
office technical support staff services billed on an hourly basis, as provided
in an approved Annual Budget.
SECTION 7.04. LEASING. (a) The Managing General Partner
shall have the right from time to time to enter into leases for premises in the
Project or any other property leased, owned or acquired by the Partnership,
provided that the terms of such leases are in conformity with the most recently
approved Annual Budget, or current leasing guidelines (as amended from time to
time in accordance with this Agreement, the "LEASING GUIDELINES"). The
Managing General Partner may only amend, modify, or terminate an existing lease
with the prior approval of the other General Partner. Leasing Guidelines will
be prepared by the Managing General Partner and consented to by each of the
other General Partners other than the Managing General Partner. At least once
per calendar year the Managing General Partner shall, and each
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other General Partner may, review the then-current Leasing Guidelines and
propose any changes to such Leasing Guidelines as the Managing General Partner
or General Partner reasonably determines is necessary to make such Leasing
Guidelines consistent with the then-current market conditions affecting the
Project. Any proposed changes to the Leasing Guidelines shall be subject to
the prior approval of each of the General Partners.
(b) Anything to the contrary provided in subsection (a)
of this Section 7.04 notwithstanding, the Managing General Partner shall not
execute any leases for space in the Building with terms that would result
(together with the other leases for space in the Building) in the artificial
early termination of the Preference Period (for example, but without
limitation, leases providing for the payment of disproportionately high parts
of the rents or disproportionately low parts of operating expenses during a
particular month or during the early years of the lease terms), without the
prior written approval of ARICO, which approval may be withheld or conditioned
upon the spreading of any rental payments evenly over the terms of such leases
for purposes of determining the end of the Preference Period.
SECTION 7.05. BUDGETARY APPROVAL PROCESS. Each Annual
Budget and any changes thereto, shall be subject to the prior approval of each
General Partner in accordance with the procedures set forth in this Section
7.05; provided, however, that the Managing General Partner may, provided that
the same does not adversely affect the operation of the Project or the
Partnership, without the consent of each other General Partner, to the extent
of cost savings in any line item, (i) reallocate from the line item, and (ii)
allocate amounts to any line item. At least forty-five (45) days prior to the
commencement of a Fiscal Year and (subject to the right to reallocate as
permitted above) at least forty-five (45) days prior to the implementation of
any change in any approved Annual Budget then in effect, the Managing General
Partner shall submit the proposed, reasonably prepared Annual Budget or the
proposed revised Annual Budget as the case may be, to each other General
Partner. Such General Partner or General Partners, as the case may be, shall
then have forty-five (45) after receipt of the proposed Annual Budget in which
to review the same and to give the Managing General Partner written notice of
its approval or disapproval thereof, such approval not to be unreasonably
withheld. If any General Partner fails to give written notice of its
disapproval thereof, specifying its objections in reasonable detail, on or
before the expiration of such 45-day period, then such General Partner shall be
deemed to have approved such proposed Annual Budget. In the event that any
General Partner shall disapprove of any Annual Budget or any changes to any
Annual Budget, then pending the revision of the same by the Managing General
Partner and the approval of the same as revised by such General Partner, the
Annual Budget in effect for the Fiscal Year immediately preceding the Fiscal
Year for which the Annual Budget has not yet been approved (or in the case of
proposed changes to an Annual Budget then in effect, the Annual Budget as then
in effect without regard to the proposed changes) shall continue in effect;
provided that the same shall automatically be adjusted for increases, if any,
in Non-Discretionary Expenditures to Third Parties beyond the reasonable
control of the Managing General Partner, any direct or indirect general partner
in the Managing General Partner, or any of their respective Affiliates. For
purposes hereof, "NON-DISCRETIONARY EXPENDITURES" shall mean expenditures for
required Debt
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Service (other than Debt Service on loans which are not secured by liens on the
Project), taxes, utilities, insurance and any other item which reasonably must
be expended to protect the Project. Anything to the contrary provided in this
Agreement notwithstanding, the Managing General Partner shall be authorized to
incur and pay on behalf of the Partnership (or take or omit to take such
actions that will result in the Partnership incurring) only those expenditures
which are included in the approved Annual Budget then in effect; provided,
however, that the Managing General Partner shall, in addition, be authorized to
incur and pay such additional expenditures as may be reasonably required as a
result of, or to prevent, any emergency situation in which property damage that
would materially adversely affect the Partnership or the Project or personal
injury has occurred or is imminent.
SECTION 7.06. EMPLOYEES. The Partnership shall have
no employees except with the prior written consent of ARICO (such consent not
to be unreasonably withheld), and all construction, leasing, providing of
services to tenants, and other activities of the Partnership shall be performed
by independent contractors to the full extent required to qualify ARICO as a
qualified REIT subsidiary and to qualify ARICO Parent as a REIT (when
considering ARICO's interest hereunder separately from other assets that may be
owned by ARICO), or as otherwise consented to by ARICO in its sole discretion.
SECTION 7.07. TERMINATION OF MANAGING GENERAL PARTNER. (a)
ARICO may elect by written notice to 1212 to terminate 1212 as the Managing
General Partner and to become the Managing General Partner at any time and for
any reason or no reason.
(b) Upon termination of 1212 as the Managing General
Partner, 1212 shall deliver to the new Managing General Partner the following
with respect to the Project and other assets and liabilities of the
Partnership:
(i) within ninety (90) days after such termination, a
final accounting, reflecting the balance of income and expenses as of
the date of termination,
(ii) as soon as practicable, but, in no event, later than
thirty (30) days following such termination, any funds of the
Partnership, including, without limitation, all funds in any bank
accounts, held by the Managing General Partner and any tenant security
deposits with respect to Partnership properties, and
(iii) immediately upon such termination, all records,
contracts, leases, receipts for deposits, unpaid bills, and other
papers or documents which are in the Managing General Partner's
possession or which are reasonably obtainable by the Managing General
Partner and which pertain to the Partnership or its properties.
SECTION 7.08. DUTIES AND CONFLICTS. (a) Subject to other
standards or requirements that may be provided by specific provisions of this
Agreement, the following general provisions shall apply to 1212 or ARICO, as
indicated below:
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(i) The 1212 Group and ARICO shall only be obligated to
devote such time and attention to the conduct of the Partnership's
business as shall be reasonably required therefor, but shall not be
obligated to devote their full time and attention, or that of their
respective officers, employees, consultants or advisors, to the
conduct of such business.
(ii) Each of 1212 and ARICO shall act in good faith in the
performance of their obligations hereunder, and each shall be liable
to the Partnership and to the other Partners for the consequences of
its Culpable Acts in the exercise of (or the failure to exercise) its
rights, duties and responsibilities arising hereunder or at law.
(iii) Managing General Partner shall not allow ARICO's name
to be used in conjunction with the name of the Partnership, and
Managing General Partner shall not disclose any of the rights or
powers of ARICO hereunder to any Person except in the ordinary and
necessary course of business with such Person, unless such disclosure
is approved in writing by ARICO, or unless such disclosure is required
by law.
(b) With respect to all matters and transactions between
(i) the Partnership, on the one hand, and (ii) any Affiliate of the Managing
General Partner or any other person with whom the Managing General Partner (or
person who is directly or indirectly a partner in the Managing General Partner)
maintains a continuing business relationship (whether or not such other person
is an Affiliate of the Managing General Partner or any person who is directly
or indirectly a partner in the Managing General Partner), on the other hand,
the Managing General Partner shall conduct itself and make decisions with
respect to the Partnership in a manner consistent with the Managing General
Partner's fiduciary duties as a General Partner (subject to Section 7.05(c)),
and as if it were dealing with an unrelated party on an arm's-length basis.
(c) Nothing contained in this Agreement shall be
construed so as to prohibit any Partner or any Affiliate of such Partner from
owning, operating, or investing in any real estate development not owned or
operated by the Partnership wherever located. Each Partner agrees that the
other Partner or any Affiliate of such Partner may engage in or possess an
interest in another business venture or ventures of any nature and description,
independently or with others, including but not limited to the ownership,
financing, leasing, operation, management, syndication, brokerage and
development of real property, and neither the Partnership nor the Partners
shall have any rights by virtue of this Agreement in and to said independent
ventures or to the income or profits derived therefrom. Notwithstanding the
foregoing, no Partner or Affiliate shall acquire fee ownership of the Block Six
Land for such Partner's or Affiliate's own account unless such Partner or
Affiliate has first afforded the Partnership an opportunity to acquire such
Block Six Land on substantially the same terms. The Managing General Partner
shall use sound business judgment in projecting the future cash requirements of
the Partnership, and in establishing reserves therefor.
SECTION 7.09. COMPENSATION. Except as expressly provided
in this Section 7.09, or as expressly and specifically approved by each General
Partner, neither the
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Managing General Partner nor any Affiliate of the Managing General Partner
shall be paid compensation for services to the Partnership. Notwithstanding
the foregoing, the Managing General Partner shall be reimbursed by the
Partnership for all actual, reasonable and necessary expenses incurred in
connection with the discharge of its duties as the Managing General Partner
under this Agreement, except that the Managing General Partner shall not be
reimbursed for any General Overhead Costs and Expenses, for any amounts
required to be borne or contributed by Managing General Partner under this
Agreement, or for any expenses resulting from the Culpable Acts of Managing
General Partner. In addition to such reimbursement, the Managing General
Partner, or one or more of its Affiliates, shall receive, as compensation for
all services performed or to be performed by them for the Partnership, the
following:
(a) If, and for so long as an Affiliate of 1212 is the
Manager, the Manager shall be entitled to receive management fees and leasing
commissions from the Partnership in accordance with the Management Agreement.
(b) Any Affiliate of the Managing General Partner that
performs certain accounting services for the Partnership in connection with (i)
the preparation of the Partnership's books and records for the annual audit
described in Section 8.01 hereof and (ii) the preparation of the Partnership
tax returns shall be reimbursed for the actual and direct cost of performing
such services; provided, however, no such reimbursements shall exceed the
additional amount that the Partnership's Certified Public Accountant would
reasonably have been expected to charge for such annual audit or such tax
return if such preparatory accounting services had not been performed.
SECTION 7.10. AUTHORITY OF MANAGING GENERAL PARTNER. To
the extent provided by the Partnership Law, no person dealing with the
Partnership (other than a Partner, any person who is, directly or indirectly, a
partner in any Partner, or any Affiliate of any Partner or any such person)
shall be required to inquire into the authority of the Managing General Partner
to take any action or make any decision under this Agreement which, pursuant to
the provisions of this Agreement or the Partnership Law, does not require the
express approval, consent or joinder of any General Partner who is not the
Managing General Partner and/or the Limited Partner. However, the preceding
sentence shall not operate to expand or limit the authority, powers, duties or
obligations of the Managing General Partner under this Agreement. The General
Partners other than the Managing General Partner (being only ARICO on the date
hereof) shall have all of the powers of general partners under the Act, but
shall not have the right to sign for or bind the Partnership, except as
otherwise provided in this Agreement.
SECTION 7.11. CERTAIN RIGHTS AND PRIVILEGES OF GENERAL
PARTNERS. In addition to the rights of the General Partners set forth
elsewhere in this Agreement or otherwise available at law or in equity, each
General Partner that is not the Managing General Partner shall have the
following special rights and privileges:
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(a) the right, subject to the terms of lease agreements
to Third Parties, of access (personally or through a representative) to the
Project and any other properties owned or controlled by the Partnership, at all
reasonable times and at its own risk and expense, and the right to observe all
operations thereon.
(b) the right (personally or through a representative) to
inspect and audit at all reasonable times all books, records or invoices of the
Partnership and of the Managing General Partner pertaining to any matters of
accounting or pertaining to the acquiring, developing, or operating of the
Partnership's business or assets, all of which books, records and invoices
shall be kept at an office to be maintained by the Managing General Partner in
the City of Seattle, Washington, or in such other location as may be approved
by each of the General Partners.
(c) the right to consult with the Managing General
Partner with respect to the business of the Partnership on a regular basis, and
to advise the Managing General Partner with respect to the business of the
Partnership.
ARTICLE VIII
BOOKS AND RECORDS
SECTION 8.01. ACCOUNTING. The Fiscal Year of the
Partnership shall be a calendar year. The Partnership shall keep and maintain
at its principal office (or at such other location as shall be approved by each
General Partner) separate books of account for the Partnership showing a true
and accurate record of all costs and expenses incurred, all charges made, all
credits made and received, and all income derived in connection with the
operation of the Partnership's business on an accrual basis and in accordance
with GAAP and such other subsidiary records as otherwise may be required under
this Agreement. The Partnership shall furnish to the Partners monthly
statements reflecting progress on construction, all receipts, including funds
drawn down under any mortgage or other loans, and all disbursements, including
payments on mortgage or other indebtedness, and shall show, in comparative
form, the operating results actually realized and the results projected by the
Annual Budget then in effect and actual operating results from prior years.
The Partnership shall additionally furnish such other information, statements,
and reports as may be reasonably requested by any Partner. Each Partner shall
at its own sole expense have the right, at any time during business hours,
without notice to the Managing General Partner (or any other Partner or the
Partnership), to examine, audit and copy the Partnership's books and records.
The expenses chargeable to the Partnership shall include only those which are
reasonable and necessary for the ordinary and efficient operation of the
Partnership's business and the performance of the obligations of the
Partnership under any leases, mortgages or other agreements relating to the
Project or the business of the Partnership.
SECTION 8.02. FINANCIAL STATEMENTS. Within ninety (90) days
after the end of each Fiscal Year of the Partnership, the Managing General
Partner shall furnish to each Partner
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financial statements of the Partnership for such Fiscal Year, audited and
certified by the Partnership's Certified Public Accountant. Additionally, the
Managing General Partner shall furnish to all Partners unaudited quarterly
financial statements within thirty (30) days after the end of each of the first
three fiscal quarters of each Fiscal Year.
SECTION 8.03. TAX RETURNS. The Managing General Partner
shall cause the Partnership's Certified Public Accountant to prepare all income
and other tax returns of the Partnership and shall cause the same to be filed
timely and to be delivered to all Partners timely in order to be included with
each Partner's tax return. The Managing General Partner shall furnish to each
Partner a copy of each such return as soon as it has been filed, together with
any schedules or other information which each Partner may require in connection
with such Partner's own tax affairs. From time to time as requested by any
General Partner, the Managing General Partner shall promptly make and deliver
or cause to be made and delivered to such General Partner estimates of the
Partnership's taxable income for the current Fiscal Year.
SECTION 8.04. PARTNERS' MEETINGS. Regular meetings of the
Partners to review the Partnership's business and affairs and such other
matters as any Partner may propose, will be held at the Partnership's principal
office at least annually, and more frequently as requested by any General
Partner. Special meetings may be called by any General Partner on 30 days'
notice to the other and shall be held at the Partnership's principal office or
at such other locations as the Partners may jointly decide. Any matters to be
discussed or addressed at a meeting of the Partners may be discussed or
addressed instead by conference telephone calls, provided that each Partner is
furnished prior to such call true and complete copies of all documents, reports
and other written items to be reviewed or discussed at such meeting.
SECTION 8.05. CONTINUITY OF FINANCIAL AFFAIRS. In the
conduct of the Partnership's business and affairs, the Managing General Partner
shall not pay or incur any costs, expenses or obligations or accelerate or
defer the receipt of any revenues or otherwise manipulate the financial affairs
of the Partnership so as to cause the financial results of the Partnership in
any period to be other than they would be were such matters conducted in the
ordinary course of business.
ARTICLE IX
BUY-SELL
SECTION 9.01. BUY-SELL. At any time after the earlier to
occur of (i) Preference Termination Date and (ii) January 1, 2003 and provided
that such exercise does not constitute a default under any indebtedness of the
Partnership secured by a lien on the Project or any portion thereof or under
any material lease or other agreement to which the Partnership is a party or by
which it is bound, either General Partner (the "OFFEROR") may, at any time
thereafter, give notice (the "OFFER NOTICE") to the other (the "OFFEREE") that
the Offeror desires to exercise its rights pursuant to this Section 9.01. Any
Offer Notice shall
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specify a price (the "OFFER PRICE"), shall be accompanied by a summary of all
bona fide offers for the Project, or the Offeror's Interest, made to the
Offeror within the previous six (6) months by financially capable potential
buyers and shall contain an offer to (a) buy the Offeree's Interest in the
Partnership for an amount equal to the cash amount the Offeree would have
received had the Project been sold to a third party for the Offer Price and the
proceeds of sale distributed in accordance with Section 5.05 hereof ("OPTION
A") or (b) sell to the Offeree the Interest of the Offeror for an amount equal
to the cash amount the Offeror would have received had the Project been sold to
a third party for the Offer Price and the proceeds of sale distributed in
accordance with Section 5.05 hereof ("OPTION B"). The Offeree shall have a
period of one hundred twenty (120) days after the giving of such notice in
which to exercise, by written notice to the Offeror, Option A or Option B. For
purposes of this Section 9.01, 1212's Interest shall include both its general
partner Interest and its limited partner Interest in the Partnership. If the
Offeree shall fail to exercise either Option A or Option B within said one
hundred twenty (120) day period, the Offeror may at any time following the
expiration of said one hundred twenty (120) day period give written notice of
such failure to the Offeree and, if the Offeree shall fail to exercise either
Option A or Option B within ten (10) days after the Offeror gives notice of
such failure, the Offeror shall exercise either Option A or Option B. If
either Option A or Option B is properly exercised as above provided, then 1212
and ARICO shall each buy or sell, as the case may be, the entire Partnership
Interest of 1212 or ARICO, as the case may be, to be transferred, the closing
to be held on a business day selected by the party electing the option and set
forth in the notice of exercise, which day shall be at least fifteen (15) and
not more than ninety (90) days after the notice of exercise is given, at the
principal office of the Partnership. At the closing the purchase price
specified above shall be paid by the purchasing Partner by good certified or
official bank check or by a wire transfer of funds. The terms of the purchase
and sale shall be unconditional, except that the class of Partners whose
interest is to be sold shall be deemed to represent and warrant to the
purchasing class of Partners that its entire interest in the Partnership is
subject to no legal or equitable claims (other than legal or equitable claims
to such interest, if any, of the class of Partners purchasing the same pursuant
to this Section 9.01) and upon demand shall deliver an instrument confirming
such representation and warranty at the closing. Subject to the first sentence
of this Section 9.01, either General Partner may exercise its rights pursuant
to this Section 9.01 at any time, including during the pendency of the first
refusal procedures of Section 10.03(a) and, once exercised, shall supersede any
such pending procedures.
ARTICLE X
TRANSFER OF PARTNERSHIP INTERESTS
SECTION 10.01. TRANSFERS OF 1212'S INTEREST. (a) Subject
to the other provisions of this Article X, 1212 may freely make a Transfer of
all or any part of its general partner Interest in the Partnership without the
consent of ARICO; provided, however, that 1212 will not make any such Transfer
that would or could result in there being more than one general partner of the
Partnership in addition to ARICO at any time, except with the prior written
consent of ARICO (which consent may be withheld or may be conditioned upon such
matters as
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ARICO determines in its sole discretion). Subject to the other provisions of
this Article X, 1212 may freely make a Pledge of its general partner Interest
in the Partnership.
(b) 1212 shall not make a Transfer or Pledge of all or
any part of its limited partner Interest in the Partnership except in
connection with a Transfer or Pledge of all of 1212's general partner Interest
in the Partnership permitted pursuant to the provisions of this Agreement. In
the event 1212 makes a Transfer or Pledge of all its general partner Interest
in the Partnership, 1212 shall simultaneously Transfer or Pledge all of 1212's
limited partner Interest to the transferee or grantee of 1212's general partner
Interest.
(c) No Transfer by 1212 of its general partner Interest
(or any part thereof) or its limited partner Interest in the Partnership shall
relieve 1212 of its obligation to make any required capital contribution or
loan to the Partnership pursuant to this Agreement.
(d) Neither (i) WRALP, the general partner of 1201, nor
(ii) 1201, the general partner of 1212, may make any Transfer of any portion of
their general partner interests in their respective partnerships if, as a
result of such Transfer, the beneficial percentage interest of WRALP, as an
indirect general partner in 1212, would be less than five percent (5%). By way
of example and not by way of limitation, if WRALP owns a sixty percent (60%)
general partner interest in 1201, and if 1201 owns a ten percent (10%) general
partner interest in 1212, then a Transfer of nine and one-half percent (9.5%)
interest in 1201 out of WRALP's interest in 1201 (i.e., WRALP then owns fifty
and one-half percent (50.5%) of 1201) would result in WRALP owning a 5.05%
beneficial interest as an indirect general partner in 1212, and such Transfer
would be permitted hereunder.
SECTION 10.02. TRANSFERS OF ARICO'S INTEREST. ARICO may
freely make a Transfer of its Interest in the Partnership, subject to Section
10.03 hereof. No Transfer by ARICO of its Interest (or any part thereof) in
the Partnership shall relieve ARICO of its obligation to make any required
capital contribution or loan to the Partnership pursuant to this Agreement.
SECTION 10.03. TRANSFERS IN GENERAL. For purposes of this
Section 10.03, 1212's Interest shall be deemed to include both its Interest as
a general partner and its Interest as a limited partner in the Partnership,
except as specified in Section 10.03(a)(4).
(a) RIGHT OF FIRST REFUSAL.
(1) Prior to the Transfer of its entire Interest in the
Partnership (whether by an original or substituted Partner or by a
party who has not become a substituted Partner) in one transaction or
a series of related transactions to any Person other than an Affiliate
of the transferring Partner, the transferring Partner shall first
offer in writing (the "OFFER") to the other Partner the right to
acquire such Interest on the same terms as the transferring Partner
offers such Interest to such other Person. The Offer shall include
the
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full details of any offer to such other Person, and which must be
solely for cash, promissory note, or some combination thereof. A
Partner shall be deemed to have waived its right to accept the Offer
unless such Partner sends notice to the transferring Partner accepting
the Offer within one hundred twenty (120) days after receipt of the
Offer.
(2) If the other Partner timely accepts the offer of an
Interest, then the transferring Partner shall Transfer, and the
acquiring Partner shall acquire, the Interest offered in accordance
with the terms of the Offer, and the acquiring Partner shall thereupon
be a substituted Partner to the extent of the acquired Interest. Upon
the Transfer of the Interest to the acquiring Partner, an appropriate
amendment of the Certificate of Limited Partnership shall, to the
extent required, be filed in accordance with the provisions of the
Act. At the election of the acquiring Partner, the Interest acquired
pursuant to this Section 10.03(a) shall be either a general
partnership Interest or a limited partnership Interest, and such
election shall not be effective unless and until the amendment to this
Agreement contemplated by Section 10.03(d) hereof has been executed
and delivered.
(3) If the other Partner does not accept the Offer, then
the transferring Partner may, subject to the other provisions of this
Agreement, transfer its entire Interest to the Person named in the
Offer upon the terms and conditions set forth in the Offer, or upon
other terms and conditions that, taken as a whole, are no less
economically favorable to the transferring Partner, ignoring all tax
issues, within one hundred eighty (180) days after determination that
the Offer was not accepted by the other Partner. Such transferee
shall not become a substituted Partner without the consent of the
remaining Partner, which consent may be withheld in the sole
discretion of the remaining Partner. If such Transfer is not made in
accordance with the initial offer within said one hundred eighty (180)
day period, then any Transfer shall again be subject to this Section
10.03(a).
(4) A Transfer of any portion of an Interest in the
Partnership shall likewise be subject to the provisions of this
Section 10.03(a), except that with respect to 1212, such transferee
shall be of 1212's general partner Interest only.
(b) REQUIREMENTS FOR TRANSFER. Under no circumstances
may any Interest in the Partnership, nor any portion thereof, be Transferred to
any Person (including Affiliates of the transferor): (i) unless the transferee
executes and delivers to the other Partner an instrument pursuant to which the
transferee agrees to be bound by the terms of this Agreement, together with
such additional instruments and documents as shall be reasonably required by
the other Partner; (ii) unless such Transfer is made pursuant to an effective
registration statement under all applicable federal and state securities laws
or in a transaction which is exempt from registration under such laws; and
(iii) (if any Partner shall request) unless the transferor delivers to the
Partnership an opinion, in form and substance, and issued by counsel, all
reasonably acceptable to the requesting Partner, covering such securities, tax
and other aspects of the proposed
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Transfer as the requesting Partner may reasonably require; provided, however,
that the requesting Partner shall not be permitted to object to a proposed
Transfer on the ground that the proposed Transfer would cause a dissolution or
termination of the Partnership for federal or state income tax purposes (except
for Transfers to Affiliates as provided in Section 7.08). Moreover, no
Interest in the Partnership, nor any portion thereof, may be Transferred if
such Transfer would: (x) result in the violation of the Securities Act of 1933,
the Securities Exchange Act of 1934 or any other applicable federal or state
laws; or (y) be a violation of or an event of default under, or result in an
acceleration of any indebtedness under, any note, mortgage, loan agreement or
similar instrument or document to which the Partnership is a party or under any
such instrument or document which is required by any provision of this
Agreement to be consented to by ARICO; or (z) cause all or any part of the
Partnership's assets to become "tax-exempt use property" within the meaning of
Section 168(h) (or any successor provision) of the Code. This Section 10.03(b)
shall govern all other provisions of this Agreement pertaining to Transfers,
Pledges or other assignments or conveyances of Partnership Interests
whatsoever.
(c) SUBSTITUTE PARTNERS. Subject to the provisions of
Section 10.05 below dealing with Transfers to Affiliates, and subject to
Section 12.01(b), a transferee (other than an existing Partner, but including
any transferee by reason of foreclosure or deed in lieu thereof) of the
Interest of a Partner may be admitted as a substitute Partner only with the
consent of all Partners, which consent may be conditioned on, among other
matters, the execution of the amendment contemplated in Section 10.03(d) below,
and which consent may be withheld in the sole discretion of any Partner. If
all Partners do not consent to the admission of any transferee as a substitute
Partner, then such transferee shall have all of the rights (but only those
rights) of a transferee of a limited partnership interest under the Partnership
Law. Moreover, unless all Partners consent (which consent may be withheld in
their sole discretion) to the admission of such transferee as a substitute
Partner, the transferring Partner shall continue as a Partner in the
Partnership notwithstanding the Transfer or other conveyance (including by
foreclosure or by deed in lieu of foreclosure) of the entirety of such
Partner's Interest in the Partnership.
(d) AMENDMENT TO AGREEMENT. In the event that all
Partners shall consent to the admission of any such transferee as a substitute
Partner, as a condition precedent to such admission, the Partners and such
proposed substitute Partner shall enter into an amendment to this Agreement
confirming the admission of such substitute Partner, providing for the
assumption by such substitute Partner of all obligations and liabilities
attendant to the Interest so transferred, specifying whether the substituted
Partner is being admitted as a general partner or a limited partner, making
such modifications to this Agreement as may be necessary in order for this
Agreement to accommodate additional general partners or additional limited
partners, as the case may be, and providing for such other matters as the
parties thereto may mutually determine. In connection with any Transfer of a
Partner's Interest, whether or not the transferee shall be admitted as a
substitute Partner, the Managing General Partner shall prepare and file or
cause to be prepared and filed all amendments to the Certificate of Limited
Partnership that may be required under the Partnership Law.
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(e) PLEDGES.
(1) The granting of a Pledge of all or any part of the
Interest of a Partner, including but not limited to the distributions
such Partner is entitled to receive from the Partnership (the Interest
or part thereof subject to such Pledge being herein called the
"PLEDGED INTEREST"), or the foreclosure of any such Pledge or Transfer
in lieu of foreclosure with respect thereto, shall not give rise to
any preemptive rights or rights of first refusal under the provisions
of Section 10.03(a); however, the Pledged Interest may not thereafter
be conveyed to the assigns of the purchaser or grantee of such
Interest, except pursuant to the provisions of Section 10.03(a)
hereof.
(2) In the case of any such foreclosure (or Transfer in
lieu thereof) under any instrument creating or evidencing such Pledge
if the purchaser or grantee under such instrument is already a
Partner, then such Person shall automatically be admitted as a Partner
with respect to the Interest so acquired (subject, however, to the
execution and delivery of the amendment contemplated by Section
10.03(d). If the purchaser or grantee under such instrument is not
already a Partner, then the consent of all Partners and full
compliance with all provisions hereof applicable to the admission of a
transferee or assignee of a Partner's Interest as a substitute Partner
shall be required.
(3) Each loan or pledge agreement or other instrument or
document entered into by the Partner granting a Pledge (the "PLEDGING
PARTNER") and any lender (the "PARTNER'S LENDER") shall provide that,
in the event that the Pledging Partner defaults with respect to the
indebtedness or other obligations secured by such Pledge, (i) the
Partner's Lender will furnish written notice of such default to the
other Partner before any foreclosure proceedings are begun or any
similar action is taken with respect to any part of the Pledged
Interest, and (ii) the other Partner shall have the right, at its
election (which shall be made within ten (10) days of the other
Partner's receipt of notice of the default), either (A) to purchase,
without recourse, from the Partner's Lender such loan or other
obligation and all liens and security interests securing payment of
the same for a cash price equal to the outstanding principal amount
thereof and all unpaid accrued interest and other sums due thereon,
with the closing of such purchase to occur within ten days after the
other Partner elects to so purchase such loan or other obligation, or
(B) to cure the default at any time prior to the foreclosure or
Transfer in lieu thereof (the Partner's Lender being required to give
the other Partner at least 20 days from the date of its receipt of
notice of the default in which to cure the default) and thereupon to
be subrogated to the extent of payments made in curing such default to
the rights of the Partner's Lender (provided, however, that the
Partner's Lender may restrict the right of the other Partner to
exercise any such right of subrogation until all remaining
indebtedness and obligations of the Pledging Partner to the Partner's
Lender secured by the Pledge have been fully satisfied). No Pledge of
an Interest in the Partnership shall be effective until executed
copies of the Pledge and all other instruments and documents
evidencing such Pledge are delivered to the other Partner. Each
holder of a Pledge shall
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be charged with knowledge of, and be bound by, the terms of every
other Pledge of a Partner's Interest. At the request of any General
Partner, the Managing General Partner shall deliver a certificate
setting forth all Pledges of the Partners' Interest in the
Partnership, limited with respect to Pledges of the requesting
Partner's Interest, to the documents delivered to the Managing General
Partner hereunder. Any Person to whom such certificate is addressed
may rely upon the same, and the statements of the Managing General
Partner contained in such certificate and made in good faith, shall be
binding upon the Partnership and shall be conclusively presumed to be
true. Cumulative of the foregoing, the Pledging Partner shall also
notify the other General Partner of any default (or alleged default)
by it with respect to any such loan or other obligation within two (2)
business days of the occurrence of such default and also within two
(2) business days of receipt by the Pledging Partner of any notice
from the Partner's Lender alleging or asserting the occurrence of any
default.
(4) References in this Section 10.03(e) to a "Partner",
as applicable to a Pledging Partner or Partner's Lender, but not as
applicable to the other Partner, shall include any assignee of such
Partner's Interest in the Partnership, whether or not such assignee
has become a substituted Partner.
(5) The provisions of this Section 10.03(e) (other than
Section 10.03(e)(1) and the first sentence of Section 10.03(e)(2))
shall not apply with respect to any lien on, or security interest in,
the Interest of any Partner granted by such Partner to the Partnership
or to any other Partner to secure any obligation of such Partner to
the Partnership or the other Partner pursuant to this Agreement.
SECTION 10.04. CONTINUING INVOLVEMENT OF WRALP AND ARICO.
(a) ARICO has entered into this Agreement and acquired its Interest in the
Partnership in reliance on the continuing involvement of WRALP as a direct or
indirect general partner in the Partnership. Accordingly, and as a material
inducement to ARICO to acquire its Interest, 1212 and WRALP covenant and agree
with ARICO as follows:
(i) Until the earlier of (A) October 14, 1998, or (B) the
date that 1212 shall have made a Transfer of the entirety of its
Interest (as both a general partner and a limited partner) in the
Partnership to a Third Party pursuant to a Transfer authorized under
Section 10.01(a) above, (i) WRALP shall at all times be and remain,
directly or indirectly, a general partner of the Partnership, and (ii)
without the prior consent (which consent may be withheld or
conditioned upon such matters as ARICO may determine in its sole
discretion) of ARICO, no Person other than WRALP, or its Affiliates,
shall be directly or indirectly general partners of 1212.
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(ii) 1212 shall at all times comply with Section 6.11(b)
hereof.
(iii) 1212 does not have the right to voluntarily dissolve
or to withdraw from the Partnership, it being agreed that Transfers,
Pledges, and other conveyances expressly permitted under this Article
VII shall not constitute such a prohibited withdrawal.
(b) Upon a breach of the covenants, conditions or
agreements set forth in Section 10.04(a), in addition to the remedy set forth
in Section 8.01(b), ARICO may recover from 1212 (in its capacity as a general
partner) and WRALP damages resulting from such breach, and may also pursue such
legal or equitable remedies that may be available. Such liability of 1212 and
WRALP shall be a recourse obligation.
(c) 1212 has entered into this Agreement in reliance on
the continuing involvement of ARICO as a partner (whether as a general partner
or a limited partner) in the Partnership. Accordingly, ARICO covenants and
agrees with 1212 that ARICO does not have the right to voluntarily dissolve or
to withdraw from the Partnership, it being agreed that Transfers, Pledges, and
other conveyances expressly permitted under this Article X shall not constitute
such a prohibited withdrawal. The liability of ARICO for any breach of the
provisions of this Section 10.04(c) shall be a non-recourse obligation, 1212
specifically agreeing to look solely to ARICO's Interest in the Partnership for
the recovery of any judgment against ARICO.
SECTION 10.05. TRANSFERS TO AFFILIATES. Upon the Transfer
by a Partner of its entire Interest in the Partnership to an Affiliate of such
Partner, which Transfer is otherwise permitted by and is in accordance with all
of the provisions of this Agreement (including, without limitation, in the case
of any Transfer by 1212, the provisions of Section 10.04), such Affiliate shall
be admitted as a Partner to the Partnership. During any twelve (12) month
period, neither Partner shall make a Transfer of all or any portion of its
Interest to an Affiliate of such Partner involving a Sharing Ratio equal to or
more than the amount by which:
(a) the product of (i) the total Sharing Ratio of the
transferring Partner (as of the start of such twelve month period) multiplied
by (ii) the then applicable percentage of transfers of partnership interests
that would cause a termination for tax purposes under the Code, exceeds
(b) the Sharing Ratios previously the subject of a
Transfer by such transferring Partner to an Affiliate of such Partner during
such twelve month period,
unless the transferring Partner agrees to indemnify the non-transferring
Partner against any material, adverse tax consequences resulting from a tax
termination of the Partnership caused by the Transfer to an Affiliate of the
transferring Partner involving a greater Sharing Ratio than permitted above in
this Section 10.05 or unless the non-transferring Partner, in its sole
discretion, waives such indemnification.
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SECTION 10.06. PIGGY-BACK RIGHTS OF THE PARTNERS. For
purposes of this Section 10.06, 1212's Interest shall include both its Interest
as a general partner and its Interest as a limited partner in the Partnership.
In the event that either General Partner (the "CONVEYANCING PARTNER") should
desire to make a Transfer of all of its Interest in the Partnership, other than
to an Affiliate, then the Conveyancing Partner shall give prior written notice
thereof to the other Partner, and if the other Partner shall not elect to
exercise any right available to it under Section 10.03(a) to acquire the
Interest of the Conveyancing Partner, the other Partner shall nevertheless have
the right to require the Conveyancing Partner to use its best efforts to secure
from the Conveyancing Partner's transferee, for the benefit of the other
Partner, the Transfer of all of the other Partner's Interest in the Partnership
on the same terms and conditions as are applicable to the proposed Transfer
between the Conveyancing Partner and its transferee. The Conveyancing Partner
shall have no obligation to the other Partner in the event that the transferee
shall decline for any reason to acquire the other Partner's Interest, or if the
transferee shall agree to do so only on terms which are different (whether more
favorable or less favorable) than those that the transferee has made available
to the Conveyancing Partner, and the Conveyancing Partner shall be entitled to
proceed with its proposed Transfer in any such event. In the event that the
transferee elects to acquire any or all of the other Partner's Interest, and
the other Partner elects to proceed with such Transfer of its own Interest, the
transactions between each Partner and the transferee shall be separate and
distinct and shall be conducted pursuant to such terms and conditions as may
have been agreed between each Partner and the transferee. This Section 10.06
shall also apply to any Transfer involving the interest of any direct or
indirect general partner in 1212 other than to another partner in 1212 or an
Affiliate of any partner in 1212, and ARICO shall be entitled to exercise its
rights as the "other Partner" set forth in this Section 10.06, the same as if
such transaction involved 1212's Interest in the Partnership.
ARTICLE XI
BROKERS
SECTION 11.01. BROKERS. Each Partner represents and
warrants to the other Partners that it has not dealt with any real estate
broker or finder in connection with the formation of the Partnership or the
transactions contemplated herein and agrees to indemnify and hold harmless the
other Partners and the Partnership from and against any actions, claims or
demands for any commissions or fees arising from a breach of the foregoing
representation and warranty by such Partner.
ARTICLE XII
TERMINATION
SECTION 12.01. DISSOLUTION. (a) Except as set forth in
Sections 12.01(a)(2), 12.01(a)(4) and 12.01(a)(5), the Partnership shall be
dissolved upon the occurrence of any of the following events:
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(1) The disposition of all or substantially all of the
non-cash assets of the Partnership (including without limitation the
Project), or the expiration of the term provided in Section 1.04
hereof.
(2) The acquisition by 1212 of the entire Interest of
ARICO hereunder, or the acquisition by ARICO of the entire Interest of
1212 (both as a general partner and as a limited partner) hereunder,
unless simultaneously with the acquisition of such Interest, the
acquiring Partner shall have notified the other Partner of its
election to continue the business of the Partnership.
(3) The written agreement by both General Partners to
dissolution of the Partnership .
(4) (i) The breach by 1212 or WRALP of any of the
covenants, conditions or agreements set forth in Section 10.04(a)
hereof, or (ii) the withdrawal, dissolution, removal, or Bankruptcy of
ARICO, or of 1212 or any direct or indirect general partner of 1212,
unless, in either case, within ninety (90) days after the occurrence
of such event, the remaining General Partner shall have notified the
other General Partner in writing of its election to continue the
business of the Partnership.
(5) The breach by ARICO of the provisions of Section
10.04(c), unless within ninety (90) days after the occurrence of such
event, 1212 shall have notified ARICO in writing of 1212's election to
continue the business of the Partnership.
(b) The following shall apply in the event of an
occurrence under Section 12.01(a)(4):
(1) If an event described in Section 12.01(a)(4)(ii)
occurs and the General Partners that are not the Bankrupt General
Partner notify the Bankrupt General Partner of their election to
continue the business of the Partnership within such ninety (90) day
period, then the General Partners that are not the Bankrupt General
Partner may, within such ninety (90) day period, remove the Bankrupt
General Partner as a general partner (and as the Managing General
Partner, if applicable) of the Partnership. In the event of a breach
or default by 1212 or WRALP under Section 10.04(a) hereof, then ARICO
may, at any time while such breach or default remains uncured by the
defaulting party, remove 1212 as a general partner (and as the
Managing General Partner, if applicable) of the Partnership.
(2) Upon such removal, the general partner Interest of
the removed General Partner shall become and continue as a limited
partner interest subject to all of the terms and provisions hereof and
at law applicable to limited partner interests, except that the
removed General Partner (in its capacity as a general partner) shall
remain liable as a general partner for all liabilities and obligations
incurred hereunder or at law prior to its
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removal as a general partner, and except that no such removal shall
relieve 1212 from any obligations to make capital contributions to the
Partnership pursuant to this Agreement, whether before or after such
removal.
(3) Concurrently with such removal (if, at the time of
such removal the removed General Partner is the Managing General
Partner) the General Partners that are not the removed General Partner
may appoint a substitute Managing General Partner for the Partnership
(the "SUBSTITUTE MANAGING GENERAL PARTNER"), who may be an existing
General Partner, to assume the duties and obligations of the removed
General Partner in its capacity as the Managing General Partner under
this Agreement, and the Substitute Managing General Partner shall ipso
facto be admitted to the Partnership as the Managing General Partner,
without any requirement for the consent of the removed General Partner
or any other Partner.
(4) [Intentionally Deleted].
(5) In connection with the events described in this
Section 12.01(b), ARICO, 1212, and the Substitute Managing General
Partner shall execute an appropriate amendment to this Agreement
reflecting the occurrence of the events contemplated hereby and such
other modifications to the Agreement as may be appropriate to
accommodate multiple limited partners. In addition, the Partners
shall cause an appropriate amendment to the Certificate of Limited
Partnership to be filed in compliance with all applicable requirements
of the Partnership Law.
(6) The removed General Partner agrees to cooperate fully
with the General Partners that are not the removed General Partners
and the Substitute Managing General Partner, if applicable, in
promptly effectuating the removal and substitution provided for in
this Section 1001(b). The removed General Partner hereby irrevocably
appoints the General Partners that are not the removed General Partner
as the attorney-in-fact of the removed General Partner (which power of
attorney is irrevocable and is coupled with an interest) to execute
any and all bills of sale, assignments, amendments of this Agreement,
and any certificates, and any other instruments and agreements
necessary or appropriate to effectuate such removal and substitution.
(c) Upon the occurrence of an event described in Section
12.01(a)(2), if the acquiring Partner has elected to continue the business of
the Partnership, then the acquiring Partner shall have the right to admit such
limited partners as the acquiring Partner shall determine to be necessary for
the continued existence of the Partnership as a limited partnership under the
Partnership Law.
SECTION 12.02. INSANITY, BANKRUPTCY OR DISSOLUTION OF A
PARTNER. (a) The Partnership shall not be dissolved by the death, insanity or
dissolution of a Limited Partner, but no heir, legatee or devisee of a deceased
Limited Partner (other than another limited
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partner), no representative of the estate of a deceased or legally incompetent
limited partner and no successor to the dissolved Limited Partner may be
admitted to the Partnership as a substitute limited partner except with the
consent of the General Partners and by compliance with the provisions of the
Partnership Law.
(b) For purposes of this Section 12.02(b), "Partner"
shall mean, when referring to 1212, 1212 in its capacities as both a general
partner and as a limited partner of the Partnership. In the event that any
Partner should be dissolved and liquidated, with the result that its partners,
shareholders or other successors upon liquidation (if more than one) become
transferees of such Partner's Interest in the Partnership and whether or not
they be admitted as substitute Partners or remain as assignees (the
"SUCCESSORS") then the Successors shall, upon receipt of a written request (the
"DESIGNATION REQUEST") to do so from the other Partner, choose a single Person
(the "SUCCESSOR REPRESENTATIVE") who may, but need not, own an interest in the
Successors' Interest, to act on their behalf in all respects relating to the
Partnership. After the occurrence of the events giving rise to the appointment
of the Successor Representative and his appointment in fact, the Successor
Representative alone will exercise all rights of the Partner to which it
succeeded for all purposes of this Agreement. The other Partner shall be
entitled to treat as the Successor Representative any Person who is designated
as such in a writing signed by a majority in interest of the Successors, and if
the other Partner has not received a writing sufficient, in the other Partner's
sole judgment, validly to designate the Successor Representative within thirty
(30) days of its service of the Designation Request upon any Successor, then
the other Partner may appoint any Successor to be the Successor Representative
and shall promptly serve written notice of such appointment on the Successors.
Any Successor Representative who dies, resigns, or fails or refuses to perform
his duties may be replaced, such replacement to be by written notice to the
other Partner executed by a majority in interest of Successors (or, if the
other Partner fails to receive such written notice within thirty (30) days of
the death, resignation, or failure or refusal to act of the Successor
Representative, by the other Partner's own appointment of any Successor as a
replacement, which appointment shall be announced by written notice from the
other Partner to the Successors). The Successors shall be bound by all actions
taken and decisions made by any Successor Representative, and the Partnership
and the Partners shall be entitled to rely upon the Successor Representative as
fully as if the Successor Representative were the agent and attorney-in-fact
for the Successors. No Successor Representative shall be held liable, in such
capacity as the Successor Representative, to any Successor or any other Partner
except in the case of such Successor Representative's gross negligence or
willful misconduct, and the Successors shall indemnify the Successor
Representative for any liabilities or obligations which the Successor
Representative incurs solely as a result of its capacity as such (other than as
a result of such Successor Representative's gross negligence or willful
misconduct). Any payment made by the Partnership to the Successor
Representative pursuant to such indemnity shall be made from cash which
otherwise would have been distributions to the Successors pursuant hereto, and
shall reduce their rights to distributions correspondingly.
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SECTION 12.03. WINDING UP AFFAIRS AND DISTRIBUTION OF
ASSETS. Upon the dissolution of the Partnership pursuant to Section 12.01
hereof and if the Partnership shall not be continued pursuant to the provisions
of Sections 12.01(a)(2), 12.01(a)(4) or 12.01(a)(5), if applicable, there shall
be appointed a Person, who may be the Managing Partner, to wind up the affairs
of the Partnership and distribute its assets. The appointment shall be made by
the Managing General Partner (but subject to the approval of ARICO) in the case
of dissolution pursuant to Clauses (1), (2) or (3) of Section 12.01 (a), and by
ARICO in the case of dissolution pursuant to Section 12.01(a)(4). The Person so
appointed may decline such appointment. Another Person shall be selected (in
the same manner and for the same purpose) to succeed the Person originally
selected, or to succeed any subsequently selected Person, whenever such
previously selected Person fails for any reason to carry out such purpose. The
Person so selected and acting hereunder from time to time is herein called the
"LIQUIDATING TRUSTEE". The Liquidating Trustee shall proceed diligently to
wind up the affairs of the Partnership and distribute its assets.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. INVESTMENT REPRESENTATIONS. Each of the
Partners, by execution of this Agreement, and each assignee or transferee of a
Partner by acceptance of the rights and interests of its assignor or transferor
in the Partnership, represents and warrants to and covenants and agrees with
the Partnership and the other Partner that its Interest has been acquired under
this Agreement for its own account, for investment, and not with a view to or
for sale in connection with any distribution thereof, or with any present
intention of distributing or selling such Interest, and that it will not make a
Transfer or attempt to make a Transfer of its Interest in violation of the
Securities Act of 1933, the Securities Exchange Act of 1934 or any other
securities law, state or federal, applicable thereto. Each Partner agrees to
indemnify and hold harmless the Partnership and the other Partner, their
respective agents and representatives and the controlling persons of each of
the foregoing, from and against any and all loss, claims, damage, or liability
directly or indirectly related to, arising from or incurred in connection with
any breach of the foregoing representations and warranties (including any
misrepresentation or omission related thereto, whether existing on the date
hereof or arising subsequent hereto) by such Partner. Nothing contained in
this Agreement shall prohibit ARICO Parent from selling its common stock or
other securities.
SECTION 13.02. PERSONAL LIABILITY. In no circumstances
shall a shareholder, limited partner (including Perkins Building Partnership or
any partner in Perkins Building Partnership), director, officer, employee or
agent of a Partner be personally liable for any of the obligations of such
Partner under this Agreement except to the extent, if any, specifically
provided in this Agreement or in any separate agreement now or hereafter
executed and delivered by any such shareholder, limited partner, director,
officer, employee or agent.
<PAGE> 48
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The foregoing provisions of this Section 13.03 shall not apply to any direct or
indirect general partner of 1212 in 1212's capacity as a general partner of the
Partnership.
SECTION 13.03. CERTIFICATE REQUIREMENTS. The Partners shall
sign, swear to and file promptly any certificate required in connection with
the formation, existence, continuation, dissolution or liquidation of the
Partnership, or in connection with any assumed name used by the Partnership,
if, as and when the same may be required under any applicable laws.
SECTION 13.04. NOTICES. Any notice provided for in or
permitted under this Agreement shall be made in writing and may be given or
served by (i) depositing the same in the United States mail, postage prepaid,
registered or certified with return receipt requested, and addressed to the
party to be notified at the address herein specified, (ii) delivering the same
in person to the party to be notified or by prepaid messenger service or (iii)
telex, telegram, telecopy, or other written telecommunication medium. If
notice is deposited in the United States mail pursuant to clause (i) of this
Section 9.06, it will be effective from and after the moment that it is so
deposited. Notice given in any other manner shall be effective only if and
when received at the address of the party to be notified. For the purpose of
notice, the address of the parties shall be, until changed as hereinafter
provided for, as follows:
if to 1212:
1212 Second Avenue Limited Partnership
c/o Wright Runstad & Company
1191 Second Avenue, Suite 2000
Seattle, Washington 98101
Attention: Douglas E. Norberg
with a copy to:
Jerome D. Whalen
Whalen & Firestone
1221 Second Avenue, Suite 410
Seattle, Washington 98101
if to ARICO:
ARICO-Seattle, Inc.
c/o Cornerstone Properties Inc.
31 West 52nd Street, Suite 1600
New York, New York 10019
Attention: President
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with a copy to:
Shearman & Sterling
153 East 53rd Street
New York, New York 10022
Attention: Real Estate Group Notices 2189/4 (TGL)
The parties shall have the right from time to time and at any time to change
their respective addresses (within the continental United States) and each
shall have the right to specify as its address any other address by (within the
continental United States) at least fifteen (15) days' written notice to the
other party. Each party shall have the right from time to time to specify
additional parties (within the continental United States) to whom notice
hereunder must be given by delivering to the other party fifteen (15) days'
written notice thereof setting forth the address of such additional party or
parties; provided, however, that neither party shall have the right to
designate more than four such additional parties. Notice required to be
delivered hereunder to either party shall not be deemed to be effective until
the additional parties, if any, designated by such party have been given notice
in a manner deemed effective pursuant to the terms of this Section 13.04. For
so long as Perkins Building Partnership is directly or indirectly a partner in
the Partnership, a copy of any notice given by either General Partner shall be
given to Perkins Building Partnership, c/o Perkins Coie, 1201 Third Avenue,
40th Floor, Seattle, Washington 98101, Attention: Managing Partner.
SECTION 13.05. GOVERNING LAW. This Agreement shall be
governed by, and construed in accordance with, the law of the State of
Washington.
SECTION 13.06. MODIFICATION, TERMINATION AND WAIVER. This
Agreement may be modified, terminated or waived only by a writing signed by the
party to be charged with such modification, termination or waiver.
SECTION 13.07. SUCCESSORS AND ASSIGNS. This Agreement shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns. However, no assignment of any interest in this
Agreement may be made otherwise than in accordance with the provisions of this
Agreement.
SECTION 13.08. HEADINGS; SEVERABILITY. The headings in, and
the arrangement of the provisions of, this Agreement are for convenience of
reference only, shall not affect the meaning of any provision of this Agreement
and shall not be taken into account in construing any such provision. If any
provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 50
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SECTION 13.09. APPROVALS AND CONSENTS. Any approval,
satisfaction, or consent hereunder must be express and in writing duly executed
and delivered by the party to be bound thereby, unless otherwise specified to
the contrary in this Agreement.
SECTION 13.10. ATTORNEYS' FEES. In the event any Partner
defaults in the performance of any of the terms, conditions and agreements
contained in this Agreement and any other Partner places the enforcement of
this Agreement, or any part thereof, in the hands of any attorney who files
suits upon the same (either by direct action or counterclaim), and should such
non-defaulting Partner prevail in such suit, the defaulting Partner agrees to
pay such nondefaulting Partner's reasonable attorneys' fees and costs of suit.
SECTION 13.11. OTHER VENTURES. Nothing contained in this
Agreement shall be construed so as to prohibit any Partner or any Affiliate of
such Partner from owning, operating, or investing in any real estate
development not owned or operated by the Partnership wherever located. Each
Partner agrees that the other Partner or any Affiliate of such Partner may
engage in or possess an interest in another business venture or ventures of any
nature and description, independently or with others, including but not limited
to the ownership, financing, leasing, operation, management, syndication,
brokerage and development of real property, and neither the Partnership nor the
Partners shall have any rights by virtue of this Agreement in and to said
independent ventures or to the income or profits derived therefrom.
SECTION 13.12. COUNTERPARTS. This Agreement may be executed
in several counterparts, each of which shall be an original of this Agreement
but all of which, taken together, shall constitute one and the same agreement.
SECTION 13.13. TERMINOLOGY. Whenever required by the
context, any gender shall include any other gender and the singular shall
include the plural and the plural shall include the singular. Without negating
the provisions hereof regarding limitations on assignment, references to any
party shall also include the respective successors and assigns of such party.
All Exhibits hereto constitute a part hereof and are hereby incorporated
herein.
SECTION 13.14. NON-WAIVER. No waiver or waivers of any
breach or default by any party of any term, condition, or liability of or
performance by any other party of any duty or obligation hereunder shall be
deemed a waiver of any other term, condition, or liability or the breach or
default thereof. No waiver or waivers shall be deemed or construed to be a
waiver or waivers of subsequent breaches or defaults of any kind, character, or
description under any circumstance. Failure on the part of any party to
complain of any action or inaction on the part of any other party or to declare
the other party in default for breach, no matter how long such failure may
continue, shall not be deemed to be a waiver by such party of any of its rights
hereunder.
SECTION 13.15. CASUALTY AND CONDEMNATION. In the event of
casualty or condemnation affecting the Project, or any portion thereof, then,
subject to the Partnership's
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agreements with third parties (including without limitation contractors,
tenants, and mortgagees), such portion of the Project will be reconstructed to
the extent practicable (but no Partner shall be obligated to contribute any
funds in excess of its distributable share of insurance and condemnation
proceeds or to assume personal liability under any loans with respect to such
reconstruction, except to the extent that it is otherwise required under this
Agreement to make loans or contributions to the Partnership), or if 1212 and
ARICO shall mutually so elect, such portion of the Project will not be
reconstructed.
SECTION 13.16. FURTHER ASSURANCES. Each Partner agrees to
execute, acknowledge, deliver, file, record and publish such further
certificates, amendments to certificates, instruments and documents, and do all
such other acts and things as may be required by law, or as may be required to
carry out the intent and purposes of this Agreement.
SECTION 13.17. INDEMNITIES. (a) If not prohibited by law,
the Managing General Partner (and each of its (i) officers, directors,
shareholders and employees, or (ii) partners and each of its and their
partners' officers, directors, shareholders, and employees, as applicable)
shall be and is hereby indemnified and held harmless by the Partnership from
and against any and all claims, demands, liabilities, costs (including court
costs and attorneys' fees), damages, suits, proceedings, and actions (whether
administrative or investigative) of any nature whatsoever ("CLAIMS") in which
the Managing General Partner becomes involved, as a party or otherwise, by
reason of its management of the affairs of the Partnership (including, without
limitation, acting as the tax matters partner of the Partnership pursuant to
Section 6231(a)(7) of the Code); provided, however, such indemnity shall not
apply to Claims arising from the Managing General Partner's Culpable Acts. The
rights of indemnification provided herein shall be cumulative of and in
addition to any and all rights to which the Managing General Partner may
otherwise be entitled by contract or as a matter of law or equity and shall
extend to its successors and legal representatives.
(b) If not prohibited by law, any General Partner who is
not the Managing General Partner (and each of its (i) officers, directors,
shareholders and employees, or (ii) partners and each of its and their
partners' officers, directors, shareholders, and employees, as applicable)
shall be and hereby is indemnified and held harmless by the Partnership from
and against any and all Claims in which such General Partner (or any of its (i)
officers, directors, shareholders and employees, or (ii) partners and each of
its and their partners' officers, directors, shareholders, and employees, as
applicable) become involved, as a party or otherwise, by reason of its Interest
in the Partnership or the Partnership's ownership, development, or operation of
the Project; provided, however, such indemnity shall not apply to Claims
arising from Culpable Acts of such General Partner. The rights of
indemnification provided herein shall be cumulative of and in addition to any
and all rights to which any General Partner who is not the Managing General
Partner may otherwise be entitled by contract or as a matter of law or equity
and shall extend to successors and legal representatives of such General
Partner.
<PAGE> 52
52
(c) If not prohibited by law, the Limited Partner (in
such capacity), and each of its officers, directors, shareholders and
employees, shall be and hereby is indemnified and held harmless by the
Partnership from and against any and all Claims in which the Limited Partner or
any of its officers, directors, shareholders, or employees become involved, as
a party or otherwise, by reason of its Interest in the Partnership or the
Partnership's ownership, development, or operation of the Project; provided,
however, such indemnity shall not apply to Claims arising from the Limited
Partner's Culpable Acts. The rights of indemnification provided herein shall
be cumulative of and in addition to any and all rights to which the Limited
Partner may otherwise be entitled by contract or as a matter of law or equity
and shall extend to the Limited Partner's successors and legal representatives.
SECTION 13.18. ENTIRE AGREEMENT. This Agreement contains
the entire agreement between the parties relating to the subject matter hereof
and all prior agreements relative hereto which are not contained herein are
terminated. Amendments, variations, modifications or changes herein may be
made effective and binding upon the parties by, and only by, the setting forth
of same in a document duly executed by each party, and any alleged amendment,
variation, modification or change herein which is not so documented shall not
be effective as to any party.
ARTICLE XIV
REIT PROVISIONS
SECTION 14.01. REIT PROVISIONS. ARICO Parent has qualified
and has elected to be taxed as a real estate investment trust ("REIT") under
the Code. It is a material inducement for ARICO's (and ARICO Parent's)
decision to invest in the Project and the Partnership that the Project be
operated, and that 1212 agree that the Partnership shall acquire assets and
shall operate its business, only in such a manner as would permit ARICO Parent
to qualify as a REIT under the Code, as if ARICO's interest in the Partnership
were ARICO's only asset (and as if ARICO were ARICO Parent's only asset) and
the income from the Partnership were ARICO's only income. Without limiting the
generality of the foregoing, (a) the Manager shall be an independent
contractor, as defined in Section 856(d)(3) of the Code and will not be a
Partner, a shareholder in a Partner, or a partner in a partnership that is a
Partner, and (b) the Partnership will not (i) enter into any prohibited
transaction as defined in Section 857(b)(6)(B)(iii) of the Code, (ii) lease any
premises in the Building to a Partner, (iii) without the consent of ARICO, make
any election under Section 453(d) of the Code, or (iv) without the consent of
ARICO, enter into any transaction which by its nature is likely to produce
taxable income or gain under the Code in a Fiscal Year without equivalent
receipts in that same Fiscal Year of cash or readily marketable assets (e.g.,
such as accepting a debt obligation of a tenant with a below market interest
rate or accepting interest in payment of rent). To further assist ARICO Parent
in maintaining its REIT status, if ARICO so elects, the Partnership shall
finance (rather than using distributable cash) the payment of Partnership
Expenditures (other than
<PAGE> 53
obligatory principal reductions in Partnership Indebtedness) due and payable in
any Fiscal Year to the extent that the total of such expenditures exceeds the
Partnership's federal income tax deductions for such Fiscal Year. In addition,
in determining the amount of reserves for any Fiscal Year, ARICO's cash
distribution requirements in order to maintain ARICO Parent's REIT status will
be taken into account.
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Amendment effective as of September 27, 1995.
1212: 1212 SECOND AVENUE LIMITED PARTNERSHIP,
- ----
a Washington Limited Partnership
By: 1201 Third Avenue Limited Partnership,
a Washington limited partnership, General Partner
By: Wright Runstad Associates Limited Partnership,
a Washington limited partnership, General
Partner
By: Wright Runstad & Company, a Washington
corporation, General Partner
By: /s/ DOUGLAS E. NORBERG
----------------------------------
Douglas E. Norberg,
President
ARICO: ARICO - SEATTLE, INC.
- -----
By: /s/ SCOTT M. DALRYMPLE
---------------------------------------------------
Scott M. Dalrymple, Vice President
By: /s/ KEVIN P. MAHONEY
---------------------------------------------------
Kevin P. Mahoney, Vice President
<PAGE> 54
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
THIS IS TO CERTIFY that on this 27th day of September, 1995,
before me, the undersigned, a notary public in and for the State of New York,
duly commissioned and sworn, personally appeared DOUGLAS E. NORBERG, to me
known to be the President of WRIGHT RUNSTAD & COMPANY, a corporation, to me
known to be a general partner of WRIGHT RUNSTAD ASSOCIATES PARTNERSHIP, a
limited partnership, to me known to be the general partner of 1201 THIRD AVENUE
LIMITED PARTNERSHIP, a limited partnership, known to me to be a general partner
of 1212 SECOND AVENUE LIMITED PARTNERSHIP, the limited partnership that
executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation and
said limited partnerships for the uses and purposes therein mentioned, and on
oath stated that said individual was authorized to execute said instrument.
WITNESS my hand and official seal the day and year in this
certificate first above written.
/s/ LORRAINE MICHELS
-------------------------------------
Notary Public in and for the State of
New York, residing at NY NY
----------------
My Appointment Expires:
2-28-96
-------------------------------------
[NOTARY STAMP]
<PAGE> 55
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
This is to certify that on this 27th day of September, 1995,
before me, the undersigned, a Notary Public in and for the State of New York,
duly commissioned and sworn, personally appeared Kevin P. Mahoney, to me known
to be the Vice President of ARICO - SEATTLE, INC., a Delaware corporation, that
executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation for
the uses and purposes therein mentioned, and on oath stated that said
individual was authorized to execute said instrument.
WITNESS my hand and official seal the day written.
/s/ LORRAINE MICHELS
-------------------------------------
Notary Public in and for the State of
New York, residing at NY NY
----------------
My Appointment Expires:
2-28-96
-------------------------------------
[NOTARY STAMP]
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
This is to certify that on this 27th day of September, 1995,
before me, the undersigned, a Notary Public in and for the State of New York,
duly commissioned and sworn, personally appeared Scott M. Dalrymple, to me
known to be the Vice President of ARICO - SEATTLE, INC., a Delaware
corporation, that executed the within and foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said corporation for the uses and purposes therein mentioned, and on oath
stated that said individual was authorized to execute said instrument.
WITNESS my hand and official seal the day and year in this
certificate first above written.
/s/ LORRAINE MICHELS
-------------------------------------
Notary Public in and for the State of
New York, residing at NY NY
----------------
My Appointment Expires:
2-28-96
-------------------------------------
[NOTARY STAMP]
<PAGE> 56
Exhibit A
Property Description
PARCEL A: LAND
Lots 1 through 8, inclusive, Block 5, Addition to the Town of Seattle, as laid
out by A.A. Denny (commonly known as A.A. Denny's Second Addition to the City
of Seattle), according to the plat thereof recorded in Volume 1 of Plats, page
30, in King County, Washington;
EXCEPT the southwesterly 12 feet of Lots 1, 4, 5 and 8 thereof condemned in
District Court Cause Number 7097 for widening of Second Avenue, as provided by
Ordinance Number 1107 of the City of Seattle;
AND EXCEPT the easterly 9 feet of Lots 2, 3, 6 and 7 thereof condemned in King
County Superior Court Cause Number 54135 for the widening of Third Avenue, as
provided by Ordinance No. 14345 of the City of Seattle.
PARCEL B: LEASED LAND
Lots 2, 3, 6, and 7, Block 6, Addition to the Town of Seattle, as laid out by
A.A. Denny (commonly known as A.A. Denny's Second Addition to the City of
Seattle), according to the plat thereof recorded in Volume 1 of Plats, page 30,
in King County, Washington; EXCEPT the northeasterly 12 feet thereof condemned
in District Court Cause Number 7097 for Second Avenue, as provided by Ordinance
Number 1107.
<PAGE> 57
APPENDIX A
DEFINITIONS
As used in the "Acceptance Notice" as defined in Section 10.03(a), the
following terms have the following meanings:
"AAA" - as defined in Section 5.09.
"ADDITIONAL EQUITY CONTRIBUTION" - as defined in Section 2.02.
"ADDITIONAL EQUITY PREFERRED RETURN" - as defined in Section
5.02.
"ADDITIONAL EQUITY RATE" - as defined in Section 5.02.
"ADJUSTED BASIS" - as such term is defined in Section 1011 of
the Code.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" - shall mean with respect
to any Partner, the deficit balance, if any, in such Partner's capital account
as of the end of the relevant Fiscal Year or as of any other relevant
determination date, after giving effect to the following adjustments:
(i) credit to such capital account of any amounts which
such Partner is obligated to restore (pursuant to the terms of this
Agreement or otherwise) or is deemed to be obligated to restore
pursuant to the penultimate sentences of Section 1.704-1T(b)(4)(iv)(f)
and Section 1.704-1T(b)(4)(iv)(h)(5) of the Section 704(b) Regulations
after taking into account any net decrease in a Partner's share of
Partnership Minimum Gain or Minimum Gain Attributable to Partner
Nonrecourse Debt which has occurred as of the relevant determination
date; and
(ii) debit to such capital account of the items described
in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Section 704(b)
Regulations.
"AFFILIATE" - with respect to any designated Person, any other
Person who, directly or indirectly, controls, is controlled by, or is under
common control with such designated Person. Without limiting the foregoing, an
Affiliate of a Person who is a partnership shall include all Persons who,
directly or indirectly, are general partners of that partnership and shall also
include all limited partners of that partnership.
"AGREEMENT" or "ARTICLES" - the Third Amended and Restated
Articles of Limited Partnership of the Partnership, including this any Exhibits
thereto.
"ANNUAL BUDGET" - the budget prepared by the Managing General
Partner and approved by all of the other General Partners as set forth in
Section 7.05 hereof.
"APPOINTMENT DATE" - as defined in Section 5.09.
<PAGE> 58
"ARBITRATION NOTICE" - as defined in Section 5.09.
"ARBITRATOR" - as defined in Section 5.09.
"ARICO" - ARICO-Seattle, Inc., a Delaware corporation and a
wholly owned subsidiary of ARICO Parent.
"ARICO PARENT" - Cornerstone Properties Inc., a Nevada
corporation, formerly known as ARICO America Realestate Investment Company.
"BANKRUPTCY" - when (i) proceedings in bankruptcy under the
provisions of the United States Bankruptcy Code, or any other federal or state
bankruptcy laws shall have been filed by or against a Person and such
proceedings have not been stayed or dismissed after the expiration of six
months following such filing, or (ii) a receiver or similar functionary is
appointed to take possession of all or a material portion of the assets of a
Person and such receiver or similar person has not been dismissed within six
months of his appointment, or (iii) a Person makes a general assignment for the
benefit of creditors, or (iv) all or substantially all of the assets of a
Person are taken by execution or other process.
"BANKRUPT GENERAL PARTNER" - any General Partner that is the
subject of a Bankruptcy or with respect to which a direct or indirect partner
is the subject of a Bankruptcy.
"BLOCK SIX LAND" - the real property described as Parcel B in
Exhibit A attached to the Agreement.
"BLOCK SIX SHORTFALL" - as defined in Section 1.03(a).
"BLOCK SIX SUBLEASE" - that certain lease of improvements
dated October 8, 1985, between 1212, as landlord, and Block Six Limited
Partnership, as tenant, as amended.
"BUILDING" - as defined in Section 1.03(a).
"CAPITAL ACCOUNT TRIGGER DATE" - as defined in Section 3.05.
"CAPITAL BASE" - at any particular time, and except as
expressly provided to the contrary herein, the cumulative amount of all Equity
Contributions (excluding the Additional Equity Contribution) made by ARICO to
the Partnership, as reduced by distributions to ARICO from time to time
pursuant to Section 5.05(j).
"CAPITAL EXPENDITURES" - capital expenditures made in
accordance with the Annual Budget in effect from time to time.
"CARRYING VALUE" - with respect to Special Property, the fair
market value thereof determined at the time and in the manner specified in, and
as adjusted thereafter pursuant to, Section 3.04(b) hereof.
<PAGE> 59
"CERTIFICATE" - as defined in Section 1.01(b).
"CERTIFIED PUBLIC ACCOUNTANT" - an independent certified
public accountant of high quality and reputation selected by the Managing
General Partner and subject to the approval of each other General Partner,
which Certified Public Account shall take into account reports and other
information furnished by such General Partner to its shareholders, lenders,
governmental authorities, and other parties.
"CLAIMS" - as defined in Section 13.17.
"CODE" - the Internal Revenue Code of 1986, as amended, or any
successor statute.
"CONVEYANCING PARTNER" - as defined in Section 10.06.
"COURT" - as defined in Section 5.09.
"CREDIT FACILITY AGREEMENT" - as defined in Section 4.01.
"CULPABLE ACTS" - with respect to any Person, gross
negligence, fraud, bad faith, misconduct, misappropriation of funds, breach of
any fiduciary duty or the intentional breach of this Agreement by such Person.
"CUMULATIVE AEPR DEFICIT" - as defined in Section 5.02.
"CUMULATIVE PREFERENCE DEFICIT" - as defined in Section 5.01.
"DEBT SERVICE" - as defined in the definition of Operating
Costs.
"DEPRECIATION" - for each Fiscal Year or other period, (i) in
the case of Partnership property other than Special Property, an amount equal
to the depreciation, amortization (including, without limitation, amortization
of leasing costs) or other cost recovery deduction allowable for federal income
tax purposes with respect to the property for that year or other period, and
(ii) in the case of Special Property, the amount computed pursuant to Section
3.04(b)(v) hereof for that year or other period.
"DESIGNATION REQUEST" - as defined in Section 12.02(b).
"DETERMINATION" - as defined in Section 5.09.
"DIRECT" general partner of a Person - the owner of a general
partner interest in such Person.
"ECONOMIC RISK OF LOSS" - as defined in Section
1.704-1T(b)(4)(iv)(k)(1) of the Section 704(b) Regulations.
<PAGE> 60
"EQUALIZING PAYMENT" - as defined in Section 5.06.
"EQUITY CONTRIBUTION" - as defined in Section 2.01(a).
"EQUITY REFINANCING DETERMINED RATE" - as defined in Section
5.02.
"FIRST RESTATED ARTICLES" - as defined in the Recitals.
"FISCAL YEAR" - a twelve month period commencing January 1.
"GAAP" - generally accepted accounting principles consistently
applied.
"GENERAL OVERHEAD COSTS AND EXPENSES" - all the following
costs and expenses incurred from time to time by the Managing General Partner
and each Affiliate of the Managing General Partner or any Person included
therein in respect of the Partnership, the Project, or any of the transactions
contemplated hereby: (i) salaries, bonuses and other compensation of all
employees of the Managing General Partner and each Affiliate of the Managing
General Partner other than the Project Staff; (ii) rent for offices of the
Managing General Partner and each Affiliate of the Managing General Partner
used in performing obligations hereunder except for Project Offices; (iii)
telephone, telegraph and utility charges incurred by the Managing General
Partner and each Affiliate of the Managing General Partner except those
referred to below; (iv) office supplies, rent, repair and maintenance of office
machines and postage incurred by the Managing General Partner and each
Affiliate of the Managing General Partner except those referred to below; (v)
travel expenses (other than car allowances payable to Project Staff) incurred
by the Project Staff, who reside in the City of Seattle, within the City of
Seattle; and (vi) other costs and expenses of the Managing General Partner and
each Affiliate of the Managing General Partner in its management of the affairs
of the Partnership. General Overhead Costs and Expenses shall not include any
of the following items to the extent that they inure to the Project exclusive
benefit or which are incurred for the direct construction or operations of the
Project: (a) cost of labor and materials incorporated in any improvements,
including, without limiting the generality of the foregoing, all contract
prices of contractors and suppliers under contracts with or on behalf of the
Partnership; (b) architectural and engineering fees to architects and engineers
under contracts with or on behalf of the Partnership in connection with the
Project; (c) costs of reproductions of Plans; (d) advertising agency charges;
costs of brochures, models and films; and other advertising and leasing
expenses paid to third parties; (e) out-of-town travel expenses and costs of
lodging and meals for the Managing General Partner and each Affiliate of the
Managing General Partner and their personnel while out of the city of their
residence in connection with the Project; (f) accountants' fees and attorney's
fees; fees paid to computer services for preparation of critical path method
studies; (g) brokerage fees and commissions, finder's fees and similar payments
made to brokers in connection with obtaining leases; (h) fees paid to landscape
architects, design consultants and other outside consultants; (i) telephone
service at the Project and Project offices and all telephone toll calls and
telegrams; (j) the salaries, bonuses and other compensation paid or payable to
the Project Staff at or below the level of "Assistant Project Manager" (or its
functional equivalent) for the time such employees are, on a regular basis,
assigned to the development of the Project; (k) all costs of an
<PAGE> 61
on-site Project office and of office supplies, rent, repair and maintenance of
office machines and postage incurred for or in connection with the Project; and
(1) all other costs incurred in development of the Project other than those
described in clauses (i) through (vi) of the immediately preceding sentence.
"GENERAL PARTNERS" - 1212 (in its capacity as a general
partner), ARICO, and each additional Person admitted to, or converting an
Interest within, the Partnership as a general partner in accordance with the
terms and provisions of the Agreement.
"INDIRECT" general partner of a Person - the owner of a
general partnership interest in the owner of a general partnership interest in
such Person, or any higher tier general partner.
"INSTITUTIONAL LENDER" - as defined in Section 5.02.
"INTEREST" - as defined in Section 3.01.
"LAND" - as defined in Section 1.03(a).
"LEASE" - as defined in Section 1.03(a).
"LEASING GUIDELINES" - the leasing guidelines attached as
Exhibit B.
"LIMITED PARTNER" - 1212 (in its capacity as a limited
partner), and any successor which qualifies under the Act to be a limited
partner and is admitted to the Partnership as a Limited Partner pursuant to the
terms of the Agreement.
"LIQUIDATED PARTNER" - as defined in Section 3.05.
"LOSSES" - see "PROFITS".
"MANAGEMENT AGREEMENT" - the agreement then in effect,
executed by the Partnership, providing for the management of the Project.
"MANAGER" - the Person managing the Project pursuant to the
Management Agreement then in effect.
"MANAGING GENERAL PARTNER" - the General Partner with the
rights of the Managing General Partner set forth in this Agreement, and
initially means 1212 (in its capacity as a general partner).
"MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT" - that
amount determined in accordance with the principles of Section
1.704-1T(b)(4)(iv)(h)(6) of the Section 704(b) Regulations.
<PAGE> 62
"NET OPERATING CASH FLOW" - for any period of determination,
means Operating Revenues for such period minus the sum of Operating Costs and
Capital Expenditures attributable to such period.
"NON-DISCRETIONARY EXPENDITURES" - as defined in Section 7.05.
"NONRECOURSE BUILT-IN GAIN" - with respect to any Special
Property that is subject to a mortgage or negative pledge securing a
Nonrecourse Liability, the amount of any taxable gain that would be allocated
to the Partners pursuant to Section 6.03(a) or (b) hereof, or both, if such
property were disposed of in a taxable transaction in full satisfaction of such
liability and for no other consideration.
"NONRECOURSE DEDUCTIONS" - any and all items of loss or
deduction (including any expenditure described in Section 705(a)(2)(B) of the
Code) that, in accordance with the principles of Section 1.704-1T(b)(4)(iv)(b)
of the Section 704(b) Regulations, are attributable to a Nonrecourse Liability.
"NONRECOURSE LIABILITY" - as defined in Section
1.704-1T(b)(4)(iv)(k)(3) of the Section 704(b) Regulations.
"OFFEREE" - as defined in Section 9.01.
"OFFER NOTICE" - as defined in Section 9.01.
"OFFEROR" - as defined in Section 9.01.
"OFFEROR PARTNER" - as defined in Section 10.03(a).
"OFFER PRICE" - as defined in Section 9.01.
"OLD WR & CO." - Wright Runstad & Company, a Washington
corporation that was dissolved pursuant to Articles of Dissolution dated
December 31, 1986, filed on December 31, 1986, pursuant to RCW 23A.28.110, and
substantially all of the assets of which were transferred to WRALP and to WR &
Co.
"$126.1 MILLION RATE" - as defined in Section 5.02.
"OPERATING COSTS" - all current obligations, determined on the
accrual basis of accounting, of the Partnership for (i) operating expenses of
the Project, including the management fee under the Management Agreement, (ii)
payments of interest, premium, if any, and principal on the Project Loan and
any other Permitted Loans ("DEBT SERVICE"), (iii) taxes (determined on an "as
payable" basis, rather than with respect to when any lien for such taxes may
have arisen), insurance and other amounts for the ownership or operation of the
Project, (iv) the Block Six Shortfall, and (v) the costs, fees and expenses
incurred relative to any refinancing or sale by the Partnership to the extent
not deducted in computing Refinancing Funds
<PAGE> 63
and Sales Proceeds; provided, however, that distributions to the Partners
(excluding, for avoidance of doubt, Debt Service payments which do not
constitute any part of such distributions) shall not be Operating Costs.
"OPERATING REVENUES" - all gross receipts of the Partnership
(less any discounts or allowances) other than (i) Financing Funds, (ii)
Refinancing Funds, (iii) Third Party Loans, (iv) Sales Proceeds, and (v) loans
and capital contributions of the Partners (including, without limitation, all
other loans by the Partners, the Equity Contribution and all other capital
contributions of the Partners).
"OPTION A" - as defined in Section 9.01.
"OPTION B" - as defined in Section 9.01.
"OTHER PARTNER" - as defined in Section 10.03(a).
"PARTNER NONRECOURSE DEBT" - as defined in Section
1.704-1T(b)(4)(iv)(k)(4) of the Section 704(b) Regulations.
"PARTNER NONRECOURSE DEDUCTIONS" - any and all items of loss
or deduction (including any expenditure described in Section 705(a)(2)(B) of
the Code) that, in accordance with the principles of Section
1.704-1T(b)(4)(iv)(h)(3) of the Section 704(b) Regulations, are attributable to
Partner Nonrecourse Debt.
"PARTNERS" - the General Partners and the Limited Partner.
"PARTNER'S LENDER" - as defined in Section 10.03(e).
"PARTNERSHIP" - Third and University Limited Partnership, a
limited partnership formed under the laws of the State of Washington, and its
successors and assigns.
"PARTNERSHIP LAW" - as defined in Section 1.01.
"PARTNERSHIP MINIMUM GAIN" - amount determined in accordance
with the principles of Sections 1.704-1T(b)(4)(iv)(a) and (c) of the Section
704(b) Regulations.
"PERKINS BUILDING PARTNERSHIP" - Perkins Building Partnership,
a Washington general partnership, a limited partner in 1212.
"PERMITTED LOANS" - the Project Loan and all other
indebtedness of the Partnership (but not the separate indebtedness of any
Partner), whether secured or unsecured, if authorized and incurred in
accordance with the provisions of this Agreement or as may otherwise be
approved by both Partners.
<PAGE> 64
"PERSON" or "PERSON" or "PARTY" - an individual, trust,
estate, government, partnership, joint venture, corporation, company, firm or
any other entity whatsoever.
"PLEDGE" - any bona fide, voluntary pledge, mortgage, deed of
trust, security interest or other consensual lien or hypothecation of, in or on
any property or any interest therein.
"PLEDGED INTEREST" - as defined in Section 10.03(e).
"PLEDGING PARTNER" - as defined in Section 10.03(e).
"PREFERENCE PERIOD" - as defined in Section 5.01(b).
"PREFERENCE RETURN" - as defined in Section 5.01(a).
"PREFERENCE TERMINATION DATE" - as defined in Section 5.01(b).
"PREFERENCE TEST" - as defined in Section 5.01(b).
"PREFERENCE TEST CASH FLOW" - as defined in Section 5.01(b).
"PRIME RATE" - the rate established by Seattle First National
Bank, from time to time as its "base rate" or "prime rate", or in the absence
of any such established rate, the rate so designated from time to time in the
Wall Street Journal listing of money rates.
"PROFITS" or "LOSSES" - for each Fiscal Year or other period,
an amount equal to the Partnership's taxable income or loss for that year or
period, determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703 (a)(1) of the Code shall be included in
computing taxable income or loss), with the following adjustments:
(a) Any income of the Partnership exempt from federal
income tax and not otherwise taken into account in computing Profits
or Losses pursuant to this Section 1.16 shall be added to such taxable
income or loss;
(b) Any expenditures of the Partnership described in
Section 705(a)(2)(B) of the Code or treated as expenditures described
in Section 705(a)(2)(B) of the Code pursuant to Section
1.704-1(b)(2)(iv)(i) of the Section 704(b) Regulations, and not
otherwise taken into account in computing Profits or Losses pursuant
to this definition, shall be subtracted from such taxable income or
loss;
(c) In the event the Carrying Value of any Partnership
asset (other than the Project) is determined or redetermined pursuant
to Sections 3.04(b)(ii) or (iii) hereof, the amount by which such
Carrying Value (as so determined or redetermined) exceeds or is
exceeded by the asset's Adjusted Basis or previous Carrying Value, as
appropriate, shall
<PAGE> 65
be taken into account as gain or loss, respectively, from the
disposition of that asset (as though the asset was disposed of in a
fully taxable transaction immediately prior to the determination or
redetermination) for purposes of computing Profits or Losses in the
Fiscal Year in which the determination or redetermination is made;
(d) Gain or loss resulting from the disposition of any
Partnership asset (other than the Project) with respect to which gain
or loss is recognized for federal income tax purposes shall, if such
asset has a Carrying Value, be computed by reference to the Carrying
Value of such Partnership asset notwithstanding that the Adjusted
Basis of such property differs from its Carrying Value;
(e) In lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing taxable
income or loss for federal income tax purposes, there shall be taken
into account in computing Profits or Losses the Depreciation for the
Fiscal Year or other period, other than such Depreciation as is
specifically allocated pursuant to Section 6.03(d); and
(f) Notwithstanding any other provision of this
definition, any items of income, gain, loss or deduction (including,
without limitation, Property Gain, Property Loss and Depreciation)
that are specially allocated pursuant to Section 6.03, 6.04 or 6.05
hereof shall not be taken into account in computing Profits or Losses.
"PROJECT" - as defined in Section 1.03(a).
"PROJECT LOAN" - the TULP Funding loan and any replacement
first mortgage loan, including without limitation, the Teachers Loan.
"PROJECT OFFICE" - the office space in Seattle, Washington
used as an office exclusively for the Project.
"PROJECT STAFF" - those employees of any Affiliate of the
Managing General Partner that performs services for the Partnership or that
performs services in connection with the Project at or below the level of
"Senior Project Manager" or its functional equivalent, that, on a regular
basis, are assigned to, and employed at, the Project Office and/or the site of
the Project (but only for the duration of such assignment and duration), and
such other persons as shall be approved by each General Partner who is not the
Managing General Partner, to the extent that such employees or other persons
are actually working on the business of the Partnership and the Project.
"PROPERTY GAIN" or "PROPERTY LOSS" - for each Fiscal Year or
other period, an amount equal to the Partnership's taxable gain or loss for
that year or period with respect to any sale or other disposition of the
Project for federal income tax purposes, determined in accordance with section
703(a) of the Code, with the following adjustments:
<PAGE> 66
(a) In the event the Carrying Value of the Project is
determined or redetermined pursuant to Sections 3.04(b)(ii) or (iii),
the amount by which such Carrying Value (as so determined or
redetermined) exceeds or is exceeded by the Project's Adjusted Basis
or previous Carrying Value, as appropriate, shall be taken into
account in the same manner as if such excess or deficiency were actual
gain or loss, respectively, from the disposition of the Project
(assuming the Project was disposed of in a fully taxable transaction
for a price equal to the newly determined or redetermined Carrying
Value) for purposes of computing Property Gain or Property Loss with
respect to the Project in the Fiscal Year in which the determination
or redetermination is made; and
(b) Gain or loss resulting from any disposition of the
Project with respect to which gain or loss is recognized for federal
income tax purposes shall, if the Project has a Carrying Value, be
computed with reference to the Carrying Value of the Project at the
time of its disposition rather than its Adjusted Basis.
"REFINANCING FUNDS" - the proceeds of any financing or
refinancing (i) of the Leasehold Estate, or any portion thereof, by 1212, or
(ii) of the Project, or any portion thereof, by the Partnership (and not by a
Partner, whether or not Partnership property may be collateral therefor)
including without limitation, any net proceeds payable to Issuer or to the
Partnership in connection with the unwinding, modification, or sale of any
interest rate hedging or swap arrangement, after being reduced by (a) payments,
repayments or other retirements of previously existing debt obligations of 1212
or the Partnership, as applicable, made with such funds, (b) proceeds required
to pay construction costs and other costs of 1212 or the Partnership which
financing or refinancing was incurred to pay and to meet other reasonable
requirements of 1212 or the Partnership as applicable and (c) all costs
incurred by 1212 or the Partnership, as applicable, in such financing or
refinancing, including without limitation, any costs incurred by Issuer or by
the Partnership in connection with the unwinding, modification, or sale of any
interest rate hedging or swap arrangement.
"REIT" - a real estate investment trust as defined in the
Code.
"SAMIS" - as defined in Section 1.03(a).
"SALE PROCEEDS" - the sum of the aggregate proceeds (including
cash, the principal amount of notes and other debt obligations, and the fair
market value of securities and other property, but excluding selling expenses
and any then-existing debt of the Partnership (but not the separate debt of any
Partner) subject to which the sale was made) received by the Partnership (a) as
the consideration for the voluntary or involuntary sale of any part of the
Partnership's capital assets other than sales of immaterial assets in the
ordinary course of business and (b) as the net amount of insurance (including
title insurance) proceeds or other compensation and condemnation awards, in
excess of funds used for repairs and restoration or to retire previously
existing debt of the Partnership, which are available for distribution. Unless
and except as may be otherwise specifically provided herein, "Sale Proceeds"
relate to and include only matters with respect to the disposition of the
property of the Partnership and not to the disposition by a Partner of its
Interest in the Partnership.
<PAGE> 67
"SECOND RESTATED ARTICLES" - as defined in the Recitals.
"SECTION 704(b) REGULATIONS" - the Treasury Regulations
promulgated on December 31, 1985, September 9, 1986, and December 29, 1988 (as
amended on November 20, 1989) pursuant to section 704(b) of the Code, and any
amended or successor provisions thereto.
"$79.1 MILLION RATE" - as defined in Section 5.02.
"SHARING RATIO" - as defined in Section 3.02.
"SPECIAL PROPERTY" - a Partnership asset for which a Carrying
Value is determined or redetermined pursuant to Section 3.04(b) hereof.
"SUBMISSION DATE" - as defined in Section 5.09.
"SUBSTITUTE MANAGING GENERAL PARTNER" - as defined in Section
12.01(a).
"SUCCESSOR REPRESENTATIVE" - as defined in Section 12.01(b).
"SUCCESSORS" - as defined in Section 12.02(b).
"TEACHERS" - as defined in Section 4.02.
"TEACHERS COMMITMENT" - as defined in Section 4.02.
"TEACHERS LOAN" - as defined in Section 4.02.
"TERMINATION" - a termination of the Partnership pursuant to
section 708(b)(1)(B) of the Code.
"THIRD PARTY" - any Person other than the Partnership or a
Partner. Without limiting the foregoing, an Affiliate of a Partner (other than
the Partnership or another Partner) and an Affiliate of the Partnership (other
than a Partner) shall be a Third Party.
"TRANSFER" - any direct or indirect sale, assignment,
transfer, gift, conveyance, or other disposition (excluding, however, a
Pledge), whether voluntary or involuntary (by operation of law or otherwise),
of any project or an interest in any project.
"TREASURY REGULATIONS" - pronouncements which are designed to
clarify, interpret and apply the provisions of the Code, and which are
designated as "Treasury Regulations" or "Temporary Regulations" by the United
States Department of the Treasury.
"TULP FUNDING" - TULP Funding Corporation, a Delaware
corporation, and a wholly owned subsidiary of ARICO Parent.
<PAGE> 68
"1201" - 1201 Third Avenue Limited Partnership, a Washington
limited partnership, and the general partner of 1212.
"1212" - 1212 Second Avenue Limited Partnership, a Washington
limited partnership.
"1212 GROUP" - collectively, 1212 and each partner in 1212 and
all of their respective Affiliates (other than Perkins Building Partnership and
its partners or the Partnership itself), including without limitation 1201,
WRALP, WR & Co., H. Jon Runstad, Howard S. Wright and their respective
Affiliates (other than the Partnership itself). References to the 1212 Group
shall also be references to each Person included in the 1212 Group.
"1212 PARTNERSHIP AGREEMENT" - the limited partnership
agreement dated as of October 14, 1986, as amended by an amendment dated as of
September 1, 1988, pursuant to which 1212 is organized, among 1201 Third Avenue
Limited Partnership as general partner, and Block Five Limited Partnership,
Matthew J. Griffin, and Perkins Building Partnership, as limited partners.
"UCC" - the Uniform Commercial Code, RCW 62A, as amended.
"UNPAID ADDITIONAL EQUITY CONTRIBUTION" - as defined in
Section 5.02.
"WR & CO." - Wright Runstad & Company, a Washington
corporation formed on December 10, 1986, and the general partner of WRALP.
"WRALP" - Wright Runstad Associates Limited Partnership, a
Washington limited partnership, and the general partner of 1201.
<PAGE> 1
EXHIBIT 10.52
ASSIGNMENT OF RECORDED DOCUMENTS
Dated as of April 7, 1995
FOR AND IN CONSIDERATION of One Dollar ($1.00) and further good and
valuable consideration to it in hand paid, the receipt of which is hereby
acknowledged, NWC FUNDING CORPORATION, a Delaware corporation ("Assignor"),
hereby sells, transfers and assigns, without recourse, to NORWEST CORPORATION,
a Delaware corporation ("Assignee"), all of Assignor's right, title and
interest in and to the following documents (collectively, the "Assigned
Documents"):
1. Mortgage and Security Agreement and Fixture Financing Statement
Securing a Revolving Line of Credit dated August 5, 1986, filed of
record August 7, 1986, as Document No. 1745421 executed by NWC Limited
Partnership and Norwest Bank Building Company to Deutsche Bank AG, New
York Branch, in the original principal amount of $110,000,000.00.
Amended by Amendment to Mortgage and Security Agreement and Fixture
Financing Statement Securing a Revolving Line of Credit dated January
15, 1987, filed of record January 22, 1987, as Document No. 1795812.
Assigned by Deutsche Bank AG, New York Branch and Deutsche Bank AG,
Cayman Island Branch to NWC Funding Corporation pursuant to Assignment
of Mortgage and Security Agreement and Fixture Financing Statement
dated November 4, 1987, filed of record November 16, 1987, as Document
No. 1888189.
Amended and restated pursuant to Amendment and Restatement of Mortgage
and Security Agreement and Fixture Financing Statement dated as of
November 4, 1987, filed of record November 16, 1987, as Document No.
1888191.
Collaterally assigned from NWC Funding Corporation to Deutsche Bank
AG, New York Branch and Morgan Guaranty Trust Company of New York, as
their interests may appear, pursuant to an Assignment and Security
Agreement dated as of November 4, 1987, filed of record December 14,
1987, as Document No. 1894794, which collateral Assignment and
Security Agreement has been satisfied and terminated by a Satisfaction
and Termination dated as of April 1995, filed of record _______, 1995,
as Document No. ________.
<PAGE> 2
Amended by a First Amendment to Mortgage and Security Agreement and
Fixture Financing Statement Securing a Revolving Line of Credit dated
as of August 7, 1992, filed of record October 8, 1992, as Document No.
2304100, by and between NWC Limited Partnership, a Minnesota limited
partnership, and NWC Funding Corporation, a Delaware corporation.
Amended by a Second Amendment to Mortgage and Security Agreement and
Fixture Financing Statement Securing a Revolving Line of Credit dated
September 29, 1993, filed of record ________, 1995, as Document No.
__________.
2. Assignment of Leases and Rents dated August 5, 1986, filed of
record August 7, 1986, as Document No. 1745422, by and between NWC
Limited Partnership, Norwest Bank Building Company and Deutsche Bank
AG, New York Branch.
Amended by First Amendment to Assignment of Leases and Rents dated
January 15, 1987, filed of record January 22, 1987, as Document No.
1795813.
Assigned by Deutsche Bank AG, New York Branch and Deutsche Bank AG,
Cayman Islands Branch to NWC Funding Corporation pursuant to
Assignment of Leases and Rents dated November 4, 1987, filed of record
November 16, 1987, as Document No. 1888190.
Amended and restated pursuant to Amendment and Restatement of
Assignment of Leases and Rents dated as of November 4, 1987, filed of
record November 16, 1987, as Document No. 1888192.
Collaterally assigned from NWC Funding Corporation to Deutsche Bank
AG, New York Branch and Morgan Guaranty Trust Company of New York, as
their interests may appear, pursuant to an Assignment and Security
Agreement dated as of November 4, 1987, filed of record December 14,
1987, as Document No. 1894794, which collateral Assignment and
Security Agreement has been satisfied and terminated by a Satisfaction
and Termination dated as of April ___, 1995, filed of record
_____________, 1995, as Document No. ____________.
Amended by First Amendment to Assignment of Leases and Rents dated
August 7, 1992, filed of record October 8, 1992, as Document No.
2304101, by and between NWC Limited Partnership, a Minnesota limited
partnership, and NWC Funding Corporation, a Delaware corporation.
-2-
<PAGE> 3
Amended by a Second Amendment to Assignment of Leases and Rents dated
as of September 29, 1993, filed of record ________, 1995, as Document
No. _____________.
Assignor does hereby covenant and warrant to Assignee that it has good right
and lawful authority to transfer and assign the Assigned Documents and hereby
authorizes and empowers Assignee to take any action which it may deem necessary
to enforce the terms and conditions thereof. This Assignment is binding upon
the successors and assigns of Assignor and inures to the benefit of the heirs,
legal representatives, successors and assigns of the Assignee.
This Assignment may be executed simultaneously in any number of
counterparts, each of which shall be deemed to be an original, and together
shall constitute and be one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
-3-
<PAGE> 4
NWC FUNDING CORPORATION
By
----------------------------------------
Kevin P. Mahoney
Its Vice President and Treasurer
and
By /s/ THOMAS P. LOFTUS
----------------------------------------
Thomas P. Loftus
Its Vice President and Secretary
STATE OF ________________)
) ss.
COUNTY OF _______________)
The foregoing instrument was acknowledged before me this ___ day of
April, 1995, by Kevin P. Mahoney, the Vice President and Treasurer of NWC
Funding Corporation, a Delaware corporation, on behalf of the corporation.
----------------------
Notary Public
STATE OF MINNESOTA)
) ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 7th day of
April, 1995, by Thomas P. Loftus, the Vice President and Secretary of NWC
Funding Corporation, a Delaware corporation, on behalf of corporation.
KRISTINA DAVIS /s/ KRISTINA DAVIS
NOTOARY PUBLIC - MINNESOTA --------------------------
My Commission Expires Jan. 31, 2000 Notary Public
-4-
<PAGE> 5
NWC FUNDING CORPORATION
By /s/ KEVIN P. MAHONEY
-----------------------------
Kevin P. Mahoney
Its Vice President and Treasurer
and
By
------------------------------
Thomas P. Loftus
Its Vice President and Secretary
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS)
The foregoing instrument was acknowledged before me this 6th day of
April, 1995, by Kevin P. Mahoney, the Vice President and Treasurer of NWC.
Funding Corporation, a Delaware corporation, on behalf of the corporation.
MELANIE PEARSON /s/ MELANIE PEARSON
Notary Public, State of Texas -----------------------
My Commission Expires NOTARY Public
01/04/97
STATE OF MINNESOTA)
) ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this ____ day of
April, 1995, by Thomas P. Loftus, the Vice President and Secretary of NWC
Funding Corporation, a Delaware corporation, on behalf of the corporation.
-------------------------
Notary Public
-4-
<PAGE> 6
THIS THIRD AMENDED AND RESTATED PROMISSORY NOTE HAS
BEEN ASSIGNED BY NWC FUNDING CORPORATION TO DEUTSCHE
BANK AG, NEW YORK BRANCH, PURSUANT TO AN ASSIGNMENT
AND SECURITY AGREEMENT DATED AS OF NOVEMBER 4, 1987,
AS AMENDED, AND THE RIGHTS OF THE HOLDER HEREOF ARE
SUBJECT TO THE TERMS OF SAID ASSIGNMENT
THIRD AMENDED AND RESTATED
PROMISSORY NOTE
$110,000,000.00 Minneapolis, Minnesota
August 5, 1986
FOR VALUE RECEIVED, the undersigned, NWC LIMITED PARTNERSHIP, a
Minnesota limited partnership (the "Borrower"), hereby agrees and promises to
pay to the order of NWC Funding Corporation, a Delaware corporation (and the
assignee of NFW Corporation, a Minnesota corporation under an assignment
agreement dated as of November 4,1987) ("Holder") or its assigns at the office
of Deutsche Bank AG, New York Branch (the "Bank") at 31 West 52nd Street, New
York, New York 10019, or such other place as the Holder, or its assigns, may
from time to time designate, the principal sum of One Hundred Ten Million and
00/100 Dollars ($110,000,000.00) or so much as may be advanced hereunder as
Primary Obligations from time to time in accordance with the terms and
conditions of the Amendment and Restatement, dated as of November 4, 1987, to
that certain Credit Facility Agreement, dated as of August 5, 1986, and amended
as of December 15, 1986. and February 17, 1987 as such Amendment and
Restatement was amended as of August 7, 1992, and as further amended of even
date herewith (as the same may from time to time be further amended,
supplemented or otherwise modified, the "Credit Facility Agreement"), between
the Borrower and the Holder, and to pay interest on the unpaid principal
balance from the date hereof at the rates per annum and at the times specified
in the Credit Facility Agreement until this Note is fully paid. Both the
principal balance and interest thereon shall be payable in coin or currency
which at the time of payment is legal tender for the payment of public or
private debts in the United States of America.
The outstanding principal of all amounts advanced under the Credit
Facility Agreement and evidenced hereby shall be due and payable on December
31, 2005.
<PAGE> 7
This Note is a third amendment and restatement of the promissory note
originally issued by the Borrower in favor of the Bank on August 5, 1986, as
the same was amended and restated as of November 4, 1987, to evidence the
endorsement of the same by the Bank to the Holder and the assignment of the
same from the Holder to the Bank, and as further amended and restated as of
August 7, 1992, to evidence, among other things, the extension of the maturity
date thereof. This Note supersedes in its entirety, but has not been issued in
satisfaction of, the second amended and restated note delivered by the Borrower
to the Bank. The original principal amount of this Note has not been amended.
This Note constitutes a revolving line of credit note under which
advances, payments and readvances may be made from time to time as Primary
Obligations in accordance with the terms of the Credit Facility Agreement
provided the maximum amount of outstanding principal hereunder shall in no
event exceed One Hundred Ten Million and 00/100 Dollars ($110,000,000). This
Note is secured by an Amendment and Restatement, dated as of November 4, 1987,
to the Mortgage and Security Agreement and Fixture Financing Statement Securing
a Revolving Line of Credit given by the Borrower to the Holder, dated as of
August 5, 1986 and amended as of January 15, 1987, as such Amendment and
Restatement was further amended as of August 7, 1992, and as further amended of
even date herewith (as the same may from time to time be further amended,
supplemented or otherwise modified, the "Mortgage"), which constitutes a
revolving line of credit mortgage by Borrower in accordance with Minn. Stat.
Sections 507.325 and 508.555. All amounts advanced and readvanced under this
Note shall be secured by the Mortgage, regardless of the time or amount of
advances, payments or readvances and whether or not the advances or readvances
are obligatory.
Per diem interest shall be computed on the basis of a three hundred
sixty (360) day year but shall be payable on the actual days elapsed during the
term of this Note.
All payments made under this Note shall be applied first to interest,
second to any late charges due hereunder, and then to principal except that if
any advances made by Holder due to the occurrence of an Event of Default (as
defined in the Credit Facility Agreement) are not repaid on demand, any moneys
received, at the option of Holder may first be applied to repay such advances,
plus interest thereon at the variable Default Rate per annum thereafter (as
defined in the Credit Facility Agreement), and the balance, if any, shall be
applied on account of any installments then due.
This Note is secured by (i) the Mortgage by which Borrower has granted
to Holder a first mortgage lien on and security interest in the Premises, as
therein defined, located in Hennepin County, Minnesota (the "Premises"); (ii)
an Amendment and Restatement, dated as of November 4, 1987, to the Assignment
of Leases and Rents, dated as of August 5, 1986, as such Amendment and
Restatement was amended as of August 7, 1992, and as further amended of even
date herewith (as the same may from time to time be further amended,
supplemented or otherwise modified, the "Assignment") by which Borrower has
-2-
<PAGE> 8
assigned to Holder its interest in all rents and leases of the Premises; (iii)
the Credit Facility Agreement; and (iv) certain other collateral security
documents (as the same may from time to time be further amended, supplemented,
or otherwise modified, "Security Documents"). The terms of the Mortgage, the
Assignment, and the Credit Facility Agreement and an other Security Documents
securing this Note are incorporated herein by reference and made a part hereof
The remedies of Holder, as provided herein, and in the Mortgage, the
Assignment, the Credit Facility Agreement, and other collateral Security
Documents shall be cumulative and concurrent and may be pursued singularly,
successively or together at the sole discretion of Holder and may be exercised
as often as the occasion therefor shall arise.
It is agreed that time is of the essence in the performance of this
Note. Upon the occurrence of an Event of Default under or as defined in the
Mortgage, the Assignment, the Credit Facility Agreement, or any other Security
Document, Holder shall have the right and option to declare, without notice,
all remaining unpaid principal and accrued interest evidenced by this Note
immediately due and payable. Holder may exercise this option to accelerate at
any time during the occurrence of any Event of Default described above
regardless of any forbearance by Holder.
Upon the occurrence of an Event of Default and if the same is referred
to any attorney for collection or any action at law or in equity is brought
with respect hereto, Borrower shall pay Holder all expenses and costs of
collection, including, but not limited to, attorneys' fees.
Borrower, all guarantors and all other persons liable for all or any
part of the indebtedness evidenced by this Note severally waive presentment for
payment, protest and notice of non-payment and dishonor. From time to time,
without affecting the obligations of Borrower under this Note, the Mortgage,
the Assignment, the Credit Facility Agreement or any other Security Document,
and without affecting the guaranty of any person, corporation, partnership or
other entity for payment of the indebtedness evidenced by this Note, and
without giving notice to or obtaining the consent of Borrower or such
guarantors, and without liability on the part of Holder, Holder may, at
Holder's option, extend the time for payment of sums due under this Note,
reduce payments thereon, release anyone liable for the payment of any portion
of the indebtedness evidenced by this Note, accept a renewal or extension of
the Note, join in any extension or subordination agreement, release any
security given therefor, take or release other or additional security, and
agree in writing with Borrower to modify the rate of interest or period of
amortization of this Note and to change the amount of the monthly installments
payable hereunder.
All agreements between Holder and Borrower are hereby expressly
limited so that no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to
-3-
<PAGE> 9
Holder for the use, forbearance, loaning or detention of the indebtedness
evidenced hereby exceed the maximum permissible under applicable law. ff from
any circumstances whatsoever, fulfillment of any provisions hereof or of the
Mortgage Credit Facility Agreement Assignment or any other Security Documents
shall involve transcending the limit of validity prescribed by law, then, the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity and if from any circumstances Holder should ever receive as interest
an amount which would exceed the highest lawful rate, such amount which would
be in excess of such highest lawful rate shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest or
returned to Borrower, at the option of Holder. This provision shall control
every other provision of an agreements between Borrower and Holder and shall
also be binding upon and available to any subsequent holder or endorsee of this
Note.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other remedy under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any such right or remedy on a future occasion.
Notwithstanding anything to the contrary contained in this Note, the
Mortgage, the Credit Facility Agreement, the Assignment or the Security
Documents (collectively, the "Loan Documents"), the Holder agrees that no
deficiency or other money judgment, order or execution shall be sought, taken,
or entered in any suit, action, or proceeding, whether legal or equitable,
against the Borrower or any partners, shareholders, officers or directors of
the Borrower (direct or indirect), or its successors and assigns, for the
purpose of enforcing or obtaining satisfaction of any of the obligations under
the Loan Documents and that the Holder's sole recourse under the Loan Documents
shall be against the Premises and the other property encumbered by the Loan
Documents.
Notwithstanding anything herein to the contrary, any reference herein
to the Credit Facility Agreement, the Mortgage, the Assignment or any Security
Document shall be to such document as the same may be amended from time to
time.
-4-
<PAGE> 10
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date and year set forth above.
<TABLE>
<S> <C>
NWC LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: Sixth & Marquette Limited Partnership, a Minnesota limited
partnership
Its: General Partner
By: Hines Minneapolis 1986 Associates Limited Partnership, a
Minnesota limited partnership
Its: General Partner
By: GDHI Limited Partnership, a Texas limited partnership
Its: General Partner
By: /s/ GERALD D. HINES
-------------------------------
Gerald D. Hines
Its: General Partner
Pay to the order of Deutsche Bank AG
New York Branch Pay to the order of Norwest
Corporation, without Representation
NWC FUNDING Corporation or Recourse.
DEUTSCHE BANK AG, New York Branch
By: /s/ THOMAS P. LOFTUS
------------------------
Title: President By: /s/ JEAN HANNIGAN
------------ ----------------------------
By: /s/ SCOTT M. DALRYMPLE By: /s/ VOSHWANIE S. SEWSANKAR
----------------------------
Title: Secretary
-------------
NWC FUNDING CORPORATION
By: /s/ THOMAS P. LOFTUS
----------------------------
By: /s/ SCOTT M. DALRYMPLE
----------------------------
</TABLE>
-5-
<PAGE> 1
EXHIBIT 10.53
ASSIGNMENT OF DOCUMENTS
Dated as of April 7, 1995
FOR AND IN CONSIDERATION of One Dollar ($1.00) and further good and
valuable consideration to it in hand paid, the receipt of which is hereby
acknowledged, NWC FUNDING CORPORATION, a Delaware corporation ("Assignor"),
hereby sells, transfers and assigns, without recourse, to NORWEST CORPORATION,
a Delaware corporation ("Assignee"), all of Assignor's right, title and
interest, if any, in and to the following documents (collectively, the
"Assigned Documents"):
1. Note. That certain Third Amended and Restated
Promissory Note, dated as of August 5, 1986, made by NWC Limited
Partnership, a Minnesota limited partnership (the "Borrower") payable
to the order of the Assignor in the original principal amount of
$110,000,000 (the "Note").
2. Credit Agreement. That certain Amendment and
Restatement to Credit Facility Agreement, dated as of November 4,
1987, as amended by that certain First Amendment to Credit Facility
Agreement, dated as of August 7, 1992, and that certain Second
Amendment to Credit Facility Agreement, dated as of September 29,
1993, each by and between the Assignor and the Borrower (as amended,
the "Credit Agreement").
3. Other Documents. Each and every UCC financing
statement (together with each continuation and amendment thereof),
mortgage, security agreement, assignment of rents, subordination
agreement and each other instrument, document and agreement securing
payment of the Note or otherwise relating to the security for the
Note, including (without limitation) those certain documents described
in Exhibit A hereto.
Assignor does hereby covenant and warrant to Assignee that it has good right
and lawful authority to transfer and assign the Note and the Credit Agreement
and all of its right, title, claim and interest, if any, in and to other
Assigned Documents and hereby authorizes and empowers Assignee to take any
action which it may deem necessary to enforce the terms and conditions thereof
and agrees to execute such additional documents and instruments as may be
requested by Assignee to effectuate the full assignment of the Assigned
Documents to the Assignee. This Assignment is binding upon the successors and
assigns of Assignor and inures to the benefit of the heirs, legal
representatives, successors and assigns of the Assignee.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 2
This Assignment may be executed simultaneously in any number of
counterparts, each of which shall be deemed to be an original, and together
shall constitute and be one in the same instrument.
NWC FUNDING CORPORATION
By
---------------------
Kevin P. Mahoney
Its Vice President and Treasurer
and
By /s/ THOMAS P. LOFTUS
-----------------------
Thomas P. Loftus
Its Vice President and Secretary
STATE OF ________________ )
)ss.
COUNTY OF _______________ )
The foregoing instrument was acknowledged before me this ____ day of
April, 1995, by Kevin P. Mahoney, the Vice President and Treasurer of NWC
Funding Corporation, a Delaware corporation, on behalf of the corporation.
-----------------------
Notary Public
STATE OF MINNESOTA)
) ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 7th day of
April, 1995, by Thomas P. Loftus, the Vice President and Secretary of NWC
Funding Corporation, a Delaware corporation, on behalf of corporation.
KRISTINA DAVIS /s/ KRISTINA DAVIS
NOTARY PUBLIC - MINNESOTA ---------------------
My Commission Expires Jan. 31, 2000 Notary Public
-2-
<PAGE> 3
This Assignment may be executed simultaneously in any number of
counterparts, each of which shall be deemed to be an original, and together
shall constitute and be one in the same instrument.
NWC FUNDING CORPORATION
By /s/ KEVIN P. MAHONEY
---------------------
Kevin P. Mahoney
Its Vice President and Treasurer
and
By
---------------------
Thomas P. Loftus
Its Vice President and Secretary
STATE OF TEXAS )
)ss.
COUNTY OF HARRIS )
The foregoing instrument was acknowledged before me this 6th day of
April, 1995, by Kevin P. Mahoney, the Vice President and Treasurer of NWC
Funding Corporation, a Delaware corporation, on behalf of the corporation.
[ MELANIE PEARSON ] /s/ MELANIE PEARSON
[Notary Public, State of Texas] ---------------------
[ My Commission Expires ] Notary Public
[ 01/04/97 ]
STATE OF MINNESOTA)
) ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this ____ day of
April, 1995, by Thomas P. Loftus, the Vice President and Secretary of NWC
Funding Corporation, a Delaware corporation, on behalf of corporation.
---------------------
Notary Public
-2-
<PAGE> 4
Exhibit A
NORWEST CENTER
COMMERCIAL PAPER PROGRAM
INDEX
1987
PREAMBLE
<TABLE>
<CAPTION>
I. Abbreviations:
-------------
<S> <C>
ARICO AMERICA REALESTATE INVESTMENT "ARICO"
COMPANY
BAKER & BOTTS "BB"
BENNET, RINGROSE, WOLSFELD, JARVIS, "BRW"
GARDNER, INC.
CESAR PELLI & ASSOCIATES "CP"
DEUTSCHE BANK AG "DB"
DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH "DBCI"
DEUTSCHE BANK AG, NEW YORK BRANCH "DBNY"
FAEGRE & BENSON "FB"
GERALD D. HINES "Hines"
GERALD D. HINES INTERESTS, LTD. "Hines Ltd."
GOLDMAN SACHS MONEY MARKETS, INC. "Goldman Sachs"
HINES CONSOLIDATED INVESTMENTS, INC. "Hines Investments"
HINES MINNEAPOLIS 1986 ASSOCIATES "HM 86"
LIMITED PARTNERSHIP
I.A. NAMAN & ASSOCIATES, INC. "IAN"
KENDALL/HEATON ASSOCIATES "KH"
MOODY'S INVESTORS SERVICE "Moody's"
MORGAN GUARANTY TRUST COMPANY OF "Morgan"
NEW YORK
MORTENSON/SCHAL, A JOINT VENTURE "MS"
NFW CORPORATION "NFW"
NORWEST CENTER, INC. "NCI"
NORWEST CORPORATION "Norwest"
NWC LIMITED PARTNERSHIP "NWC"
NWC FUNDING CORPORATION "NWC Funding"
SIXTH & MARQUETTE LIMITED PARTNERSHIP "SM"
STANDARD & POOR'S CORPORATION "SP"
TITLE SERVICES, INC. "TSI"
WHITE & CASE "WC"
</TABLE>
-1-
<PAGE> 5
NORWEST COMMERCIAL PAPER PROGRAM
INDEX TO DOCUMENTS
II. LIST OF FIRST CLOSING DOCUMENTS
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
A. Commercial Paper Documents
--------------------------
1. Letter of Credit Agreement, dated as of November 4, 155
1987, between NWC Funding and DBNY.
2. Depositary Agreement, dated as of November 4, 1987, 156
executed by NWC Funding, agreed to by Morgan and DBNY.
3. Pledge Agreement, dated as of November 4, 1987, among 157
ARICO, DBNY and Morgan.
4. Assignment and Security Agreement, dated as of 158
November 4, 1987, among NWC Funding, DBNY and Morgan.
5. Master Rate Swap Agreement, dated as of November 4, 159
1987, between NWC Funding and DBNY.
6. Transaction Agreement to Master Rate Swap Agreement, 160
executed by DBNY and confirmed and accepted by NWC
Funding.
7. Dealer Agreement executed by Goldman Sachs and con- 161
firmed by NWC Funding as of November 4, 1987.
8. Guarantee, dated as of November 4, 1987, executed 162
by ARICO for the benefit of DBNY and NWC Funding.
9. Assignment and Assumption Agreement, between NFW and 163
NWC Funding, executed November 2, 1987.
10. Note Purchase, Assignment and Assumption Agreement, 164
among DBNY, DBCI and NWC Funding, executed November
4, 1987.
11. Assignment of Mortgage and Security Agreement and 165
Fixture Financing Statement, executed by DBNY for the
benefit of NWC Funding, executed November 4, 1987.
</TABLE>
-2-
<PAGE> 6
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
12. Assignment of Assignment of Leases and Rents, executed 166
by DBNY for the benefit of NWC Funding, executed
November 4, 1987.
13. Financing Statements executed by NWC Funding as Debtor 167
for the benefit of Morgan and DBNY.
14. Financing Statements executed by NWC Funding as Debtor 168
for the benefit of DBNY.
15. Letter of Credit Request, dated November 4, 1987, by 169
NWC Funding.
16. Officer's Certificate executed by an officer of NWC 170
Funding, dated as of November 9, 1987.
17. Officer's Certificate executed by officers of ARICO 171
dated as of November 9, 1987.
18. Officer's Certificate executed by officers of ARICO 172
dated as of November 9, 1987.
19. Officer's Certificate executed by an officer of NWC 173
dated as of December 15, 1987.
20. Officer's Certificate executed by officers of ARICO 174
dated December 15, 1987.
21. Owner's Certificate executed by NWC, dated as of 175
November 9, 1987.
22. Owner's Certificate executed by NWC, dated as of 176
November 9, 1987.
23. Owner's Certificate executed by NWC, dated as of 177
November 9, 1987.
24. Owner's Certificate executed by NWC, dated as of 178
November 9, 1987.
25. Owner's Certificate executed by NWC, dated as of 179
November 9, 1987.
26. Subordination Letter, dated as of November 4, 1987 180
executed by ARICO.
</TABLE>
-3-
<PAGE> 7
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
27. Consent Letter from DBNY, dated November 9, 1987. 181
B. Project Documents
-----------------
1. Amendment to Credit Facility Agreement dated 182
December 15, 1986, executed by DBNY DBCI, NWC,
NFW and ARICO.
2. Alternative Funding Demonstration Letter dated 183
December 15, 1986, executed by ARICO, NWC, NCI and
FB.
3. Acknowledgment of Rental Guaranty Termination dated 184
June 26, 1987, executed by ARICO.
4. Equity Funding Procedure Letter Agreement dated 185
July 10, 19878 executed by ARICO, DBNY, TSI and
NWC.
5. Amendment and Restatement to Credit Facility 186
Agreement, dated as of November 4, 1987, between NWC
Funding and NWC and consented to by DBNY and DBCI.
6. Amendment and Restatement to Mortgage and Security 187
Agreement and Fixture Financing Statement Securing a
Revolving Line of Credit, date as of November 4,
1987, between NWC and NWC Funding.
7. Amendment and Restatement to Assignment of Leases 188
and Rent, dated as of November 4, 1987, between NWC
and NWC Funding.
8. Amendment and Restatement to Construction Loan 189
Disbursement Agreement, dated as of November 4,
1987, among TSI, NWC Funding and con-
sented to by DBNY.
9. Agreement (Owner/Bank), dated as of November 4, 190
1987, between NWC and DBNY and consented to by
NWC Funding and ARICO.
10. Guarantee (Cost Overruns), dated as of 191
November 4, 1987, among Hines, Hines Ltd., HM
86, and SM for the benefit of NWC Funding.
</TABLE>
-4-
<PAGE> 8
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
11. Mortgage and Security Agreement and Fixture 192
Financing Statement, dated as of November 4, 1987,
between NWC and ARICO.
12. Letter Agreement regarding Mortgage in (11) dated 193
May 4, 1988, executed by ARICO..
13. Assignments of Contracts (6), dated as of November 4, 194
1987, by NWC.
14. Confirmations of Assignments of Contracts, dated as 195
of November 4, 1987.
a. IAN
b. MS
c. CP
d. BRW
e. KH
15. Superseded Note 196
16. UCC-3 Financing Statement executed by ARICO 197
17. Endorsement to Mortgagee Title Insurance Policy 198
No. 411-428035 issued by Commonwealth Land Title
Insurance Company.
C. Financial Instruments
---------------------
1. Irrevocable Letter of Credit, dated December 3, 199
1987.
2. Commercial Paper Note. 200
3. Commercial Paper Memorandum by Goldman Sachs 201
D. Rating Letters
--------------
1. Letter (authorizing use of rating), dated November 202
4, 1987, from DBNY to Moody's.
2. Letter (authorizing use of rating), dated November 203
4, 1987, from DBNY to SP.
3. Letter (thirty-day notice) dated November 4, 1987, 204
from NWC Funding to Moody's.
</TABLE>
-5-
<PAGE> 9
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
4. Letter (thirty-day notice) dated November 4, 1987, 205
from NWC Funding to SP.
5. Application and Agreement for Moody's Commercial 206
Paper Rating, dated November 2, 1987, by NWC
Funding and Moody's Commercial Paper Rating Letter,
dated December 7, 1987.
6. SP Corporation Rating Letter dated December 8, 207
1987.
E. Corporate Assurances
--------------------
1. Issuer
------
a. Certificate of Secretary of State of Delaware, 208
dated October 27, 1987.
b. Corporate Secretary Certificate, dated as of 209
November 4, 1987, by Schajer.
c. NWC Funding Balance Sheet, dated as of 210
September 30, 1987.
d. Incumbency Certificate, dated as of November 9, 211
1987, by NWC Funding.
2. Depositary
----------
a. Depositary Certificate, dated November 9, 1987, 212
by Morgan.
b. Certificate of Designation, dated November 9, 213
1987, by Morgan.
3. DBNY
----
a. Bank Officer Certificate, dated as of November 9, 214
1987, by DBNY.
4. ARICO
-----
a. Certificate of Secretary of State of Nevada 215
dated October 28, 1987.
</TABLE>
-6-
<PAGE> 10
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C> <C>
b. Corporate Secretary Certificate, dated as of 216
November 4, 1987.
(1) Charter Documents
(2) By-Laws
(3) Resolutions
c. Stock Power, dated November 4, 1987 by ARICO. 217
5. Owner
-----
a. Consent of Limited Partner executed by ARICO. 218
b. Consent of Limited Partner executed by F & B 219
Building Partnership.
c. Consent of Limited Partner executed by NCI. 220
d. Certificate of Secretary of State of Texas for 221
Hines Ltd. dated October 28, 1987.
e. Certificate of Secretary of State of Delaware 222
for Hines Investments dated November 3, 1987.
(1) Certificate of Good Standing
(2) Articles of Incorporation
(3) By Laws
f. Unanimous Consent of Directors of Hines 223
Investments dated November 3, 1987.
g. Secretary's Certificate of Hines Investments 224
dated November 5, 1987.
h. NWC Certificate as to Articles of Limited 225
Partnership dated November 6, 1987.
i. Certificate of the Secretary of State of 226
Minnesota for NWC dated August 5, 1986.
j. SM Certificate as to Articles of Limited 227
Partnership dated November 6, 1987.
k. Certificate of the Secretary of State of 228
Minnesota for SM dated August 5, 1986.
</TABLE>
-7-
<PAGE> 11
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
l. HM 86 Certificate as to Articles of Limited 229
Partnership dated November 6, 1987.
m. Certificate of the Secretary of State of 230
Minnesota for HM 86 dated August 5, 1986.
n. Affidavit of Hines Ltd. dated November 6, 231
1987.
E. Opinions of Counsel
-------------------
1. Opinion Letter (preference matters and 232
enforceability of the Letter of Credit Agreement),
dated December 3, 1987, rendered by WC as special
counsel to DBNY.
2. Opinion Letters, dated December 3, 1987 and December 233
15, 1987, rendered by Vinson & Elkins as special
counsel to NWC Funding and ARICO.
3. Opinion Letters, dated December 3, 1987 and December 234
15, 1987, rendered by BB representing Hines and Hines
Ltd.
4. Opinion Letters, dated December 3, 1987 and December 235
15, 1987, rendered by Oppenheimer, Wolff & Donnelly
as special counsel for DBNY.
5. Opinion Letters, dated December 3, 1987 and December 236
15, 1987, rendered by FB as special counsel
for NWC.
6. Reliance Opinion Letter, dated December 3, 1987, 237
rendered by WC to Goldman Sachs.
7. Opinion Letter (enforceability of agreements against 238
the DBNY), dated December 3, 1987 rendered by WC,
as special counsel to DBNY.
8. Opinion Letter (enforceability of agreements against 239
ARICO and NWC Funding), dated December 3, 1987
rendered by WC, as special counsel to DBNY.
9. Opinion Letter (enforceability of Letter of Credit 240
under German law), dated December 3, 1987 rendered
by counsel to DB.
</TABLE>
-8-
<PAGE> 12
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
10. Opinion Letter (reliance opinion) dated December 3, 241
1987 rendered counsel to DB.
F. Miscellaneous Documents
-----------------------
1. Architect's Certificate and Opinion dated December 15, 242
1987, executed by KH.
2. Performance and Payment Bond dated August 20, 1986. 243
3. Liability and Builder's Risk Insurance Certificates. 244
4. Subordination, Non-Disturbance and Attornment 245
Agreement dated August 5, 1986, executed by Norwest,
NWC and DBNY.
5. Subordination, Non-Disturbance and Attornment 246
Agreement dated August 5, 1986, executed by FB,
NWC and DBNY.
6. Subordination, Non-Disturbance and Attornment 247
Agreement dated August 30, 1986, executed by Deloitte,
Haskins and Sells, DBNY and NWC.
7. Skyway Agreement and Skyway Expense Agreement both 248
dated February 19, 1987 and consents thereto
executed by DBNY and DBCI.
</TABLE>
-9-
<PAGE> 13
MINNEAPOLIS NORWEST PROJECT
SEPTEMBER 1993 RESTRUCTURING
LIST OF DOCUMENTS
Parties
ARICO - ARICO America Realestate Investment Company
ARICO - Minneapolis - ARICO-Minneapolis, Inc.
DB - Deutsche Bank AG Cayman Islands and New York Branches
Faegre - Faegre & Benson
Hines Minneapolis - Hines Minneapolis 1986 Associates limited Partnership
NWC - NWC Limited Partnership
Norwest Center - Norwest Center, Inc.
Norwest Corp. - Norwest Corporation
S & M - Sixth & Marquette Limited Partnership
Documents
1. Amended and Restated Articles of Limited Partnership of NWC Limited
Partnership between S & M, ARICO and ARICO-Minneapolis.
2. New Certificate of Limited Partnership for NWC executed by S & M.
3. Letter from ARICO and ARICO-Minneapolis regarding REIT status.
4. First Amendment to Articles of Limited Partnership of Sixth &
Marquette Limited Partnership executed by Hines Minneapolis, Norwest Center and
Faegre.
<PAGE> 14
5. September 1993 Amendment to Lease Agreement between NWC and
Norwest Corp.
6. Letter regarding tax termination from Shearman & Sterling.
7. Letter regarding securities laws from Vinson & Elkins, LLP..
8. Amendments to Project Loan Documents
(a) Second Amendment to Credit Facility Agreement
(b) Second Amendment to Mortgage
(c) Second Amendment to Assignment of Leases
(d) Third Amended and Restated Note
(e) First Amendment to Letter of Credit Agreement
(f) Second Amendment to Master Rate Swap Agreement
9. Letter from ARICO consenting to loan amendment and other matters.
10. Consent from Deutsche Bank AG, New York Branch and Cayman Islands
Branch, to item 1.
<PAGE> 15
8. First Amendment to Pledge Agreement relating to the Pledge Agreement
dated as of November 4, 1987, among ARICO, the Bank and Morgan
Guaranty.
9. Consent from ARICO to the Bank and NWC, relating to amendments to the
Initial Loan Commitment, as defined in the Partnership Agreement of
the owner.
II. PROJECT DOCUMENTS
10. First Amendment to Credit Facility Agreement relating to the Amendment
and Restatement dated November 4, 1987 to the Credit Facility
Agreement dated as of August 5, 1986, as amended, between NWC and the
Owner.
11. Second Amended and Restated Promissory Note dated as of August 5,
1986, in the principal amount of $110,000,000, by the Owner payable to
NWC.
12. First Amendment to Mortgage and Security Agreement and Fixture
Financing Statement Securing a Revolving Line of Credit filed for
record in the office of the Registrar of Titles of Hennepin County,
Minnesota as Document No. 2304100, relating to the amended and
restated Mortgage and Security Agreement and Fixture Financing
Statement Securing a Revolving Line of Credit dated as of November 4,
1987, between the Owner and NWC.
13. First Amendment to Assignment of Leases and Rents filed for record in
the Office of the Registrar of Titles of Hennepin County, Minnesota,
as Document No. 2304101, relating to the amended and restated
Assignment of Leases and Rents dated as of November 4, 1987, filed
with the Hennepin County Registrar of Titles as Document No. 1888192,
between the Owner and NWC.
14. Agreement and Consent of Partners (NWC Limited Partnership) between
Sixth & Marquette Limited Partnership and ARICO.
15. Title Policy Endorsement No. 66, issued January 12, 1993 by
Commonwealth Land Title Insurance Company, to be annexed to be annexed
to Policy No. 411-428035.
III. OFFICERS' CERTIFICATES
16. Officer's Certificate as to Certificate of Incorporation, By-laws,
Resolution, Incumbency of NWC, together with Certificate of
Incorporation and all amendments to date,
-2-
<PAGE> 16
By-Laws and all amendments to date, and Consent of Sole Stockholder.
17. NWC Funding Corporation Officer's Certificate, dated August 14, 1992,
regarding certain Events of Default, as defined in the Letter of
Credit Agreement, and certain representations and warranties.
18. Good standing Certificate for NWC from the Secretary of State of
Delaware, dated July 24, 1992.
19. Officer's Certificate as to Certificate of Incorporation, By-Laws,
Resolution, Incumbency of ARICO together with (a) Certificate of
Incorporation and all amendments to date, (b) By-Laws and all
amendments to date, and (c) resolutions adopted by the Board of
Directors to date.
20 Certificate of Good Standing for ARICO, dated July 22, 1992, from the
Secretary of State of Minnesota, and Certificate of Corporate Status
for ARICO, dated July 21, 1992, from the Secretary of State of Nevada.
IV. OPINIONS OF COUNSEL
21. Legal Opinion of Vinson & Elkins, Special Counsel to NWC and ARICO,
regarding corporate status and authority of NWC and ARICO, and other
matters.
22. Legal Opinion of Baker & Botts, Counsel to Gerald D. Hines and GDHI
Limited Partnership, regarding status and authority of such
partnership.
23. Legal Opinion of Oppenheimer Wolff, & Donnelly, Special Counsel to the
Bank, regarding doing business in Minnesota, and other matters.
24. Legal Opinion of Faegre & Benson, Special Counsel to the Owner,
regarding status and authority of such partnership, and other matters.
V. RATING LETTERS
25. Letter dated July 31, 1992, from Standard & Poors to NWC, confirming
commercial paper rating.
26. Letter dated August 6, 1992, from Moody's Investors Service to NWC,
confirming commercial paper rating.
-3-
<PAGE> 17
27. (a) UCC-3 Financing Statement Assignments showing NWC as debtor
and Deutsche Bank AG, New York Branch and Morgan Guaranty as
secured parties, assigning the interests of the secured
parties to the Bank, (i) filed September 16, 1992 under File
No. 1529798, referring to UCC-1 No. 1101648, both in the
records of the Minnesota Secretary of State; and (ii) filed
September 16, 1992 under File No. 1085883, referring to UCC-1
No. 1025575, both in the records of the County Recorder of
Hennepin County, Minnesota.
(b) UCC-3 Financing Statement Continuation between NWC as debtor
and the Bank as secured party, (i) filed September 17, 1992
under File No. 1530482, referring to UCC-1 No. 1101648, both
in the records of the Minnesota Secretary of State; and (ii)
filed September 17, 1992 under File No. 1085913, referring to
UCC-1 No. 1025575, both in the records of the County Recorder
of Hennepin County, Minnesota.
-4-
<PAGE> 18
NORWEST CENTER FINANCING
INDEX
1986
PREAMBLE
I. Abbreviations:
<TABLE>
<S> <C>
ALLSTATE INSURANCE COMPANY AMERICAN RE-INSURANCE COMPANY "Allstate"
ARICO AMERICA REALESTATE "ARC"
INVESTMENT COMPANY "ARICO"
CBM ENGINEERS, INC. "CBM"
BAKER & BOTTS "BB"
BENNET, RINGROSE, WOLSFELD, JARVIS,
GARDNER, INC. "BRW"
CESAR PELLI & ASSOCIATES "CP"
CONTINENTAL CASUALTY COMPANY "CCC"
DEUTSCHE BANK AG, CAYMAN ISLANDS
BRANCH "DBCI"
DEUTSCHE BANK AG, NEW YORK BRANCH "DBNY"
DEUTSCHE BANK CAPITAL CORPORATION "DBCC"
EMPLOYERS REINSURANCE CORPORATION "ERC"
FAEGRE & BENSON "FB"
FEDERAL INSURANCE COMPANY "FIC"
GENERAL REINSURANCE CORPORATION "GRC"
GERALD D. HINES "Hines"
GERALD D. HINES INTERESTS, INC. "Hines, Inc."
GERALD D. HINES INTERESTS, LTD. "Hines Ltd."
HINES COLORADO CORPORATION "Hines Colorado"
HINES MINNEAPOLIS 1986 ASSOCIATES
LIMITED PARTNERSHIP "HM 86"
I.A. NAMAN & ASSOCIATES, INC. "IAN"
INSURANCE COMPANY OF NORTH AMERICA "Cigna"
KENDALL/HEATON ASSOCIATES "KH"
MORTENSON/SCHAL, A JOINT VENTURE "MS"
NFW CORPORATION "NFW"
NORWEST BANK BUILDING COMPANY "NBBC"
NORWEST CENTER, INC. "NCI"
NORWEST CORPORATION "Norwest"
NWC LIMITED PARTNERSHIP "NWC"
NORTH AMERICAN REINSURANCE
CORPORATION "NARC"
NWC FUNDING CORPORATION "NWC Funding"
SIXTH & MARQUETTE LIMITED
PARTNERSHIP "SM"
TITLE SERVICES, INC. "TSI"
</TABLE>
-1-
<PAGE> 19
<TABLE>
<CAPTION>
Item
Number
------
<S> <C> <C>
II. CLOSING MEMORANDUM 1
------------------
III. SITE ACQUISITION
----------------
A. Purchase Agreement Dated August 5,
1986 by and between NBBC and NWC. 2
B. Closing Statement dated August 5,
1986 by and between NBBC, as
seller, and NWC, as purchaser. 3
C. Contract for Deed dated August 5,
1986 by and between NBBC, as
seller, and NWC, as purchaser. 4
D. Certificate of Real Estate Value
dated August 5, 1986 between
NBBC, as seller, and NWC, as buyer. 5
E. Promissory Note dated August 5, 1986
between NWC and NBBC in the amount of
$3,600,000.00. 6
F. Application to open a standby letter
of credit between NWC and DBNY dated
August 5, 1986. 7
G. Irrevocable Standby Letter of Credit
dated August 5, 1986 in the amount of
$3.750,000.00 issued by DBNY to NWC. 8
H. Purchase Agreement (Artifacts) dated
August 5, 1986 between NBBC and NWC. 9
I. Affidavit of NBBC dated August 4, 1986. 10
J. Non-Foreign Affidavit of NBBC
dated August 5, 1986. 11
K. Agreement dated August 5, 1986 between
SM and NBBC regarding redemption
payment. 12
L. Warranty Deed dated January 15, 1987
between NBBC, as Grantor and NWC, as
Grantee. 13
</TABLE>
-2-
<PAGE> 20
<TABLE>
<S> <C> <C>
IV. PARTNERSHIP FORMATION
---------------------
A. Master Agreement dated August 5,
1986 by and among ARICO, Hines,
Hines, Inc., Hines Limited, HM 86,
SM, and NWC. 14
B. Articles of Limited Partnership
of NWC by and between SM, as
general partner, and ARICO, as
limited partner, effective
August 5, 1986. 15
1. Certificate of Limited
Partnership of NWC. 16
2. Certificate of Right or
Consent to the Use of an
Assumed Name of NWC Limited
Partnership by Norwest
Properties, Inc. and NWC. 17
3. Secretary of State of
Minnesota Certificate of
Formation or Registration
of Limited Partnership of
NWC, dated August 5, 1986. 18
5. Letter dated December 15,
1986 between NWC and ARICO. 19
6. Full Funding Demostration
Letter Agreement dated
February 17, 1987 between ARICO
and SM. 20
7. UCC-1 Financing Statement; SM
as debtor, ARICO as creditor
filed with the Secretary of
State of Minnesota. 21
C. Articles of Limited Partnership
of SM, dated August 5, 1986. 22
1. Certificate of Limited
Partnership of SM, dated
August 5, 1986. 23
</TABLE>
-3-
<PAGE> 21
<TABLE>
<S> <C> <C>
2. Secretary of State of
Minnesota Certificate of
Formation or Registration
of Limited Partnership of
SM, dated August 5, 1986. 24
3. Certificate of Right or
Consent to the Use of an
Assumed Name of Sixth &
Marquette Limited Partnership
by Norwest Properties,
Inc. and SM. 25
4. Guaranty of Partnership
Obligations dated August 5,
1986 between HM 86, as beneficiary,
and Norwest Corporation,
as Guarantor. 26
5. UCC-1 Financing Statement; FB
as debtor, NWC as creditor filed
with the Secretary of State
of Minnesota. 27
6. UCC-1 Financing Statement; HM 86
as debtor, NCI as Creditor filed
with the Secretary of State
of Minnesota. 28
7. SM Consent. 29
D. Articles of Limited Partnership
of HM 86, dated August 5, 1986. 30
1. Certificate of Limited
Partnership of HM 86, dated
August 5, 1986. 31
2. Secretary of State of Minnesota
Certificate of Formation
or Registration of Limited
Partnership of HM 86, dated
August 5, 1986. 32
</TABLE>
-4-
<PAGE> 22
<TABLE>
<S> <C> <C>
V. PARTNERSHIP CONVEYANCES
------------------------
A. Acknowledgment, Assignment and Conveyance
dated August 5, 1986 by HM 86,
GDHI and Hines. 33
B. Acknowledgment, Assignment and Conveyance
dated August 5, 1986 by SM. 34
VI. FINANCING
---------
A. Commitment Letter, dated
August 5, 1986, by DBNY to
NWC. 35
B. Credit Facility Agreement,
dated August 5, 1986 between
DBNY, DBCI, NFW and
NWC. 36
1. Letter dated December 15, 1986
by DBNY and DBCI regarding
Credit Facility Agreement. 37
2. Letter dated as of December 15,
1986 by DBNY to NWC regarding
Credit Facility Agreement. 38
3. Letter dated January 30,
1987 by DBNY to NWC regarding
Credit Facility Agreement. 39
C. Promissory Note in the
amount of $110,000,000.00,
dated August 5, 1986 between
NWC and DBNY. 40
D. Mortgage and Security Agreement
and Fixture Financing
Statement securing a revolving
line of credit, dated
August 5, 1986 between NWC,
NBBC, and DBNY. 41
E. First Amendment to Mortgage
and Security Agreement dated
January 15, 1987 between NWC
NBBC and DNBY. 42
</TABLE>
-5-
<PAGE> 23
<TABLE>
<S> <C> <C>
F. Construction Loan Disbursement
Agreement, dated August
5, 1986 between TSI, NWC,
DBNY, and NFW. 43
G. Security Agreement, dated
August 5, 1986 by NWC in
favor of DBNY. 44
H. UCC-1 Financing Statement
executed by NBBC, as Debtor,
filed with the county recorder. 45
I. UCC-1 Financing Statement
executed by NBBC, as Debtor,
filed with the Secretary of
State of Minnesota. 46
J. UCC-1 Financing Statement
executed by NWC, as Debtor,
filed with the county
recorder. 47
K. UCC-1 Financing Statement
executed by NWC, as Debtor,
filed with the Secretary of
State of Minnesota. 48
L. Affidavit of NWC Limited
Partnership, dated August 5,
1986. 49
M. Affidavit of Sixth and
Marquette Limited Partnership,
dated August 5, 1986. 50
N. Affidavit of Hines Minneapolis
1986 Associates
Limited Partnership, dated
August 12, 1986. 51
O. Affidavit of Gerald D. Hines
Interests, Ltd., dated
August 5, 1986. 52
</TABLE>
-6-
<PAGE> 24
<TABLE>
<S> <C> <C>
P. Assignment of Leases and
Rents, dated August 5, 1986
by NWC and NBBC to DBNY. 53
Q. First Amendment to Assignment
of Leases and Rents dated
January 15, 1987 between NWC
NBBC and DBNY. 54
R. Borrower's Assignment of
Plans and Specifications and
Civil Engineer's Contract,
dated August 5, 1986 by NWC
to DBNY. 55
S. Borrower's Assignment of
Plans and Specifications and
Architect's Contract and
Subcontracts, dated August
5, 1986 by NWC to DBNY. 56
T. Borrower's Assignment of
Plans and Specifications and
Engineer's Contract, dated
August 5, 1986 by NWC to DBNY. 57
U. Borrower's Assignment of
General Contract and Subcontracts,
dated August 5, 1986
by NWC to DBNY. 58
V. Certificate of Tenancies and
Leases, dated August 5, 1986
by NWC to DBNY. 59
W. Letter, dated September 9,
1986, by NWC to DBNY listing
persons authorized to execute
requests for advance. 60
X. Letter, dated July 24, 1986,
by DBCC to NWC Funding re
serial forward interest rates
swaps. 61
Y. Termination of Memorandum
Agreement dated August 5,
1986 by DBNY and DBCC. 62
</TABLE>
-7-
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
VII. LEASES
------
A. Faegre & Benson
1. Lease Agreement by and between
NWC and FB, dated
August 5, 1986. 63
2. Memorandum of Lease, dated
August 5, 1986, by NWC and
FB. 64
3. Subordination, Non-Disturbance
and Attornment Agreement,
dated August 5, 1986, between
FB, NWC, and DBNY. 65
4. Guaranty, dated August 5,
1986, between Hines Limited
and FB. 66
5. Security Agreement, dated
August 5, 1986, by FB to
NWC. 67
6. Subordination of Contract
For Deed to Lease, dated
August 5, 1986 by NBBC,
NWC, and FB. 68
7. Letter Agreement, dated
August 5, 1986, by Hines
Limited to FB re completion
of skyway. 69
8. Letter Agreement, dated
August 5, 1986, by Hines
Limited to FB re termination
of letter agreement
dated October 28, 1985. 70
9. Construction Commencment
Certificate, dated August
12, 1986 by FB. 71
</TABLE>
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<TABLE>
<S> <C> <C>
B. Norwest Corporation
1. Lease Agreement by and between
NWC and Norwest, dated
August 5, 1986. 72
2. Memorandum of Lease, dated
August 5, 1986, between NWC,
as Landlord, and Norwest, as
Tenant. 73
3. Subordination, Non-Disburbance,
and Attorranent Agreement,
dated August 5, 1986 between
Norwest, NWC and DBNY. 74
4. Letter Agreement, dated August
5, 1986 by Hines Limited
to Norwest re termination
of letter agreement of July
11, 1985 and credit facility
agreement. 75
5. Letter dated September 15, 1986
by GDHI terminating Agreement
dated August 5, 1986. 76
6. Completion Guaranty by
Hines Limited for the benefit
of Norwest. 77
7. Agreement dated August 5, 1986
by SM for the benefit of NorWest
regarding plans. 78
VIII. CORPORATE ASSURANCES
--------------------
A. Gerald D. Hines Interests, Inc.
-------------------------------
1. Secretary's Certificate of
Resolutions and Incumbency. 79
2. Qualification and Good Standing
in Minnesota. 80
</TABLE>
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<PAGE> 27
<TABLE>
<S> <C> <C>
B. ARICO America Realestate Investment Company
-------------------------------------------
1. Certificate of Existence and
Good Standing in Nevada. 81
2. Certificate of Good Standing
in Minnesota. 82
3. Secretary's Certificate of
Incumbency. 83
C. NFW Corporation
---------------
1. Certificate of Existence and
Good Standing in Minnesota. 84
2. Secretary's Certificate of
Resolutions. 85
3. Incumbency Certificate. 86
4. Written Action in Lieu of
Organization Meeting by
Directors 87
D. Norwest Corporation
-------------------
1. Certificate of Existence. 88
2. Secretary's Certificate of
Resolutions. 89
3. Incumbency Certificate. 90
4. Qualification and Good Standing
in Minnesota. 91
5. Norwest By-laws. 92
E. Norwest Bank Building Company
-----------------------------
1. Certificate of Existence
in Minnesota. 93
2. Secretary's Certificate of
Resolutions. 94
3. Incumbency Certificate. 95
</TABLE>
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<PAGE> 28
<TABLE>
<S> <C> <C>
4. Articles of Incorporation and
By-laws. 96
F. Norwest Center, Inc.
--------------------
1. Certificate of Existence
in Minnesota. 97
22. Secretary's Certificate of
Resolutions. 98
3. Incumbency Certificate. 99
4. Articles of Incorporation and
By-laws. 100
IX. TITLE INSURANCE
---------------
A. Title Commitment
----------------
1. Owner's Policy. 101
2. Lender's Policy. 102
3. Power of Attorney for
NAR. 103
4. Financial Statement
of NAR. 104
5. Notary's Certificate of
NAR. 105
6. Power of Attorney for
Allstate Insurance. 106
7. Notary's Certificate
of Allstate. 107
8. Power of Attorney of ARC. 108
9. ARC Balance Sheet. 109
10. Power of Attorney of
Cigna. 110
11. Notary's Certificate of
Cigna. 111
</TABLE>
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<PAGE> 29
<TABLE>
<S> <C> <C>
12. Power of Attorney of
CCC. 112
13. Notary's Certificate
of CCC. 113
14. Power of Attorney of
ERC. 114
15. Financial Statement of
ERC. 115
16. Power of Attorney and
Acknowledgment of FIC. 116
17. Power of Attorney of
GRC. 117
18. Financing Statement of
GRC. 118
19. Confirmation Letter of
Commonwealth. 119
20. Letter Agreement by Commonwealth re: insured
closing service. 120
21. Letter by TSI re: Lender's
Policy and Owner's Policy. 121
B. Reinsurance Agreements (Owner and
----------------------------------
Lender)
-------
1. First American Title Insurance
Company. 122
2. Attorney's Title Insurance
Fund. 123
3. Title USA Insurance Corporation. 124
4. Lawyers Title Insurance
Corporation. 125
5. Safeco Title Insurance Company. 126
</TABLE>
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<PAGE> 30
<TABLE>
<S> <C> <C>
6. Stewart Guaranty Title Company. 127
7. Western Title Insurance Company. 128
8. Transamerica Title Insurance
Company. 129
9. Chicago Title Insurance Company. 130
10. Title Insurance Company of
Minnesota. 131
11. Industrial Valley Title Insurance Company. 132
X. LEGAL OPINIONS
--------------
A. BB opinion regarding closing documents. 133
B. FB environmental opinion. 134
C. FB opinion regarding securities
law. 135
D. FB opinion regarding loan
documents. 136
XI. MISCELLANEOUS PROJECT MATTERS
-----------------------------
A. Construction contract dated August
5, 1986 between NWC and MS. 137
B. Performance and Payment Bond in
the amount of $100,243,665.00 between
MS, as principal and NWC between FW,
DBNY, and ARICO, as obligees. 138
C. BCE Agreement between NWC and MCC
dated August 4, 1986. 139
D. Letter dated July 24, 1986 by IAN. 140
E. Architect's certificate and opinion
dated July 25, 1986. 141
</TABLE>
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<PAGE> 31
<TABLE>
<S> <C> <C>
F. Engineer's certificate and opinion
dated July 25, 1986. 142
G. Architectural design consultants
certificate and opinion dated July 25,
1986. 143
H. Letter dated October 3, 1985 by BRW
regarding proposal for civil engineering
services. 144
I. Agreement between architect and consultant
dated August 15, 1985 between
KH and NCP. 145
J. Agreement between architect and
engineer dated August 15, 1985 between
KH and CBM. 146
K. Tunnel Agreement. 147
L. Letter Agreement dated February 13,
1987 by NWC regarding Tunnel Agreement. 148
M. Skyway Agreement dated February 19,
1987 between Darrel M. Holt, Elizabeth
L. Holt and NWC. 149
N. Skyway Expense Agreement dated
February 19, 1987 between Darrel M.
Holt, Elizabeth L. Holt and NWC. 150
O. Consent to Skyway Agreement by
DBNY, DBCI, and NFW. 151
P. Application for Account Opening by
NWC. 152
Q. Partnership Bank Account Agreement
between DBNY and NWC. 153
R. Signature certificate of NWC. 154
</TABLE>
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<PAGE> 32
THIS THIRD AMENDED AND RESTATED PROMISSORY NOTE HAS BEEN
ASSIGNED BY NWC FUNDING CORPORATION TO DEUTSCHE BANK AG, NEW
YORK BRANCH, PURSUANT TO AN ASSIGNMENT AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 4, 1987, AS AMENDED, AND THE RIGHTS OF
THE HOLDER HEREOF ARE SUBJECT TO THE TERMS OF SAID ASSIGNMENT
THIRD AMENDED AND RESTATED
PROMISSORY NOTE
$110,000,000.00
Minneapolis, Minnesota
August 5, 1986
FOR VALUE RECEIVED, the undersigned, NWC LIMITED PARTNERSHIP, a
Minnesota limited partnership (the "Borrower"), hereby agrees and promises to
pay to the order of NWC Funding Corporation, a Delaware corporation (and the
assignee of NFW Corporation, a Minnesota corporation under an assignment
agreement dated as of November 4, 1987) ("Holder") or its assigns at the office
of Deutsche Bank AG, New York, Branch (the "Bank") at 31 West 52nd Street, New
York, New York 10019, or such other place as the Holder, or its assigns, may
from time to time designate, the principal sum of One Hundred Ten Million and
00/100 Dollars ($110,000,000.00) or so much as may be advanced hereunder as
Primary Obligations from time to time in accordance with the terms and
conditions of the Amendment and Restatement, dated as of November 4, 1987, to
that certain Credit Facility Agreement, dated as of August 5, 1986, and amended
as of December 15, 1986 and February 17, 1987 as such Amendment and Restatement
was amended as of August 7, 1992, and as further amended of even date herewith
(as the same may from time to time be further amended, supplemented or
otherwise modified, the "Credit Facility Agreement"), between the Borrower and
the Holder, and to pay interest on the unpaid principal balance from the date
hereof at the rates per annum and at the times specified in the Credit Facility
Agreement until this Note is fully paid. Both the principal balance and
interest thereon shall be payable in coin or currency which at the time of
payment is legal tender for the payment of public or private debts in the
United States of America.
The outstanding principal of all amounts advanced under the Credit
Facility Agreement and evidenced hereby shall be due and payable on December
31, 2005.
<PAGE> 33
This Note is a third amendment and restatement of the promissory note
originally issued by the Borrower in favor of the Bank on August 5, 1986, as
the same was amended and restated as of November 4, 1987, to evidence the
endorsement of the same by the Bank to the Holder and the assignment of the
same from the Holder to the Bank, and as further amended and restated as of
August 7, 1992, to evidence, among other things, the extension of the maturity
date thereof. This Note supersedes in its entirety, but has not been issued in
satisfaction of, the second amended and restated note delivered by the Borrower
to the Bank. The original principal amount of this Note has not been amended.
This Note constitutes a revolving line of credit note under which
advances, payments and readvances may be made from time to time as Primary
Obligations in accordance with the terms of the Credit Facility Agreement,
provided the maximum amount of outstanding principal hereunder shall in no
event exceed One Hundred Ten Million and 00/100 Dollars ($100,000,000). This
Note is secured by an Amendment and Restatement, dated as of November 4, 1987,
to the Mortgage and Security Agreement and Fixture Financing Statement Securing
a Revolving Line of Credit given by the Borrower to the Holder, dated as of
August 5, 1986 and amended as of January 15, 1987, as such Amendment and
Restatement was further amended as of August 7, 1992, and as further amended of
even date herewith (as the same may from time to time be further amended,
supplemented or otherwise modified, the "Mortgage"), which constitutes a
revolving line of credit mortgage by Borrower in accordance with Minn. Stat.
Sections 507.325 and 508.555. All amounts advanced and readvanced under this
Note shall be secured by the Mortgage, regardless of the time or amount of
advances, payments or readvances and whether or not the advances or readvances
are obligatory.
Per diem interest shall be computed on the basis of a three hundred
sixty (360) day year but shall be payable on the actual days elapsed during the
term of this Note.
All payments made under this Note shall be applied first to interest,
second to any late charges due hereunder, and then to principal, except that
if any advances made by Holder due to the occurrence of an Event of Default (as
defined in the Credit Facility Agreement) are not repaid on demand, any moneys
received, at the option of Holder may first be applied to repay such advances,
plus interest thereon at the variable Default Rate per annum thereafter (as
defined in the Credit Facility Agreement), and the balance, if any, shall be
applied on account of any installments then due.
This Note is secured by (i) the Mortgage by which Borrower has granted
to Holder a first mortgage lien on and security interest in the Premises, as
therein defined, located in Hennepin County, Minnesota (the "Premises"); (ii)
an Amendment and Restatement, dated as of November 4, 1987, to the Assignment
of Leases and Rents, dated as of August 5, 1986, as such Amendment and
Restatement was amended as of August 7,1992, and as further amended of even
date herewith (as the same may from time to time be further amended,
supplemented or otherwise modified, the "Assignment") by which Borrower has
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<PAGE> 34
assigned to Holder its interest in all rents and leases of the Premises; (iii)
the Credit Facility Agreement; and (iv) certain other collateral security
documents (as the same may from time to time be further amended, supplemented,
or otherwise modified, "Security Documents"). The terms of the Mortgage, the
Assignment, and the Credit Facility Agreement and all other Security Documents
securing this Note are incorporated herein by reference and made a part hereof.
The remedies of Holder, as provided herein, and in the Mortgage, the
Assignment, the Credit Facility Agreement, and other collateral Security
Documents shall be cumulative and concurrent and may be pursued singularly,
successively or together at the sole discretion of Holder and may be exercised
as often as the occasion therefor shall arise.
It is agreed that time is of the essence in the performance of this
Note. Upon the occurrence of an Event of Default under or as defined in the
Mortgage, the Assignment, the Credit Facility Agreement, or any other Security
Document, Holder shall have the right and option to declare, without notice,
all remaining unpaid principal and accrued interest evidenced by this Note
immediately due and payable. Holder may exercise this option to accelerate at
any time during the occurrence of any Event of default described above
regardless of any forbearance by Holder.
Upon the occurrence of an Event of Default and if the same is referred
to any attorney for collection or any action at law or in equity is brought
with respect hereto, Borrower shall pay Holder all expenses and costs of
collection, including, but not limited to, attorneys' fees.
Borrower, all guarantors and all other persons liable for all or any
part of the indebtedness evidenced by this Note severally waive presentment for
payment, protest and notice of non-payment and dishonor. From time to time,
without affecting the obligations of Borrower under this Note, the Mortgage,
the Assignment, the Credit Facility Agreement or any other Security Document,
and without affecting the guaranty of any person, corporation, partnership or
other entity for payment of the indebtedness evidenced by this Note, and
without giving notice to or obtaining the consent of Borrower or such
guarantors, and without liability on the part of Holder, Holder may at Holder's
option, extend the time for payment of sums due under this Note, reduce
payments thereon, release anyone liable for the payment of any portion of the
indebtedness evidenced by this Note, accept a renewal or extension of the Note,
join in any extension or subordination agreement, release any security given
therefor, take or release other or additional security, and agree in writing
with Borrower to modify the rate of interest or period of amortization of this
Note and to change the amount of the monthly installments payable hereunder.
All agreements between Holder and Borrower are hereby expressly
limited so that no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to
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<PAGE> 35
Holder for the use, forbearance, loaning or detention of the indebtedness
evidenced hereby exceed the maximum permissible under applicable law. If from
any circumstances whatsoever, fulfillment of any provisions hereof or of the
Mortgage Credit Facility Agreement, Assignment or any other Security Documents
shall involve transcending the limit of validity prescribed by law, then, the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity and if from any circumstances Holder should ever receive as interest
an amount which would exceed the highest lawful rate, such amount which would
be in excess of such highest lawful rate shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest or
returned to Borrower, at the option of Holder. This provision shall control
every other provision of all agreements between Borrower and Holder and shall
also be binding upon and available to any subsequent holder or endorsee of this
Note.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other remedy under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any such right or remedy on a future occasion.
Notwithstanding anything to the contrary contained in this Note, the
Mortgage, the Credit Facility Agreement, the Assignment or the Security
Documents (collectively, the "Loan Documents"), the Holder agrees that no
deficiency or other money judgment, order or execution shall be sought, taken,
or entered in any suit, action, or proceeding, whether legal or equitable,
against the Borrower or any partners, shareholders, officers or directors of
the Borrower (direct or indirect), or it successors and assigns, for the
purpose of enforcing or obtaining satisfaction of any of the obligations under
the Loan Documents and that the Holder's sole recourse under the Loan Documents
shall be against the Premises and the other property encumbered by the Loan
Documents.
Notwithstanding anything herein to the contrary, any reference herein
to the Credit Facility Agreement, the Mortgage, the Assignment, or any Security
Document shall be to such document as the same may be amended from time to
time.
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<PAGE> 36
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date and year set forth above.
<TABLE>
<S> <C>
NWC LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: Sixth & Marquette Limited
Partnership, a Minnesota limited
partnership
Its: General Partner
By: Hines Minneapolis 1986 Associates
Limited Partnership, a Minnesota
limited partnership
Its: General Partner
By: GDHI Limited Partnership,
a Texas limited partnership
Its: General Partner
By: /s/ GERALD HINES
-------------------------
Gerald D. Hines
Its: General Partner
Pay to the order of Deutsche Bank AG Pay to the order of Norwest Corporation,
New York Branch without Representation or Recourse.
NWC FUNDING CORPORATION DEUTSCHE BANK AG, New York Branch
By: /s/ THOMAS P. LOFTUS By: /s/ JEAN M. HANNIGAN
---------------------- ---------------------------
Title: President Jean M. Hannigan
Assistant Vice President
By: /s/ SCOTT M. DALRYMPLE
---------------------- By: /s/ VISHWANIE S. SEWSANKAR
Title: Secretary ---------------------------
Vishwanie S. Sewsankar
Associate
NWC FUNDING CORPORATION
By:/s/ THOMAS P. LOFTUS
------------------------
By:/s/ SCOTT M. DALRYMPLE
------------------------
</TABLE>
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<PAGE> 1
EXHIBIT 10.54
PURCHASE AND SALE AGREEMENT
Seller: MICHAEL C. FONG, OSAMA EL
HADDAD, AND MARK S. JAMES AS
TRUSTEES OF LINCOLN SUMMER
REALTY TRUST, AND NOT
INDIVIDUALLY
Buyer: CORNERSTONE PROPERTIES INC.
Dated as of: SEPTEMBER 27, 1995
Property: 125 SUMMER STREET
BOSTON, MASSACHUSETTS
<PAGE> 2
Buyer and Seller hereby enter into this Purchase and Sale Agreement
(this "Agreement") as of the Effective Date.
1. DEFINED TERMS.
a. The terms listed below shall have the following meanings
throughout this Agreement:
<TABLE>
<S> <C>
Buyer: Cornerstone Properties Inc., a Nevada corporation
Buyer's Address: 31 West 52nd Street
Suite 1600
New York, New York 10019
Facsimile: (212) 474-7199
Closing Date: November 1, 1995, being the date which is twenty one (21) days following the expiration of the Review
Period.
Contracts: Contracts means all service, maintenance, supply, construction, utility, so-called "linkage" and
management contracts affecting the construction, use, ownership, maintenance and/or operation of the
Property (including contracts for the construction of tenant improvements), and which are included in
Exhibit G, and all other contracts which become Approved Contracts in accordance with the terms hereof,
except those agreements which as of the date hereof have been fully performed.
Contract Rights: Any rights of Seller in and to the Contracts.
Deposit: Five Million and 00/100 Dollars
($5,000,000.00), together with all interest earned thereon in accordance with the Escrow Agreement.
Description of
Improvements: A 22-story office building with ground floor retail space known as 125 Summer Street, Boston,
Massachusetts, containing approximately 463,691 square feet of net rentable area, together with below
grade parking on five levels for approximately 292 vehicles.
</TABLE>
-1-
<PAGE> 3
<TABLE>
<S> <C>
Effective Date: September 27, 1995, the date both parties have executed this Agreement, and a fully executed copy has
been delivered to each of Seller and Buyer.
Escrow Holder: The Title Company.
Improvements: All buildings and other improvements located on or affixed to the Land, including, without limitation,
any and all utility, plumbing, electrical, heating, air-conditioning and ventilation lines, systems, and
boilers, and the subsurface parking garage.
Intangible Rights: All intangible and mixed property used in connection with or relating to the Property, including without
limitation all representations, warranties, guarantees, indemnities, bonds, approvals, licenses,
applications, permits, plans, drawings, specifications, surveys, maps, engineering reports and other
technical descriptions, environmental reports, trade names and trade marks, telephone numbers (to the
extent transferable) and similar property, other than the Contract Rights and the Leases.
Land: Those certain parcels of land in Boston, Suffolk County, Massachusetts more particularly described on
Exhibit A attached hereto, together with all rights, easements, and interests appurtenant thereto.
Leasing Costs: Legal expenses, space planning and architectural fees, tenant improvement costs, moving allowances,
leasing commissions, and tenant inducements including without limitation free rent, lease takeovers and
signing bonuses.
Material Adverse
Change: An aggregate economic impact which exceeds $250,000, arising out of or attributable to either (x) the
cost to cure, remedy, remediate, discharge, repair, remove, or satisfy, or (y) anticipated revenue loss
and/or re-leasing costs, resulting from, in the case of either (x) or (y): (i) the subject matter of one
or more Notices which has not been cured by the Closing; (ii) any Involuntary Title Defect arising during
the
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Title Period which Seller is not obligated to discharge pursuant to Section 15.b; (iii) any default by
one or more tenants under the Leases which remains uncured at Closing; or (iv) any other matter disclosed
in a modified, updated or supplemented representation, warranty, exhibit or schedule made by Seller as
provided in Section 12.o.
Personal Property: All tangible personal property interests of Seller in any way relating directly or indirectly to the Real
Property, including without limitation all furniture, fixtures, equipment, machinery, furnishings,
carpets, drapes, blinds and mini-blinds, service and maintenance equipment, tools, signs, telephones and
other communication equipment, intercom equipment and systems, vehicles and replacement parts (excluding
any of the foregoing which are leased from third parties pursuant to any of the Contracts) and the
Intangible Rights.
Property: The Real Property, the Personal Property, the Leases, and the Contract Rights.
Property Location 125 Summer Street
(Street, City, Boston, Suffolk County, Massachusetts
County and State):
Purchase Price: One Hundred Five Million and 00/100 Dollars ($105,000,000.00).
Real Property: The Land and the Improvements.
Review Period: The period from September 11, 1995 to and including October 11, 1995.
Seller: Michael C. Fong, Osama El Haddad, and Mark S. James as Trustees of Lincoln Summer Realty Trust under
Declaration of Trust dated March 18, 1986, recorded with the Suffolk Registry of Deeds in Book 12355, Page
111, as amended through and including Amended and Restated Declaration of Trust dated September 29, 1994,
recorded with Suffolk Registry of Deeds in Book 19365, Page 211, and not individually.
Seller's Address: c/o Jaymont (U.S.A.) Incorporated
One Biscayne Tower
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
2 South Biscayne Boulevard
Miami, Florida 33131
Facsimile: (305) 374-6371
and
125 Summer Street
Boston, Massachusetts 02110
Facsimile: (617) 345-9307
Seller's Jaymont 125 Summer Venture, a Massachusetts joint venture (formerly know as the
Beneficiary: Perry-Jaymont Venture) the partners in which are (i) 125 Summer Associates Limited Partnership, a
Massachusetts limited partnership the sole general partner of which is Jaymont (U.S.A.) Incorporated, a
Delaware corporation, and (ii) JTKO Land Incorporated, a Delaware corporation.
Seller's Remedial
Limit: An aggregate expenditure for any and all remedial activities which Seller may be called upon to undertake
pursuant to this Agreement of $250,000.
Title Company: Ticor Title Insurance Company
101 Federal Street
Boston, Massachusetts 02110
</TABLE>
b. The following terms are defined in the referenced portion of this
Agreement:
<TABLE>
<CAPTION>
DEFINED TERM DEFINED IN
<S> <C>
Agreement Preliminary Statement
Approved Contract List Section 2.c
Approved Contracts Section 2.c
BAPCC Exhibit N
BAPCC Regulations Exhibit N
Board Exhibit N
BOT Section 16
BRA Section B.a(19)
Buyer's Agents Section 4
Closing Section 7
Contingencies Section 5
Contract Assignment Section 2.c
Decision Exhibit N
Deed Section 2.a
DIP Agreement Section 8.a(19)
Disapproved Environmental Condition Section 6.b
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
Disapproved Condition Section 6.b
Disapproved Title Exception Section 6.a
Escrow Agreement Section 3
Extended Closing Date Section 7.c
Extension Period Section 7.c
General Instrument of Transfer Section 2.d
Hazardous Materials Section 6.b
Interim Period Section 6.e
Lease Assignment Section 2.b
Leases Section 2.b
MOU Exhibit N
Negation Notice Section 12.0
New Lease Section 14.e
New BOT Lease Section 16
Notice Section 12.g
OJCS Exhibit N
Qualifying BOT Lease Section 16.b
Required Tenant Estoppels Section B.a(12)
Response Notice Section 6.c
Response Period Section 6.c
Responsible Parties Section 37.b
Review Materials Section 4
Section 6.a Notice Section 6.a
Section 6.b Notice Section 6.b
Section 6 Notice Section 6.b
Seller's Documents Section 8
Seller's Estoppel Section 8.a(12)
Seller's Extension Period Section 7.c
Seller's Title Requirements Section 5.a(2)
Site Assessment Section 6.b
Specimen Title Policy Section 5.a(2)
Survey Section 5.a(2)
Tenant Estoppels Section 8.a(12)
Title Commitment Section 5.a(2)
Title Requirements Section 5.a(2)
</TABLE>
2. PURCHASE OF PROPERTY; PAYMENT OF PURCHASE PRICE.
Seller shall sell the Property to Buyer, and Buyer shall purchase the
Property from Seller, subject to all of the terms, covenants and conditions
hereinafter set forth in this Agreement.
a. Real Property. Seller shall sell all Seller's right,
title and interest in and to the Real Property to Buyer, and Buyer shall
purchase all Seller's right, title and interest in and to the Real Property
from Seller, on all of the mutual terms, covenants and conditions hereinafter
set forth in this Agreement. The Real Property shall be conveyed to Buyer by a
good and sufficient Quitclaim Deed (the "Deed") in the form annexed hereto as
Exhibit B.
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<PAGE> 7
b. Leases. Seller shall assign to Buyer all of its
right, title and interest in and to all of the leases, occupancy agreements, or
licenses of space in the Real Property, together with any amendments of any of
the foregoing or any related agreements, including guarantees and brokerage
agreements (but excluding contracts for the construction of tenant
improvements) creating ongoing obligations of the parties thereto and which are
listed on Exhibit G, and all other leases and related agreements which become
New Leases in accordance with the terms hereof (collectively "Leases"), and
Buyer shall assume all obligations under the same (except as provided in
Section 9.b(5)), pursuant to the an Assignment and Assumption Agreement (the
"Lease Assignment") in the form annexed hereto as Exhibit C.
c. Contract Rights. Prior to the date of this
Agreement, Seller delivered to Buyer copies of the Contracts listed in Exhibit
G. Buyer shall, no later than October 3, 1995, deliver to Seller a written list
(the "Approved Contract List") of those Contracts which Buyer desires to
assume, with the understanding that any Contract not included on the Approved
Contract List is a Contract which Buyer desires to be terminated by Seller
prior to Closing. Buyer agrees that any Contract listed on Exhibit G which is
terminable by the owner of the Property, without penalty, with no more than
thirty (30) days notice, other than those with Stuart Dean and Gibbs McAlister,
shall be included on the Approved Contract List. Seller have the right to
object to the omission of any Contract from the Approved Contract List other
than any contract for the management of all or any portion of the Real
Property, by giving notice within three (3) business days from its receipt of
the Approved Contract List. In the event that Seller objects to the omission
of any Contract in a timely manner, and Buyer and Seller do not agree as to the
Approved Contract List on or before the expiration of the Review Period, then
Buyer shall be entitled to treat such failure as an unsatisfied Contingency for
the purposes of Section S.a below and shall have the right to elect to
terminate this Agreement as provided for in Section 5.d, mutatis, mutandis. If
Buyer does not so terminate this Agreement, the Approved Contract List shall be
deemed to include any Contract to which Seller has so objected. In the event
that (i) Buyer and Seller agree upon the Approved Contract List on or before
the expiration of the Review Period, or (ii) Seller fails to make a timely
objection to the Approved Contract List submitted by Buyer, then such List
shall become a part hereof, and Seller shall diligently terminate the Contracts
not on the Approved Contracts List prior to Closing, it being agreed that in
any event all management agreements for the Real Property shall be terminated
by the Closing Date. Seller shall assign to Buyer Seller's interest in the
Contract Rights which relate to those Contracts contained on the Approved
Contract List agreed upon by Buyer and Seller during the Review Period (the
"Approved Contracts"), and Buyer shall assume the same pursuant to the a
Contract Rights Assignment (the "Contract Assignment") in the form annexed
hereto as Exhibit D.
d. Other Interests. All other interests of Seller in
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the Property (including, without limitation, the Personal Property) shall be
transferred and assigned by Seller to Buyer pursuant to a General Instrument of
Transfer (the "General Instrument of Transfer") in the form annexed hereto as
Exhibit E.
3. DEPOSIT. On the Effective Date, Buyer shall deposit with the
Escrow Holder, by wire transfer to Escrow Holder's account, the sum of Five
Million and 00/100 Dollars ($5,000,000.00) as a deposit on account of the
Purchase Price. The Escrow Holder shall hold the Deposit pursuant to the terms
of an escrow agreement (the "Escrow Agreement") in the form attached hereto as
Exhibit F. Buyer and Seller shall each bear one-half (1/2) of the costs and
expenses, if any, of the Escrow Holder; provided, however, that in the event of
any dispute between Buyer and Seller involving the Escrow Holder, the losing
party shall bear all the costs and expenses, if any, of the Escrow Holder in
connection with the resolution of such dispute.
4. DELIVERY OF MATERIALS FOR REVIEW; CONFIDENTIALITY.
In connection with Buyer's acquisition of the Property, prior to the
Effective Date Seller delivered to Buyer or otherwise made available to Buyer
for its review at the Improvements, the materials ("Review Materials") set
forth on the Due Diligence Information List attached hereto as Exhibit G. In
addition to the Review Materials set forth on said Exhibit G, Seller shall
deliver to Buyer copies of all other materials and other information contained
in Seller's or Seller's property manager's files (i) which are of the same
categories as the materials set forth on Exhibit G but not heretofore delivered
to Buyer, and/or (ii) which are requested from time to time in writing by Buyer
or its counsel during the Review Period and are reasonably material to Buyer's
due diligence investigation of the Property, but the request for and/or
delivery of such additional materials shall not extend the Review Period.
Seller shall deliver to Buyer by facsimile on October 10, 1995 a certified rent
collection status report for the month of October. Prior to the Closing, the
Review Materials and all materials, books and records examined by or on behalf
of Buyer pursuant to this Agreement shall: (i) be held in strict confidence by
Buyer; (ii) not be used for any purpose other than the investigation and
evaluation of the Property by Buyer and its lenders, attorneys, employees,
agents, engineers, architects, contractors, insurers, consultants and
representatives (collectively, "Buyer's Agents"); and (iii) not be disclosed,
divulged or otherwise furnished to any other person or entity except to Buyer's
Agents or as required by law. If this Agreement is terminated for any reason
whatsoever, Buyer shall return to Seller all of the Review
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Materials in the possession of Buyer and Buyer's Agents. The provisions of
this Section shall survive the termination of this Agreement.
5. CONTINGENCIES.
a. Contingencies to Purchase. Buyer's obligation to
purchase the Property is subject to Buyer's satisfaction with the contingencies
described below (the "Contingencies"). Buyer shall promptly commence and
diligently prosecute its efforts to satisfy the Contingencies; however, with
respect to any Contingency whose satisfaction requires Buyer's approval,
satisfaction, or determination, such matter shall be within Buyer's sole
discretion. All Contingencies are solely for Buyer's benefit, and may be
waived only by Buyer.
(1) Condition and State of the Property. Buyer shall
determine that it is satisfied with the condition and state of the
Property in its sole discretion.
(2) Title Commitment; Survey. Buyer, at Buyer's expense,
promptly after the Effective Date shall request issuance during the
Review Period, of (i) a commitment of the Title Company (the "Title
Commitment") to issue an owner's title policy in the form of a
specimen ALTA Form B (1987) owner's policy of title insurance with
respect to the Real Property (the "Specimen Title Policy"), and
specifying Title Company's requirements relating to the issuance of
such Specimen Title Policy (the "Title Requirements") and (ii) an ALTA
survey of the Real Property by a duly licensed surveyor showing all
physical conditions affecting the Real Property sufficient for the
deletion of the survey exception in accordance with the Title
Requirements (the "Survey").
(3) Corporate Approval. The Board of Directors of Buyer
shall have approved the acquisition by Buyer of the Property on the
terms and conditions set forth in this Agreement.
b. Time. Buyer shall have the Review Period in which to
satisfy or waive the Contingencies. Buyer may waive any of the Contingencies
at any time prior to the expiration of the Review Period by notice to Seller.
c. Termination or Satisfaction. At any time within the
Review Period Buyer may deliver a notice to Seller that any of the
Contingencies are not satisfied or waived and that this Agreement has
terminated and is of no further force or effect. Upon any such termination of
this Agreement, Escrow Holder shall return the Deposit to Buyer. If Buyer has
not given notice within the Review Period that the Contingencies are not
satisfied
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or waived, the Contingencies shall be deemed to have been satisfied or waived.
Buyer may, but shall not be obligated to, deliver a confirmatory notice to
Seller that the Contingencies are satisfied or waived. If the Contingencies
are satisfied or waived, the parties shall be obligated to proceed to Closing,
as defined below.
6. TITLE AND HAZARDOUS MATERIALS.
a. Notice of Disapproved Title Exceptions. Within five
(5) business days after Buyer receives both the Title Commitment and the
Survey, but in no event later than October 3, 1995, Buyer shall have the right,
but not the obligation, to give notice (a "Section 6.a Notice") to Seller of
Buyer's disapproval of any of the title exceptions contained in the Title
Commitment or Survey and specifying those Title Requirements, if any, contained
in the Title Commitment which Title Company has identified as to be performed
by or on behalf of Seller (a "Disapproved Title Exception").
b. Notice of Disapproved Environmental Condition. Buyer
shall cause a preliminary site assessment from Buyer's environmental engineer
(the "Site Assessment") to be performed. Within five (5) business days after
Buyer receives the Site Assessment, but in no event later than October 3, 1995,
Buyer shall have the right, but not the obligation, to give notice (a "Section
6.b Notice" and together with a Section 6.a Notice, a "Section 6 Notice") of
Buyer's disapproval of any Hazardous Materials on, at or under or released from
the Property (a "Disapproved Environmental Condition," and collectively with a
Disapproved Title Exception, a "Disapproved Condition"). As used herein, the
term "Hazardous Materials" shall include, but not be limited to,
asbestos-containing materials, polychlorinated biphenyls, flammable materials,
explosives, radioactive materials, petroleum products and those materials or
substances now or heretofore defined as "hazardous substances," "hazardous
materials," "hazardous waste," "toxic substances," or other similar
designations under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Refuse Act, 33 U.S.C. Section 407 et seq., the
Emergency Planning and Community Right-To-Know Act, the Massachusetts Hazardous
Waste Management Act, M.G.L. Chapter 21C, the Massachusetts Oil and Hazardous
Material Release Prevention and Response Act, M.G.L. Chapter 21E, together
with all implementing regulations, including without limitation the
Massachusetts Contingency Plan
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or any other applicable similar state federal, county, regional, municipal or
local law, statute, ordinance, rule or regulation governing the control of
substances dangerous to public health or safety as same may be amended from
time to time.
c. Response Period. In the event that Buyer shall give
a Section 6 Notice to Seller, then Seller shall within four (4) days after
receipt thereof (the "Response Period"), give a responsive notice to Buyer (the
"Response Notice") wherein Seller shall either (i) agree to remove or satisfy,
as the case may be, the Disapproved Title Exception or remediate the
Disapproved Environmental Condition, as the case may be, or (ii) object to
removing, satisfying, or remediating, as the case may be, the Disapproved
Condition(s) on or before the Closing Date; provided, however, that Seller
hereby agrees that it shall agree to remove, and shall not object to, any
Disapproved Title Exception which is (x) a mortgage or related security
documents or similar encumbrance given to secure indebtedness for money
borrowed or resulting from unpaid taxes, or (y) any voluntary lien or
encumbrance created or granted by Seller after the date and time of the Title
Commitment and Survey, as applicable, or (z) required to be removed by Seller
pursuant to Section 15.b.
d. Uncured Disapproved Conditions. If Seller fails to
give the Response Notice within the relevant Response Period, or if Seller
objects in the relevant Response Notice to removing, satisfying, or remediating
on or before the Closing Date, as the case may be, any of the Disapproved
Conditions which it is not otherwise required by Section 6.c hereof to remove,
satisfy, or remediate, then in either such case Buyer shall have the right, but
not the obligation, at any time on or before the expiration of four (4) days
following the expiration of the Response Period to either (i) give Seller
notice that Buyer waives its objections) to such Disapproved Conditions or (ii)
give Seller notice that Buyer is unwilling to waive such objections) (it being
agreed that if Buyer shall fail to give Seller any such notice pursuant to the
immediately preceding clause (i) or (ii), then Buyer shall be deemed to have
given Seller a notice pursuant to the immediately preceding clause (ii) to the
effect that it is unwilling to waive such objections). Upon giving of such
notice that Buyer is unwilling to waive such objections), this Agreement shall
automatically terminate and be void and without further recourse to the parties
hereto except as otherwise specifically set forth herein and Escrow Holder
shall return the Deposit to Buyer.
e. Relationship to Contingencies. Nothing in this
Section 6 shall be construed to limit Buyer's rights to terminate this
Agreement under Section 5 with respect to the Review Period.
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7. CLOSING REQUIREMENTS.
a. The Closing. On the Closing Date, all matters to be
performed under this Agreement incident to the sale of the Property, and the
payment of the Purchase Price (collectively, the "Closing") shall be performed
at the offices of Seller's counsel, Rubin and Rudman, 50 Rowes Wharf, Boston,
Massachusetts 02110, or other mutually acceptable location. The Closing shall
commence on the day preceding the Closing Date at 10:00 a.m. All documents to
be delivered at the Closing and all payments to be made shall be delivered to
the Escrow Holder on the Closing Date, in escrow, pending the prompt recording
of the Deed and other instruments as are required to be recorded to effect the
transfer and conveyance of the Property, upon which recording, and confirmation
from the Title Company that it is prepared to issue an owner's policy of title
insurance in the form of the Specimen Title Policy, containing such
endorsements, affirmative coverages, deletions of printed exceptions and title
exceptions, and reinsurance agreements as are customary for commercial office
properties in the City of Boston, insuring the Buyer's title to the Real
Property in the amount of the Purchase Price, all instruments and funds shall
then be delivered out of escrow; provided, however, that the Deed shall not be
recorded and such other instruments, funds, and other Closing deliveries shall
be returned by the Escrow Holder to the party which delivered them in the event
that on the Closing Date (i) Seller shall be unable to give title, or to make
conveyance, or to deliver possession, all as herein provided, (ii) the Title
Requirements shall not be satisfied to the satisfaction of the Title Company,
or (iii) the Property does not conform to the provisions of Section 7.b.
hereof, and the provisions of Section 7.c hereof shall then be applicable. It
is acknowledged that time is of the essence of this Agreement.
b. Possession and Condition of the Property. Without
limiting the generality of the foregoing, at Closing full possession of the
Real Property free of all tenants and occupants, except for tenants and
occupants under the Leases and New Leases, is to be delivered, said Property to
be then (i) in the same condition as it now is, reasonable use and wear thereof
excepted and except as otherwise provided in Sections 15 and 19, and (ii) in
compliance with the provisions of Section 6 hereof. Buyer and/or Buyer's
agents shall be entitled to inspect the Property prior to the delivery of the
Deed in order to determine whether the condition thereof complies with the
terms hereof.
c. Extension to Cure. If on the Closing Date Seller
shall be unable to give title, or to make conveyance, or to deliver possession,
all as herein provided, or if on the Closing Date the Property does not conform
to the provisions of Section 7.b., Seller, in its sole discretion, may give
notice to Buyer,
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on or before the Closing Date, that it elects to use reasonable efforts to cure
all impediments which cause it to be unable to give title, make conveyance or
deliver possession as aforesaid, all as herein provided. Buyer shall thereupon
have the option, to be exercised by notice to Seller given on or before the
third (3rd) business day following receipt of such notice from Seller, (i) to
terminate this Agreement, whereupon Escrow Holder shall return the Deposit to
Buyer and all obligations of the parties hereto shall cease without recourse to
the parties hereto, (ii) to exercise its election under Section 7.e, or (iii)
to extend the Closing Date for a period (the "Seller's Extension Period") of up
to thirty (30) days to permit Seller to cure as aforesaid. In the event that
Buyer shall fail to timely give the aforesaid notice then Buyer shall be deemed
to have elected the option in the foregoing clause (iii).
d. Termination. If, at the expiration of the Seller's
Extension Period, Seller shall have failed so to give title, make conveyance,
deliver possession, or make the Property conform, as the case may be, all as
herein provided, then, subject to Buyer's rights under Section 7.e, this
Agreement shall terminate, whereupon Escrow Holder shall return the Deposit to
Buyer and all obligations of the parties hereto shall cease without recourse to
the parties hereto except as otherwise specifically set forth herein including,
without limitation, Section 11.b.
e. Buyer's Election. Buyer shall have the election, on
the original or any extended Closing Date, to accept such title as Seller can
deliver to the Property in its then condition and to pay therefor the Purchase
Price without deduction (except to the extent necessary to clear title of any
mortgages or related security documents given or similar encumbrance to secure
indebtedness for money borrowed and except as otherwise provided in Section
15), in which case Seller shall convey such title by delivering the Deed
subject to the conditions contained in this Agreement, including, without
limitation, Section 11.b.
f. Accuracy of Representations and Warranties. It is a
condition to each party's obligations to proceed to Closing that all of the
representations and warranties of the other party hereunder are true and
correct in all material respects as of the Closing Date (subject to any update
or modification thereof as provided in Section 12.o, and except as provided in
Section 15) and such party has performed all of its covenants hereunder. If
any condition to Buyer's or Seller's obligations hereunder is not fulfilled,
Buyer or Seller, as the case may be, shall have no obligation to proceed to
Closing.
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8. CLOSING DELIVERIES.
a. Seller's Deliveries. Seller shall deliver or cause
to be delivered the following documents (the "Seller's Documents") to Buyer at
Closing (the receipt of all the following by Buyer shall be a precondition to
Buyer's obligation to complete the Closing):
(1) The duly executed and acknowledged Deed.
(2) The original, signed Leases and New Leases (or
certified copies thereof if originals are not available) as well as
Seller's tenant lease files, and the certified rent roll for the
current month.
(3) All tenant security deposits including any interest
earned thereon to the extent required to be returned to any tenant
under any Lease or New Lease. If any tenant security deposit is in
the form of a letter of credit, Seller shall use reasonable efforts to
obtain and deliver at the Closing an amendment thereto or a
replacement letter of credit naming Buyer as beneficiary. If any such
letter of credit has not been so amended or replaced as of the
Closing, at Closing Seller shall enter into an agency agreement with
Buyer pursuant to which Seller will acknowledge that any such letter
of credit is in the name of Seller as agent for Buyer, and that Seller
will, as agent for Buyer, present and draw upon such letter of credit
upon demand by Buyer. The obligations of Seller with respect to such
letter of credit security deposits shall survive the Closing.
(4) A certification duly executed by Seller and Seller's
Beneficiary, in the form attached hereto as Exhibit H, stating that
neither Seller nor Seller's Beneficiary is a "foreign person" within
the meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended. If Seller and Seller's Beneficiary shall fail or be unable
to deliver the same, then Buyer shall have the right to withhold such
portion of the Purchase Price as may be necessary, in the opinion of
Buyer or its counsel, to comply with said Section 1445.
(5) Originals (or certified copies thereof if originals
are not available) of all documents and materials assigned pursuant to
the Contract Assignment.
(6) Originals (or certified copies thereof if originals
are not available) of all other Review Materials if not already
provided, together with all updates and modifications thereof and
additions thereto through the
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Closing, and all other books and records in Seller's possession
pertaining in a material way to the operation and management of the
Property. To the extent that any of the governmental approvals
included in the Review Materials require transfer or reissuance in the
name of Buyer, Seller will cooperate with Buyer, at Buyer's expense,
to facilitate such transfer or reissuance.
(7) A certificate by Seller to Buyer in the form attached
hereto as Exhibit I to the effect that all of the representations and
warranties of Seller hereunder, as the same may be modified or updated
as set forth herein, remain true and correct in all material respects
as of the Closing.
(8) Executed and acknowledged counterparts of the General
Instrument of Transfer.
(9) An affidavit and indemnity in form and substance
customarily delivered in connection with commercial transactions in
the City of Boston to enable the Title Company to omit from any title
insurance policy issued tc Buyer or Buyer's mortgagee exceptions for
(i) parties in possession (except for tenants under the Leases or New
Leases) and (ii) mechanic's liens created by or through Seller.
(10) Any trust, corporate, partnership or other
authorization documents necessary to record the Deed.
(11) Evidence of the authority of any individuals or
constituent partners in Seller's Beneficiary to execute any
instruments executed and delivered by Seller or Seller's Beneficiary
at Closing.
(12) Estoppel certificates from tenants of the Property
representing tenants occupying eighty percent (80%) of the space
occupied by tenants at the Property, dated no earlier than twenty (20)
days prior to the Closing Date ("Tenant Estoppels") in the form
attached hereto as Exhibit J (provided that if any Lease specifies the
form of estoppel certificate which the tenant thereunder is obligated
to deliver, such form may be delivered in lieu of the form attached
hereto as Exhibit J). Seller shall use diligent efforts to obtain
Tenant Estoppels from all tenants. Seller shall provide Buyer with
all executed Tenant Estoppels and a list of the missing Tenant
Estoppels five (5) days prior to the Closing Date. If Seller fails to
obtain Tenant Estoppels from tenants representing eighty percent (80%)
of the space occupied by tenants at the Property, then so long as
Buyer receives Tenant Estoppels (collectively, "Required Tenant
Estoppels") in respect of all tenants set forth on
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<PAGE> 16
Exhibit K hereto, Seller shall be permitted (but not obligated) to
deliver a Seller Estoppel for such tenants as Seller may elect so that
such Seller Estoppels, together with all Tenant Estoppels received,
shall represent tenants occupying eighty percent (80%) of the space
occupied by tenants at the Property. For purposes of this Agreement,
a Seller Estoppel shall mean an estoppel certificate from Seller for
any tenant setting forth all of the information required by the Tenant
Estoppel form attached hereto as Exhibit K. Seller shall indemnify,
defend and hold Buyer harmless from and against any loss, cost or
expense arising out of (i) Seller's failure to disclose in any such
Seller Estoppel any default by Seller as landlord or by the tenant in
whose place such Seller Estoppel is given, or (ii) any other
misrepresentation contained in such Seller Estoppel. If and to the
extent that any Tenant Estoppel is received from and after Closing for
any Tenant for which Buyer has received a Seller Estoppel, the Seller
Estoppel shall automatically terminate as it relates to such tenant to
the extent consistent with the information contained in the Seller
Estoppel.
(13) Evidence of the termination of Seller's property
manager for the Property.
(14) Evidence reasonably satisfactory to Buyer and Title
Company that all real estate taxes, sewer and water rates and charges,
special assessments and betterments, and any utility charges the
nonpayment of which could result in a lien upon the Property have been
paid, to the extent the same are then due and payable.
(15) Any and all keys, and lock and safe combinations.
(16) Evidence reasonably satisfactory to Buyer that all
Contracts other than the Approved Contracts have been terminated as of
the Closing Date.
(17) If the Approved Contracts include any contract for
the construction of tenant improvements to be assigned by Seller to
Buyer, evidence of payment by Seller of all amounts incurred
thereunder through the Closing Date, including without limitation
receipts and lien waivers from the general contractor thereunder.
With respect to any such construction contract having an aggregate
contract price of more than $250,000, Seller shall use its best
efforts to obtain an estoppel certificate from the general contractor
thereunder for the benefit of Buyer, dated no more than five (5) days
prior to the Closing Date, certifying (i) that the contract is free
from default by such contractor or by Seller as "owner" thereunder;
(ii) all amounts theretofore
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<PAGE> 17
paid under such contract; (iii) that the contractor has no claims
against the Seller other than for quantified unpaid amounts specified
in the estoppel certificate; and (iv) the amount of the contract sum
not then due and payable. If Seller shall be unable to obtain any
such contractor estoppel, and, if such an estoppel is obtained, with
respect to the period from the date thereof through the Closing Date,
Seller shall represent to Buyer the amounts theretofore paid under
such contract and, to the best of Seller's knowledge, the matters set
forth in clauses (i), (iii) and (iv) above. With respect to any
construction contract having an aggregate contract price of $250,000
or less, Seller shall represent to Buyer the amounts theretofore paid
under such contract and, to the best of Seller's knowledge, the
matters set forth in clauses (i), (iii) and (iv) above.
Representation made under this Section 8.a(17) shall be treated for
all purposes as a representation made in Section 12 hereof.
(18) Any discharges, releases, other documents or other
conditions required by the Title Company as Seller's Title
Requirements under the Title Commitment are received or satisfied to
the reasonable satisfaction of Title Company so as to enable Title
Company to issue the owner's title policy in the form of the Specimen
Title Policy.
(19) An estoppel certificate from the Boston Redevelopment
Authority (the "BRA") to the effect that all "linkage" payments and
public improvements heretofore required to be paid or performed by
Seller or Seller's Beneficiary under the Development Impact Project
Agreement for 125 Summer Street dated May 18, 1987 between the BRA and
Seller's Beneficiary (the "DIP Agreement") have been so paid and
performed. If Seller shall be unable to obtain any such BRA estoppel,
Seller shall represent to Buyer at Closing that all such "linkage"
payments and public improvements have been so paid and performed,
which representation shall be treated for all purposes as a
representation made in Section 12 hereof.
(20) Such other instruments as Buyer may reasonably
request.
To the extent that Buyer fails to receive the above deliveries or any
of the deliveries specified in Section B.b below, or any of the conditions set
forth above as conditions to Buyer's obligation to close pursuant to this
Agreement shall fail to be fulfilled, then Buyer shall have the remedies
provided in Section 11.b
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b. Mutual Deliveries. Buyer and Seller shall deliver or
cause to be delivered the following at the Closing:
(1) Executed and acknowledged counterparts of the
Contract Assignment.
(2) Executed and acknowledged counterparts of the Lease
Assignment.
(3) A closing statement reflecting the adjustments made
at the Closing and described in Section 9 hereof.
(4) An instruction to the Escrow Holder directing the
Escrow Holder to apply the Deposit to the Purchase Price.
c. Buyer's Deliveries. On the Closing Date, Buyer shall
deliver at the Closing in escrow with the Title Company:
(1) The Purchase Price for the Property (plus any
additional funds necessary to pay Buyer's share of closing costs and
prorations, as hereinafter set forth), reduced by the amount of the
Deposit, by wire transfer of immediately available funds. The amount
of the Purchase Price paid to Seller shall be net of any closing costs
and prorations payable by Seller as herein set forth.
(2) Such other instruments as Seller may reasonably
request.
9. CLOSING COSTS AND PRORATIONS. At Closing, closing costs shall
be paid and prorations made as follows. All adjustments and prorations shall
be made through but not including the Closing Date:
a. Closing Costs. Seller shall pay any state, county,
or local transfer taxes, deed stamps, and any recording charges customarily
paid by Seller. Buyer shall pay any recording costs customarily paid by Buyer,
and the title insurance premium for the Owner's title insurance policy issued
at Closing to Buyer by the Title Company and the costs for the Survey.
b. Prorations. The Purchase Price shall be subject to
the following prorations:
(1) Taxes. Real and personal property taxes and general
and special assessments shall be prorated on the basis of the fiscal
year for such taxes and assessments. If the Closing Date shall occur
before the real property tax rate for such fiscal year is fixed, the
apportionment of taxes shall be made on the basis of the taxes
assessed for
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the preceding fiscal year. After the real property taxes are finally
fixed for the fiscal year in which the Closing Date occurs, Seller and
Buyer shall make a recalculation of the apportionment of such taxes,
and Seller or Buyer, as the case may be, shall make an appropriate
payment to the other based on such recalculation. To the extent
Seller has applied to obtain any real estate tax refund, the amount of
the net proceeds of such tax refund shall be prorated through the
Closing Date, if, as and when such proceeds are paid by the applicable
governmental taxing authority (it being understood that to the extent
any tenant leasing space in the Real Property shall be entitled to any
portion of such tax abatement, that such portion shall be turned over
to Buyer to remit to such tenant and shall be deducted from any tax
refund proceeds in connection with calculating the net proceeds
thereof).
(2) Rents. Prepaid rent, nondelinquent base rents,
additional rents in the nature of operating expense recoveries,
electricity recoveries, and tax reimbursements under the Leases and
parking charges shall be prorated. Rents collected after the Closing
Date from tenants whose rental was delinquent on the Closing Date,
shall be deemed to apply first to current rental due at the time of
payment and second to the rentals which were delinquent on the Closing
Date. Unpaid and delinquent rents, to which Seller is entitled, shall
be turned over to Seller if collected by Buyer after the Closing Date,
less any reasonable collection costs actually incurred by Buyer.
Buyer agrees to use good faith efforts to attempt to collect such
rents. As of the Closing Date, Buyer shall be entitled to a credit
for any tenant security deposits and interest thereon, if any, and any
other amounts due tenants pursuant to such security deposits unless
such security deposits are assigned pursuant to Section 8 or have been
previously applied by Seller. In the event that any additional rent
or the calculation thereof is subject to adjustment pursuant to the
terms and provisions of any Lease (e.g., year-end adjustments to
escalation charges, tenant audits, and the like), then after the
amount of such additional rent is finally determined by Buyer, the
parties shall make the proper adjustments so that the proration will
be accurate based upon the actual amount of such additional rent
collected for the period in question, and payment shall be made
promptly to Buyer or Seller, whichever may be entitled to such
payment, by the other party for the purpose of making such adjustment.
(3) Utilities. Charges and assessments for sewer and
water and other utilities, including charges for consumption of
electricity, steam and gas shall be apportioned by Buyer and Seller.
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(4) Adjustment of Approved Contracts. Payments required
or received under all Approved Contracts which are in the nature of
service or maintenance contracts shall be apportioned by Buyer and
Seller. Seller shall be entitled to reimbursement at Closing for all
expenses incurred and paid for Leasing Costs under any Approved
Contract pursuant to or in connection with any New Lease as provided
in Section 14.e. Buyer shall be entitled to reimbursement at Closing
for all expenses which remain to be paid under any Approved Contract
for Leasing Costs for Leases other than New Leases except commissions
which may become due in connection with the extension or renewal of
any Lease after the Closing Date or in connection with the exercise
after the Closing Date by any tenant of any expansion or extension
option contained in any of the Leases.
(5) Leasing Costs. To the extent that Seller has paid or
incurred Leasing Costs for New Leases not adjusted pursuant to the
provisions of Section 9.b(4) above, including without limitation
Leasing Costs for which Buyer is responsible in accordance with the
provisions of Section 16.d, Seller shall be entitled to reimbursement
at Closing for all such Leasing Costs, provided, however, that Buyer
shall not be obligated to reimburse Seller for any free rent period
prior to the Closing Date or other non-cash inducement attributable to
the New Lease. Buyer shall be entitled to reimbursement at Closing
for all Leasing Costs which remain to be paid under any Leases which
are not New Leases, except commissions which may become due in
connection with the extension or renewal of any Lease after the
Closing Date or in connection with the exercise after the Closing Date
by any tenant of any expansion or extension option contained in any of
the Leases, but only to the extent not adjusted pursuant to the
provisions of Section 9.b(4) above.
c. Post Closing Cooperation. After the Closing, Buyer
and Seller shall cooperate with each other, and shall cause their respective
property managers for the Property to cooperate with each other, including
without limitation making available books and records for the Property, in
order to respond to any Tenant inquiry concerning, challenge to or audit of,
any operating expense or similar additional rent or rent escalation item. To
the extent that any adjustment or proration required hereunder was based on
estimates at the time of Closing, the parties shall readjust and re-prorate
based upon final numbers when available, and make payment as appropriate based
upon such readjustment and re-proration.
The provisions of this Section 9 shall survive Closing.
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10. NOTICE TO TENANTS. Immediately after the Closing, Buyer and
Seller shall notify tenants under the Leases and the New Leases in writing of
Buyer's acquisition of the Property, which notices shall be in the form
attached hereto as Exhibit L.
11. DEFAULT.
a. Buyer's Default. In the event that the transaction
contemplated by this Agreement does not close due to a default by Buyer, Seller
shall retain the Deposit as liquidated damages, and not as a penalty, and this
shall be Seller's sole and exclusive remedy except with respect to the
covenants and indemnities set forth in Sections 4 and 14.d. The parties agree
that Seller's actual damages would be difficult or impossible to determine if
Buyer defaults, and the Deposit is the best estimate of the amount of damages
Seller would suffer. The Deposit has been determined by the parties as a
reasonable sum for damages.
b. Seller's Default.
(1) Except as provided in Section 11.b(2), in the event
that the transaction contemplated by this Agreement does not close as
a result of a default by Seller, Buyer's sole and exclusive remedy
against Seller shall be to commence an action for specific performance
of this Agreement to obtain such title as Seller is able to convey to
the Property in its then condition, and Buyer shall have no right to
an action for damages against Seller. The parties agree that Buyer's
actual damages would be difficult or impossible to determine if Seller
defaults and the ownership of the Property has a unique value to Buyer
which is not adequately capable of being compensated through the
payment of damages, so that it is specifically acknowledged and agreed
that Buyer shall be entitled to the remedy of specific performance in
connection with any such default, provided, however, that Seller shall
not be required to expend an amount in excess of Seller's Remedial
Limit (calculated without regard to legal fees or costs incurred by
Seller in connection with such specific performance action) to
specifically perform this Agreement except to the extent Seller has
intentionally defaulted hereunder. Alternatively, in the case of
Seller's default, Buyer may elect to have the Deposit returned to
Buyer, and in such case this Agreement shall terminate, and Buyer and
Seller shall have no further obligations hereunder except as otherwise
specifically set forth herein.
(2) If the remedy of specific performance is unavailable
as a result of a willful and intentional act by Seller in breach of
this Agreement, Seller shall be liable for the damages sustained by
Buyer by reason of such
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default, provided that the liability of Seller for such damages shall
not exceed Five Million and 00/100 Dollars ($5,000,000.00).
(3) If the Closing shall occur, the provisions of this
Section ii.b shall not affect the liability of Seller hereunder.
12. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby makes
the following representations and warranties to Buyer as of the Effective Date:
a. Delivery of Written Materials. All Review Materials
and other written materials (including, without limitation, the Exhibits to
this Agreement) which Seller has delivered or shall deliver to Buyer pursuant
this Agreement are and shall be complete in all material respects. The copies
of the Leases, and the Contracts and the DIP Agreement delivered to Seller are
true, accurate and complete in all material respects.
b. Other Agreements. On the Closing Date there will be
no contracts, agreements or understandings, oral or written, with any person
affecting the Property except (i) the Approved Contracts, (ii) those Leases
listed on Exhibit G and any New Leases, (iii) the development approvals which
have been obtained with respect to the Property including without limitation
the DIP Agreement, all licenses and permits required by any zoning or
environmental laws, and the applications therefor, (iv) the exceptions to title
to the Property permitted in accordance with Section 6 hereof, and (v) any
other agreements delivered by Seller to Buyer during the Review Period.
c. Due Authorization. Each of Seller and Seller's
Beneficiary is validly existing, has all necessary power and authority to own
and use its properties and to transact the business in which each is engaged,
and has full power and authority to enter into this Agreement, to execute and
deliver the documents and instruments required of Seller or Seller's
Beneficiary herein, and to perform its obligations hereunder. Seller is duly
authorized to execute and deliver, and perform this Agreement and all documents
and instruments and transactions contemplated hereby or incidental hereto. No
consents not already obtained are necessary to enable Seller or Seller's
Beneficiary to perform this Agreement or carry out the transactions
contemplated hereby or incidental hereto.
d. Enforceability. This Agreement and all documents
required hereby to be executed by Seller, when so executed, shall be legal,
valid, and binding obligations of Seller enforceable against Seller in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium,
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and other similar laws affecting the rights of creditors generally and, as to
enforceability, the general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
e. No Conflict. The execution and delivery of, and
consummation of the transactions contemplated by this Agreement is not
prohibited by, and will not conflict with, constitute grounds for termination
of, or result in the breach of any of the Leases or the Contracts or any other
agreement or instrument to which Seller is now a party or otherwise subject, or
with the organizational documents of Seller or Seller's Beneficiary.
f. Leases. Except as set forth on Exhibit M hereto, (a)
no rent has been paid by any tenant or occupant of the Property more than
thirty (30) days in advance, (b) to the best of Seller's knowledge, neither any
tenant nor Seller is in default in the performance of any material covenant,
agreement or condition contained in any of the Leases, (c) Seller has not
received written notice from any tenant regarding pending or threatened offsets
against rent or for any other monetary or material claim against Seller and no
future rent concessions have been created which are not disclosed in the
Leases; (d) to the best of Seller's knowledge, except as provided in this
Agreement with respect to any New Lease, any and all construction or
improvements that were required to be performed by Seller under any Lease have
been fully completed and accepted by each tenant and all leasing commissions
payable on account of any of the Leases have been fully paid, except those
which may become due in connection with the extension or renewal of any Lease
or in connection with the exercise by any tenant of any expansion or extension
option contained in any of the Leases; and (e) to the best of Seller's
knowledge the Leases are in full force and effect. The representations and
warranties made in this Section 12.f shall be deemed withdrawn as to each Lease
for which Seller delivers to Buyer a Tenant Estoppel at Closing, and to the
extent that the matters set forth in such Tenant Estoppel Certificate are at
variance with this Section 12.f, such matters shall be deemed updated
representations of Seller in accordance with Section 12.o.
g. Notices. Seller has received no written notice or
citation (a "Notice"):
(1) From any federal, state, county or municipal
authority alleging any fire, health, safety, building pollution,
environmental, zoning or other violation of any law, regulation,
permit, order or directive in respect of the Property or any part
thereof, which has not been entirely corrected;
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(2) From any insurance company or bonding company of any
defects or inadequacies in the Property or any part thereof, which
would adversely affect the insurability of the same or of any
termination or threatened termination of any policy of insurance or
bond.
(3) From any governmental authority with respect to a
proposed eminent domain taking of all or any portion of the Property.
If any such Notice is received by Seller prior to Closing, Seller
shall notify Buyer promptly thereof and provide a copy of such Notice to Buyer.
h. Violation of Law. To the best of Seller's knowledge,
except as set forth on Exhibit N, all governmental approvals required for the
current use of the Property have been issued and are currently in effect
without violation, the Property is not under investigation for failure to
comply with any statutes, laws, ordinances, rules, regulations, orders or
directives of any and all governmental agencies pertaining to the use or
occupancy of the Property, and the Property is in compliance with, and not in
violation of, any applicable statutes, laws, ordinances, rules, regulations,
orders or directives; provided, however, that Seller makes no representation
herein with respect to compliance with the Americans with Disabilities Act or
any rule, regulation or interpretation promulgated thereunder.
i. Hazardous Materials. To the best of Seller's
knowledge, except as disclosed in the Review Materials, including without
limitation the materials described on Exhibit O, there are no Hazardous
Materials at the Property except for ordinary cleaning, landscaping,
maintenance, and office supplies which are used and stored in compliance with
applicable laws, and neither Seller nor any third party has previously used,
manufactured, generated, treated, stored, disposed of, or released any
Hazardous Materials on or under the Property or transported any Hazardous
Materials over the Property.
j. Absence of Defects. To the best of Seller's
knowledge, there are no material physical, structural, or mechanical defects of
the Property, including, without limitation, the plumbing, heating,
ventilation, air conditioning, elevator, and electrical systems or parking or
loading areas, and all such items are in good operating condition and repair,
ordinary wear and tear excepted.
k. Legal Proceedings. Except as set forth on Exhibit P
hereto, there are no actions, suits or proceedings, pending, or, to Seller's
knowledge, threatened before any court,
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commission, agency or other administrative authority against, or affecting
Seller or the Property other than personal injury claims in the nature of "slip
and fall" which are covered by insurance maintained by Seller. Seller has not
suffered or confessed any judgment in or before any such court, commission,
agency or other administrative authority against which remains unsatisfied.
l. No Employees. Seller does not directly employ any
employees who work at the Property.
m. Leasing Commissions. Except as set forth on Exhibit
O hereto, no person is entitled to any leasing commission in connection with
the extension or renewal of any Lease or in connection with the exercise by any
tenant of any expansion or extension option contained in any of the Leases.
Neither the Seller nor the Property is subject to any "protection list" or
similar obligation with respect to the future leasing of the Property.
n. Mechanics' Liens. On the Effective Date, Seller is
not a party to one or more construction contracts for tenant improvements to
the Property or any portion thereof, which remains in force and effect, under
which more than $250,000 in the aggregate remains unpaid.
o. Updating of Schedules, Exhibits, Representations and
Warranties. Seller shall have the right to modify, update and supplement all
representations and warranties made herein, and any exhibits and schedules
related thereto attached to or delivered in connection with this Agreement to
the extent required to make such representations, warranties, exhibits and
schedules true, accurate and complete by giving notice to Buyer at any time
through the Closing Date. The provision of Section 15 shall be applicable to
any such modification, update and/or supplement.
p. As-Is Purchase. As a material inducement to Seller
to execute this Agreement, Buyer acknowledges, represents and warrants that,
except as expressly provided in this Agreement, upon the satisfaction or waiver
of the Contingencies (i) Buyer will have fully examined and inspected the
Property, including the construction, operation and leasing of the Property,
together with the Review Materials and such other documents and materials with
respect to the Property which Buyer deems necessary or appropriate in
connection with its ,investigation and examination of the Property, (ii) Buyer
will have accepted the foregoing and the physical condition, value,
presence/absence of Hazardous Materials, financing status, use, leasing,
operation, tax status, income and expenses of the Property, (iii) the Property
will be purchased by Buyer "AS IS"
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and "WHERE IS" and with all faults and, upon Closing, Buyer shall assume
responsibility for the physical condition of the Property and (iv) Buyer will
have decided to purchase the Property solely on the basis of its own
independent investigation. Except as expressly set forth herein or in Seller's
Documents, Seller has not made, does not make, and has not authorized anyone
else to make any representation as to the present or future physical condition,
value, presence/absence of hazardous materials, financing status, leasing,
operation, use, tax status, income and expenses or any other matter or thing
pertaining to the Property, and Buyer acknowledges that no such representation
or warranty has been made and that in entering into this Agreement it does not
rely on any representation or warranty other than those expressly set forth in
this Agreement or in Seller's Documents. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT OR IN SELLER'S DOCUMENTS, SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY. Seller shall not be liable
for or bound by any verbal or written statements, representations, real estate
broker' s "setups" or information pertaining to the Property furnished by any
real estate broker, agent, employee, servant or any other person unless the
same are specifically set forth in this Agreement or in Seller's Documents.
The provisions of this Section 12.p. shall survive the Closing. If Buyer shall
proceed to Closing with actual knowledge of any matter, or as to any matter set
forth in (i) the Review Materials (ii) the Approved Contracts or (iii) the
Leases which is in conflict with any of Seller's representations, warranties or
indemnities made in this Agreement, Buyer shall be deemed to have waived such
Seller's representations, warranties or indemnities to the extent inconsistent
with such actual knowledge or the contents of such Review Materials, Approved
Contracts or Leases.
q. Limitation of Seller's Representations. The
representations and warranties set forth in this Section 12 shall survive the
Closing to the date occurring twelve (12) months after the Closing Date, at
which time such representations and warranties shall terminate and be of no
further force or effect. All other representations and warranties made by
Seller in this Agreement, unless expressly provided otherwise, shall not
survive the Closing. Where representations and warranties are made in this
Agreement to the "best of Seller's knowledge," such phrase shall mean and be
limited to the actual knowledge of Michael C. Fong, Osama El Haddad, Mark S.
James, and Richard C. Lovell. For purposes of the representations and
warranties made by Seller in this Agreement and/or Seller's Documents, (1)
"Seller's knowledge" shall not include that of any independent contractor hired
by Seller or of any former employee of Seller, Jaymont (U.S.A.) Incorporated,
A. W. Perry, Inc. or any affiliate or
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subsidiary of any of them, and (2) notices received by any independent
contractor hired by Seller and not delivered by such contractor to Seller shall
not be deemed to have been received by Seller.
Buyer agrees that it shall not assert a claim against Seller for breach of any
one or more representations and warranties unless Buyer has sustained aggregate
loss by reason thereof in the amount of $100,000.
13. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby makes
the following representations and warranties to Seller as of the Effective
Date:
a. Due Authorization. Upon satisfaction of the
Contingency described in Section 5.a(3), Buyer has full power to execute,
deliver and carry out the terms and provisions of this Agreement and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement, and the individuals) executing this Agreement on behalf of
Buyer has the authority to bind Buyer to the terms and conditions of this
Agreement.
b. Enforceability. Upon satisfaction of the Contingency
described in Section 5.a(3), this Agreement and all documents required hereby
to be executed by Buyer, when so executed, shall be legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, and other similar laws affecting the rights of creditors generally
and, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
14. ACTIONS AFTER THE EFFECTIVE DATE. The parties covenant to do
the following through the Closing Date.
a. Maintenance and Operation of Property. Seller shall
continue to operate, maintain and insure the Property consistent with the
present business and operations thereof and in a first-class manner, and Seller
shall maintain the buildings, improvements, utilities, and systems that
comprise or that are upon the Property in good condition and repair, normal
wear and tear and casualty excepted, it being the intention of the parties
hereto that the general operations of the Property shall not be changed between
the date hereof and the date of Closing. Seller shall maintain all existing
insurance coverages (providing coverage under a blanket policy in an amount in
excess of the replacement cost of the Real Property) (or similar replacements
thereof) in full force and effect. Seller shall not enter into any Contract or
equipment lease that cannot be terminated by the
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owner of the Property, without penalty, with thirty (30) days notice, without
the prior written consent of Buyer, which consent shall not be unreasonably
withheld or delayed. Any such Contract or equipment lease approved by Buyer
shall be deemed an Approved Contract.
b. Representations and Warranties. Subject to the
provisions of Section 12.o, each party shall use diligent efforts to prevent
any act or omission that would render any of its representations and warranties
herein untrue or misleading, and shall immediately notify the other party if
such act or omission occurs.
c. Entry; Buyer's Inspection. Buyer and Buyer's Agents
may enter the Property for purposes of (i) performing nondestructive physical
tests (except that Buyer may perform minor intrusive testing to determine the
presence of asbestos-containing materials, termites and other wood destroying
insects, provided that all damage resulting therefrom is promptly repaired by
Buyer at its sole expense and to Seller's reasonable satisfaction) and (ii)
conduct any and all engineering, environmental and other inspections at the
Property and examine and evaluate the Review Materials and all other relevant
agreements and documents within the possession of Seller or subject to its
control, as Buyer may reasonably request. No soil and/or ground water sampling
shall be performed unless and until the location, scope and methodology of such
sampling and the environmental consultant selected by Buyer to perform such
sampling have all been approved by Seller, which approval shall not be
unreasonably withheld. Seller shall advise Buyer of its decision concerning
such sampling and such proposed consultant within three (3) business days after
request therefor by Buyer. Prior to conducting any such sampling, Buyer shall
have a utility mark-out performed for the Property. Copies of all
environmental and engineering reports prepared by or on behalf of Buyer with
respect to the Property shall be provided promptly to Seller upon request. With
respect to Buyer's right to inspect the Property, Buyer agrees that (i) each
inspection shall be performed during normal business hours or at such other
times as Seller and Buyer shall mutually agree and (ii) Buyer and Buyer's
Agents shall use all reasonable efforts to minimize any disruption to the
tenants, guests, employees, occupants of the Property and the operation
thereof. Buyer shall give to Seller one (1) business day's advance notice of
any such inspections, reviews or examinations. Buyer shall perform any testing
or inspection of the Property only after Buyer has provided to Seller
certificates of insurance or other evidence reasonably satisfactory to Seller
that Buyer and/or Buyer's Agents carries general liability insurance in an
amount of at least One Million Dollars ($1,000,000) together with evidence of
adequate worker's compensation insurance. Seller shall have the right, at its
option, to cause Seller's
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representative to be present at all inspections, reviews and examinations
conducted on the Property by Buyer. Notwithstanding anything to the contrary
contained in this Agreement, any investigation or examination of the Property,
the Review Materials or other materials with respect to the Property performed
by Buyer or Buyer's Agents prior to the Closing shall be performed at the sole
risk and expense of Buyer, and Buyer shall be solely responsible for the acts
or omissions of any of Buyer's Agents brought on, or to, the Property by Buyer.
In addition, Buyer shall defend, indemnify and hold Seller harmless from and
against all loss, expense (including, but not limited to, reasonable attorneys'
fees and court costs arising from the enforcement of this indemnity), damage
and liability resulting from claims for personal injury, wrongful death or
property damage against Seller or any of the Property arising from or as a
result of, any act or omission of Buyer or Buyer's Agents in connection with
any inspection or examination of the Property by Buyer or Buyer's Agents,
except that Buyer's agreements as set forth in this sentence shall not extend
to any condition that is discovered by Buyer to be present on, under or about
the Property. The provisions of this Section 14.d shall survive the Closing or
the earlier termination of this Agreement.
d. Tenant Interviews. During the last seven (7) days of
the Review Period, and provided that Buyer has acknowledged to Seller in
writing that it is prepared to waive all other Contingencies (but Buyer need
not actually waive the Contingencies and shall retain its right to terminate
this Agreement in its sole discretion as provided in Section 5), Buyer may also
enter the Property for the purpose of conducting interviews with existing
tenants under the Leases, but entry for such purpose shall be made only with
prior appointment with Seller or Seller's management agent for the Property,
and Seller shall have the right to have its representative accompany Buyer on
any such interview.
e. Leasing.
(1) Prior to the expiration of the Review Period, but
subject to the provisions of Section 14.e(2), Seller may enter into
any new Lease or any amendment or modification to any Lease (any of
the foregoing a "New Lease"), or termination of any Lease, without the
prior approval of Buyer. Seller shall keep Buyer advised of proposals
made by Seller or any prospective tenant with respect to any proposed
new lease and shall provide drafts of any New Lease to Buyer as
prepared, and Seller shall give notice to Buyer of any such New Lease
or termination within one (1) business days after the same has been
effected, together with a reasonably detailed budget setting forth the
Leasing Costs to be incurred in connection with such New Lease, and a
copy
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of any proposed construction contract for the construction of tenant
improvements in connection with such proposed New Lease and of any
leasing commission agreement related thereto. Any such construction
contract and commission agreement shall be treated for all purposes as
an Approved Contract. All Leasing Costs incurred by Seller in
connection with such New Leases, in amounts not to exceed the amounts
of such Leasing Costs detailed in the budgets submitted by Seller to
Buyer, shall, if a Closing shall occur, be the obligation of Buyer,
and to the extent that Seller has theretofore expended any sums for
any of the foregoing, Buyer shall reimburse Seller at Closing for the
amount of any such sums expended.
(2) Notwithstanding the provisions of Section 14.e(l), in
order to permit Buyer sufficient time to evaluate the impact of any
New Lease upon the satisfaction of the Contingencies, Seller shall not
enter into any New Lease or related construction contract or
commission agreement during the last two (2) business days of the
Review Period unless the proposed New Lease, in the form to be
executed by Seller, and the form of any related construction contract
and/or commission agreement, has been delivered to Buyer prior to such
two (2) business day period.
(3) After the expiration of the Review Period, except as
provided in Section 16 hereof, Seller shall not enter into any New
Lease, or any construction contract for the construction of tenant
improvements in connection with any proposed New Lease or any leasing
commission agreement related thereto, except in compliance with this
Section 14.e(3). A copy of each New Lease proposed to be entered into
by Seller after the expiration of the Review Period will be submitted
to Buyer for its approval prior to execution by Seller, together with
a reasonably detailed budget setting forth the Leasing Costs to be
incurred in connection with such New Lease, and a copy of any proposed
construction contract for the construction of tenant improvements in
connection with such proposed New Lease and of any such commission
agreement. Buyer shall notify Seller in writing within three (3)
business days after its receipt of each such proposed New Lease,
budget, commission agreement, and construction contract, if
applicable, either of its approval or disapproval thereof, including
of the Leasing Costs to be incurred in connection therewith and of any
such construction contract or commission agreement. Buyer agrees that
approval of any New Lease or related construction contract or
commission agreement which is consistent with the prevailing market in
the City of Boston shall not be unreasonably withheld or delayed. In
the event Buyer informs Seller that Buyer does not approve any such
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proposed New Lease, Seller shall not enter into such New Lease, or any
such construction contract or commission agreement, as the case may
be. In the event Buyer fails to notify Seller in writing of its
approval or disapproval of any such proposed New Lease or contract
within the three-day time period for such purpose set forth above,
such failure shall be deemed the approval by Buyer of such New Lease,
budget and contract. Upon the approval or deemed approval of any such
construction contract or Commission agreement, if the work under such
contract is not complete as of the Closing Date or the commission has
not been fully paid, such contract shall be treated for all purposes
as an Approved Contract. If Buyer approves, or is deemed to have
approved of, any New Lease, all Leasing Costs incurred by Seller in
connection therewith, in an amount not to exceed the amount of such
Leasing Costs approved or deemed approved by Buyer as provided herein,
shall, if a Closing shall occur, be the obligation of Buyer, and to
the extent that Seller has theretofore expended any sums for any of
the foregoing, Buyer shall reimburse Seller at Closing for the amount
of any such sums expended.
f. Pending Tax Abatement Proceedings. If Seller has
applied to obtain any real estate tax abatement or refund, Seller shall not
discontinue such application prior to the Closing Date. After the Closing
Buyer and Seller shall cooperate with each other, and shall cause their
respective property managers for the Property to cooperate with each other,
including without limitation making available books and records for the
Property, in order to enable the prosecution of any such application. The
provisions of this Section 14.f shall survive Closing.
15. CERTAIN ADVERSE CHANGES.
a. Changes Relating to Hazardous Materials. If there
shall occur, during the period which begins on the date of Buyer's Site
Assessment and ends at the time of recording the Deed in connection with the
Closing hereunder, any placement or release of Hazardous Materials on, at or
under the Property in violation of applicable laws that would have an effect on
the value of the Property, Buyer shall have the right to terminate this
Agreement by giving notice of such termination to Seller within five (5) days
after Buyer learns of such release or placement. Upon any such termination of
this Agreement, Escrow Holder shall return the Deposit to Buyer.
Alternatively, if Buyer does not so terminate this Agreement, Buyer may give
notice to Seller within such five (5) day period that it will proceed to
Closing and the Purchase Price will be reduced by the lesser of (i) the amount
by which the estimated cost of completing such remediation (as agreed upon by
Buyer and Seller, each acting in good faith) exceeds $250,000, or (ii) the
unexpended amount, as
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of the Closing Date, of Seller's Remedial Limit.
b. Changes Relating to Title. During the period which
begins after the date and time of the Title Commitment and ends at the time of
recording the Deed in connection with the Closing hereunder (the 'Title
Period"), Seller shall not voluntarily make any changes in the condition of
title to the Property which will not be released and removed at Closing, except
with Buyer's advance written consent. Buyer shall have the right to approve or
disapprove any exceptions to title (including, without limitation, any matter
which would be shown on an accurate survey of the Real Property) suffered
involuntarily by Seller during the Title Period (an "Involuntary Title Defect")
or which arose prior to the Title Period but was inadvertently omitted by the
Title Company from the Title Commitment (an "Omitted Defect"). If Buyer
disapproves of any such Involuntary Title Defect, then Buyer may give to Seller
a notice that it requires that Seller remove or satisfy such Involuntary Title
Defect, and Seller shall be obligated to so remove or satisfy such Involuntary
Title Defect, but only to the extent that the cost thereof, when added to any
other remedial expenditures made by Seller pursuant to this Section !5, does
not exceed Seller's Remedial Limit. If Buyer disapproves of any such Omitted
Defect, then Buyer may give to Seller a notice that it requires that Seller
remove or satisfy such Omitted Defect, an the provisions of Sections 6.a, 6.c
and 6.d shall be applicable thereto, mutatis, mutandis.
c. Material Adverse Change. If a Material Adverse
Change shall occur prior to Closing, Buyer shall have the right to terminate
this Agreement by giving notice of such termination to Seller within (5) days
after the occurrence of such Material Adverse Change. If Buyer shall give such
notice, Seller shall have the right to negate such notice by giving notice to
Buyer (a "Negation Notice") within five (5) days after receipt of Buyer's
notice that Seller will pay so much of the cost to cure, remedy, discharge,
repair, remove, satisfy or remediate the matters contributing to such Material
Adverse Change, or restore so much of the anticipated revenue loss, and/or pay
the re-leasing costs, as the case may be, relating thereto, as may be necessary
to reduce the aggregate economic impact of such Material Adverse Change to
$250,000; provided, however, that if the amount of such economic impact is not
ascertainable with reasonable certainty at the time of the giving of Seller's
Negation Notice, Seller's Negation Notice may contain Seller's undertaking to
pay or restore the amount agreed upon by Buyer and Seller, each acting in good
faith, when such economic impact is so ascertainable. Upon the giving of such
Negation Notice, at Closing Seller shall be obligated to pay the amount
undertaken in such Negation Notice, or to escrow at Closing an amount agreed
upon between Seller and Buyer pending final agreement upon an amount as
aforesaid, and Buyer shall be obligated to proceed to Closing in accordance
with this Agreement. The Closing Date shall be automatically extended for such
period of time as is necessary to enable Buyer and Seller to give and respond
to notices as contemplated herein. If Seller does not give such Negation
Notice with such five (5) day period, subject to the provisions
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<PAGE> 33
of Section 7.e, this Agreement shall terminate, and Escrow Holder shall return
the Deposit to Buyer.
16. NEW BANK OF TOKYO LEASE. Buyer acknowledges that Seller is in
negotiation with the Bank of Tokyo ("BOT") for the extension of the BOT lease
for 91,281 square feet of the Property. With respect to such lease extension,
or new lease, with BOT (the "New BOT Lease"), Buyer and Seller agree as
follows:
a. During the Review Period.
(1) Prior to the expiration of the Review Period, but
subject to the provisions Section 16.a(2), Seller reserves the right
to enter into the New BOT Lease on such terms as Seller may determine.
Seller shall keep Buyer advised of proposals made by Seller or BOT
with respect to any proposed New BOT Lease, and of the Seller's
estimate of the Leasing Costs associated with any such proposals. If
Seller and BOT shall have signed or initialled a term sheet setting
forth the material economic terms of the New BOT Lease prior to the
expiration of the Review Period, Seller may conclude such New BOT
Lease, even if after the expiration of the Review Period, without the
need for the prior approval of Buyer so long as the New BOT Lease is
consistent in all material terms with such term sheet and, except as
otherwise provided in such term sheet, (i) contains no provisions with
regard to early termination of the New BOT Lease, (ii) contains no
provision permitting extension or renewal of the term thereof other
than for a term of not more than an additional five years at a rental
rate not less than 90% of prevailing market rent at the commencement
of such extension or renewal term, and (iii) as to all other terms and
conditions, contains no provisions more onerous to landlord than the
cognate provisions of any existing Lease with BOT. Seller shall give
notice to Buyer of any such New BOT Lease or term sheet within one (1)
business day after the same has been effected.
(2) Notwithstanding the provisions of Section 16.a(l), in
order to permit Buyer sufficient time to evaluate the impact of any
New BOT Lease upon the satisfaction of the Contingencies, Seller shall
not enter into any New BOT Lease, or initial a term sheet therefor,
during the last two (2) business days of the Review Period unless the
proposed New BOT Lease is a Qualifying BOT Lease, or such term sheet,
in the form to be executed by Seller, has been delivered to Buyer
prior to such two (2) business day period.
b. After the Review Period. After the expiration of the
Review Period, Seller may enter into the New BOT Lease for
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<PAGE> 34
91,281 square feet without the prior approval of Buyer so long as the New BOT
Lease (i) provides for a base rental rate of not less than $29.50 per foot
(with 12 free parking spaces), (ii) is for a term of five years, (iii) permits
expansion of the premises demised thereunder of no more than 20% of the initial
premises at a rent of not less than $29.50 per foot for the initial five year
term of the New BOT Lease (or the portion of such five-year term remaining at
the time of such expansion premises are added to the New BOT Lease) requiring
tenant allowance of not more than $15.00 per foot and the payment of leasing
commissions of not more than $2.00 per foot, (iv) contains no provisions with
regard to early termination of the New BOT Lease, (v) contains no provision
permitting extension or renewal of the term thereof other than for a term of
not more than an additional term of five years at a rental rate not less than
90% of prevailing market rent at the commencement of such extension or renewal
term, and (vi) as to all other terms and conditions, contains no provisions
more onerous to landlord than the cognate provisions of any existing Lease with
BOT (a "Qualifying BOT Lease"). After the expiration of the Review Period,
except as provided in Section 16.a above, prior approval by Buyer shall be
required for any New BOT Lease which is not a Qualifying BOT Lease.
c. After the Closing. If Seller shall not have entered
into a New BOT Lease prior to Closing, Buyer agrees that in the period from the
Closing Date through and including December 31, 1995, it will continue to
negotiate in good faith with BOT to reach agreement on a Qualifying BOT Lease.
Buyer will keep Seller advised of the progress of such negotiations. Seller
acknowledges that after the Closing, the negotiation and documentation of a New
BOT Lease be solely within the control of Buyer.
d. Leasing Costs. Buyer and Seller shall be responsible
for Leasing Costs associated with a New BOT Lease as follows:
(1) With respect to any New BOT Lease entered into by
Seller prior to the Closing, Buyer shall be responsible for the first
$1,138,967 of such Leasing Costs; Seller and Buyer shall each be
responsible for one half of the next $500,000 of such Leasing Costs,
and Seller shall be responsible for all Leasing Costs in excess of
$1,638,967, and the parties shall make appropriate adjustments at
Closing to reflect the foregoing;
(2) With respect to any Qualifying BOT Lease entered into
by Buyer on or before December 31, 1995, Buyer shall be responsible
for the first $1,138,967 of such Leasing Costs; Seller and Buyer shall
each be responsible for one half of the next $500,000 of such Leasing
Costs, and Seller shall be
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<PAGE> 35
responsible for all Leasing Costs in excess of $1,638,967; provided,
however, that without the prior approval of Seller, Seller's aggregate
obligation for such Leasing Costs shall not exceed $300,000.
The party responsible for Leasing Costs shall either pay such costs directly
when incurred, or reimburse the other party if such costs have been paid in the
first instance by the other party. Buyer and Seller agree that (i) any free
rent included in the Leasing Costs for a Qualifying BOT Lease shall be
considered the first dollars of Leasing Costs paid, and (ii) if such free rent
shall exceed $1,138,967, for the purpose of applying Seller's obligation to be
responsible for Leasing Costs, free rent shall be treated as if a payment due
to a third party and shall, to the extent of Seller's obligation therefor, be
paid by Seller to Buyer.
e. Success Fee. If Seller shall have entered into a
Qualifying BOT Lease prior to the Closing, on the Closing Date, Buyer shall pay
to Seller the a success fee in the amount of Five Hundred Thousand and 00/100
Dollars ($500,000.00) (the "Success Fee"). If Buyer shall enter into a
Qualifying BOT Lease on or before December 31, 1995, Buyer shall pay the
Success Fee to Seller, by wire transfer to Seller's account as specified in
Exhibit F, on or before the date which is two (2) business days after the
execution and delivery by Buyer and BOT of the New BOT Lease. In the case of a
such post-Closing payment of the Success Fee, Buyer may offset against such
Success Fee any Leasing Costs associated with the New BOT Lease for which
Seller is responsible as herein provided and which have not been paid or
reimbursed, as applicable, by Seller at the time of payment of such Success
Fee.
f. Provisions Survive. The provisions of this Section
16 shall survive the Closing.
17. USE OF PROCEEDS TO CLEAR TITLE. Any unpaid taxes,
assessments, water charges and sewer rents" together with the interest and
penalties thereon to Closing Date, and any other liens and encumbrances which
Seller is obligated to pay and discharge together with the cost of recording
and filing any instruments necessary to discharge such liens and encumbrances
of record, may be paid out of the proceeds of the monies payable on the Closing
Date if Seller delivers to Buyer on the Closing Date official bills for such
taxes, assessments, water charges, sewer rents, interest and penalties and
instruments in recordable form sufficient to discharge any other liens and
encumbrances of record and Buyer's title company agrees to insure against such
liens or encumbrances.
18. SURVIVAL. The terms, covenants and indemnities contained in
this Agreement required to be operative after
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<PAGE> 36
delivery of the Deed shall survive delivery of the Deed without limitation as
to time, unless a time limitation is expressly provided, and shall not be
deemed to have been merged in the Deed.
19. DAMAGE TO PROPERTY. If the Property or any part thereof (i)
is damaged by casualty or (ii) is taken by exercise of the power of eminent
domain prior to the Closing Date, and in the case of either such casualty or
taking the damage to the Property exceeds $500,000, as reasonably determined by
Buyer, Buyer may terminate this Agreement by notice given to Seller within ten
(10) days of the date Seller gives notice to Buyer of such casualty or taking.
If Buyer does not so terminate this Agreement or such damage does not exceed
$500,000, the parties shall proceed to Closing as follows: In the case of
damage due to casualty, the Purchase Price shall be adjusted by an amount
mutually agreed upon by Buyer and Seller, each acting reasonably, as the cost
to restore the Property to the condition existing prior to the casualty (to the
extent not restored by the Closing Date), and Buyer shall retain all insurance
proceeds arising from the casualty. In the case of a taking, at the Closing
Seller shall pay over or assign to Buyer all awards recovered or recoverable on
account of such taking. Buyer agrees to cooperate with Seller after the
Closing in the adjustment of any insurance claim made by Seller in connection
with such casualty, including without limitation providing reasonable access
for inspection of the Property by insurance representatives or adjusters in
connection with any loss adjustment.
20. BROKERAGE COMMISSION. Seller and Buyer each warrant to the
other party that its sole contact with the other party or the Property
regarding this transaction has been directly with the other party or with
Spaulding and Slye as consultant to Buyer. Buyer shall be responsible for any
investment fees or commissions, payable to Spaulding and Slye in connection
with the transaction contemplated by this Agreement. Seller and Buyer further
warrant to each other that no broker or finder can properly claim a right to a
commission or finder's fee based upon contacts between the claimant and the
warranting party with respect to the other party or the Property. Seller and
Buyer shall indemnify, defend and hold the other party harmless from and
against any loss, cost or expense, including, but not limited to, attorneys'
fees and court costs, resulting from any claim for a fee or commission by any
broker or finder in connection with the Property and this Agreement resulting
from the indemnifying party's actions. The foregoing indemnities shall survive
the Closing.
21. BOOKS AND RECORDS. From and after Closing, Seller shall have
the right to inspect and otherwise have access to any books and records for the
Property at reasonable times and upon
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<PAGE> 37
reasonable notice to the extent reasonably necessary for Seller to complete any
tax returns or to reconcile any payments or credits for real estate taxes,
common area expenses or other similar items.
22. SUCCESSORS AND ASSIGNS. The terms, covenants and conditions
herein contained shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto. Buyer may not assign Buyer's
rights hereunder to any party other than a wholly owned subsidiary of Buyer
without Seller's consent. No such assignment shall relieve Buyer named herein
of any liability to Seller.
23. ENTIRE AGREEMENT. This Agreement contains all of the
covenants, conditions and agreements between the parties and shall supersede
all prior correspondence, agreements and understandings, both verbal and
written. The parties intend that this Agreement constitute the complete and
exclusive statement of its terms and that no extrinsic evidence may be
introduced in any proceeding involving this Agreement.
24. ATTORNEYS' FEES. In the event of any litigation regarding the
rights and obligations under this Agreement or in the Escrow Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees and court
costs. Each party shall bear its own attorneys, fees in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated hereunder.
25. NOTICES. All notices required to be given pursuant to the
terms hereof shall be in writing and delivered by hand delivery, in which case
notice shall be deemed given on the day of delivery, or by overnight delivery
service (such as Federal Express) or via facsimile transmission (with
confirmation copy sent by overnight delivery service), in which case notice
shall be deemed given on the day after the day sent, addressed to Seller at
Seller's Address, with a courtesy copy to Myrna Putziger, Esq., Rubin and
Rudman, 50 Rowes Wharf, Boston, Massachusetts 02110, Facsimile (617) 439-9556;
and to Buyer at Buyer's Address, with a courtesy copy Clarence W. Olmstead,
Jr., Esquire, Shearman & Sterling, 153 East 53rd Street, New York, New York
10022, Facsimile (212) 848-5252. The foregoing addresses may be changed by
written notice to the other party as provided herein.
26. EXHIBITS AND DEFINED TERMS. All exhibits attached hereto are
incorporated herein by reference thereto. All of the terms and definitions set
forth in the Defined Terms section are incorporated in this Agreement by
reference thereto.
27. TIME. Time is of the essence of every provision herein
contained. When the last day for the performance of any act
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<PAGE> 38
permitted or required hereunder falls on any day which is not a business day in
the City of Boston, Massachusetts, such act may be performed on the next
business day in said city. When an act must be form or a notice given by the
end of a specified day, such act must be performed or such notice given by 6:00
p.m. in the City of Boston, Massachusetts.
28. STANDSTILL PERIOD. During the Review Period, Seller will not
directly or indirectly solicit, provide any information to, engage in
discussions or negotiations with, or enter into any agreement or understanding
with any person, entity or group, concerning sale of the Property or interests
therein, or any similar transaction, provided, however that the foregoing shall
not restrict Seller's right to respond to any unsolicited offer so long as such
response does not entail any such negotiation or the entering into any such
agreement or understanding.
29. APPLICABLE LAW. This Agreement shall be governed by the laws
of the Commonwealth of Massachusetts.
30. NO ORAL MODIFICATION OR WAIVER. This Agreement may not be
changed or amended orally, but only by an agreement in writing. No waiver
shall be effective hereunder unless given in writing, and waiver shall not be
inferred from any conduct of either party.
31. NO RECORDING. Buyer agrees that it shall not record this
Agreement or any summary of the provisions thereof with the Suffolk Registry of
Deeds. Any such recording shall automatically render this Agreement null and
void.
32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
33. CAPTIONS. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope,
meaning or intent of this Agreement.
34. SEVERABILITY. The invalidation or unenforceability in any
particular circumstance of any of the provisions of this Agreement shall in no
way affect any of the other provisions hereof, which shall remain in full force
and effect.
35. NO JOINT VENTURE. This Agreement shall not be construed as in
any way establishing a partnership, joint venture, express or implied agency,
or employer-employee relationship between Buyer and Seller.
36. NO THIRD PARTY BENEFICIARIES. This Agreement is for
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<PAGE> 39
the sole benefit of the parties hereto, their respective successors and
permitted assigns, and no other person or entity shall be entitled to rely upon
or receive any benefit from this Agreement or any term hereof.
37. LIMITATION ON PERSONAL LIABILITY.
a. Except as expressly set forth in Section 37.b, no
Trustee of Seller, and no joint venture partner of Seller's Beneficiary, no
general or limited partner of any partnership which is a joint venture partner
in Seller's Beneficiary, and no officer, director, or stockholder of any
corporation which is a partner at any tier in Seller's Beneficiary, no
disclosed or undisclosed principal of Seller, and no person or entity in any
way affiliated with Seller shall have any personal liability with respect to
this Agreement, any instrument delivered by Seller at Closing, or the
transaction contemplated hereby, nor shall the property of any such person or
entity be subject to attachment, levy, execution or other judicial process.
b. Notwithstanding the provisions of Section 37.a,
Seller's Beneficiary, the joint venture partners of Seller's Beneficiary, and
Jaymont (U.S.A.) Incorporated (collectively, the "Responsible Parties"), shall
be liable for the obligations of Seller hereunder, provided, however, that the
aggregate liability of the Responsible Parties shall not exceed Two Million and
00/100 Dollars ($2,000,000.00); provided that in the case of damages arising by
reason of Seller's default as described in Section ii.b(2) hereof, such
aggregate liability shall not exceed Five Million and 00/100 Dollars
($5,000,000.00).
38. EXECUTION. The submission of this Agreement for examination
does not constitute an offer by or to either party. This Agreement shall be
effective and binding only after due execution and delivery by the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed one or more
copies of this Agreement under seal the day and year first above written.
"SELLER"
/s/ MARK S. JAMES
--------------------------------------
Mark S. James as Trustee of Lincoln
Summer Realty Trust, and not
individually
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<PAGE> 40
"BUYER"
CORNERSTONE PROPERTIES INC.
By: /s/ FRANCIS H. SHIELDS, JR.
------------------------------
By: /s/ SCOTT M. DALRYMPLE
------------------------------
The undersigned Jaymont (U.S.A.) Incorporated, a Delaware corporation,
general partner of 125 Summer Associates Limited Partnership, a Massachusetts
limited partnership which is a venturer in Seller's Beneficiary, joins in the
foregoing Agreement for the limited purpose of agreeing to the provisions of
Section 37.b thereof, and agrees that Seller may assert claims arising under
the foregoing Agreement, to the extent provided in said Section 37.b, directly
against Jaymont (U.S.A.) Incorporated as though it were the "Seller" under the
Agreement.
JAYMONT (U.S.A.) INCORPORATED
By: /s/ RICHARD LOVELL
-------------------------------
Treasurer
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<PAGE> 41
EXHIBIT A
LAND DESCRIPTION
PARCEL I
That certain parcel of land with the buildings thereon in Boston, Suffolk
County, Massachusetts shown on a plan entitled "Plan of Land, Boston, Mass."
dated September 17, 1984 prepared by Harry R. Feldman, Inc., Revised January
24, 1985, recorded with Suffolk Registry of Deeds on February 1, 1985 with
Instrument No. 227, in Book 11385, Page 112, bounded and described according to
said plan as follows:
<TABLE>
<S> <C>
NORTHERLY by Summer Street by three lines measuring twenty-seven and 19/100 (27.19) feet, sixty-one and 22/100
(61.22) feet, and one hundred three and 92/100 (103.92) feet;
EASTERLY by South Street one hundred seventeen and 48/100 (117.48) feet;
SOUTHERLY by land now or formerly of the Commonwealth of Massachusetts one hundred seven and 89/100 (107.89)
feet;
'EASTERLY by said land now or formerly of the Commonwealth of Massachusetts fifty-eight and 47/100 (58.47) feet;
SOUTHERLY by land now or formerly of Myer C. & Frances Handle and Charlotta Rosenberg, Trustees by two lines
measuring forty-two and 56/100 (42.56) feet, 21/100 (0.21) feet and thirty-seven and 98/100 (37.98)
feet;
WESTERLY by Lincoln Street one hundred eighty-four and 48/100 (184.48) feet.
</TABLE>
PARCEL II
A certain parcel of land located in Boston, Suffolk County, Massachusetts known
and numbered as 34-38 Lincoln Street and shown as Parcel 15-RT-5 on a plan of
land shown on an Order of Taking from the Commonwealth of Massachusetts for the
Department of Public Works dated December 22, 1954 and recorded on December 24,
1954 in the Suffolk Registry of Deeds, Book 7020, Page 271, said parcel being
more particularly bounded and described as follows:
WESTERLY by Lincoln Street - 19 feet;
<PAGE> 42
<TABLE>
<S> <C>
NORTHERLY by property now or formerly of 30 Lincoln Street Trust - 81 feet; and
SOUTHEASTERLY
to
SOUTHWESTERLY in three courses - 17.00 feet, 14.60 feet, and by an arc with the length of 40.83 feet and a radius of
20 feet, all as shown on said Plan.
</TABLE>
-2-
<PAGE> 43
EXHIBIT B
Form of Deed
QUITCLAIM DEED
MICHAEL C. FONG, OSAMA EL HADDAD, AND MARK S. JAMES as Trustees of
LINCOLN SUMMER REALTY TRUST under Declaration of Trust dated March 18, 1986,
recorded with the Suffolk Registry of Deeds in Book 12355, Page 111, as
amended, and not individually, having a place of business at 125 Summer Street,
Boston, Suffolk County, Massachusetts, in consideration of One Hundred Five
Million and 00/100 Dollars ($105,000,000.00) paid, grants to CORNERSTONE
PROPERTIES INC., a Nevada corporation(1) having a place of business at 31 West
52nd Street, Suite 1600, New York, New York, with QUITCLAIM COVENANTS, the land
with the buildings and other improvements thereon in Boston, Suffolk County,
Massachusetts known and numbered as 125 Summer Street, and more particularly
described as follows:
PARCEL I
That certain parcel of land with the buildings thereon in Boston, Suffolk
County, Massachusetts shown on a plan entitled "Plan of Land, Boston, Mass."
dated September 17, 1984 prepared by Harry R. Feldman, Inc., Revised January
24, 1985, recorded with Suffolk Registry of Deeds on February 1, 1985 with
Instrument No. 227, in Book 11385, Page 112, bounded and described according to
said plan as follows:
<TABLE>
<S> <C>
NORTHERLY by Summer Street by three lines measuring twenty-seven and 19/100 (27.19) feet, sixty-one and 22/100
(61.22) feet, and one hundred three and 92/100 (103.92) feet;
EASTERLY by South Street one hundred seventeen and 48/100 (117.48) feet;
SOUTHERLY by land now or formerly of the Commonwealth of Massachusetts one hundred seven and 89/100 (107.89)
feet;
EASTERLY by said land now or formerly of the Commonwealth of Massachusetts fifty-eight and 47/100 (58.47) feet;
</TABLE>
- --------------------
(1) or any assignee permitted by Section 22 of the Agreement.
<PAGE> 44
<TABLE>
<S> <C>
SOUTHERLY by land now or formerly of Myer C. & Frances Handle and Charlotta Rosenberg, Trustees by two lines
measuring forty-two and 56/100 (42.56) feet, 21/100 (0.21) feet and thirty-seven and 98/100 (37.98)
feet;
WESTERLY by Lincoln Street one hundred eighty-four and 48/100 (184.48) feet.
</TABLE>
PARCEL II
A certain parcel of land located in Boston, Suffolk County, Massachusetts known
and numbered as 34-38 Lincoln Street and shown as Parcel 15-RT-5 on a plan of
land shown on an Order of Taking from the Commonwealth of Massachusetts for the
Department of Public Works dated December 22, 1954 and recorded on December 24,
1954 in the Suffolk Registry of Deeds, Book 7020, Page 271, said parcel being
more particularly bounded and described as follows:
<TABLE>
<S> <C>
WESTERLY by Lincoln Street - 19 feet;
NORTHERLY by property now or formerly of 30 Lincoln Street Trust - 81 feet; and
SOUTHEASTERLY
to
SOUTHWESTERLY in three courses - 17.00 feet, 14.60 feet, and by an arc with the length of 40.83 feet and a radius of
20 feet, all as shown on said Plan.
</TABLE>
together with all rights and interests appurtenant thereto, including, without
limitation, any water and mineral rights, development rights, air rights,
easements and rights-of-way.
The said premises are conveyed subject to encumbrances of record to
the extent in force and effect.
For Grantor's title, see:
Quitclaim Deed from 125 Summer Street Corporation to Grantor herein
dated December 23, 1986, recorded with Suffolk Registry of Deeds in
Book 13279, Page 224; and
Quitclaim Deed from Joseph N. Resha and William C. Bradford to Grantor
herein dated March 18, 1986, recorded with Suffolk Registry of Deeds
in Book _____, Page ____.
-2-
<PAGE> 45
Executed under seal this ___ day of November, 1995.
--------------------------------------
Mark S. James as Trustee of Lincoln
Summer Realty Trust, and not
individually
State of: ______________)
) ss.
County of: _____________)
On this ____ day of November, 1995 before me personally appeared Mark
S. James as Trustee of Lincoln Summer Realty Trust under Declaration of Trust
dated March 18, 1986, recorded with the Suffolk Registry of Deeds in Book
12355, Page 111, as amended, and not individually who, being duly sworn, did
say that the foregoing instrument was signed in by him as Trustee as aforesaid
and that said instrument was his free act and deed.
----------------------------------
Notary Public
My Commission Expires:
-3-
<PAGE> 46
EXHIBIT C
Form of Lease Assignment
ASSIGNMENT AND ASSUMPTION OF LEASES AND TENANCIES
125 SUMMER STREET
BOSTON, MASSACHUSETTS
This Assignment and Assumption of Leases and Tenancies (this
"Assignment") is made as of the ___th day of November, 1995 by and between
Michael C. Fong, Osama El-Haddad, and Mark S. James as Trustees of Lincoln
Summer Realty Trust under Declaration of Trust dated March 18, 1986, recorded
with the Suffolk Registry of Deeds in Book 12355, Page 111, as amended, and not
individually (the "Assignor"), and Cornerstone Properties Inc., a Nevada
corporation(1) (the "Assignee") .
In connection with the conveyance of certain property owned by
Assignor known and numbered as 125 Summer Street, Boston, Suffolk County,
Commonwealth of Massachusetts, which property is more particularly described in
SCHEDULE I attached hereto and made a part hereof (the "Property"), and in
consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Assignor hereby transfers and assigns to the Assignee all of the Assignor's
right, title and interest in and to those certain leases which are described on
the schedule attached hereto as SCHEDULE II and made a part hereof
(collectively, the "Leases"), and all of the rights, benefits and privileges
thereunder, including without limitation the right to receive rentals
thereunder from and after the date hereof, and the right to receive the
proceeds of the exercise of any option to purchase contained therein, whenever
exercised, together with all security deposits, advance rentals, and cleaning
deposits (collectively, the "Deposits") whether such Deposits are set forth in
said SCHEDULE II or not, and all guarantees, if any, of the Leases.
The Assignor agrees to defend with counsel approved by the Assignee,
which approval will not be unreasonably withheld or delayed, save harmless and
indemnify the Assignee from and against all claims, demands, liabilities, costs
and expenses arising out of any obligations of the Assignor under the Leases
arising or occurring prior to the date hereof; provided, however, that the
Assignor's agreement to so defend, save harmless and indemnify the Assignee
shall not extend to claims, demands, liabilities, costs and expenses arising
out of any obligations of
- ------------------
(1) or any assignee permitted by Section 22 of the Agreement.
<PAGE> 47
the Assignor under the Leases arising or occurring prior to the date hereof of
which the Assignee has actual knowledge on the date hereof by reason of the
disclosure of any such claims, demands, liabilities, costs and expenses in any
Tenant Estoppel Certificate delivered by the Assignor to the Assignee from a
tenant under the Leases. The foregoing limitation upon the Assignor's
agreement to defend, indemnify and save harmless shall not affect the liability
of the Assignor for any such claims, demands, liabilities, costs and expenses,
which the Assignee does not hereby assume.
The Assignee hereby accepts the assignment of the Leases set forth
above and hereby assumes all obligations of the Assignor under the Leases first
arising from and after the date hereof, including, without limitation, all
obligations with respect to the Deposits (to the extent delivered by Assignor
to Assignee), and hereby agrees to defend with counsel approved by the
Assignor, which approval will not be unreasonably withheld or delayed, save
harmless and indemnify the Assignor from and against all claims, demands,
liabilities, costs and expenses arising out of any obligations of the Assignee
under the Leases first arising or occurring from and after the date hereof.
In the event of any inconsistency between the terms hereof and the
terms of the Purchase and Sale Agreement dated September __, 1995 between
Assignor and Assignee, the terms of the Purchase and Sale Agreement shall
govern.
This Assignment may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Assignment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns and shall be
governed by the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have executed this Assignment under
seal as of the date first written above.
ASSIGNOR:
Witness:
- ----------------------- ---------------------------------
Mark S. James as Trustee of Lincoln
Summer Realty Trust, and not
individually
-2-
<PAGE> 48
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
Witness:
By:
- ----------------------- --------------------------
Name:
Title:
State of: ______________)
) ss.
County of: _____________)
On this ___ day of November, 1995 before me personally appeared Mark
S. James as Trustee of Lincoln Summer Realty Trust under Declaration of Trust
dated March 18, 1986, recorded with the Suffolk Registry of Deeds in Book
12355, Page 111, as amended, and not individually who, being duly sworn, did
say that the foregoing instrument was signed in by him as Trustee as aforesaid
and that said instrument was his free act and deed.
-------------------------------
Notary Public
My Commission Expires:
-3-
<PAGE> 49
SCHEDULE I
The Property
PARCEL I
That certain parcel of land with the buildings thereon in Boston, Suffolk
County, Massachusetts shown on a plan entitled "Plan of Land, Boston, Mass."
dated September 17, 1984 prepared by Harry R. Feldman, Inc., Revised January
24, 1985, recorded with Suffolk Registry of Deeds on February 1, 1985 with
Instrument No. 227, in Book 11385, Page 112, bounded and described according to
said plan as follows:
<TABLE>
<S> <C>
NORTHERLY by Summer Street by three lines measuring twenty-seven and 19/100 (27.19) feet, sixty-one and 22/100
(61.22) feet, and one hundred three and 92/100 (103.92) feet;
EASTERLY by South Street one hundred seventeen and 48/100 (117.48) feet;
SOUTHERLY by land now or formerly of the Commonwealth of Massachusetts one hundred seven and 89/100 (107.89)
feet;
EASTERLY by said land now or formerly of the Commonwealth of Massachusetts fifty-eight and 47/100 (58.47) feet;
SOUTHERLY by land now or formerly of Myer C. & Frances Handle and Charlotta Rosenberg, Trustees by two lines
measuring forty-two and 56/100 (42.56) feet, 21/100 (0.21) feet and thirty-seven and 98/100 (37.98)
feet;
WESTERLY by Lincoln Street one hundred eighty-four and 48/100 (184.48) feet.
</TABLE>
PARCEL II
A certain parcel of land located in Boston, Suffolk County, Massachusetts known
and numbered as 34-38 Lincoln Street and shown as Parcel 15-RT-5 on a plan of
land shown on an Order of Taking from the Commonwealth of Massachusetts for the
Department of Public Works dated December 22, 1954 and recorded on December 24,
1954 in the Suffolk Registry of Deeds, Book 7020, Page 271, said parcel being
more particularly bounded and described as follows:
-4-
<PAGE> 50
<TABLE>
<S> <C>
WESTERLY by Lincoln Street - 19 feet;
NORTHERLY by property now or formerly of 30 Lincoln Street Trust - 81 feet; and
SOUTHEASTERLY
to
SOUTHWESTERLY in three courses - 17.00 feet, 14.60 feet, and by an arc with the length of 40.83 feet and a radius of
20 feet, all as shown on said Plan.
</TABLE>
-5-
<PAGE> 51
SCHEDULE II
LEASES
SECURITY DEPOSITS AND GUARANTIES
-6-
<PAGE> 52
EXHIBIT D
Form of Contract Assignment
CONTRACT RIGHTS ASSIGNMENT
125 SUMMER STREET
BOSTON, MASSACHUSETTS
(SERVICE AND CONSTRUCTION CONTRACTS)
This Contract Rights Assignment (this "Assignment") is made as of the
___th day of November, 1995 by and between Michael C. Fong, Osama El Haddad,
and Mark S. James as Trustees of Lincoln Summer Realty Trust under Declaration
of Trust dated March 18 1986, recorded with the Suffolk Registry of Deeds in
Book 12355, Page 111, as amended, and not individually (the "Assignor"), and
Cornerstone Properties Inc., a Nevada corporation(1) (the "Assignee").
In connection with the conveyance of certain property owned by
Assignor known and numbered as 125 Summer Street, Boston, Suffolk County,
Commonwealth of Massachusetts, which property is more particularly described in
SCHEDULE I attached hereto and made a part hereof (the "Property"), and in
consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor hereby sells, assigns, transfers, grants and conveys unto Assignee all
of Assignor's right, title and interest in and to those certain contracts and
agreements, and all modifications and amendments thereof, listed in SCHEDULE II
attached hereto and made a part hereof (collectively, the "Contracts"), which
Contracts concern,and relate to service, maintenance, supply, construction,
utility, parking and management contracts affecting the construction, use,
ownership, maintenance and/or operation of the Property, together with the
improvements erected thereon, but expressly excluding any leases of any portion
of the Property. Assignor agrees to defend with counsel approved by Assignee,
save harmless and indemnify Assignee from and against all claims, demands,
liabilities, costs, and expenses arising out of any obligations of Assignor
under the Contracts arising or occurring prior to the date hereof.
To have and to hold the same unto Assignee, its successors and
assigns, from and after the date of execution and delivery hereof for all the
rest of any term thereof mentioned in any of the Contracts respectively,
subject to the covenants, conditions and provisions also mentioned in each of
the Contracts
- ------------------
(1) or any assignee permitted by Section 22 of the Agreement.
<PAGE> 53
respectively.
Assignee hereby accepts the assignment of the Contracts set forth
above and hereby assumes all obligations of Assignor under the Contracts
(subject to any limitation of liability contained therein) first arising from
and after the date hereof, and hereby agrees to defend with counsel approved by
Assignor, save harmless and indemnify Assignor from and against all claims,
demands, liabilities, costs and expenses arising out of any obligations of
Assignee under the Contracts first arising or occurring from and after the date
hereof.
In the event of any inconsistency between the terms hereof and the
terms of the Purchase and Sale Agreement dated September ___, 1995 between
Assignor and Assignee, the terms of the Purchase and Sale Agreement shall
govern.
This Assignment shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and assigns and shall be
governed by the laws of the Commonwealth of Massachusetts.
This Assignment may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Assignment under
seal as of the date first written above.
ASSIGNOR:
Witness:
- ------------------------------- -------------------------------------
Mark S. James as Trustee of Lincoln
Summer Realty Trust, and not
individually
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
Witness:
By:
- ------------------------------ -------------------------------------
Name:
Title:
-2-
<PAGE> 54
SCHEDULE I
The Property
PARCEL I
That certain parcel of land with the buildings thereon in Boston, Suffolk
County, Massachusetts shown on a plan entitled "Plan of Land, Boston, Mass."
dated September 17, 1984 prepared by Harry R. Feldman, Inc., Revised January
24, 1985, recorded with Suffolk Registry of Deeds on February 1, 1985 with
Instrument No. 227, in Book 11385, Page 112, bounded and described according to
said plan as follows:
<TABLE>
<S> <C>
NORTHERLY by Summer Street by three lines measuring twenty-seven and 19/100 (27.19) feet, sixty-one and 22/100
(61.22) feet, and one hundred three and 92/100 (103.92) feet;
EASTERLY by South Street one hundred seventeen and 48/100 (117.48) feet;
SOUTHERLY by land now or formerly of the Commonwealth of Massachusetts one hundred seven and 89/100 (107.89)
feet;
EASTERLY by said land now or formerly of the Commonwealth of Massachusetts fifty-eight and 47/100 (58.47) feet;
SOUTHERLY by land now or formerly of Myer C. & Frances Handle and Charlotta Rosenberg, Trustees by two lines
measuring forty-two and 56/100 (42.56) feet, 21/100 (0.21) feet and thirty-seven and 98/100 (37.98)
feet;
WESTERLY by Lincoln Street one hundred eighty-four and 48/100 (184.48) feet.
</TABLE>
PARCEL II
A certain parcel of land located in Boston, Suffolk County, Massachusetts known
and numbered as 34-38 Lincoln Street and shown as Parcel 15-RT-5 on a plan of
land shown on an Order of Taking from the Commonwealth of Massachusetts for the
Department of Public Works dated December 22, 1954 and recorded on December 24,
1954 in the Suffolk Registry of Deeds, Book 7020, Page 271, said parcel being
more particularly bounded and described as follows:
-3-
<PAGE> 55
<TABLE>
<S> <C>
WESTERLY by Lincoln Street - 19 feet;
NORTHERLY by property now or formerly of 30 Lincoln Street Trust - 81 feet; and
SOUTHEASTERLY
to
SOUTHWESTERLY in three courses - 17.00 feet, 14.60 feet, and by an arc with the length of 40.83 feet and a radius of
20 feet, all as shown on said Plan.
</TABLE>
-4-
<PAGE> 56
SCHEDULE II
Approved Contracts
-5-
<PAGE> 57
EXHIBIT E
Form of General Instrument of Transfer
GENERAL INSTRUMENT OF TRANSFER
125 SUMMER STREET
BOSTON, MASSACHUSETTS
This General Instrument of Transfer (this "Instrument") is made as of
the ___th day of November, 1995 by and between Michael C. Fong, Osama El
Haddad, and Mark S. James as Trustees of Lincoln Summer Realty Trust under
Declaration of Trust dated March 18, 1986, recorded with the Suffolk Registry
of Deeds in Book 12355, Page 1ll, as amended, and not individually (the
"Assignor"), and Cornerstone Properties Inc., a Nevada corporation(1) (the
"Assignee") .
In connection with the conveyance of certain property owned by
Assignor known and numbered as 125 Summer Street, Boston, Suffolk County,
Commonwealth of Massachusetts, which property is more particularly described in
SCHEDULE I attached hereto and made a part hereof (the "Property"),. and in
consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor hereby sells, assigns, transfers, grants and conveys unto Assignee,
all of Assignor's right, title and interest in and to the following
(collectively, the "Interests"):
1. All appurtenances and privileges belonging to the Property and the
rights, benefits and privileges of owning and operating the same;
2. All rights, entitlements and/or approvals to develop the Property
which have been or may hereafter be granted by governmental bodies
having jurisdiction or authority over the Property, and any
certificates evidencing compliance therewith;
3. All variances, conditional use permits, exceptions, rezonings, general
plan amendments, parcel maps, development agreements, permits,
licenses, and applications, including without limitation all
development impact project applications, approvals, and agreements,
planned development area applications and agreements and any other
governmental approvals and consents (if any) relating to the Property;
- ------------------
(1) or any assignee permitted by Section 22 of the Agreement.
<PAGE> 58
4. All guarantees, warranties, indemnities and other instruments giving
rise to any rights or benefits of Assignor in respect of the Property
and all claims and/or causes of action against contractors with
respect to the Property or any part thereof or any buildings,
structures or improvements thereon;
5. All certifications made by any architect, engineer, surveyor or other
design professional with respect to the compliance of the Property or
any portion thereof with zoning, permitting, environmental or other
laws and regulations.
6. All trademarks, tradenames, service marks, logos and any and all
derivations therefrom relating to or associated with the Property and
all telephone numbers (to the extent transferable) used in connection
with the operation of the Property, provided, however, that the name
"Jaymont" and any company names including such name, are not included
in the Interests;
7. All bonds, construction contracts, architect's contracts, licenses,
applications, permits, plans, drawings, specifications, "as-built"
plans and/or surveys, site plans, maps, and any other plans relating
to the construction of the improvements on the Property;
8. All engineering, soils, ground water and environmental reports and
other technical descriptions and environmental reports concerning the
Property;
9. All tangible personal property interests of Seller in any way relating
directly or indirectly to the Property, including without limitation
all furniture, fixtures, equipment, machinery, furnishings, carpets,
drapes, blinds and mini-blinds, service and maintenance equipment,
tools, signs, telephones and other communication equipment, intercom
equipment and systems, vehicles and replacement parts (excluding any
of the foregoing which are leased from third parties), including
without limitation the items specified on SCHEDULE II attached hereto
and made a part hereof (the "Personal Property"); and
10. [If the Property or any part thereof is taken by exercise of the power
of eminent domain prior to the Closing Date, and therefore Section 19
is applicable at the time of Closing]:
All awards recovered or recoverable on account of a taking by the
exercise of the power of eminent domain by [name of taking authority]
as described in the order of taking dated [date] recorded with the
Suffolk Registry of Deeds in Book____, Page ____; and
-2-
<PAGE> 59
11. Any and all other tangible, intangible and mixed property interests of
Assignor (exclusive of any contract rights) in any way relating
directly or indirectly to the Property.
Assignor hereby covenants with Assignee that: (i) Assignor is the
lawful owner of the Personal Property has good right to sell the same; (ii) all
of the Interests are free from all adverse claims or encumbrances; and (iii)
Assignor will warrant and defend the Interests against the lawful claims and
demands of all persons.
Assignee hereby accepts the foregoing transfer from Assignor of the
above-assigned Interests.
This Instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and assigns and shall be
governed by the laws of the Commonwealth of Massachusetts.
This Instrument may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Assignment under
seal as of the date first written above.
ASSIGNOR:
Witness:
- ------------------------------ ----------------------------------
Mark S. James as Trustee of Lincoln
Summer Realty Trust, and not
individually
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
Witness:
By:
- ----------------------------- --------------------------------
Name:
Title:
-3-
<PAGE> 60
SCHEDULE I
The Property
PARCEL I
That certain parcel of land with the buildings thereon in Boston, Suffolk
County, Massachusetts shown on a plan entitled "Plan of Land, Boston, Mass."
dated September 17, 1984 prepared by Harry R. Feldman, Inc., Revised January
24, 1985, recorded with Suffolk Registry of Deeds on February 1, 1985 with
Instrument No. 227, in Book 11385, Page 112, bounded and described according to
said plan as follows:
<TABLE>
<S> <C>
NORTHERLY by Summer Street by three lines measuring twenty-seven and 19/100 (27.19) feet, sixty-one and 22/100
(61.22) feet, and one hundred three and 92/100 (103.92) feet;
EASTERLY by South Street one hundred seventeen and 48/100 (117.48) feet;
SOUTHERLY by land now or formerly of the Commonwealth of Massachusetts one hundred seven and 89/100 (107.89)
feet;
EASTERLY by said land now or formerly of the Commonwealth of Massachusetts fifty-eight and 47/100 (58.47) feet;
SOUTHERLY by land now or formerly of Myer C. & Frances Handle and Charlotta Rosenberg, Trustees by two lines
measuring forty-two and 56/100 (42.56) feet, 21/100 (0.21) feet and thirty-seven and 98/100 (37.98)
feet;
WESTERLY by Lincoln Street one hundred eighty-four and 48/100 (184.48) feet.
</TABLE>
PARCEL II
A certain parcel of land located in Boston, Suffolk County, Massachusetts known
and numbered as 34-38 Lincoln Street and shown as Parcel 15-RT-5 on a plan of
land shown on an Order of Taking from the Commonwealth of Massachusetts for the
Department of Public Works dated December 22, 1954 and recorded on December 24,
1954 in the Suffolk Registry of Deeds, Book 7020, Page 271, said parcel being
more particularly bounded and described as follows:
-4-
<PAGE> 61
<TABLE>
<S> <C>
WESTERLY by Lincoln Street - 19 feet;
NORTHERLY by property now or formerly of 30 Lincoln Street Trust - 81 feet; and
SOUTHEASTERLY
to
SOUTHWESTERLY in three courses - 17.00 feet, 14.60 feet, and by an arc with the length of 40.83 feet and a radius of
20 feet, all as shown on said Plan.
</TABLE>
-5-
<PAGE> 62
SCHEDULE II
Personal Property
-6-
<PAGE> 63
JAYMONT 125 SUMMER VENTURE
21-Sep-95
INVENTORY OF NON-CONSUMABLE ITEMS
<TABLE>
<CAPTION>
ITEM
QUANTITY DESCRIPTION
- ---------------------------
<S> <C>
37 SMOKE DETECTOR
1 BAND SAW
1 PIPE VICE
1 1/2" BENDER
2 ROTO SPLIT
1 SIX FOOT EXTENSION CORD
1 HYDRAULIC PUNCH (1/2"-4")
1 WIPE CART
1 CONDUIT RACK
1 3/4" BENDER
1 BENDER HANDLE (845)
1 50' SNAKE (1/8")
1 100' SNAKE (1/8")
1 100' SNAKE (1/4")
1 1/2" HAMMER DRILL
1 BATTERY (48-11-0080)
1 3/8" HAMMER DRILL
1 SCREW GUN
1 BENDER HANDLE (846)
3 FLUKE MULTI METER
1 TAPE MEASURE
1 HOLE SAW KIT
1 RACHET CABLE CUTTER
1 GREENLEE 603
1 SAWZALL
1 AMPROBE ACD-4
1 SPERRY 530
1 AMPROBE CT 326 B
1 AMPROBE PAVA -37
1 AMPROBE RAL-4R
1 1" BENDER
1 1 1/4" BENDER
2 HD 502-10
3 KNOPP TESTER
1 STEAM POWER WASHER
12 SMOKE DETECTORS
6 BRASS PORTABLE POSTS
6 RUBBER FLOOR PROTECTORS
5 6' LENGTHS OF VELVET ROPE
20 POLISHED BRASS ROPE ENDS
1 LONG CHAIN NOSE PLIERS
1 SET ALLEN WRENCHES
2 8" SIDE CUT PLIERS
1 LENOX HACKSAW
1 PUNCH & CHISEL SET
1 8" ADJUST WRENCH
1 20" ADJUST WRENCH
1 10" PIPE WRENCH
1 12" PIPE WRENCH
1 14" PIPE WRENCH
1 12" ADJUST WRENCH
</TABLE>
<PAGE> 64
<TABLE>
<S> <C>
1 SET NUT DRIVERS
1 CHEST
1 WHEEL DRESSER
1 ROTO ZIP MACHINE
1 BENCH GRINDER
2 SCAFFOLD FRAMES
1 3LB DRILLING HAMMER
1 9" MAG ALUM TORP LEVEL
2 24' PROF ALUM LEVEL
1 FLARING TOOL
3 TOILET PLUNGERS
2 RETACT UTILITY KNIFE
1 STANLEY CLAW HAMMER
1 10" PLIERS
2 12" TOMGUE & GROOVE PLIERS
2 25 PERSON FIRST AID KIT
2 YELLOW DROP LIGHT
1 DUST PAN & BRUSH
3 FLASHLIGHT
4 24" FLOOR SQUEEGE
2 18" BREAKER PUSH BROOM
1 SERVICE CART
6 2" LAM PIN TUMBLER PADLOCK
1 NUISANCE DUST MASK
3 HEARING PROTECTOR
2 6'WOOD STEP LADDER
1 AIR HOSE
2 8'WOOD STEP LADDER
1 4" BENCH VISE
1 10'WOOD STEP LADDER
1 20' ALUM EXT LADDER
2 24' ALUM EXT LADDER
1 RELEASE FITTING
1 50' SNAKE
2 TOOL CABINET
1 WOODEN DOLLY
1 DEEP SOCKET SET
1 1/2 SOCKET SET
1 100PC STANLEY SET
1 6 PERSON LOCKER
2 VOLTAGE TESTER
12 HARD HAT
1 DUSTER/DUST PAN
3 SAFETY GOGGLES
1 PIPE WRENCH
3 HEARING PPOTECTOR
1 WORK BENCH
2 EYE WASH STATION
1 55 GAL INDUSTR VAC.
2 THERMOMETERS
1 5 GAL OSHA GAS CAN
8 SHELF UNITS
1 TOOL CABINET
1 DRIVE SOCKET
1 6" CORROGATED SHELF BINS
2 5/16 X 1/2 D SOCKET
1 3/8 X 1/2 D SOCKET
1 7/16 X 1/2 D SOCKE7
1 5/16 COMBO WRENCH
1 3/8 COMBO WRENCH
</TABLE>
<PAGE> 65
<TABLE>
<S> <C>
3 7/16 COMBO WRENCH
1 1 1/2 COMBO WRENCH
12 28" SAFETY CONE
2 CRUSH PROOF HOSE
2 FUNNEL
2 GREENLEE THERMOMETER
1 WOODEN DOLLY
1 PROBE
1 PLATFORM TRUCK
1 HOSE REEL
6 24" TRAFFIC CONES
3 44 GAL LIDS
3 44 GAL TRASH CONT
1 FLOOR JACK
5 5OLB. C02 WHEEL UNIT
1 UNIT HEATER
1 DREMIL GRINDER
1 UNIT HEATER
3 FLOURESCENT LANTERN
2 HAND TRUCK
1 PCV DRUM PUMP
3 RUBBER HOSE
1 POLOROID JOBPRO CAMERA
1 GOGGLES
2 SCREWDRIVER
2 SUMP PUMPS
1 PHILLIPS SCREWDRIVER
1 SCREWDRIVER
1 PHILLIPS SCREWDRIVER
2 RUBBER HOSE
1 DRILL TE-54
1 BIT TE-Y-GB 2"
1 BIT TE-FY-GB 3"
1 DRILL TE-5
1 BIT PACKAGE
1 BIT PACKAGE
1 RACHET
1 HEX KEY SET
4 ASSORTED WRENCHES
1 BIT SET
1 SNIPS
1 CUTTING SHEARS
1 LEVEL
1 DRILL BIT SET
1 SCREWDRIVER SET
1 JIG SAW
1 JIG SAW BLADES
1 LADDER STABILIZER
2 POWER STRIP
1 LIGHTMETER
1 BALOMETER
1 LONG NOSE PLIERS
1 INSUL.ADTUSTABLE PLIERS
1 SCREWDRIVER SET
1 EMERGENCY LANTERN
1 PAIR HD GLOVES
1 PAIR ELE. SHEARS
1 AIRLESS SPRAYER
1 PUNCH SET
1 BULB REMOVER
</TABLE>
<PAGE> 66
<TABLE>
<S> <C>
1 HAND HOIST
1 2-GAL.GAS SAFETY CAN
1 TIME CLOCK/STAMP
1 CARPET-ELEVATOR BANKS
1 CARPET-MAIN LOBBY
1 CARPET-GALLERIA AREA
2 SINGLE DESK CHARGER
3 6 UNIT PACK CHARGER
9 FUJTSU UHF PORT RADIO
7 LEATHER HOLDING CASE
5 FUJITSU BATTERIES
11 MOTOROLA P110 W/CKARGERS
1 ID HORZ SYS 110 CAMERA
2 CORDLESS DRILL
1 9V BATTERY
1 R. A. ATTACHMENT
1 PULLMAN WET/DRY VAC
1 SNOW BLOWER, ARIENS SHP
1 PERSONNEL LIFT
1 WELCOME SIGNS
1 FAX MACHINE
1 POWER GARAGE SWEEPER
1 DOUBLE PRINTER BK/WL
</TABLE>
<PAGE> 67
JAYMONT MANAGEMENT
FURNITURE & EQUIPMENT
<TABLE>
<S> <C>
3 WOODEN PEDESTALS
13 18" PLANTERS
2 24" PLANTERS
2 TABLE/CENTER DRAWER 30x60
3 SWIVEL CHAIR-BEIGE FABRIC
2 4 DRAWER LEGAL FILE
1 TAN/WALNUT TOP
1 KIMBALL DESK R/RETURN
1 KIMBALL DESK L/RETURN
4 LATERAL FILES
1 TABLE LAM. TOP
3 LATERAL FILE
3 TABLE/CENTER DRAWER
2 5 DRAWER FILE
1 CONF TABLE
1 BASE
1 FILE TOP
1 HIGHBACK BRN. LEATHER CHAIR
8 CONF ROOM CHAIR
4 SIDE CHAIRS-BEIGE FABRIC
1 ROUND TABLE
1 VISUAL BOARD
1 FILE SERVER
1 LASER JET SERIES 2
1 5280 WORKSTATION
1 915 W/1.2 MB FLOPPY
2 SHIVA NETMODEM/E
1 CONTROLLER
1 1000 FT CABLE
2 DIRECTORY COMP/DISPLAYS
1 CREDENZA
2 DESKS
2 FABRIC CHAIRS
1 HARDWOOD CABINET
1 HIGHBACK-BLUE FABRIC
1 IBM TYPEWRITER
3 CLEAR CLIPBOARDS
1 FILE STARTER
2 SCISSORS
2 SURGE OUTLET
1 HEWLETT PACKARD COPIER
1 CANNON MPID CALCULATOR
1 TEXAS INSTRUMENTS TI-35X CALCULATOR
1 SHARP EL-2192G CALCULATOR
1 SHARPSHARP EL-1197M CALCULATOR
</TABLE>
<PAGE> 68
EXHIBIT F
Form of Escrow agreement
To: Ticor Title Insurance Company
Re: Purchase and Sale Agreement dated September ___, 1995 (the
"Purchase Agreement") by and between Michael C. Fong, Osama El
Haddad, and Mark S. James as Trustees of Lincoln Summer Realty
Trust under Declaration of Trust dated March 18, 1986,
recorded with the Suffolk Registry of Deeds in Book 12355,
Page 111, as amended through and including Amended and
Restated Declaration of Trust dated September 29, 1994,
recorded with Suffolk Registry of Deeds in Book 19365, Page
211, and not individually ("Seller"), and Cornerstone
Properties Inc., a Nevada corporation ("Buyer"), with respect
to the purchase and sale of 125 Summer Street, Boston,
Massachusetts.
Date: September ___, 1995
Gentlemen:
Ticor Title Insurance Company is hereby requested to act as escrow
holder for the above referenced transaction pursuant to and in accordance with
this Escrow Agreement (this "Agreement"). Capitalized terms used herein
without definition which are defined in the Purchase Agreement, a copy of which
is delivered herewith, shall have the meanings ascribed to them therein.
Without limiting the generality of the foregoing, Ticor Title Insurance Company
is hereby deemed to be the "Escrow Holder" within the meaning of the Purchase
Agreement.
1. Buyer hereby deposits with Escrow Holder the sum of Five
Million and 00/100 Dollars ($5,000,000.00) (the "Deposit") pursuant to the
Purchase Agreement. The Deposit is to be held in an interest-bearing money
market type account with State Street Bank and Trust Company or other bank
acceptable to Buyer and Seller. Interest earned on the Deposit shall become a
part thereof and shall be payable to the party receiving the Deposit.
2. Buyer's tax identification number is 74-2170858. Seller's tax
identification number is 13-3461955. Wiring instructions for each of Escrow
Holder, Buyer and Seller are attached hereto as Schedule A.
3. a. If Buyer shall terminate the Purchase Agreement on or
before October 11, 1995, Buyer may so notify Escrow Holder in
<PAGE> 69
writing, with a copy of such notice to Seller. Forthwith upon receipt of such
notice, Escrow Holder shall pay over the Deposit to Buyer, whereupon this
Agreement shall terminate. Seller waives any right to contest the return of
the Deposit on or before October 11, 1995.
b. If Buyer shall terminate the Purchase Agreement or
the Purchase Agreement shall terminate in accordance with its terms after
October 11, 1995 other than pursuant to Section ll.a thereof, Buyer may so
notify Escrow Holder in writing (the "Buyer's Deposit Notice"), with a copy of
such notice to Seller. If within ten (10) days after the date of the Buyer's
Deposit Notice Seller has not given Escrow Holder a Dispute Notice in
accordance with in Section 6 below, Escrow Holder shall pay over the Deposit to
Buyer, whereupon this Agreement shall terminate.
4. If Seller shall have a right to retain the Deposit pursuant to
Section ii,a of the Purchase Agreement by reason of Buyer's default, Seller may
so notify Escrow Holder in writing (the "Seller's Deposit Notice"), with a copy
of such notice to Buyer. If within ten (10) days after the date of the
Seller's Deposit Notice, Buyer has not given Escrow Holder a Dispute Notice in
accordance with Section 6 below, Escrow Holder shall pay over the Deposit to
Seller, whereupon this Agreement shall terminate.
5. Upon the occurrence of the Closing, Buyer and Seller shall
jointly notify Escrow Holder thereof in writing, and Escrow Holder shall
release the Deposit in accordance with such joint notice, whereupon this
Agreement shall terminate.
6. If at any time hereafter either Buyer or Seller (the "Notice
Party") shall deliver to the other (the "Recipient") and to Escrow Holder a
written notice (given in accordance with either Paragraph 3.b or 4 hereof)
asserting that the Notice Party is entitled to the Deposit (a "Demand Notice"),
the Demand Notice shall include a copy of the notice to be given to the
Recipient pursuant to the Purchase Agreement and a statement, on which Escrow
Holder may rely, that the Notice Party has notified the Recipient that the
Notice Party is entitled to the Deposit. Escrow Holder shall, ten (10) days
after receipt of a Demand Notice, deliver the Deposit in accordance with
Section 3.b or Section 4 hereof, as applicable, unless within said period of
ten (10) days the Recipient shall give written notice to Escrow Holder and the
Notice Party that it disputes the Notice Party's claim to the Deposit (a
"Dispute Notice"), in which case Escrow Holder shall retain the Deposit until
it receives written instructions executed by both Seller and Buyer as to the
disposition and disbursement of the Deposit, or until ordered by final court
order, decree or judgment, which has not been appealed and for which the appeal
period has expired, to deliver the Deposit to a particular party, in which
event the Deposit shall be delivered in accordance with such notice,
instruction,
-2-
<PAGE> 70
order, decree or judgment.
7. The duties of the Escrow Holder shall be determined solely by
the express provisions of this Agreement and are purely ministerial in nature.
The Escrow Holder is not charging a fee for performing its services under this
Agreement. if there is any dispute between the partes hereto as to whether or
not the Escrow Holder is obligated to disburse or release the Deposit held
under and pursuant to this Agreement, the Escrow Holder shall not be obligated
to make such disbursement or delivery, but in such event shall hold the Deposit
until receipt by the Escrow Holder of (i) an authorization in writing signed by
all persons having an interest in said dispute, directing the disposition of
the Deposit, or (ii) a final judgment regarding the rights of the parties in an
appropriate legal proceeding which final judgement has not been appealed and
with respect to which the time to appeal has expired. The Escrow Holder is
authorized by Buyer and Seller to interplead all interested parties in any
court having jurisdiction and to deposit the Deposit with the clerk of any such
court, and thereupon the Escrow Holder shall be fully relieved and discharged
of any further responsibility under this Agreement.
8. Upon disbursement of the Deposit in accordance with this
Agreement, all rights and obligations of the Escrow Holder shall be deemed to
have been satisfied and Buyer and Seller shall have no recourse against the
Escrow Holder.
9. The Escrow Holder shall not be liable for any mistake
of fact or error of judgment or any acts or omissions of any kind unless caused
by its willful misconduct or gross negligence. The parties hereto each release
the Escrow Holder from liability for any act done or omitted to be done by the
Escrow Holder in good faith in the performance of its obligations and duties
hereunder. The Escrow Holder shall be entitled to rely on any instrument or
signature believed by it to be genuine and may assume that any person
purporting to give any writing, notice, or instruction in connection with this
Agreement is duly authorized to do so by the party on whose behalf of such
writing, notice, or instruction is given.
10. The parties hereby acknowledge and agree that Federal Deposit
Insurance for the Deposit, it any, is limited to a cumulative maximum amount of
$100,000.00 for each individual depositor for all of the depositor's accounts
at the same or related institution, The parties further hereby acknowledge and
agree that certain banking instruments such as, but not limited to, repurchase
agreements and letters of credit, are not covered at all by Federal Deposit
Insurance. The parties acknowledge and agree that the Escrow Holder shall have
no obligation or liability with respect to insuring the Deposit or with respect
to
-3-
<PAGE> 71
the solvency of the depository institution, or otherwise with respect to the
appropriateness of the depository institution for purposes of the deposit(s)
contemplated hereby. Further, the parties understand that the Escrow Holder
assumes no responsibility for, nor will they hold the same liable for, any lose
occurring which arises from the fact that (a) the amount of the account or
accounts contemplated hereby may cause the aggregate amount of any individual
depositors account or accounts to exceed $100,000.00, (b) that this excess
amount is not insured by the Federal Deposit Insurance Corporation, or (c) that
Federal Deposit Insurance is not available on certain types of bank
instruments.
11. The undersigned hereby jointly and severally indemnify the
Escrow Holder for and hold it harmless against any lose, liability, or expense
incurred without negligence or bad faith on the part of the Escrow Holder
arising out of or in connection with the acceptance of or the performance of
its duties under this Agreement (an "Indemnified Expense"), as well as the
costs and expenses, including reasonable attorneys$ fees and disbursements, of
defending against any claim or liability arising under this Agreement;
provided, however, that if the Indemnified Expense is incurred because of the
fault of either the Buyer or Seller then the party at fault shall be
responsible for the cost.
12. This Agreement shall be construed in accordance with the laws
of The Commonwealth of Massachusetts.
13. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
14. This Agreement may not be changed or modified except as agreed
in a writing signed by each of the parties hereto. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
heirs, successors and assigns.
15. All notices required to be given pursuant to the terms hereof
shall be in writing and delivered by hand delivery, in which case notice shall
be deemed given on the day of delivery, or by overnight delivery service (such
as Federal Express), in which case notice shall be deemed given on the day
after the day sent, addressed as follows: (i) to Seller at Seller's Address,
with a courtesy copy to Myrna Putziger, Esq., Rubin and Rudman, 50 Rowes Wharf,
Boston, Massachusetts 02110, Facsimile (617) 4399556; (ii) to Buyer at Buyer's
Address, with a courtesy copy Clarence W. Olmstead, Jr., Esquire, Shearman &
Sterling, 153 East 53rd Street, New York, New York 10022, Facsimile (212)
848-5252; and (iii) to Escrow Holder at 101 Federal Street, Boston,
Massachusetts 02110, Attention: Terrance Nolan, Facsimile (617)
-4-
<PAGE> 72
261-7641.
16. As between the Buyer and Seller, in the event of any
inconsistency between the terms of this Agreement and the Purchase Agreement,
the terms of the Purchase Agreement shall control.
The foregoing is executed under seal as of the date first above
written.
"SELLER"
-----------------------------------
Mark S. James as Trustee of Lincoln
Summer Realty Trust, and not
individually
"BUYER"
CORNERSTONE PROPERTIES INC.
By:
--------------------------------
-5-
<PAGE> 73
The foregoing is agreed to
as of this _____ day of September, 1995.
TICOR TITLE INSURANCE COMPANY
By:_____________________________
Title:
-6-
<PAGE> 74
SCHEDULE A
ESCROW HOLDER'S WIRING INSTRUCTIONS:
<TABLE>
<S> <C>
Bank: State Street Bank and Trust Company
Boston, Massachusetts
ABA#: 011 000 028
Account: Ticor Title Insurance Company Custodial Escrow Account
Account No.: 68209980
Phone Advise: Francie O'Brien
SELLER'S WIRING INSTRUCTIONS:
Bank: Bankers Trust Company
Wilmington, Delaware
ABA#: 031 100 380
Account: Jaymont (U.S-A.) Incorporated
Account No.: 00501665
BUYER'S WIRING INSTRUCTIONS:
Bank: Deutsche Bank AG New York
ABA#: 026 003 780
Account: Cornerstone Properties Inc.
Account No.: 107015080032
</TABLE>
-7-
<PAGE> 75
EXHIBIT G
DUE DILIGENCE INFORMATION LIST
<PAGE> 76
Exhibit G
1. Application by Perry/Jamont Venture to Public Works Department, City
of Boston for Projection Permit, in, on, or over the Public Way (for
Cornices) dated May 31, 1988.
2. Boston Residents Construction Employment Plan for 125 Summer Street
undated; together with a First Amendment dated May 15, 1987.
3. Appendix C to Application to City of Boston Air Pollution Control
Commission for Parking Freeze Permits (cover letter from Rubin and
Rudman states a hearing on same scheduled for May 16, 1995).
4. Letter from the City of Boston, The Environment Department regarding
approval of exemption from the parking freeze requirements.
5. Transportation Impact Study and Access Plan prepared by Vanasse/Hangen
dated July, 1986.
6. Maintenance Agreement between City of Boston and Perry/Jamont Venture
dated September 8, 1987.
7. Amended and Restated Declaration of Trust for Lincoln Summer Realty
Trust dated September 29, 1994.
8. Memorandum of Understanding among City of Boston, The Boston
Redevelopment Authority and certain developers, as described in the
Memorandum dated February, 1987.
9. Development Impact Project Agreement between Boston Redevelopment
Authority, and Perry/Jamont Venture dated May 18, 1987.
10. Engineer's Certificate executed by Bryant Associates, Inc. on February
26, 1988 (attached to McCormack & Putziger Environmental Opinion).
11. Mechanical Engineer's Certificate executed by Bryant Associates, Inc.
on March 24, 1988 (attached to McCormack & Putziger Environmental
Opinion).
12. Developer's Certificate executed by Trustee of Lincoln Summer Realty
Trust on March 2, 1988 (attached to McCormack & Putziger Environmental
Opinion).
13. Architect's Certificate executed by Kohn, Pederson Fox Associates, PC
on March 21. 1988 (attached to McCormack & Putziger Environmental
Opinion).
14. Application by Perry/Jamont Venture to Massachusetts Department of
Environmental Quality Engineering Division of Air Quality Control
prepared by Jaymont Properties to install boilers, ovens, space
heaters, fuel burning engines or other stationary fossil
<PAGE> 77
2
fuel bunting devices dated October 26, 1984; Acknowledgment of receipt
of Application by Massachusetts Department of Environmental Quality
Engineering Division of Air Quality Control dated October 19, 1987.
15. Application by Perry/Jamont Venture to Division of Water Pollution
Control for Permit for Sewer System Extension or Connection filed
October 22, 1987.
16. Appeal by Perry-Jaymont Realty to the Inspectional Services
Commissioner regarding the refusal of Application to Construct
twenty-three (23) story office building: Appeal dated October 30,
1986.
17. Decision of the City of Boston Board of Appeal on the Appeal of
refusal of the Application for a building construction permit dated
December 11, 1986.
18. City of Boston Inspectional Services Department Demolition Permit B
issued to Perry/Jamont Venture on August 21, 1987; Additional Pen-nit
Nos. 3683, 3551, 3767, 3768, 3739, 3738, 3770, 3740, and 3769 are
included.
19. Demolition/Renovation Notification Information Sheets as required in
Title 40 CFR Part 61, Subpart M, Sec. 61.146 of the NESHAP Asbestos
Standard revised October 21, 1986.
20. Application by Perry/Jaymont Venture to Massachusetts Water Resources
Authority Sewerage Division, Water Quality Department for Sewer Use
Discharge Permit dated September 16, 1987.
21. Transportation Access Plan Agreement between City of Boston
Transportation Department Boston Redevelopment Authority and
Perry/Jamont Venture dated May 26, 1988.
22. Plan of Land updated January 12, 1987 (Harry R. Feldman, Inc.,
Surveyor).
23. Plan of Land dated February 1987 (Survey Engineers of Boston,
Surveyor).
24. Site Plan Drawing Nos: A-003, A-121; Building Elevations Drawing Nos.:
A-201, A-202; Lincoln Street Entrance Plans Drawing No. A-360; South
Street Entrance Plans Drawing No. A-361; Summer Street Entrance Plans
Drawing No. A-362.
25. Survey update letter of Survey Engineers of Boston to Perry/Jaymont
Venture dated November 8, 1989.
26. Easement from Building Commissioner of the City of Boston to Boston
Edison Company dated May 10, 1966.
<PAGE> 78
3
27. Business Certificate for Jaymont 125 Summer Venture issued by The
Commonwealth of Massachusetts dated September 19, 1994.
28. Certificate of Occupancy Nos. 22828, 22920, 22924, 22925, 22931,
22932, 22933, 25306, 23358, 27500, 27194, 23707, 23639, 24475, 30527,
24450, 24451 and 23639. all issued by The City of Boston Inspectional
Services Department.
29. Certificate for Use of Elevator issued by The Commonwealth of
Massachusetts Department of Public Safety Elevator Division on October
18, 1989 (Certificate No. 002595).
30. City of Boston Assessing Department Fiscal Year 1996 Annual Income and
Expense Requisition affirmed by Building owner on June 30, 1995.
31. City of Boston Assessing Department Information Requisition for Fiscal
Year 1995 (Application No. 09501496).
32. City of Boston Assessing Department Information Requisition for Fiscal
Year 1994.
33. Three (3) letters of Mulhern and Mulhern (dated December 28, 1993,
August 15, 1994 and September 1, 1994) regarding Real Estate Tax
Abatement Applications.
34. Application for Abatement of Real Estate Tax for 1992 (incomplete).
35. FY 92 Valuation for 125 Summer Street dated December 2, 1991.
36. Environmental Report prepared by Haley & Aldrich dated December 29,
1986.
37. Opinion of McCormack & Putziger dated January 11, 1988.
38. Decision of the City of Boston Board of Appeal on the Appeal of
Perry/Jaymont Venture to vary the terms of the Boston Zoning Code
under Statute 1956. Chapter 665, as amended, Section 8 (Hearing date:
December 9, 1986).
39. Notice of Decision BZC-17628 by the City of Boston Board of Appeal.
40. Decision of the City of Boston Board of Appeal on the Appeal of 125
Summer Street, Ward 3, BZC-17628 (Hearing date: June 6, 1995).
41. Opinion of McCormack & Putziger dated March 28, 1988.
42. Hazardous Materials Summary by Perry/Jamont Venture dated October 27.
1988.
<PAGE> 79
4
43. Permit granted to Jaymont (USA) Corp to maintain a private garage for
350 vehicles. issued by City of Boston Public Safety
Commission-Committee on Licenses, issued January 9, 1989.
44. License granted to Jaymont (USA) Corp for the building storage of
7,000 gallons of gasoline in tanks of vehicles and 550 gallons of
diesel fuel for emergency generator, issued by City of Boston Public
Safety Commission-Committee on Licenses, issued January 9, 1989.
45. Title Insurance Policy No. 09-30021 issued by Ticor Title Guarantee
Company in the amount of $130,000,000.00.
46. Title Insurance Policy No. L9-037112 issued by Ticor Title Guarantee
Company in the amount of $130,000,000.00.
47. Final Construction Drawings Dated 7/10/87:
- Architectural Drawings
- Structural Drawings
- Mechanical Drawings
- Electrical Drawings
48. Contract with Waltham Chemical Co. (pest control)
49. Contract with Stuart Dean (metal maintenance)
50. Contract with American Cleaning Co., Inc. (window cleaning)
51. Contract with American Service Company, Inc. (fire alarm testing)
52. Contract with Baldwin Pump Service (pump maintenance)
53. Contract with Barclay Chemical Company, Inc. (water treatment)
54. Contract with Boston Botanicals (fresh flowers)
55. Contract with Boston Document Company (copier lease)
56. Contract with Currier Landscaping (landscaping)
57. Contract with Fujitec America, Inc. (elevator maintenance)
58. Contract with Gibb-McAlister (chiller maintenance)
59. Contract with W.A. Kraft Corp (inspection)
<PAGE> 80
5
60. Contract with Janitronics (cleaning)
61. Tax Bills:
- 1993 Preliminary Real Estate Tax lst Quarter
- 1993 Preliminary Real Estate Tax 2nd Quarter
- 1993 Real Estate Tax 3rd Quarter
- 1993 Real Estate Tax 4th Quarter
- 1994 Preliminary Real Estate Tax 1st Quarter
- 1994 Preliminary Real Estate Tax 2nd Quarter
- 1994 Preliminary Real Estate Tax 3rd Quarter
- 1994 Real Estate Tax 3rd Quarter
- 1994 Real Estate Tax 4th Quarter
- 1995 Preliminary Real Estate Tax lst Quarter
- 1995 Preliminary Real Estate Tax 2nd Quarter
- 1995 Real Estate Tax 3rd Quarter
- 1995 Real Estate Tax 4th Quarter
- 1996 Preliminary Real Estate Tax 1st Quarter
62. 1990 Audited Balance Sheet
63. 1991 Audited Balance Sheet
64. 1992 Audited Balance Sheet
65. 1993 Audited Balance Sheet
66. 1994 Unaudited Balance Sheet
67. 1990 Audited Income and Expense Report
68. 1991 Audited Income and Expense Report
69. 1992 Audited Income and Expense Report
70. 1993 Audited Income and Expense Report
71. 1994 Unaudited Income and Expense Report
72. 1990 General Ledger, Operating and Capital
73. 1991 General Ledger, Operating and Capital
74. 1992 General Ledger, Operating and Capital
<PAGE> 81
6
75. 1993 General Ledger, Operating and Capital
76. 1994 General Ledger, Operating and Capital
77. 1990 Audited Cash Flow Statement
78. 1991 Audited Cash Flow Statement
79. 1992 Audited Cash Flow Statement
80. 1993 Audited Cash Flow Statement
81. 1994 Unaudited Cash Flow Statement
82. 1993 Budget Package, complete package with all schedules
83. 1994 Budget Package, complete package with all schedules
84. 1995 Budget Package, complete package with all schedules
85. 1995 Reforecast plus 7 month actuals
86. Roofing System Warranty (Goodyear)
87. Solid Core Door Warranty (Weyerhauser)
88. Insulating Glass Warranty (Sunglas Products)
89. McCormack & Putziger opinion (1/11/88) regarding compliance with
Boston Zoning Code
90. Water & Sewer Bills 95, 94, 93, 92
91. Electric Bills through 8/95, 94, 93
92. Lease Proposals:
- Montgomery Securities draft lease
- United Airlines 9/5/95
- Acacia Realty Advisors 8/30/95, 9/6/95
93. Lease between Lincoln Summer Realty Trust and A&M Rentals, Inc., d/b/a
Thrifty Car Rental dated March 21, 1995.
<PAGE> 82
7
94. Lease between Lincoln Summer Realty Trust and AFL/CIO dated December
18. 1990.
95. Lease between Lincoln Summer Realty Trust and Alternative Resources
Corporation dated February 16, 1993; First Amendment dated January 31,
1995.
96. Lease between Lincoln Summer Realty Trust and Aranon Corporation d/b/a
For Eyes Optical Company dated September 24, 1990.
97. Lease between Lincoln Summer Realty Trust and Bank of New England,
N.A. as assigned to BOT Financial Corporation dated December 22, 1988;
First Amendment dated February 15, 1989; Second Amendment dated August
17, 1989; Third Amendment dated November 20, 1989.
98. Lease between Lincoln Summer Realty Trust and BOT Financial
Corporation dated June 5, 1989; First Amendment dated November 20,
1989; Second Amendment dated February 28, 1990; Third Amendment dated
December 7, 1994.
99. Lease between Lincoln Summer Realty Trust and The Bank of Tokyo Trust
Company, dated March 23, 1992.
100. Lease between Lincoln Summer Realty Trust and Bernkopf, Goodman &
Baseman dated February 12, 1988; First Amendment dated December 9,
1994.
101. Lease between Lincoln Summer Realty Trust and Boston Overseas
Investors, Inc. as assigned to Boston Investor Services, Inc. dated
June 19, 1992; First Amendment dated January 17, 1995.
102. License Agreement between Lincoln Summer Realty Trust and Boston
Telecommunications Group, Inc. dated March 1, 1995.
103. Lease between Lincoln Summer Realty Trust and Bromberg & Sunstein
dated July 19, 1994; First Amendment dated February 1, 1995.
104. Lease between Lincoln Summer Realty Trust and Bums & Levinson dated
December 16, 1987; First Amendment dated September 3, 1993.
105. Lease between Lincoln Summer Realty Trust and Commonwealth of
Massachusetts Division of Capital Planning and Operations (Pension
Reserves Investment Management Board "PRIMB") dated July 6, 1995.
106. Lease between Lincoln Summer Realty Trust and Cudaback Strategic
Communications, Inc. dated June 27, 1994.
<PAGE> 83
8
107. Lease between Lincoln Summer Realty Trust and Daniels Printing,
Limited Partnership dated July 12, 1995.
108. Lease between Lincoln Summer Realty Trust and Fingertips, Etc. I,
Inc. dated January 12, 1995.
109. Lease between Lincoln Summer Realty Trust and Gadsby & Hannah Lease
Company dated July 2, 1987; First Amendment dated December 21, 1989;
Second Amendment dated December 21, 1989; I-ease Termination Agreement
February 16, 1992.
110. Lease Between Lincoln Summer Realty Trust and Gadsby & Hannah dated
February 16, 1992.
111. Lease between Lincoln Summer Realty Trust and Hassman & Rachstein
dated July 1, 1991; First Amendment dated May 18, 1994.
112. Lease between Lincoln Summer Realty Trust and A.W. Perry Management
Corporation as assigned to Jaymont 125 Summer Venture dated August 15,
1989; First Amendment dated May 5, 1995.
113. Lease between Lincoln Summer Realty Trust and Jean R. Lebrun and
Wildie Zama d/b/a Boston Hair Design dated August 23, 1993.
114. Lease between Lincoln Summer Realty Trust and John Southworth
Enterprises. Inc. dated November 3, 1990; First Amendment dated June
29, 1994, effective October 1, 1993.
115. Lease between Lincoln Summer Realty Trust and Kudzu Capital
Corporation dated January 9, 1995.
116. Lease between Lincoln Summer Realty Trust and Pannell Kerr Forster,
P.C. dated May 14, 1992; First Amendment dated June 24, 1992.
117. Temporary Agency Agreement and annexed lease between Lincoln Summer
Realty Trust and Robert L Green dated July 28, 1995.
118. Lease between Lincoln Summer Realty Trust and Romac & Associates dated
August 31, 1992.
119. Lease between Lincoln Summer Realty Trust and Sphinx Computer Corp.
dated March 1, 1995.
<PAGE> 84
9
120. Lease between Lincoln Summer Realty Trust and The Hole in the Wall
dated March 1, 1989; First Amendment dated March 1, 1989; Second
Amendment dated November 1. 1991, Third Amendment dated February 23,
1995.
121. Lease between Lincoln Summer Realty Trust and United States Fidelity
and Guaranty, Company dated February ___, 1993.
122. Lease between Lincoln Summer Realty Trust and Touche Ross & Co. dated
February 1988; First Amendment dated December 16, 1988; Second
Amendment dated May 30, 1990; Third Amendment dated April 28,
1994.
123. Lease between Lincoln Summer Realty Trust and Shawmut National
Corporation dated May 29, 1992.
124. Lease between Lincoln Summer Realty Trust and Incentives Research,
Inc. dated August 3, 1992; assigned to Brattle/IRI Inc. under that
certain Assignment and Assumption Agreement dated as of January 1,
1995.
125. Sublease between Brattle/IRI Inc. and Tower Technology, Inc. dated
September 8, 1995.
126. Lease Abstracts:
- AFL/CIO
- Alternative Resources
- Bank of Tokyo
- Bernkopf Goodman
- Boston Investor Service
- Bromberg & Sounstein
- Bums & Levinson
- Cudaback Strategic
- Daniels Printing
- Deloitte & Touche
- Fingertips
- For Eyes
- Gadsby & Hannah
- Hassman & Rachstein
- Hole in Wall
- Incentives Research
- John Southworth
- Kudzu Capital
- Lebrun Hair
- Mass Pension Reserves
- Jaymont Management
- Pannell Kerr Forster
<PAGE> 85
10
Abstracts continued -
- Shared Technologies
- Shawmut National
- Sphinx Computer
- Thrifty Car Rental
- U.S. Fidelity & Guar
<PAGE> 86
EXHIBIT H
Form of Non-Foreign Certificate
NON-FOREIGN CERTIFICATE
125 SUMMER STREET
BOSTON, MASSACHUSETTS
To inform Cornerstone Properties Inc., a Nevada corporation(1) (the
"Transferee") that withholding of tax under Section 1445 of the Internal
Revenue Code of 1986, as amended (the "Code") will not be required upon the
transfer of certain real property to the Transferee by Michael C. Fong, Osama
El Haddad, and Mark S. James as Trustees of Lincoln Summer Realty Trust under
Declaration of Trust dated March 18, 1986, recorded with the Suffolk Registry
of Deeds in Book 12355, Page 111, as amended, and not individually, for the
benefit of Jaymont 125 Summer venture (collectively, the "Transferor"), the
undersigned hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as those terms are defined in
the Code and the Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification number is
13-3461955; and
3. The Transferor's office address is:
c/o Jaymont (U.S.A.) Incorporated
One Biscayne Tower
2 South Biscayne Boulevard
Miami, Florida 33131
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment or both.
Under penalty of perjury, I declare that I have examined this
Certification and to the best of my knowledge and belief it is true, correct
and complete, and I further declare that I have
- -------------
(1) or any assignee permitted by Section 22 of the Agreement.
<PAGE> 87
authority to sign this document on behalf of the Transferor.
Date: November ____, 1995
"TRANSFEROR"
-----------------------------------
Mark S. James as Trustee of Lincoln
Summer Realty Trust, and not
individually
JAYMONT 125 SUMMER VENTURE
By: 125 Summer Associates Limited
Partnership, venturer
By: Jaymont (U.S.A.)
Incorporated, general
partner
By:
----------------------
By: JTKO Land Incorporated,
venturer
By:
-------------------------
-2-
<PAGE> 88
EXHIBIT I
November ___, 1995
Cornerstone Properties Inc.
31 West 52nd Street
Suite 1600
New York, New York 10019
Re: Seller's Bring-down Certificate
Gentlemen:
Reference is made to the Purchase and Sale Agreement dated September ___, 1995
(the "Agreement") by and between Michael C. Fong, Osama El Haddad, and Mark S.
James as Trustees of Lincoln Summer Realty Trust under Declaration of Trust
dated March 18, 1986, recorded with the Suffolk Registry of Deeds in Book
12355, Page 111, as amended, and not individually ("Seller"), and Cornerstone
Properties Inc., a Nevada corporation ("Buyer"), with respect to the purchase
and sale of 125 Summer Street, Boston, Massachusetts. Capitalized terms used
herein without definition which are defined in the Agreement shall have the
meanings ascribed to them therein.
Seller hereby certifies to Buyer that:
(i) all of the representations and warranties of Seller made in
the Agreement, as modified or updated in accordance with the
Agreement through the date hereof, remain true and correct in
all material respects as of the date hereof; and
(ii) attached hereto is the rent roll for the Property for the
month of November, which rent roll is true and correct as of
the date hereof.
Very truly yours,
- -----------------------------
Mark S. James as Trustee of
Lincoln Sumner Realty Trust,
and not individually
-1-
<PAGE> 89
EXHIBIT J
Form of Tenant Estoppel
To: Cornerstone Properties Inc.("Buyer")
and
Trustees of Lincoln Summer Realty Trust
Re: 125 Summer Street (the "Property")
Boston, Suffolk County, Massachusetts
The undersigned ______________________________, a ___________________
("Tenant") is the tenant under that certain lease dated _______________ (the
"Lease," which term shall include the amendments, if any, referred to below) by
and between Tenant and the Trustees of Lincoln Summer Realty Trust under
Declaration of Trust dated March 18, 1986, recorded with the Suffolk Registry
of Deeds in Book 12355, Page 111, as amended, as lessor ("Landlord") covering
premises commonly known as [Suite _____________] in the Property (the "Leased
Premises"). Tenant hereby certifies the following as of the date hereof:
1. Tenant is the tenant under the Lease demising the Leased
Premises. The term of the Lease commenced on and will expire on
___________________ and will expire on _______________.
2. Tenant certifies to Buyer that:
a. the Lease is in full force and effect and has not been
cancelled, modified, assigned, extended or amended
(collectively "modifications") except as follows:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
the Lease has been properly executed by Tenant; the Lease
represents the entire understanding between Landlord and
Tenant; and there are no other agreements in force or effect
between Landlord and Tenant;
b. the Leased Premises consists of ____________ rentable square
feet;
c. the current monthly rent for the Leased Premises as of
___________ is $_________ and has been paid through
_______________.
d. the total current additional/escalation rent for common
<PAGE> 90
area maintenance, real estate taxes, insurance and the like
(all charges other than fixed rent) as of ____________ is
$____________ and is payable monthly;
e. no installment of rent under the Lease has been paid more than
thirty (30) days in advance nor are any installment of rent
past due;
f. Tenant is not in arrears on any rent or other charges payable
by Tenant under the Lease;
g. Tenant has accepted and is occupying the Leased Premises, and
the Premises have been completed by Landlord as required by
the Lease without defect;
h. the Lease has been neither assigned nor any portion of the
Leased Premises subleased by Tenant except as follows:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
i. to the best of Tenant's knowledge, (i) Landlord has performed
all of Landlord's obligations under the Lease to be performed
by Landlord as of the date hereof, (ii) Landlord is not in
default under the Lease, and (iii) no event has occurred
which, with the giving of notice or the passage of time, or
both, could result in a default by Landlord;
j. Tenant has no existing defenses, offsets, deductions, liens,
claims or credits against the rentals under the Lease or
against the enforcement of the Lease by Landlord;
k. there exists no default on the part of Tenant nor state of
facts which, with the giving of notice or the passage of time,
or both, could result in a default by Tenant;
l. All contributions, if any, required to be paid by Landlord
under the Lease to date for improvements to the Leased
Premises have been paid;
m. Except as set for below, Tenant has not been granted any
options to extend, renew or terminate the term of the Lease
earlier than the date specified in paragraph 1, any rights of
first refusal on or right to expand into any other space in
the Property or any options or
-2-
<PAGE> 91
rights of first refusal or first offer to purchase the Leased
Premises or the Property;
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
n. the Lease does not provide for any payments or other tenant
inducements (including, without limitation, rent credits) by
Landlord to Tenant which are currently due and payable, or
which are due and payable in the future, except as follows:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
o. there is not pending or, to the best of Tenant's knowledge,
threatened against or contemplated by Tenant, any petition in
bankruptcy, whether voluntary or otherwise, any assignment for
the benefit of creditors, or any petition seeking
reorganization or arrangement under the Federal bankruptcy
laws or those of any state;
p. Tenant has paid a security deposit in the amount of
$__________________, on which no interest is payable;
q. Tenant has been given the right to utilize __________ parking
spaces in the parking garage on the Property and is paying for
such spaces at the monthly rate of $__________________;
3. This certification is made to induce Buyer to acquire the
Property of which the Leased Premises are part. Tenant further acknowledges
and agrees that the addressees hereof and their respective successors and
assigns and the holder of any mortgage at any time encumbering the Property
from and after the date of this Tenant Estoppel Certificate shall have the
right to rely on this Tenant Estoppel Certificate.
4. Tenant acknowledges that in connection with the sale of the
Property by Landlord to Buyer all of the interest of the Landlord in and to the
Lease will be duly assigned to Buyer and that, after notice from Landlord and
Buyer, all rent payments under the Lease shall be paid to Buyer or its
authorized agent, from and after the date of sale.
5. The undersigned is authorized to execute this Tenant Estoppel
Certificate on behalf of Tenant.
-3-
<PAGE> 92
<TABLE>
<S> <C>
Dated this ____ day of _____________, 1995.
______________________________
By:___________________________
Its:__________________________
</TABLE>
-4-
<PAGE> 93
EXHIBIT K
Require Tenant Estoppels
<TABLE>
<CAPTION>
NAME OF TENANT SQUARE FEET LEASED
- -------------- ------------------
<S> <C>
Bank of Tokyo 91,281
Bernkopf, Goodman & Baseman 20,555
Burns & Levinson 85,169
Deloitte & Touche 105,560
Gadsby & Hannah 4l,932
</TABLE>
<PAGE> 94
EXHIBIT L
Form of Tenant Notice
November ___, 1995
[Name and Official Notice
Address of Tenant]
[Name and address of Tenant
at the Property, if not
Official Notice Address]
Re: 125 Summer Street, Boston, Massachusetts
Dear Tenant:
This letter is to notify you that on November ___, 1995, Michael C. Fong,
Osama El Haddad, and Mark S. James as Trustees of Lincoln Summer Realty Trust
under Declaration of Trust dated March 18, 1986, recorded with the Suffolk
Registry of Deeds in Book 12355, Page 111, as amended, and not individually
(the "Trust"), conveyed the property known and numbered as 125 Summer Street,
Boston, Massachusetts (the "Property"), to Cornerstone Properties Inc.(1) In
connection with the sale of the Property, the Trust transferred and assigned
all of its right, title and interest in and to its lease with you for a portion
of the Property to Cornerstone Properties Inc.(1) Therefore, all future rent
payments should be made payable to
CORNERSTONE PROPERTIES INC.(1)
and mailed to Landlord's new notice address which is as follows:
If you have any questions regarding this notice, please call
_______________________.
Very truly yours,
__________________________
Mark S. James as Trustee of
Lincoln Summer Realty Trust,
and not individually
- 1 -
<PAGE> 95
[Name of Tenant]
November ____, 1995
Page 2
CONFIRMED:
CORNERSTONE PROPERTIES INC.(1)
By:__________________________
Name:
Title:
cc: [As required by the lease]
__________________
(1) or any assignee permitted by Section 22 of the Agreement.
<PAGE> 96
EXHIBIT M
Lease Related Disclosures
1. Green Temporary Tenancy Agreement. Seller has entered into a
Temporary Tenancy Agreement dated as of July 28, 1995 with Mr. Robert Green
("Green") for approximately 3,500 square feet on the 10th floor of the Property
pursuant to which Robert Green (and those occupying through him) has the right
to occupy such premises through October 7, 1995. Such Temporary Tenancy
Agreement was entered into by Seller as an accommodation by Seller to Green to
assure the vacancy of the 14th floor of the Property formerly demised to
Metropolitan Structures, occupied by said Metropolitan Structures, Green and
others as a holdover tenant, and from which premises Green had refused to
vacate notwithstanding delivery of a notice to quit. Seller is in possession
of an Execution for Possession of the premises occupied by Green issued by the
Boston Municipal Court upon an Agreement for Judgment between Seller and Green.
Seller has agreed to refrain from causing such Execution to be levied until
October 8. 1995. Based upon the prior conduct of Green, it is possible that
Green (and/or those occupying through him) will not voluntarily vacate on
October 7, 1995 and will attempt to resist their removal from such premises by
legal process.
2. BOT Rent Credit. BOT is entitled to offset as a credit
against monthly rent the sum of $61,582.33 per month for the remainder of the
term of the existing BOT Leases. This is the only offset to which BOT is
entitled relating to the Inducement Payments (as defined in the two Leases with
BOT covering floors 2-5), and there if no obligation of the Landlord under such
Leases to post a letter of credit.
The BOT Leases also permit BOT to claim reimbursement in an
amount up to $50,000 for tenant improvement expenditures made on any of the
second, third or fourth floors of the Property at any time through the end of
the current term thereof. Seller shall be solely responsible for any
reimbursement due to BOT for such $50,000.
3. Daniels Printing Construction. Construction of tenant
improvements required under the Lease with Daniels Printing is not yet
complete, and to the extent that leasing commissions are due at the time that
such tenant takes occupancy, such commissions have not yet been paid.
4. PRIM Board Lease Commission. Mr. Travis Powell of Peter
Elliot & Company (the "Broker") was the broker in connection with the Lease to
the Massachusetts Pension Reserves Management Board (the "PRIM Board Lease").
Seller has paid the Broker a commission with respect to the PRIM Board Lease in
the amount of $4.00 per square foot. The Broker expected to be paid an
additional $7,450, which Seller has not paid and has not agreed to pay. Seller
shall be solely responsible for any claim by the Broker for additional
commission associated with the PRIM Board Lease.
<PAGE> 97
EXHIBIT N
Violation of Law
1. Parking Freeze: The parking garage portion of the Property was
constructed pursuant to an exemption from the "parking freeze" imposed in the
City of Boston pursuant to the State Implementation Plan under the Federal
Clean Air Act, The City of Boston Air Pollution Control Commission (the
"BAPCC") administers such parking freeze and has promulgated the "City of
Boston Rules and Regulations for the Issuance of Parking Freeze Permits" (the
"BAPCC Regulations"). A letter dated March 3, 1987 from the BAPCC to Seller's
counsel confirms such exemption, subject to three provisos. The second such
proviso provides that "parking spaces shall be utilized by tenants, employees,
patrons and guests of the building only."
On May 16, 1995, the BAPCC voted to authorize the use of 75 parking
spaces in the garage portion of the Property as commercial/public parking
spaces, usable by anyone, and to issue a Parking Freeze Permit under the BAPCC
Regulations to evidence such approval, The application submitted by Seller
requesting such Parking Freeze Permit recognized the policy of the BAPCC to
encourage short-term parking in commercial/public parking spaces.
Seller makes no representation as to its compliance with the terms of
the parking freeze exemption.
2. Rental Cars: Thrifty Rental Car is a tenant of the Property
under a Lease which commenced on March 21, 1995. Rental car agency use is a
forbidden use in the zoning district in which the Property is located, Seller
sought and obtained zoning relief from the Boston Board of Appeal (the "Board")
to permit use of the Property for a rental car agency. Such relief is
contained in a decision dated June 20, 1995 in case BZC-17628. Such decision
includes a proviso that the maximum number of cars permitted is five. If and
to the extent that Thrifty Rental Car has more than five vehicles on the
Property at any one time, the Property would be in violation of the Decision.
3. Voluntarv Employment Plan: The DIP Agreement required, inter
alia, that Seller enter into a Memorandum of Understanding with respect to
Seller's Employment Opportunity Plan to achieve a goal that 50% of the
permanent employment opportunities created by the Property be made available to
Boston residents. As contemplated therein, Seller entered into a Memorandum of
Understanding dated February ___, 1987 with the BRA (the "MOU"). The MOU
requires that (i) Seller advise new tenants of the Property of the 50% Boston
residents goal, urge the tenant to pursue such goal, and deliver to the tenant
the so-called "Boston for Boston" Employment Services Guide; (ii) solicit
workforce statistical information from tenants yearly through February, 1996;
and (iii) meet annually through July, 1996 to update the Employment Services
Guide, In addition, as required by the MOU, Seller entered into a First Source
Agreement with the City of
<PAGE> 98
Boston Office of Jobs and Community Service ("OJCS") which requires that, with
certain exceptions, Seller permit OJCS to refer candidates for job openings
before other forms of candidate solicitation are pursued. Seller is required
to obligate its service providers to follow this procedure as well. Seller
makes no representation as to whether it in compliance with the MOU or the
First Source Agreement.
-2-
<PAGE> 99
EXHIBIT O
Documents Relating to Hazardous Materials
<TABLE>
<S> <C> <C>
1. 21E report: Oil and Hazardous Material Site Evaluation
------------------------------------------
prepared by Haley & Aldrich
Lincoln Street Site
Boston, MA
9/11/85 - File #5276
2. 21E report: Report on Phase II Oil and Hazardous Material
---------------------------------------------
prepared by Haley & Aldrich
Site Evaluation
125 Summer Street
Boston, MA
12/29/86 - File #572601
3. 21E report: Construction Phase Oil and Hazardous Material
---------------------------------------------
Site Evaluation
---------------
prepared by Haley & Aldrich
125 Summer Street
Boston, MA
2/3/88 - File #572604
4. Asbestos
Survey: 125 Summer Street Project
Boston, MA
Briggs Associates: Project No. 70.719
10/10/86
</TABLE>
5. Asbestos removal bid utilizing Briggs survey resulting in Removal
Contract between Perry/Jaymont Venture and National Surface Cleaning,
Inc. dated October 10, 1986,
6. During the Asbestos Removal the operations were inspected and
documented by Briggs Associates as documented by their inspection
report:
<TABLE>
<S> <C>
Asbestos Abatement
125 Summer Street
Boston, MA
Vol, I - Report, Data, Project Certification
and Appendices A through F
Briggs Associates: Project No. 70.719-12/22/86
Asbestos Abatement
125 Summer Street
Boston, MA
Vol. II - Appendix G
Briggs Associates: Proj. No. 70.719-12/22/86
</TABLE>
7. Demolition Contract with Napoli Wrecking Company dated November 13,
1986, covered removal of buildings and foundation within property
lines to a clean cellar hole,
<PAGE> 100
excluding asbestos but required (page 3H; para, 30A & 30B)
subcontractor to provide notification when asbestos was encountered.
This occurred a couple of times and the Asbestos Removal
Subcontractor, National Surface Cleaning, came to the site and removed
the material,
8. Demolition Contract with Napoli Wrecking Company dated November 13,
1986, also covered removal of basement oil storage tanks.
Letter from Turner dated 3/7/88 re:
Napoli disposal of oil tanks from basements of buildings.
9. Facade retention system caisson drilling ruptured an abandoned,
unpressurized oil filled pipeline. DEQE was notified and Jet Line
cleaned up.
10. At No, 13-23 South Street an unknown under basement oil tank was
ruptured during excavation with the contamination controlled within
the excavation and with subsequent removal of oil, water, cork, and
soil.
H&A Daily Field Report #26 dated 9/15/87 records event. H&A Daily
Field Report #27 dated 9/16/87 records Dennison
Oil contained, sealed drums, and removed.
Dennison Oil work descriptions dated 8/25/87 to 9/15/87.
Manifest log number 4-10.
11. At No 13-23 South Street an oil tank discovered in sidewalk vault
between building face and curb line.
Filed request with Boston Fire Department for permit to abandon and
backfill tank. Permit denied. Tank was removed: Boston Fire
Department receipt for disposal received 3/l/88.
-2-
<PAGE> 101
INDEX OF HAZARDOUS MATERIAL CLEAN-UP DISPOSAL MANIFESTS
<TABLE>
<CAPTION>
Date Manifest Transporter Material
---- -------- ----------- --------
<S> <C> <C> <C> <C>
1. 2/03/87 Mass DEQE "Notice of Responsibility" Bos Ed fuel oil transmission
2. 2/03/87 MA C 059004 Jet Line Services, Inc. 20 gal. diesel fuel
3. 2/03/87 MA C 059006 Jet Line Services, Inc. 6000 p oil and dirt
4. 4/17/87 MA C 059006 Jet Line Services, Inc. 350 gal #6 fuel oil and
5. 8/27/87 MA C 208777 Dennison Oil 700 gal #6 oil
6. 8/28/87 MA C 208878 Dennison Oil 1,700 gal #6 fuel oil
7. 9/02/87 MA C 208748 Dennison Oil 50 gal waste oil
8. 9/08/87 MA C 208744 Dennison Oil 250 gal waste oil
9. 9/08/87 NY A 5443686 Tonasanka Tank Trans. 15 yds./37980p #2
contaminated soil
10. 9/08/87 NY A 5443686 Tanasanka Tank Trans. 15 yds,/29580p #2
contaminated soil
</TABLE>
-3-
<PAGE> 102
EXHIBIT P
Litigation
Please refer to Exhibit F concerning the Green Temporary Tenancy
Agreement.
<PAGE> 103
EXHIBIT Q
Leasing Commissions
Pursuant to the terms of a Settlement Agreement dated September 8,
1994 by and among 125 Summer Corporation, A.W. Perry, Inc., 125 Summer
Associates Limited Partnership, and Jaymont (U.S.A.) Incorporated, Seller's
Beneficiary agreed to pay to A.W. Perry Management Corporation, an affiliate of
A.W. Perry, Inc., a leasing commission in the amount of $2.00 per square foot
in connection with expansion/renewal of the BOT Lease. Seller's Beneficiary
has paid $46,198 on account of such undertaking, and has a further potential
obligation to A.W. Perry Management Corporation in the amount of $136,364.
Seller shall be solely responsible for such obligation to A.W. Perry Management
Corporation, and such sums shall not be included in the Leasing Costs
associated with the New BOT Lease.
<PAGE> 1
EXHIBIT 10.55
Massachusetts
RECORDING REQUESTED BY
- ------------------------------------
WHEN RECORDED MAIL TO
The Northwestern Mutual Life Ins. Co.
720 East Wisconsin Avenue - Rm N16WC
Milwaukee, WI 53202
Attn: Connie Meyer
LOAN NO. C-331908 SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE and SECURITY AGREEMENT, Made as of the 20th day of December, 1995
between CSTONE-BOSTON INC., a Delaware corporation, whose mailing address is
c/o Cornerstone Properties, Inc., 31 West 52nd Street New York, New York 10019,
herein called "Mortgagor", and THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY,
a Wisconsin corporation, 720 E. Wisconsin Avenue, Milwaukee, WI 53202, herein
called "Mortgagee":
WITNESSETH, That Mortgagor, in consideration of the indebtedness herein
mentioned, does hereby grant with mortgage covenants, convey, mortgage and
warrant unto Mortgagee forever, upon the statutory condition, and with the
statutory power of sale and right of entry and possession, the following
property (herein referred to as the "Property"):
A. The land in the City of Boston, County of Suffolk,
Commonwealth of Massachusetts described in Exhibit
"A" attached hereto and incorporated herein (the
"Land") and all appurtenances thereto; and
B. All buildings and improvements now existing or
hereafter erected thereon, all waters and water
rights, all engines, boilers, elevators and
machinery, all heating apparatus, electrical
equipment, air-conditioning equipment, water and gas
fixtures, and all other fixtures of every description
belonging to Mortgagor which are or may be placed or
used upon the Land or attached to the buildings or
improvements, all of which, to the extent permitted
by applicable law, shall be deemed an accession to
the freehold and a part of the realty as between the
parties hereto.
1
<PAGE> 2
Mortgagor agrees not to sell, transfer, assign or remove anything material
described in B above now or hereafter located on the Land (other than
demolition and removal of leasehold improvements in connection with the
marketing or re-leasing of vacant leasable space) without prior written consent
from Mortgagee unless (i) such action does not constitute a sale or removal of
any buildings or improvements or the sale or transfer of waters or water rights
and (ii) such action results in the substitution or replacement with similar
items of at least equal value or utility.
Without limiting the foregoing grants, Mortgagor hereby pledges to Mortgagee,
and grants to Mortgagee a security interest under the Uniform Commercial Code
as in effect in Massachusetts (the "Uniform Commercial Code") in, all of
Mortgagor's present and hereafter acquired right, title and interest in and to
any and all
C. Cash and other funds now or at any time hereafter
deposited by or for Mortgagor on account of tax,
special assessment, replacement or other reserves
required to be maintained pursuant to the Loan
Documents (as hereinafter defined) with Mortgagee or
otherwise deposited with, or in the possession of,
Mortgagee pursuant to the Loan Documents; and
D. All surveys, soils reports, environmental reports,
architect's contracts, construction contracts,
drawings and specifications, applications, permits,
surety bonds and other contracts relating to the
acquisition, design, development, construction and
operation of the Property; and
E. All present and future rights to condemnation awards
or insurance proceeds at any time payable to or
received by Mortgagor on account of the Property or
any of the foregoing personal property; and
F. Proceeds of collateral are also covered.
All personal property hereinabove described is hereinafter referred to as the
"Personal Property".
With respect to the Personal Property and to any of the Property which is of a
nature that a security interest therein can be perfected under the Uniform
Commercial Code, this instrument shall constitute a security agreement and
financing statement if permitted by applicable law, and Mortgagor agrees to
join with Mortgagee in the execution of any financing statements and to execute
any other instruments that may be required for the perfection or renewal of
such security interest under the Uniform Commercial Code.
This Mortgage is intended to be a financing statement under the Uniform
Commercial Code with respect to the portion of the Property which is comprised
of goods which are or may become fixtures on the real property including the
Land. The addresses of
2
<PAGE> 3
Mortgagor (Debtor) and Mortgagee (Secured Party) are set forth at the beginning
of this Mortgage. This Mortgage is to be filed for record with the Registry of
Deeds of the city where the Land is located. The record owner of the Land is
the Mortgagor.
TO HAVE AND TO HOLD the same unto Mortgagee for the purpose of securing:
(a) Payment to the order of Mortgagee of the indebtedness
evidenced by a promissory note of even date herewith (and any restatement,
extension or renewal thereof and any amendment thereto) executed by Mortgagor
for the principal sum of FIFTY MILLION DOLLARS, with final maturity no later
than January 1, 2003 and with interest as therein expressed (which promissory
note, as such instrument may be amended, restated, renewed and extended, is
hereinafter referred to as the "Note"); and
(b) Payment of all sums that may become due Mortgagee under the
provisions of, and the performance of each agreement of Mortgagor contained in,
the Loan Documents.
As used herein, "Loan Documents" means this instrument, the Note, that certain
Absolute Assignment of Leases and Rents of even date herewith between Mortgagor
and Mortgagee (the "Absolute Assignment"), that certain Certification of
Borrower of even date herewith and any other agreement entered into by
Mortgagor and delivered to Mortgagee in connection with the indebtedness
evidenced by the Note, except for any separate environmental indemnity
agreement, as any of the foregoing may be amended from time to time.
TO PROTECT THE SECURITY OF THIS MORTGAGE, MORTGAGOR COVENANT'S AND AGREES:
PAYMENT OF DEBT. Mortgagor agrees to pay the indebtedness hereby secured (the
"Indebtedness") promptly and in full compliance with the terms of the loan
Documents.
OWNERSHIP. Mortgagor represents that it has not created or suffered to exist
any encumbrances whatsoever, except as appears in the title insurance policy
delivered to Mortgagee on or about the date hereof. Mortgagor does hereby
forever warrant and shall forever defend the title and possession thereof
against the lawful claims of any and all persons whomsoever.
MAINTENANCE OF PROPERTY AND COMPLIANCE WITH LAWS. Mortgagor agrees to keep the
buildings and other improvements now or hereafter erected on the Land in good
condition and repair; not to commit or suffer any waste; to comply with all
laws, rules and regulations affecting the Property; and to permit Mortgagee to
enter at all reasonable times and upon reasonable notice for the purpose of
inspection and of conducting, in a reasonable and proper manner and at
Mortgagee's expense, such tests as Mortgagee determines to be necessary in
order to monitor Mortgagor's compliance with applicable laws and regulations
regarding hazardous materials affecting the Property.
3
<PAGE> 4
INSURANCE. Mortgagor agrees to keep the Property insured for the protection of
Mortgagee in such manner as set forth below, in such amounts as set forth below
and in such companies as Mortgagee may from time to time reasonably approve,
and to promptly deliver original or certified copies of the policies (or an
ACORD 27 in the case of a blanket policy) to Mortgagee; that insurance loss
proceeds (less expenses of collection) shall, at Mortgagee's option, be applied
on the Indebtedness, whether due or not, or to the restoration of the Property,
or be released to Mortgagor, but such application or release shall not cure or
waive any default under any of the Loan Documents. If Mortgagee elects to
apply the insurance loss proceeds on the Indebtedness, no prepayment privilege
fee shall be due thereon. Specifically, Mortgagor agrees to maintain the
following types of insurance:
(a) All risk property insurance coverage with an Agreed
Amount Endorsement for the estimated replacement cost
of the Improvements with a deductible of not greater
than $25,000;
(b) Loss of rents insurance equal to twelve months rent
or business interruption insurance for 100 percent of
the annual gross earnings from business derived from
the Property;
(c) Flood insurance, if the Property is located in a
flood plain (as that term is used in the National
Flood Insurance Program), in an amount acceptable to
Lender;
(d) Mortgagor's own commercial general liability
insurance policy with Mortgagee named as an
additional insured for its interest in the Property;
and
(e) Other insurance as customarily required by first
mortgage lenders in the Boston, Massachusetts area.
Notwithstanding the foregoing provision, Mortgagee agrees that if the insurance
loss proceeds are less than the unpaid principal balance of the Note and if the
casualty occurs prior to two years prior to the maturity date of the Note, then
the insurance loss proceeds (less expenses of collection) shall be applied to
restoration of the Property to its condition prior to the casualty, subject to
satisfaction of the following conditions:
(a) There is no existing Event of Default at the time of
casualty, and if there shall occur any Event of
Default after the date of the casualty, Mortgagee
shall have no further obligation to release insurance
loss proceeds hereunder.
(b) The casualty insurer has not denied liability for
payment of insurance loss proceeds as a result of any
act, neglect, use or occupancy of the Property by
Mortgagor or any tenant of the Property.
4
<PAGE> 5
(c) Mortgagee shall be satisfied that all insurance loss
proceeds so held, together with supplemental funds
received from Mortgagor, shall be sufficient to
complete the restoration of the Property. Any
remaining insurance loss proceeds may, at the option
of Mortgagee, be applied to the Indebtedness, whether
or not due, or be released to Mortgagor.
(d) If required by Mortgagee, Mortgagee shall be
furnished a satisfactory report addressed to
Mortgagee from an environmental engineer or other
qualified professional satisfactory to Mortgagee to
the effect that no adverse environmental impact to
the Property resulted from the casualty.
(e) Mortgagee shall release casualty insurance proceeds
as restoration of the Property progresses provided
that Mortgagee is furnished satisfactory evidence of
the costs of restoration and if, at the time of such
release, there shall exist no default under the Loan
Documents with respect to which Mortgagee shall have
given Mortgagor notice pursuant to the NOTICE OF
DEFAULT provision herein. If the estimated cost of
restoration exceeds $250,000.00, (i) the drawings and
specifications for the restoration shall be approved
by Mortgagee in writing prior to commencement of the
restoration, and (ii) Mortgagee shall receive an
administration fee equal to 1% of the cost of
restoration.
(f) Prior to each release of funds, Mortgagor shall
obtain for the benefit of Mortgagee an endorsement to
Mortgagee's title insurance policy insuring against
any liens arising from the restoration.
(g) Mortgagor shall pay all costs and expenses incurred
by Mortgagee, including, but not limited to, outside
legal fees, title insurance costs, third-party
disbursement fees, third-party engineering reports
and inspections deemed necessary by Mortgagee.
(h) All reciprocal easement and operating agreements, if
any, shall remain in full force and effect between
the parties thereto on and after restoration of the
Property.
(i) Mortgagee shall be satisfied that Projected Debt
Service Coverage of at least 1.5 will be produced
from the leasing of not more than 412,322 rentable
square feet of space to (A) former tenants under
their existing leases or (B) former tenants or
approved new tenants under leases satisfactory to
Mortgagee for terms of at least five (5) years to
commence not later than (30) days following
completion of such restoration (the foregoing leases
in (A) and (B) being "Approved Leases").
As used herein, "Projected Debt Service Coverage" means a number calculated by
dividing Projected Operating Income Available for Debt Service for the first
fiscal year following restoration of the Property by the debt service during
the same fiscal year under all indebtedness secured by any portion of the
Property. For purposes of the
5
<PAGE> 6
preceding sentence, "debt service" means the greater of (x) debt service due
under all such indebtedness during the first fiscal year following completion
of the restoration of the Property and (y) debt service that would be due and
payable during such fiscal year if all such indebtedness were amortized over 25
years (whether or not amortization is actually required) and if interest on
such indebtedness were due as it accrues at the face rate shown on the notes
therefor (whether or not interest payments based on such face rates are
required).
"Projected Operating Income Available for Debt Service" means projected gross
annual rent from the Approved Leases and income from the garage forming part of
the Property for the first full fiscal year following completion of the
restoration of the Property less the operating expenses of the Property for the
last fiscal year preceding the casualty.
All projections referenced above shall be calculated in a manner satisfactory
to Mortgagee.
CONDEMNATION. Mortgagor hereby assigns to Mortgagee (i) any award and any
other proceeds resulting from damage to, or the taking of, all or any portion
of the Property in connection with condemnation proceedings or the exercise of
any power of eminent domain and (ii) the proceeds from any sale or transfer in
lieu thereof; and grants Mortgagee the right, at its option, to apply such
award and other proceeds (less expenses of collection) on the Indebtedness
(including any prepayment privilege fee), whether due or not, or to the
restoration of the Property or to release all or any portion thereof to
Mortgagor, but such application or release shall not cure or waive any default
under any of the Loan Documents.
TAXES AND SPECIAL ASSESSMENTS. Mortgagor agrees to pay before delinquency all
taxes and special assessments of any kind that have been or may be levied or
assessed against the Property, this instrument, the Note or the Indebtedness,
or upon the interest of Mortgagee in the Property, this instrument, the Note or
the Indebtedness, and to procure and deliver to Mortgagee the official receipt
of the proper officer showing timely payment of all such taxes and assessments;
provided, however, that Mortgagor shall not be required to pay any such taxes
or special assessments if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings and funds
sufficient to satisfy the contested amount have been deposited in an escrow
satisfactory to Mortgagee.
PERSONAL PROPERTY. With respect to the Personal Property, Mortgagor hereby
represents, warrants and covenants as follows:
(a) Except for the security interest granted hereby, Mortgagor is,
and as to portions of the Personal Property to be acquired after the date
hereof will be, the sole owner of the Personal Property, free from any lien,
security interest encumbrance or adverse claim thereon of any kind whatsoever;
it being understood that Mortgagor shall be permitted to enter into leases of
equipment in the ordinary course of its business. Mortgagor shall notify
Mortgagee of, and shall indemnify and defend Mortgagee and the
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Personal Property against, all claims and demands of all persons at any time
claiming the Personal Property or any part thereof or any interest therein.
(b) Except as otherwise provided herein, Mortgagor shall not
lease, sell, convey or in any manner transfer the Personal Property without the
prior consent of Mortgagee.
(c) Mortgagor maintains a place of business at the address first
set forth above in this instrument, and Mortgagor shall immediately notify
Mortgagee in writing of any change in its place of business.
(d) At the request of Mortgagee, Mortgagor shall join Mortgagee in
executing one or more financing statements and continuations and amendments
thereof pursuant to the Uniform Commercial Code of the jurisdiction in which
the Property is located in form satisfactory to Mortgagee, and Mortgagor shall
pay the cost of filing the same in all public offices wherever filing is deemed
by Mortgagee to be necessary or desirable.
OTHER LIENS. Mortgagor agrees to keep the Property free from all other
mortgage Hens and from all liens prior to the lien created hereby. The
creation of any other mortgage lien, whether or not prior to the lien created
hereby, the creation of any prior lien or the assignment or pledge by Mortgagor
of its revocable license to collect, use and enjoy rents and profits from the
Property, shall constitute a default under the terms of this instrument. The
term "mortgage" includes a mortgage, deed of trust, deed to secure debt or any
other security interest in the Property.
Notwithstanding the foregoing, upon Mortgagee's prior written consent,
CStone-Boston Inc., a Delaware corporation, may grant a mortgage lien
subordinate to the lien of this instrument and may assign or pledge to the
holder of any such subordinate hen CStone-Boston Inc.'s interest in the
revocable license to collect, use and enjoy the rents and profits from the
Property provided (i) Pro Forma Debt Service Coverage of all indebtedness
secured by mortgage liens on the Property shall be at least 1.75 as reasonably
determined by Mortgagee, (ii) the secondary lender executes Mortgagee's form of
Agreement Regarding Secondary Assignment of Leases and Rents, and (iii) the
holder of the subordinate mortgage shall not be permitted to foreclose the
subordinate mortgage for so long as this Mortgage shall have not been
discharged. A default in any required payment of the indebtedness secured by
any subordinate lien or a default in any provision, covenant or agreement
contained in any instrument creating a subordinate lien or the indebtedness
secured thereby or the acceleration of any such indebtedness shall constitute a
default under this instrument.
As used herein, "Pro Forma Debt Service Coverage" means a number calculated by
dividing (A) Net Income Available for Debt Service for the last full fiscal
year as determined from financial statements provided by Mortgagor pursuant to
the covenants hereof following the caption "FINANCIAL STATEMENTS," by (B)
Projected Debt Service during the first full fiscal year following the full
funding of the proposed subordinate loan (the "Applicable Fiscal Year") under
all indebtedness (including the Indebtedness and the proposed subordinate loan)
secured or to be secured by mortgage liens on any portion of the Property.
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For purposes of the preceding sentence, "Projected Debt Service" means the
greater of (x) actual debt service to become due during the Applicable Fiscal
Year under all indebtedness secured by mortgage liens or security interests in
or on any portion of the Property and (y) actual debt service that would become
due and payable during the Applicable Fiscal Year if all such indebtedness were
to be amortized over 25 years (whether or not amortization will be actually
required) and if interest on such notes were to become due monthly as it
accrues (regardless of the face rate shown or to be shown on the notes therefor
and whether or not monthly interest payments based on such face rates will be
required).
As used herein, "Net Income Available for Debt Service" means net income from
the Property, determined in accordance with generally accepted accounting
principles, for the applicable fiscal period plus (to the extent deducted in
determining net income from the Property) the following:
A) interest on indebtedness secured by any portion of the
Property for such fiscal period;
B) depreciation, if any, of fixed assets at or constituting the
Property for such fiscal period;
C) amortization, if any, of standard tenant finish expenditures
at the Property (but specifically EXCLUDING the amortization
of tenant finish expenditures by Mortgagor in excess of $20.00
per square foot (i.e., above standard tenant finishes), free
rent and rent concessions); and
D) amortization of costs incurred in connection with any
indebtedness secured by any portion of the Property and
leasing commissions which have been prepaid and
less the following:
E) a replacement reserve based on not less than $2.23 per net
rentable square foot per annum;
F) the amount, if any, by which actual gross income during such
fiscal period exceeds that which would have been earned from
the rental of 90% of the net rentable area in the Property;
and
G) the amount, if any, by which the actual management fee is less
than 3% of gross revenue during such fiscal period.
All adjustments to net income referenced above shall be calculated in a manner
satisfactory to Mortgagee.
LEASES. Mortgagor represents and warrants that there is no assignment or
pledge of any leases of, or rentals or income from, the Property now in effect;
and covenants that, until
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the Indebtedness is fully paid, it (i) shall not make any such assignment or
pledge to anyone other than Mortgagee and (ii) except to the extent permitted
under OTHER LIENS, shall not, unless expressly permitted under another
provision in this instrument, make any assignment or pledge to anyone of its
hereinafter described revocable license to collect, use and enjoy the rents and
profits except to the extent permitted under OTHER LIENS.
In consideration of the Indebtedness, Mortgagor, pursuant to the Absolute
Assignment, has assigned to Mortgagee all of Mortgagor's right, title and
interest in said leases, including Mortgagor's right to collect, use and enjoy
the rents and profits therefrom. Mortgagee has, in the Absolute Assignment,
granted to Mortgagor a license to collect, use and enjoy said rents and
profits. Such license is revocable by Mortgagee pursuant to the terms of the
Absolute Assignment.
FUTURE LEASES. Other than leases of 10,000 square feet of rentable space or
less entered into in the ordinary course of business which do not require
Mortgagee to enter into a non-disturbance or subordination agreement (the
"Excluded Leases"), Mortgagor shall not enter into any new lease or consent to
the assignment of any lease, or materially modify any lease (including, without
limitation, an acceptance of a surrender of such lease, a reduction in the term
thereof or an increase in the obligations of the landlord or a material
decrease in the obligations of the tenant thereunder) (any such new lease,
assignment or material modification of a lease, or any lease which provides by
its terms for Mortgagee to enter into a non-disturbance agreement (i.e., other
than Excluded Leases) being referred to herein as a "Future Lease"), except in
accordance with the following approval procedure:
(a) Mortgagor may from time to time provide Mortgagee with a term
sheet (a "Term Sheet") relating to a proposed Future Lease and specifying the
material economic terms and conditions of such Future Lease (including, without
limitation, the term, the amount of space to be leased and its location, the
base or fixed rental, and whether such amounts are quoted on a "gross" or "net"
basis, the base years or "stops" for real estate taxes and operating expenses,
the tenant improvement allowance offered to the tenant or the value of work to
be performed by landlord, brokerage commissions and free rent), together with
Mortgagor's analysis of the value of such material economic terms on a net
effective rent basis, which Term Sheet shall be so submitted prior to
submitting to Mortgagee an executed copy of such Future Lease. Mortgagee shall
approve or disapprove the Term Sheet within fifteen business days after receipt
of same, which approval shall not be unreasonably withheld. If Mortgagee shall
fail to disapprove of such Term Sheet within such fifteen business day period,
time being of the essence, Mortgagee shall be conclusively deemed to have
approved such Term Sheet. Mortgagee's approval or deemed approval of any Term
Sheet shall be deemed an approval of the economic terms of such proposed Future
Lease only.
(b) In connection with any proposed Future Lease, Mortgagor shall
further provide to Mortgagee (i) the identity of such proposed future tenant,
(ii) current financial information with respect to such proposed tenant (and
any guarantor thereof), including, without limitation, a balance sheet and
income statement, if available, for such
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<PAGE> 10
proposed tenant (and any guarantor) and any credit reference or landlord
references relating to such proposed tenant reasonably requested by Mortgagee,
(iii) the nature of such proposed tenant's business and its proposed use or
uses of the space to be leased and (iv) any other information customarily
provided relating to such proposed future tenant and reasonably requested by
Mortgagee. Within fifteen business days after Mortgagee's receipt of all of
the information required pursuant to clauses (i) through (iv) above (which
information may be submitted together with or prior to the Term Sheet for a
given Future Lease), Mortgagee shall approve or disapprove of such proposed
future tenant, which approval shall not be unreasonably withheld. In the event
that Mortgagee shall elect not to approve any proposed future tenant, Mortgagee
shall notify Mortgagor at the time of such disapproval of the specific reasons
for such disapproval. If Mortgagee shall fail to disapprove of such proposed
tenant within the foregoing fifteen business day period, time being of the
essence, Mortgagee shall be conclusively deemed to have approved such tenant.
(c) Upon or prior to the execution of any proposed Future Lease,
Mortgagor shall deliver to Mortgagee an execution copy of a Future Lease marked
to show all changes from the approved standard form of Mortgagor's lease (the
"Form Lease") and a summary of such lease setting forth the material terms and
conditions thereof. If at the time of delivery of such execution copy of a
Future Lease, Mortgagee shall have approved a Term Sheet and the proposed
tenant in connection with such proposed Future Lease, and the economic terms
and conditions of such lease are consistent with the economic terms and
conditions set forth in the approved Term Sheet (and Mortgagor shall deliver to
Mortgagee a statement certifying same), Mortgagee shall approve or disapprove
such lease within fifteen business days after the receipt thereof by Mortgagee,
which approval shall not be withheld, provided that the non-economic terms and
conditions set forth in such proposed lease are not, in the reasonable judgment
of Mortgagee or its counsel, materially less favorable to landlord than the
terms and conditions of the Form Lease, provided there has been no material
adverse change in the financial condition of the proposed tenant. If Mortgagee
shall so withhold its consent, it shall, within fifteen business days after
request by Mortgagor, notify Mortgagor of the specific reasons for such
determination and suggest modifications to the proposed Future Lease, which, if
adopted, would render the proposed Future Lease acceptable to Mortgagee. If
Mortgagee shall fail to disapprove of such lease within such fifteen business
day period, time being of the essence, Mortgagee shall be conclusively deemed
to have approved such lease. If Mortgagee shall not have approved a Term Sheet
or the proposed Future Lease, Mortgagee shall not be required to approve or
disapprove such executed lease unless and until the Term Sheet and such
information shall have been delivered by Mortgagor in accordance with the
provisions hereof. With respect to any lease which Mortgagee approves,
promptly after request of Mortgagor, Mortgagee shall execute and deliver to
Mortgagor and the approved tenant a non-disturbance and attornment agreement in
the form approved by Mortgagee,
(d) Mortgagor may propose modifications to the then-current Form
Lease as frequently as Mortgagor shall deem appropriate. Mortgagee shall
notify Mortgagor whether or not Mortgagee approves or disapproves any proposed
revision of the Form Lease within twenty business days after receipt thereof by
Mortgagee, failing which the
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proposed revision of the Form Lease shall be deemed approved. Mortgagee shall
not unreasonably withhold or delay its approval of proposed revisions to the
Form Lease, and if Mortgagee disapproves of all or any portion of such Form
Lease, Mortgagee shall specify the reasons for its disapproval and suggest
acceptable alternative provisions. Until such time as Mortgagor shall agree on
revision to the Form Lease, the then-current Form Lease shall remain in effect.
(e) All requests made by Mortgagor and all materials and
information to be furnished to Mortgagee pursuant to the preceding provisions
shall be made and furnished to Mortgagee at the following address:
The Northwestern Mutual Life Insurance Company
1133 20th Street, N.W. - Suite 700
Washington, DC 20036
Attn: Regional Manager
Re: Loan No. C-331908
Mortgagee may require Mortgagor to pay reasonable servicing fees for
Mortgagee's review of any Term Sheet, proposed future tenant, Future Lease or
Form Lease modification.
COSTS, FEES AND EXPENSES. Mortgagor agrees to appear in and defend any action
or proceeding purporting to affect the security hereof or the rights or powers
of Mortgagee hereunder; to pay all costs and expenses, including the cost of
obtaining evidence of title and reasonable attorney's fees, incurred in
connection with any such action or proceeding; and to pay any and all
reasonable attorney's fees and expenses of collection and enforcement in the
event the Note is placed in the hands of an attorney for collection,
enforcement of any of the Loan Documents is undertaken or suit is brought
thereon.
FAILURE OF MORTGAGOR TO ACT. After the occurrence of an Event of Default,
Mortgagee may, without obligation so to do, without notice to or demand upon
Mortgagor and without releasing Mortgagor from any obligation hereof: (i) make
or do the same in such manner and to such extent as Mortgagee may deem
necessary to protect the security hereof, Mortgagee being authorized to enter
upon the Property for such purpose; (E) appear in and defend any action or
proceeding purporting to affect the security hereof, or the rights or powers of
Mortgagee; (iii) pay, purchase, contest or compromise any encumbrance, charge
or lien which in the reasonable judgment of Mortgagee appears to be prior or
superior hereto; and (iv), in exercising any such powers, pay necessary
expenses, employ counsel and pay its reasonable fees. Sums so expended shall
be payable by Mortgagor immediately upon demand with interest from date of
expenditure at the Default Rate (as defined in the Note). All sums so expended
by Mortgagee and the interest thereon shall be included in the Indebtedness and
secured by the lien of this instrument.
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EVENT OF DEFAULT. Any default in any payment required in the Note or any other
Loan Document (a "Monetary Default") not cured by payment of all amounts in
default (including payment of interest at the Default Rate, as defined in the
Note, from the date of default to the date of cure on amounts owed to
Mortgagee) within five (5) business days after the date on which Mortgagee
shall have given such notice to Mortgagor shall constitute an "Event of
Default."
Any other default in any provision, covenant, agreement or warranty contained
in the Note or in any other Loan Document (a "Non-Monetary Default") not cured
within thirty (30) days after the date on which Mortgagee shall have given such
notice of default to Mortgagor (or, if the Non-Monetary Default is not curable
within such 30-day period, Mortgagor shall not have diligently undertaken and
continued to pursue the curing of such Non-Monetary Default and, if the default
is capable of being cured by the payment of money, deposited an amount
sufficient to cure such Non-Monetary Default in an escrow account satisfactory
to Mortgagee) shall constitute an "Event of Default."
NOTICES. Except as otherwise provided herein, any notice or demand hereunder
shall be in writing, may be delivered personally or sent by certified mail with
postage prepaid, by reputable courier service with charges prepaid, by
telecopier or by such other method whereby the receipt thereof may be
confirmed. Any notice or demand sent to Borrower by certified mail or
reputable courier service shall be addressed to Borrower at the address set
forth above or such other address in the United States of America as Borrower
shall designate in a notice to Lender given in the manner described herein.
Any notice sent to Borrower by telecopier shall be telecopied to 212-474-7199
or to such other telecopier number in the United States of America as shall be
designated in a notice given to Lender in the manner described herein. Any
notice sent to Lender shall be addressed to the attention of the Real Estate
Investment Department at 720 East Wisconsin Avenue, Milwaukee, WI 53202 and
shall refer to the Loan No. set forth above and, if telecopied, shall be
telecopied to 414/299-1557 or at such other address or telecopier number as
Lender shall designate in a notice given in the manner described herein. Any
notice or demand sent hereunder by telecopier shall also be sent by certified
mail or reputable courier service. Any notice or demand hereunder shall be
deemed given when received. Any notice or demand which is rejected, the
acceptance of delivery of which is refused or which is incapable of being
delivered for any reason whatsoever at the address or telecopier number
specified herein or such other address or telecopier number designated pursuant
hereto shall be deemed received as of the date of attempted delivery.
In no event shall the notice and cure period provisions recited above
constitute a grace period for the purposes of commencing interest at the
Default Rate (as defined in the Note).
APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of Default and the
commencement of any proceeding to enforce any right under this instrument
including foreclosure thereof, Mortgagee (without limitation or restriction by
any present or future law, without regard to the solvency or insolvency at that
time of any party liable for the payment of the Indebtedness, without regard to
the then value of the Property, whether
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or not there exists a threat of imminent harm, waste or loss to the Property
and or whether the same shall then be occupied by the owner of the equity of
redemption as a homestead) shall have the absolute right to the appointment of
a receiver of the Property and of the revenues, rents, profits and other income
therefrom, and said receiver shall have (in addition to such other powers as
the court making such appointment may confer) full power to collect all such
income and, after paying all necessary expenses of such receivership and of
operation, maintenance and repair of said Property, to apply the balance to the
payment of any of the Indebtedness then due.
FORECLOSURE. Upon the occurrence of an Event of Default, the entire unpaid
Indebtedness shall, at the option of Mortgagee, become immediately due and
payable for all purposes without any notice or demand, except as required by
law, (ALL OTHER NOTICE OF THE EXERCISE OF SUCH OPTION, OR OF THE INTENT TO
EXERCISE SUCH OPTION, BEING HEREBY EXPRESSLY WAIVED), and Mortgagee may, in
addition to exercising any rights it may have with respect to the Personal
Property under the Uniform Commercial Code of the jurisdiction in which the
Property is located, institute proceedings in any court of competent
jurisdiction to foreclose this instrument as a mortgage, or to enforce any of
the covenants hereof, or Mortgagee may, either personally or by agent or
attorney in fact, enter upon and take possession of the Property and may
manage, rent or lease the Property or any portion thereof upon such terms as
Mortgagee may deem expedient, and collect, receive and receipt for all rentals
and other income therefrom and apply the sums so received as hereinafter
provided in case of sale. This Mortgage and Security Agreement is upon the
statutory condition, for any breach of which Mortgagee shall have the statutory
power of sale, and Mortgagee is hereby further authorized and empowered, as
agent or attorney in fact, either after or without such entry, to sell and
dispose of the Property en masse or in separate parcels (as Mortgagee may think
best), and all the right, title and interest of Mortgagor therein, by
advertisement or in any manner provided by the laws of the jurisdiction in
which the Property is located, (MORTGAGOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO
A HEARING PRIOR TO SUCH SALE), and to issue, execute and deliver a deed of
conveyance, all as then may be provided by law; and Mortgagee shall, out of the
proceeds or avails of such sale, after first paying and retaining all fees,
charges, costs of advertising the Property and of malting said sale, and
attorneys' fees as herein provided, apply such proceeds to the Indebtedness,
including all sums advanced or expended by Mortgagee or the legal holder of the
Indebtedness, with interest from date of advance or expenditure at the Default
Rate (as defined in the Note), rendering the excess, if any, as provided by
law; such sale or sales and said deed or deeds so made shall be a perpetual
bar, both in law and equity, against Mortgagor, the heirs, successors and
assigns of Mortgagor, and all other persons claiming the Property aforesaid, or
any part thereof, by, from, through or under Mortgagor. The legal holder of
the Indebtedness may purchase the Property or any part thereof, and it shall
not be obligatory upon any purchaser at any such sale to see to the application
of the purchase money.
DUE ON SALE. The ownership and management of the Property are material
considerations to Mortgagee in making the loan secured by this instrument and
Mortgagor shall not (i) convey title to all or any part of the Property, (ii)
enter into any
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contract to convey (land contract/installment sales contract/contract for deed)
title to all or any part of the Property which gives a purchaser possession of,
or income from, the Property prior to a transfer of title to all or any part of
the Property ("Contract to Convey") or (iii) cause or permit a change in the
proportionate ownership of Mortgagor. Except if resulting from the death or
legal incompetency of any individual, any conveyance, entering into a Contract
to Convey or change in the proportionate ownership of Mortgagor shall
constitute a default under the terms of this instrument.
For purposes of this instrument, a "change in the proportionate ownership of
Mortgagor" means a change in the ownership of the voting stock of Mortgagor
such that Cornerstone Properties, Inc., no longer continues to own, directly or
indirectly, 51% or more of the voting stock of or ownership interests in
Mortgagor.
Notwithstanding anything contained herein, Mortgagor may, without the approval
of Mortgagee but subject to the Loan Documents, transfer its interest in the
Property to Cornerstone Properties, Inc. or any entity in which Cornerstone
Properties, Inc. owns, directly or indirectly, not less than 51% of the
ownership interests.
Notwithstanding the above, provided there is then no default in the terms and
conditions of any Loan Document and upon prior written request from Mortgagor,
Mortgagee shall not withhold its consent to a one-time transfer of the
Property, provided (i) the Property shall have achieved Debt Service Coverage
of at least 1.75 for the last full fiscal year of Mortgagor as determined from
financial statements furnished to Mortgagee pursuant to the provisions hereof
following the caption "Financial Statements"; (ii) the purchaser thereof has a
net worth, determined in accordance with generally accepted accounting
principles, of at least $50,000,000.00; (iii) the purchaser is experienced in
the ownership and management of Class A office buildings; (iv) the purchaser
shall have a minimum equity investment in the Property of $50,000,000; (v) the
purchaser assumes in writing all of the obligations and liabilities of
Mortgagor under the Loan Documents; (vi) the purchaser and the stockholders of
such purchaser, the beneficiaries of such purchaser, the partners of such
purchaser, or the members of such purchaser, as the case may be, execute
Mortgagee's Environmental Indemnity Agreement in the form signed by Mortgagor
and Cornerstone Properties, Inc. of even date herewith; (vii) an environmental
report on the Property no older than 90 days prior to the date of transfer
which meets Mortgagee's then current requirements is provided to Mortgagee at
least 30 days prior to the date of transfer and said report shall be
satisfactory to Mortgagee at the time of transfer; and (viii) Mortgagor and
Cornerstone Properties, Inc. shall remain liable under the Environmental
Indemnity Agreement dated of even date herewith, except for acts or occurrences
after the date of the transfer of the Property. If Mortgagor shall make a
one-time transfer to an approved purchaser, Mortgagee shall be paid a fee equal
to one percent (1%) of the then outstanding balance of the Note at the time of
transfer. The fee shall be paid on or before the closing date of such
transfer. At the time of such transfer, no modification of the Interest Rate
or repayment terms of the Note will be required.
No subsequent transfers of the Property or changes in the proportionate
ownership of purchaser shall be allowed. As used herein, a "change in the
proportionate ownership of
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purchaser" means, a change in the ownership such that an individual or entity
owning more than a majority of the ownership interest in such purchaser or
possessing the power (through ownership, by contract, or otherwise) to control
the policies of such purchaser prior to such change no longer owns a majority
of the ownership interest in such purchaser or no longer has the power to
control the policies of such purchaser.
For purposes of this provision, "Debt Service Coverage" means a number
calculated by dividing Net Income Available for Debt Service for a fiscal
period by the debt service during the same fiscal period under all indebtedness
(including the Indebtedness) secured by mortgage liens on any portion of the
Property. For purposes of the preceding sentence, "debt service" means the
greater of (x) actual debt service due under all indebtedness secured by any
portion of the Property or (y) debt service that would have been due and
payable if all indebtedness secured by any portion of the Property were
amortized over 25 years (whether or not amortization is actually required) and
if interest on such indebtedness were due monthly as it accrues (regardless of
the face rate shown on the notes therefor and whether or not monthly interest
payments based on such face rates are required).
Notwithstanding the foregoing, furthermore nothing herein shall serve to limit
the direct or indirect ownership of Cornerstone Properties, Inc.
FINANCIAL STATEMENTS. Mortgagor agrees to furnish to Mortgagee, at Mortgagor's
expense and within 90 days after the close of each fiscal year of Mortgagor
("Financial Statements Due Date") commencing with the financial statements for
the 1996 fiscal year, annual unaudited financial statements on the Property,
including
(a) a balance sheet; and
(b) an income statement with a detailed line item
breakdown of all operating expenses, expenditures for
tenant improvements, leasing commissions and capital
improvements (collectively referred to herein as the
"Statements").
Mortgagor also agrees to provide Mortgagee by the Financial Statements Due Date
a current rent roll listing tenant sales, sales per square foot and percentage
rents for all retail spaces (the "Rent Roll") and a certification (the
"Certification") by the chief financial officer of Cornerstone Properties, Inc.
(or the chief financial officer of any permitted purchaser of the Property)
stating that the Statements and Rent Roll are true and correct and the
Statements have been prepared in accordance with generally accepted accounting
principles. Mortgagor acknowledges that Mortgagee requires the Statements,
Rent Roll and Certification in order to record accurately the value of the
Property for financial and regulatory reporting.
If Mortgagor does not furnish, or cause to be furnished, the Statements, Rent
Roll and Certification to Mortgagee by the Financial Statements Due Date and
continues to fail to do so within 30 days after Mortgagee shall have given
written notice to Mortgagor that the Statements, Rent Roll and/or Certification
have not been received as required,
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(x) interest on the unpaid principal balance of the
Indebtedness shall as of the Financial Statements Due Date,
accrue and become payable at a rate equal to the sum of the
Interest Rate (as defined in the Note) plus one percent (1%)
per annum (the "Increased Rate"); and
(y) Mortgagee may elect to obtain an independent appraisal and
audit of the Property at Mortgagor's expense, and Mortgagor
agrees that it will, upon request, promptly make Mortgagor's
books and records regarding the Property available to
Mortgagee and the person(s) performing the appraisal and audit
(which obligation Mortgagor agrees can be specifically
enforced by Mortgagee).
The amount of the monthly payments due under the Note during the time in which
the Increased Rate shall be in effect shall be changed to an amount which would
be sufficient on a level payment basis to amortize the then unpaid principal
balance at the Increased Rate during the then remaining portion of a period of
25 years commencing on the Amortization Period Commencement Date (as defined in
the Note). Interest shall continue to accrue and be due and payable monthly at
the Increased Rate until the Statements, Rent Roll and Certification shall be
furnished to Mortgagee as required. Commencing on the date on which the
Statements, Rent Roll and Certification are received by Mortgagee, interest on
the unpaid principal balance shall again accrue at the Interest Rate and the
payments due during the remainder of the term of the Note shall be changed to
an amount which would be sufficient on a level payment basis to amortize the
then unpaid principal balance at the Interest Rate during the then remaining
portion of a period of 25 years commencing on the Amortization Period
Commencement Date. Notwithstanding the foregoing, Mortgagee shall have the
right to conduct an independent audit at its own expense at any time.
DEPOSITS BY MORTGAGOR. To assure the timely payment of real estate taxes and
special assessments, Mortgagee shall have the option after any Event of Default
to require Mortgagor to deposit funds with Mortgagee, in monthly or other
periodic installments in amounts estimated by Mortgagee from time to time
sufficient to pay real estate taxes and special assessments as they become due.
If at any time the funds so held by Mortgagee, or in such other account, shall
be insufficient to pay any of said expenses, Mortgagor shall, upon receipt of
notice thereof, immediately deposit such additional funds as may be necessary
to remove the deficiency. All funds so deposited shall be irrevocably
appropriated to Mortgagee to be applied to the payment of such real estate
taxes and special assessments and, at the option of Mortgagee after default,
the Indebtedness.
MODIFICATION OF TERMS. Without affecting the liability of Mortgagor or any
other person (except any person expressly released in writing) for payment of
the Indebtedness or for performance of any obligation contained herein and
without affecting the rights of Mortgagee with respect to any security not
expressly released in writing, Mortgagee may, at any time and from time to
time, either before or after the maturity of the Note, without notice or
consent: (i) release any person liable for payment of all or any part of the
Indebtedness or for performance of any obligation; (ii) make any agreement
extending the time or otherwise altering the terms of payment of an or any part
of the
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Indebtedness, or modifying or waiving any obligation, or subordinating,
modifying or otherwise dealing with the lien or charge hereof; (iii) exercise
or refrain from exercising or waive any right Mortgagee may have; (iv) accept
additional security of any kind; (v) release or otherwise deal with any
property, real or personal, securing the Indebtedness, including all or any
part of the Property.
EXERCISE OF OPTIONS. Whenever, by the terms of this instrument of the Note or
any of the other Loan Documents, Mortgagee is given any option, such option may
be exercised when the right accrues or at any time thereafter, and no
acceptance by Mortgagee of payment of Indebtedness in default shall constitute
a waiver of any other default then existing and continuing or thereafter
occurring.
NATURE AND SUCCESSION OF AGREEMENTS. Each of the provisions, covenants and
agreements contained herein shall inure to the benefit of, and be binding on,
the heirs, executors, administrators, successors and assigns of the parties
hereto, respectively, and the term "Mortgagee" shall include the owner and
holder of the Note.
LEGAL ENFORCEABILITY. No provision of this instrument, the Note or any other
Loan Documents shall require the payment of interest or other obligation in
excess of the maximum permitted by law. If any such excess payment is provided
for in any Loan Documents or shall be adjudicated to be so provided, the
provisions of this paragraph shall govern and Mortgagor shall not be obligated
to pay the amount of such interest or other obligation to the extent that it is
in excess of the amount permitted by law.
LIMITATION OF LIABILITY. Notwithstanding any provision contained herein to the
contrary, the liability of Mortgagor, its shareholders, directors, officers,
employees and agents for all of its covenants, representations, warranties and
undertakings under this Mortgage shall be subject to the limitations provided
in the Note mutatis mutandis.
CAPTIONS. The captions contained herein are for convenience and reference only
and in no way define, limit or describe the scope or intent of, or in any way
affect this instrument.
GOVERNING LAW. This Mortgage shall be controlled by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts.
17
<PAGE> 18
IN WITNESS WHEREOF, this instrument has been executed by the Mortgagor as of
the day and year first above written.
CSTONE-BOSTON INC., a Delaware
corporation
By: /s/ KEVIN P. MAHONEY
------------------------
Name: Kevin P. Mahoney
Title: Treasurer
By: /s/ THOMAS P. LOFTUS
------------------------
Name: Thomas P. Loftus
Title: Vice President
18
<PAGE> 19
STATE OF NEW YORK )
)ss.
COUNTY OF NEW YORK )
On this 18th day of December, 1995, before me appeared Kevin P.
Mahoney to me personally known, who being by me duly sworn did say that he is
the Treasurer of CSTONE-BOSTON INC., a Delaware corporation; that the seal
affixed to the foregoing instrument is the corporate seal of said corporation,
and that said instrument was executed in behalf of said corporation and its
corporate seal affixed thereto by authority of its Board of Directors; and said
Kevin P. Mahoney a aid instrument to be the free act and deed of said
corporation.
/s/ JOSEPH GORIN
-------------------------------
Notary Public in and for
My commission expires: New York County,
JOSEPH GORIN
Notary Public, State of New York
No. 31-5037452
Qualified in New York County
Commission Expires December 27, 1996
STATE OF NEW YORK )
)ss.
COUNTY OF NEW YORK )
On this 18th day of December, 1995, before me appeared Thomas Loftus
to me personally known, who being by me duly sworn did say that he is the Vice
President of CSTONE-BOSTON INC., a Delaware corporation that the seal affixed
to the foregoing instrument is the corporate seal of said corporation, and that
said instrument was executed in behalf of said corporation and its corporate
seal affixed thereto by authority of its Board of Director; and said Vice
President acknowledged said instrument to be the free act and deed of said
corporation.
/s/ JOSEPH GORIN
-------------------------------
Notary Public in and for
My commission expires: New York County,
JOSEPH GORIN
Notary Public, State of New York
No. 31-5037452
Qualified in New York County
Commission Expires December 27, 1996
This instrument was prepared by Frederick W. Bessette, Attorney, for The
Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue,
Milwaukee, WI 53202.
19
<PAGE> 20
EXHIBIT "A"
Description of Property:
PARCEL I
That certain parcel of land with the buildings thereon in Boston, Suffolk
County, Massachusetts shown on a plan entitled "Plan of Land, Boston, Mass."
dated September 17, 1984 prepared by Harry R. Feldman, Inc., Revised January
24, 1985, recorded with Suffolk Registry of Deeds on February 1, 1985 with
Instrument No. 227, in Book 11385, Page 112, bounded and described according to
said plan as follows:
NORTHERLY by Summer Street by three lines measuring twenty-seven and
19/100 (27.19) feet, sixty-one and 22/100 (61.22) feet, and
one hundred three and 92/100 (103.92) feet;
EASTERLY by South Street one hundred seventeen and 48/100 (117.48)
feet;
SOUTHERLY by land now or formerly of the Commonwealth of Massachusetts
one hundred seven and 89/100 (107.89) feet;
EASTERLY by said land now or formerly of the Commonwealth of
Massachusetts fifty-eight and 47/100 (58.47) feet;
SOUTHERLY by land now or formerly of Myer C. & Frances Handel and
Charlotta Rosenberg, Trustees by three lines measuring
forty-two and 56/100 (42.56) feet, 21/100 (0.21) feet and
thirty-seven and 98/100 (37.98) feet;
WESTERLY by Lincoln Street one hundred eighty-four and 48/100 (184.48)
feet.
PARCEL II
A certain parcel of land located in Boston, Suffolk County, Massachusetts known
and numbered as 34-38 Lincoln Street and shown as Parcel 15-RT-5 on a plan of
land shown on an Order of Taking from the Commonwealth of Massachusetts for the
Department of Public Works dated December 22, 1954 and recorded on December 24,
1954 in the Suffolk Registry of Deeds, Book 7020, Page 271, said parcel being
more particularly bounded and described as follows:
WESTERLY by Lincoln Street - 19 feet;
NORTHERLY by property now or formerly of 30 Lincoln St. Trust - 81 feet;
and
SOUTHEASTERLY
to in three courses - 17.00 feet, 46.60 feet, and by an arc with
SOUTHWESTERLY the length of 40.33 feet and a radius of 20 feet, all shown on
said Plan.
<PAGE> 1
EXHIBIT 10.56
LOAN SALE AGREEMENT
LOAN SALE AGREEMENT, dated as of November 21, 1995 (this "Agreement")
between THE SAKURA BANK, LTD., NEW YORK BRANCH, as agent (in its capacity as
agent, "Seller") for The Sakura Bank, Ltd., New York Branch ("Sakura") and The
Hokkaido Takushoku Bank, Ltd., New York Branch ("Hokkaido Takushoku"; Sakura
and Hokkaido Takushoku, collectively, the "Lenders"), and Cornerstone
Properties Inc., a Nevada Corporation ("Buyer").
or a wholly owned subsidiary thereof
RECITALS
A. The Lenders have made a loan to Tower 56 Partners, a New York
partnership ("Borrower"), in the original aggregate principal amount of
$54,000,000 (the "Loan") . The Loan is evidenced by (i) that certain Promissory
Note dated March 24, 1987 in the principal amount of $39,000,000 payable to the
order of Sakura (formerly known as The Mitsui Taiyo Kobe Bank, Ltd., New York
Branch, successor by merger to The Taiyo Kobe Bank, Ltd., New York Branch) ,
and (ii) that certain Promissory Note dated March 24, 1987 in the principal
amount of $15,000,000 payable to the order of Hokkaido Takushoku ((i) and (ii),
collectively, the "Notes"). The Notes are secured by, among other things, that
certain Mortgage and Mortgage Consolidation. Modification, Extension, Spreader
and Security Agreement dated as of March 24, 1987 (the "Mortgage") made by
Borrower in favor of Seller, encumbering the real property and improvements
commonly known as Tower 56 and located at 126 East 56th Street, New York, New
York (the "Premises").
B. Seller and Borrower have entered into that certain Agreement
dated December 16, 1991 (as amended, the "Rent Collection Agreement"; the
Notes, the Mortgage and the Rent Collection Agreement, collectively, the "Loan
Documents") pursuant to which Seller has agreed to refrain from exercising its
rights and remedies under the Notes and Mortgage through January 10, 1996 and
Borrower has agreed to allow Seller to collect all of the rents coming due with
respect to leases at the Premises through January, 1996.
C. Seller wishes to sell, and the Buyer wishes to buy, all right,
title and interest of the Lenders, as set forth in this Agreement, in, under
and to (i) the Loan, (ii) the Notes, (iii) the mortgage, (iv) the Rent
Collection Agreement, and any and all instruments, agreements and other
writings executed in connection with or pursuant to the Loan Documents, and (v)
all collateral held by the Lenders with respect to the Loan (collectively
"Purchased Interest").
AGREEMENT
In consideration of the mutual covenants and agreements contained
herein, the parties hereby agree as follows:
<PAGE> 2
2
SECTION 1. Sale and Purchase Agreement.
1.1 Subject to the terms and conditions hereof, Seller hereby
agrees to sell, transfer, and assign the Purchased Interest to Buyer, and Buyer
hereby agrees to purchase from Seller all of the Lenders, right, title and
interest, as set forth in this Agreement, in, under and to the Purchased
Interest. Buyer hereby acknowledges and agrees that the Purchased Interest
does not include any amounts that Seller has collected under the Rent
Collection Agreement, all of which are the sole property of Seller and are not
being sold hereunder (except as expressly set forth in Section 7.2 of this
Agreement).
Prior to the Closing, Seller shall be entitled to receive all payments
and distributions (including, without limitation, interest payments) with
respect to the Loan in accordance with the terms of the Notes and the mortgage
(subject to the credit for principal repayment as set forth in Section
7.1(a)(i) herein). From and after the Closing, Buyer shall be entitled to
receive all payments and distributions and to exercise and enforce all rights
with respect to the Purchased Interest.
1.2 Seller and Buyer agree that the closing of the purchase and
sale of the Purchased Interest ("Closing") shall be held on December 19, 1995
(as such date may be extended in accordance with the terms of this Agreement,
the "Closing Date") at 10:00 A.M. at the offices of Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York 10017, time being of the essence.
SECTION 2. Purchase Price, Earnest money and
Additional Earnest Money.
2.1 The Purchase Price for the Purchased Interest shall be
$30,150,000.00 (the "Purchase Price").
2.2 on or before the complete execution of this Agreement, Seller
will deposit with Simpson Thacher & Bartlett ("Escrow Agent") via wire transfer
of funds, the sum of $753,750.00 [2.5% of the Purchase Price] as earnest money
which will be held by the Escrow Agent for the mutual benefit of Seller and
Buyer and invested in an interest bearing account. Said sum together with all
interest earned thereon is herein collectively called the "Earnest Money". The
Earnest Money shall be applied to the Purchase Price at Closing or in the event
the Closing does not occur, delivered to the party under this Agreement
entitled to the Earnest Money in accordance with the terms of this Agreement.
Buyer recognizes that the Earnest Money constitutes the deposit Buyer delivered
to Seller in connection with its offer to purchase the Purchased Interests, and
consents
<PAGE> 3
3
to the transfer of the Earnest Money to the Escrow Agent and the application of
the Earnest Money as set forth in this Agreement.
2.3 Within 24 hours after the complete execution of this
Agreement, Buyer will deposit with the Escrow Agent via wire transfer of funds,
the sum of $1,507,500.00 [5% of the Purchase Price] as additional earnest
money, which is in addition to the Earnest Money and will be held by the Escrow
Agent for the mutual benefit of Seller and Buyer and invested in an interest
bearing account. Said sum together with all interest earned thereon is herein
collectively called the "Additional Earnest Money". The Additional Earnest
Money shall be applied to the Purchase Price at Closing, or in the event the
Closing does not occur, delivered to the party under this Agreement entitled to
the Additional Earnest Money in accordance with the terms of this Agreement.
2.4 The Earnest Money shall be delivered by the Seller to the
Escrow Agent via wire transfer of funds and the Additional Earnest Money shall
be delivered by the Buyer to the Escrow Agent via wire transfer of funds, each
pursuant to the following wire instructions:
Citibank Private Banking
ABA # 021000089
For the Account of Simpson Thacher
& Bartlett Escrow Account
Account #
Ref: Tower 56 Loan Sale
SECTION 3. Inspection Period/Termination/ Remediation.
3.1 (a) in the event Buyer shall determine that the condition of
the Purchased Interest is deficient as a result of any one or more of the
circumstances described in subsection (b) below, then Buyer shall, upon making
such determination, but no later than 5:00 p.m. on the date which is 21 days
after the date hereof (the "Inspection Period"), deliver written notice to
Seller of such deficiency (a "Deficiency Notice"), which Deficiency Notice
shall clearly identify the claimed deficiencies in detail. Within 10 days
after receipt of the Deficiency Notice, if a deficiency as a result of one or
more of the circumstances described in subsection (b) below actually exists,
Seller may, by notice to Buyer, (i) agree to cure such deficiency prior to the
Closing Date, in which case such cure shall be a condition to Buyer's
obligation to close hereunder, (ii) agree to reduce the Purchase Price by the
amount needed to cure such deficiency, in which case the Purchase Price shall
be reduced by such amount, or (iii) notify Buyer of Seller's intent to
terminate this Agreement, in which case, unless Buyer waives the deficiencies
listed in the Deficiency Notice as hereinafter provided, the parties hereto
shall have no further liabilities, rights or obligations hereunder and the
Earnest money and Additional Earnest Money shall be returned to Buyer. If
Seller
<PAGE> 4
4
fails to notify Buyer of its choice within such 10 day Period, Seller shall be
deemed to have elected to terminate this Agreement. If Seller elects (or is
deemed to have elected) to terminate this Agreement, Buyer may waive the
deficiencies listed in the Deficiency Notice. If Buyer waives such
deficiencies, or if Buyer has not delivered a Deficiency Notice to Seller
within the time frame described above, then (A) this Agreement shall remain in
full force and effect, (B) Buyer shall have no further right to claim any
deficiency pursuant to this Section 3.1, and (C) Buyer shall have no right or
claim to any reduction of or credit against the Purchase Price by reason of any
purported deficiency in the Purchased Interest. If Buyer timely delivers a
Deficiency Notice to Seller, Seller shall be entitled to extend the Closing Day
to provide Seller with sufficient time to cure any deficiencies set forth in
such Deficiency Notice, but in no event shall the Closing Date be extended past
December 28, 1995.
(b) Any of the following circumstances shall be a
deficiency as described in subjection (a) above:
(i) An updated and accurate search of title with respect
to the Premises, and a review of the Notes, the Mortgage and the other
Loan Documents, indicate that the Mortgage does not evidence a first
priority enforceable mortgage lien on the Premises subject and
subordinate only to (A) those matters described in Schedule B-II of
the title policy located in the Investor File (as defined in Section
5.5 below) and (B) such other matters which do not materially
adversely interfere with the current use of the Premises or with the
practical realization of the benefits of the security intended to be
provided by the Mortgage;
(ii) An inspection of the Premises by a qualified third
party professional with respect to environmental matters discloses
that hazardous substances, in material quantities or amounts not
otherwise disclosed in the environmental report located in the
Investor File or elsewhere in the investor File ("Additional Hazardous
Substances"), have been disposed of or identified on, under or about
the Premises in violation of law, and the cost to remove or otherwise
remediate such Additional Hazardous Substances exceeds 2% of the
Purchase Price; as used herein, hazardous substances means (A) those
substances included within the definition of any one or more terms
"hazardous substances", "hazardous materials", "toxic substances", and
"hazardous waste" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections
9601-9657), the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. Section 6901 et seq.), and the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801 et seq.), and
in the regulations promulgated pursuant thereto, (B) those substances
listed in the United States Department of Transportation Table (49 CFR
Section 172.101 and amendments thereto) or by the Environmental
<PAGE> 5
5
Protection Agency (or any successor agency) (40 CFR Section 302 and
amendments thereto) as hazardous substances, (C) such other
substances, materials and wastes that are regulated under applicable
local, state or federal laws, or that are classified as hazardous or
toxic under applicable federal, state or local laws or regulations;
and (D) any materials, wastes or substances that are (1) petroleum,
(2) polychlorinated biphenyls, (3) within the definition of "hazardous
substance" set forth in Section 311 of the Clean water Act (33 U.S.C.
Section 1321), or designated as "toxic pollutants" subject to chapter
26 of the Clean Water Act pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317), (4) flammable explosives, (5)
radioactive materials, (6) radon, (7) lead or lead-containing
materials in paint or drinking water, or (8) damaged friable asbestos;
but hazardous substance shall not include undamaged friable asbestos,
non-friable asbestos or non-friable asbestos-containing material;
(iii) An inspection of the Premises by a qualified third
party professional with respect to engineering/structural matters
indicates that structural and mechanical defects not otherwise
disclosed in the engineering reports located in the Investor File or
elsewhere in the Investor File ("Additional Structural Defects") exist
at the Premises and the cost to repair or otherwise remediate such
Additional Structural Defects exceeds 2% of the Purchase Price; as
used herein, structural and mechanical defects shall not include
defects arising (A) by reason of the failure of the improvements,
fixtures and mechanical systems to have a design or function
satisfactory for a new or unintended use or purpose (B) by reason of
deferred maintenance and/or wear and tear associated with the normal
operation of the improvements, fixtures and mechanical systems, (C) by
reason of the improvements, fixtures or mechanical systems having
outlived their useful life, (D) by reason of any law passed or
modified after the earlier of the construction of the improvements or
the issuance of the certificate of occupancy for the improvements, (E)
by reason of any defect in floor coverings or window treatments, (F)
by reason of any failure of the improvements, fixtures or mechanical
systems or any other aspect of the Premises to comply with the
American Disabilities Act of 1990, or (G) by reason of the existence
of asbestos or asbestos-containing material;
(iv) The Premises, or any portion thereof, is subject to a
pending condemnation proceeding that is likely to materially and
adversely affect the Premises, and notice of such proceeding was not
included in the investor File;
(v) Litigation proceedings are pending, or an order,
injunction or decree is outstanding, in each case relating to the
Premises and which would likely have a material
<PAGE> 6
adverse affect on the Premises, and notice of such proceedings, order,
injunction or decree was not included in the Investor File; or
(vi) The operation, occupancy or use of the Premises
violates any law, ordinance or regulation of a governmental authority
affecting the Premises, and such violation materially adversely
affects the operation, occupancy or use of the Premises, and notice of
such violation was not included in the Investor File.
(c) With respect to Sections 3.1(b)(ii) and 3.1(b)(iii)
above, if Seller is unable to provide Buyer and its third party professionals
with access to the Premises within 10 days of the date hereof to permit the
necessary inspections described in such Sections, Seller may in its sole
discretion, elect (i) to extend the Inspection Period and the Closing Date (but
in no event shall the Closing Date be extended past December 28, 1995) for one
day for each day after such 10 day period that access has not been obtained in
order to enable Seller to provide such access, or (ii) represent and warrant to
Buyer, which representations and warranties shall survive until March 1, 1996,
the following:
(A) no hazardous substances (as defined in Section 3.1(b)
(ii) have been disposed of or identified on, under or about the
Premises in violation of law which were not disclosed in the
environmental report located in the Investor File or elsewhere in the
Investor File and which would cost in excess of 2% of the Purchase
Price to remove or otherwise remediate; and
(B) no structural or mechanical defects (as defined in
Section 3.1(b)(iii) exist at the Premises which were not disclosed in
the engineering reports located in the Investor File or elsewhere in
the Investor File and which would cost in excess of 2% of the Purchase
Price to repair or otherwise remediate.
If Seller does not elect to make the foregoing representations and warranties,
and Seller is unable to provide Buyer and its third party professionals with
access to the Premises in order to perform the necessary inspections described
in Sections 3.1(b) (ii) and 3.1(b) (iii), Buyer may either waive the
inspections and proceed to the Closing, or terminate this Agreement in which
case the parties hereto shall have no further liabilities, rights or
obligations hereunder and the Earnest money and Additional Earnest Money shall
be returned to Buyer.
(d) Buyer shall indemnify and hold harmless Seller and
Borrower from and against all liens, claims, liabilities, losses and damages,
including without limitation reasonable attorneys' fees, which result from or
arise out of any damage to the
<PAGE> 7
7
Premises caused by the inspections of the promises performed by or on behalf of
Buyer pursuant to this Section 3.
(e) Prior to Closing, Buyer shall be provided access, at
reasonable times and upon reasonable notice, to the investor File and to
originals of the Loan Documents.
SECTION 4. Seller's Deliveries at Closing.
4.1 At the Closing, Seller shall deliver to Buyer:
(a) the original Notes, endorsed by allonges fully
executed by Sakura and Hokkaido Takushoku as appropriate, without recourse,
representation or warranty of any kind whatsoever. express or implied (other
than any covenant, representation or warranty contained in this Agreement which
expressly survives the Closing);
(b) fully executed assignments of the Purchased interest
without recourse, representation or warranty, of any kind whatsoever, express
or implied (other than any covenant, representation or warranty contained in
this Agreement which expressly survives the Closing), including a mortgage
assignment and assignments of UCC Financing Statements, all in proper form for
recording or filing;
(c) such other fully executed assignments or transfers
without recourse, representation or warranty of any kind whatsoever, express or
implied (other than any covenant, representation or warranty contained in this
Agreement which expressly survives the Closing) as Buyer may reasonably require
in order to complete the transaction contemplated hereunder;
(d) for delivery to Borrower, fully executed notices of
assignment of the Purchased Interest to Buyer, in such form as the parties may
reasonably agree;
(e) the original Mortgage and Rent Collection Agreement;
(f) the existing original title policy insuring Seller's
mortgage lien on the Premises;
(g) a statement of Seller listing (i) the outstanding
principal amount of the Loan as of the Closing Date, (ii) the amount of accrued
and unpaid interest under the Notes as of the Closing Date, and (iii) any
payments of interest which Seller received after November 13, 1995 (including
amounts from the Collection Account (as defined in the Rent Collection
Agreement) applied to interest as discussed in Section 7.2(e)) ; and
(h) a copy of the investor file.
<PAGE> 8
8
Seller shall also deliver to the Escrow Agent written authorization to deliver
the Earnest Money and Additional Earnest Money to Seller.
4.2 At the Closing, Buyer shall pay to Seller the
Purchase Price less any amounts to be credited to Buyer pursuant to the terms
of this Agreement, in immediately available funds by wire transfer payable to
Seller as follows:
Morgan Guaranty Trust Company of New York
ABA # 0210-0023-8
For the Account of The Sakura Bank, Ltd.,
New York Branch
Attn: Pat Walsh
Account No. 631-22-624
Ref: Tower 56 Loan Sale
Buyer shall also deliver to the Escrow Agent written authorization to deliver
the Earnest Money and Additional Earnest Money to Seller, and shall assume all
of Seller's obligations under the Rent Collection Agreement.
4.3 At the Closing, the Escrow Agent shall, upon receipt of
written authorization from Seller and Buyer, transfer to Seller the Earnest
Money and the Additional Earnest Money.
4.4 The obligation of Seller to effect the Closing shall be
subject to the fulfillment, or waiver of, at or prior to the Closing of the
following conditions:
(a) all representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing as though made at and as of the time of
Closing;
(b) Buyer shall have in all material respects performed all
obligations required to be performed by it under this Agreement prior to the
Closing;
(c) Buyer shall have paid to Seller the Purchase Price.
4.5 The obligation of Buyer to effect the Closing shall be subject
to the fulfillment, or waiver of, at or prior to the Closing of the following
conditions:
(a) All representations and warranties of Seller set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing as though made at and as of the time of
Closing;
(b) Seller shall have in all material respects performed all
obligations required to be performed by it under this Agreement prior to the
Closing;
<PAGE> 9
9
(c) Seller shall have delivered to Buyer all documents,
instruments and other items as required pursuant to this Agreement;
(d) Seller shall credit to Buyer at Closing all amounts required
pursuant to this Agreement to he credited at Closing.
SECTION 5. Representations and Warranties of Seller.
Seller hereby represents and warrants to Buyer, which representations
and warranties shall survive for 1 year after the Closing Date, that:
5.1 Seller is a New York branch of a Japanese banking institution
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation with full power and authority to execute, deliver
and perform its obligations under this Agreement and to sell the Purchased
Interest to Buyer. Neither the execution, delivery or performance of this
Agreement, nor the sale of the Purchased Interest to Buyer will result in any
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both would constitute a default) under, Seller's
charter documents or bylaws, or any agreement or instrument to which Seller is
a party or by which it is bound, or any statute, order, rule or regulation of
any court or other governmental authority applicable to it.
5.2 This Agreement has been duly and validly authorized, executed
and delivered by Seller, and constitutes a legal, valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms.
5.3 No registration with, or consent or approval of, or any other
action by, any federal, state or governmental agency, authority, administrative
or regulatory body, arbitrator, court or other tribunal, foreign or domestic,
is required for the execution, delivery and performance of this Agreement by
Seller or the sale by Seller of the Purchased Interest.
5.4 There is no action, suit or proceeding pending, or to Seller's
actual knowledge threatened, against Seller in any court or by or before any
other governmental agency or instrumentality which would materially and
adversely affect the ability of Seller to perform its obligations under this
Agreement.
5.5 The file prepared by Seller and its advisors with respect to
the Purchased Interest, which has been located in New York City and Los Angeles
and has been available for review by Buyer prior to the execution of this
Agreement containing originals or copies of the Notes, the Mortgage, the Rent
Collection Agreement, and other documents relating to the
<PAGE> 10
10
Purchased Interest, together with all written correspondence and other
information sent by Seller or its advisors to the Buyer which amends or
supplements such file (collectively, the "Investor File"), contains all
relevant and material documents relating to the valuation of the Loan which
were in the Seller's possession, custody or control on or prior to November 14,
1995, other than (i) any reports, analyses, appraisals, valuations and
memoranda generated internally by Seller or its advisors, (ii) any information
with respect to which Seller in good faith believes itself to be under a duty
or confidentiality and nondisclosure, and (iii) any confidential communication
between Seller and its legal counsel, including without limitation any
documents and communication subject to attorney-client privilege ((i), (ii) and
(iii), the Excluded Documents"), and Seller knows of no other relevant and
material documents. An index of the items in the Investor File is attached
hereto as Schedule 1. The Notes, the Mortgage and the Rent Collection Agreement
are true, correct and complete copies of the documents they purport to be and
have not been superseded, amended, modified. cancelled or otherwise changed in
any material respect except as set forth in the Investor File. None of the
Excluded Documents contain information essential to Buyer,s ability to acquire
the Purchased interest or to own or service the Loan.
5.6 The Lenders hold legal and record ownership of and hold good
and marketable title to the Purchased Interest subject only to certain
participation interests granted by Sakura to various lending institutions
(collectively, the "Participants") each of which Participants have consented in
writing to Seller's transfer of the Purchased interest in accordance with the
terms hereof. Except with respect to the participation interests granted to
the Participants as described in the previous sentence, neither Lender has
sold, assigned, pledged, hypothecated or otherwise transferred any of the Loan
Documents or any of its interest thereunder or thereto.
5.7 The outstanding principal balance of the Loan as of the date
hereof is $54,000,000. Except for the obligation of Seller to provide funds
from the cash Collateral Account to Borrower for the payment of certain
operating expenses pursuant to the terms of the Rent Collection Agreement,
neither the Borrower nor any other party has any right to disbursement of
additional loan proceeds or future advances with respect to the Loan, and there
are no conditions or circumstances which if satisfied or occurring could at any
time in the future give rise to a right of the Borrower or any other party to a
disbursement of additional loan proceeds or further advances with respect to
the Loan.
5.8 The Loan is not cross-collateralized with any other loan made
by Seller.
<PAGE> 11
11
SECTION 6. Representations and Warranties of Buyer.
Buyer hereby represents and warrants to Seller, which
representations and warranties shall survive for 1 year after the Closing Date,
that:
6.1 Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation and has the full power and authority to execute, deliver and perform
its obligations under this Agreement and to purchase the Purchased Interest
from Seller. Neither the execution, delivery or performance of this Agreement
nor the purchase of the Purchased Interest by Buyer, will result in a breach of
any provision of, or constitute a default (or an event which with notice or
lapse of time or both would constitute a default) under, Buyer's charter
documents or bylaws or any agreement or instrument to which Buyer is a party or
by which it is bound, or any statute, order, rule or regulation of any court or
other governmental authority applicable to Buyer.
6.2 This Agreement has been duly and validly authorized,
executed and delivered by Buyer and constitutes the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with its terms.
6.3 No registration with, or consent or approval of, or
any other action by, any federal, state or governmental agency, authority,
administrative or regulatory body, arbitrator, court or other tribunal, foreign
or domestic, is required in connection with the execution, delivery and
performance of this Agreement by Buyer or the purchase by Buyer of the
Purchased Interest.
6.4 There is no action, suit or proceeding pending, or to
Buyer's actual knowledge threatened against Buyer in any court or by or before
any other governmental agency or instrumentality which would materially and
adversely affect the ability of Buyer to perform its obligations under this
Agreement.
6.5 Buyer is a sophisticated investor and has knowledge
and experience in financial and business-matters that enable it to evaluate the
merits and risks of the transaction contemplated by this Agreement. Without
affecting the rights of the Buyer and the obligations of the Seller hereunder,
the Buyer's decision to purchase the Purchased Interest is based upon its
independent evaluation of the Investor File which was adequate and sufficient
for purposes of such decision, and of determining the nature, validity,
enforceability, collectability and value of the Purchased Interest and the
documentation thereof. Buyer acknowledges that it has had the opportunity to
review the Investor File prior to the execution of this Agreement. In entering
into this Agreement, the Buyer has not relied upon any oral or written
information provided by the
<PAGE> 12
12
Seller except for the representations contained in this Agreement, and Buyer
acknowledges and understands that Seller is not making any representations,
warranties or covenants except as explicitly set forth in this Agreement.
Buyer acknowledges and understands that no employee, agent, representative or
attorney of the Seller has been authorized to make, and that the Buyer has not
relied upon, any statements or representations other than those specifically
contained in this Agreement. Buyer acknowledges that the assignment and
transfer of the Purchased interest to Buyer is irrevocable, and that Buyer has
no recourse to Seller, except with respect to remedies resulting from breaches
of representations, warranties and covenants expressly contained in this
Agreement. Buyer acknowledges and agrees that the sale of the Purchased
Interest as provided for herein is made on an "as is", "where is" condition and
basis with all faults except as otherwise provided in this Agreement.
6.6 Buyer represents and warrants that the Borrower is
neither a partner (general or limited) in, member of, nor shareholder of and
does not otherwise directly own any equity interest in Buyer. Buyer further
represents and warrants that if in the event any affiliate of Borrower owns
(directly or indirectly) any equity interest in Buyer, the aggregate of such
equity interests owned by such affiliates does not exceed 50% of (i) the issued
and outstanding shares of Buyer (in the case of stock ownership) or (ii) the
outstanding interests in Buyer (in the case of a limited liability company or
partnership).
SECTION 7. Covenants.
7.1 (a) Buyer shall receive a credit against the Purchase
Price due to Seller at the Closing, equal to the sum of the following amounts:
(i) the amount of any payments or prepayments of any kind
or character on the Loan, if any, which are to be applied to the
repayment of principal of the Loan, and which have been actually
received by Seller after November 13, 1995; plus
(ii) the amount of net proceeds of any condemnation of the
Premises or hazard insurance proceeds, if any, not applied to restore
the Premises actually received by Seller after the date of this
Agreement.
(b) At the Closing, Buyer shall pay to Seller (in
addition to the Purchase Price) an amount equal to all amounts Seller has
transferred to Borrower's operating account after the date of this Agreement
pursuant to the terms of the Rent Collection Agreement to pay for capital
improvements, leasing commissions, tenant improvements or other similar capital
expenditures at the Premises, provided such costs or expenses were disclosed in
the Investor File, approved by Buyer in
<PAGE> 13
13
accordance with this Agreement (including if contained in any lease approved by
Buyer), or otherwise rightfully incurred by Borrower without Seller's consent.
7.2 (a) At the Closing, Seller shall assign to Buyer all
of Seller's rights under the Rent Collection Agreement from and after the
Closing Date and Buyer shall assume all of the Seller's obligations under the
Rent Collection Agreement from and after the Closing Date.
(b) Prior to Closing, Seller shall have transferred to
Borrower's operating account, in accordance with the terms of the Rent
Collection Agreement, funds sufficient to pay for any expenses which Borrower
has rightfully requested to be released in accordance with the terms of the
Rent Collection Agreement. Seller shall not transfer or otherwise apply any
other funds from the Collection Account (as defined in the Rent Collection
Agreement) except as otherwise set forth in this Section 7.2.
(c) At the Closing, Seller shall pay to Buyer (for
deposit in the replacement Collection Account established by Buyer in
accordance with subsection (e) of this Section 7.2) (i) the amount of any rents
Seller has received pursuant to the Rent Collection Agreement for the month of
January, 1996 or periods subsequent to January, 1996 (provided that Seller may
deliver such rents to Buyer in the form received (but endorsed to Buyer) rather
than making a payment to Buyer), and (ii) the amount required to be retained in
the Collection Account on the Closing Date pursuant to the terms of the Rent
Collection Agreement. For the purposes of clause (i) of this subsection (c),
any rents received by Seller shall be deemed to apply to rents in the order in
which such rents became due.
(d) If, on the Closing Date, Seller has not transferred
to Borrower's operating account in accordance with the terms of the Rent
Collection Agreement funds to pay in full (i) real estate taxes on the Premises
becoming due and payable on January 1, 1996 (the "January 1996 Real Estate
Taxes"), (ii) all of the costs and expenses incurred by Borrower in the 1995
remedial caulking of the Premises (the "Caulking Expenses") , and (iii) all
costs of repair to the support and connection system relating to the
second-floor windows and/or second-floor stone facade of the Premises resulting
from the improper installation of one of three drain pipes on the second floor
of the Premises (the "Second-Floor Facade Remediation Expenses") , and Seller
has not otherwise paid such amounts in full, Seller shall, on the Closing Date,
elect (in its sole discretion) to (A) pay any portion of the January 1996 Real
Estate Taxes, Caulking Expenses and SecondFloor Facade Remediation Expenses
which have not been transferred to Borrower's operating account by Seller or
paid by Seller, (B) pay to Buyer (for deposit in the replacement Collection
Account established by buyer in accordance with subsection (e) of this Section
7.2) the amount of January 1996 Real Estate Taxes, Caulking Expenses and
Second-Floor Facade Remediation Expenses which have not been transferred to
Borrower's operating account
<PAGE> 14
14
by Seller or paid by Seller, or (c) place the amount of any January 1996 Real
estate Taxes, Caulking Expenses and Second-Floor Facade Remediation Expenses
which have not been transferred to Borrower's operating account by Seller or
paid by Seller in an escrow account from which Borrower will be permitted to
withdraw funds, as necessary, to pay for the January 1996 Real Estate Taxes,
Caulking Expenses and Second-Floor Facade Remediation Expenses.
(e) All amounts remaining in the Collection Account after
any payments made by Seller under subsections (b), (c) and (d) of this Section
7.2 shall be retained by Seller and applied on the Closing Date towards accrued
and unpaid interest under the Note, and Seller shall terminate the collection
Account maintained with Sakura. Buyer shall be required to open and maintain a
replacement Collection Account, such requirement to survive the Closing.
(f) Buyer covenants and agrees to distribute any amounts
it receives pursuant to subsections (c) or (d) of this Section 7.2 in
accordance with the terms of the Rent Collection Agreement. Buyer shall
indemnify and hold Seller and Seller's officers, directors, stockholders,
partners, employees, affiliates, and agents (collectively, the "Seller
Indemnitees") harmless from and against any and all obligations, liabilities,
losses, claims, damages, costs and expenses, including reasonable attorneys'
fees and expenses and time charges of in-house counsel, which Seller or any
Seller Indemnitee shall incur as a result of Buyer's breach of its obligation
under this subsection (f) or Buyer's breach of any of its obligations under the
Rent Collection Agreement from and after the Closing Date. The provisions of
this subsection (f) shall survive the Closing.
(g) If, after the Closing, Seller shall receive any rents
from the Premises for the month of January, 1996 or periods subsequent to
January, 1996, Seller shall promptly deliver to Buyer such rents, in the form
received (except any checks will be endorsed to Buyer), such obligation to
survive the Closing.
7.3 Seller shall, subject to any restrictions or
prohibitions relating thereto, (i) promptly forward to Buyer any written notice
that Seller receives from Borrower after the Closing and (ii) hold any money or
other property they receive in connection with the Purchased interest after the
Closing for the benefit of Buyer and promptly pay such money or other property
in full to Buyer or as Buyer may direct in the same or equivalent form received
with the endorsement (without recourse, representation or warranty, express or
implied, except as expressly provided in this Agreement) of the Seller when
necessary or appropriate. The provisions of this Agreement shall survive the
Closing.
7.4 Neither Buyer nor Seller shall, without the prior
written consent of other, disclose, divulge or otherwise make known to the
general public the terms hereof, including, without limitation, the Purchase
Price; provided, however, that Buyer may disclose the terms hereof to its
consultants, lenders and insurers without Seller's consent.
<PAGE> 15
15
7.5 Seller shall, prior to the Closing, continue to
service the Loan in accordance with the terms of the Rent Collection Agreement
and the other Loan Documents, and in any event, in substantially the same
manner in which Seller is servicing the Loan on the date hereof.
Notwithstanding the foregoing, from and after the date hereof, Seller may not
approve any leases or capital expenditures for the Premises without Buyer's
prior written consent, not to be unreasonably withheld, nor modify any of the
Loan Documents; provided that Seller may, without Buyer's consent, approve a
lease for the 29th floor of the Premises on substantially the same terms as
disclosed in the Investor File. Seller shall terminate its servicing of the
Loan upon the completion of the Closing.
SECTION 8. Termination.
8.1 In the event of a material breach or breaches prior
to the Closing on the part of Seller of one or more representations, warranties
or agreements contained in this Agreement in respect of the Loan which ire not
cured prior to the Closing Date, Buyer shall have as its remedies, the right to
either (x) waive such material breach by Seller and proceed to Closing without
any reduction of the Purchase Price or (y) terminate this Agreement and the
Earnest Money and the Additional Earnest money shall be returned to Buyer,
together with out of pocket expenses actually incurred by Buyer in connection
with Buyer's due diligence hereunder, not to exceed $25,000. In the event
Seller fails to close when obligated to do so under this Agreement, Buyer, in
addition to any other remedy it may have under this Agreement, shall have the
right to pursue all legal and equitable remedies against Seller (including the
right to bring an action for specific performance with respect to Seller's
obligation to transfer the Purchased Interest to Buyer without any reduction in
the Purchase Price), PROVIDED, HOWEVER, THAT ANY AND ALL SUCH PURSUITS BY
BUYER OF SAID LEGAL REMEDIES SHALL BE LIMITED TO THE PURSUIT OF DIRECT DAMAGES,
AND IN NO EVENT SHALL INCLUDE ANY CONSEQUENTIAL OR PUNITIVE DAMAGES. For
purposes of this Section 8.1, a material breach shall be deemed to exist if
Buyer determines in its reasonable discretion that such breach either alone or
together with other breaches causes a loss in the value of the Purchased
Interest.
8.2 Anything contained herein to the contrary
notwithstanding, (i) in the event Buyer fails to close when obligated to do so
under this Agreement or (ii) in the event of a material breach or breaches
prior to the Closing on the part of Buyer of one or more representations,
warranties or agreements contained in this Agreement (x) which are not cured
prior to the Closing Date and (y) which are not waived by Seller, the Earnest
Money and the Additional Earnest Money shall be paid to Seller (as Seller's
sole remedy) as fixed, agreed and liquidated damages and, except with respect
to Buyer's and Seller's representations and warranties set forth in Section
9.5, the parties hereto shall be released of all obligations and liabilities
hereunder.
<PAGE> 16
16
8.3 In the event there is a breach by Buyer of the
representations, warranties, covenants or agreements made by Buyer under
Section 6.6 of this Agreement, Seller shall have the right to pursue all legal
and equitable remedies against Buyer, PROVIDED, HOWEVER, THAT ALL SUCH PURSUITS
BY SELLER OF SAID LEGAL AND EQUITABLE REMEDIES SHALL BE LIMITED TO THE PURSUIT
OF DIRECT DAMAGES WHICH IN ALL EVENTS SHALL NOT INCLUDE CONSEQUENTIAL AND
PUNITIVE DAMAGES.
SECTION 9 Miscellaneous.
9.1 Assignment; Successors and Assigns. Buyer may not
assign any rights under this Agreement to any entity without the prior written
consent of Seller, other than to an entity which controls, is controlled by or
is under common control with, Buyer. For purposes of this Section, "control"
of an entity means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such entity,
whether through the ownership of voting stock, by contract or otherwise.
Subject to the foregoing, this Agreement, including, without limitation, the
representations, warranties and covenants contained herein, shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns.
9.2 Further Assurances. Each of the parties hereto
agrees to execute and deliver, or to cause to be executed and delivered, all
such documents and writings, and to take all such actions, as any other party
may reasonably request in order to effectuate the intent and purposes of, and
to carry out the terms of this Agreement, all at the sole expense of the
requesting party.
9.3 Costs and Expenses. Each party to this Agreement
shall bear its own costs and expenses, including but not limited to attorneys'
fees and expenses, in connection with the transaction contemplated hereby.
Seller shall be responsible for any costs and expenses relating to or in
connection with the Loan Documents or the Purchased Interest allocable to the
Purchased Interest incurred or arising prior to the Closing, but will have no
liability for Expenses allocable to the Purchased Interest incurred or arising
subsequent to the Closing.
9.4 Counterpart Execution. This Agreement may be
executed in any number of counterparts, each of which, when so executed and
delivered, shall be an original, but all of which together shall constitute one
agreement binding both parties hereto.
9.5 Broker. Buyer represents and warrants that it has
not dealt with any broker or adviser in connection with the transaction
contemplated by this Agreement. Seller represents and warrants that, except
for Secured Capital Corporation, it has
<PAGE> 17
17
not dealt with any broker or advisor in connection with the transaction
contemplated hereby. Seller shall pay any and all fees and commissions it owes
to Secured Capital Corp in connection with the sale of the Purchased Interest.
Seller and Buyer shall indemnify and defend each other against any costs,
claims and expenses, including reasonable attorneys' fees, arising out of the
breach on their respective parts of any representation or warranty contained in
this Section 9.5. The foregoing indemnities shall survive the Closing.
9.6 Amendments; Waivers. (a) No amendment of any
provision of this Agreement shall be effective unless it is in writing and
signed by Seller and Buyer, and no waiver of any provision of this Agreement,
nor consent to any departure by Seller or Buyer therefrom, shall be effective
unless it is in writing and signed by the Seller and Buyer, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(b) No failure on the part of any party to exercise, and
no delay in exercising, any right hereunder or under any related document shall
operate as a waiver thereof by such party, nor shall any single or partial
exercise of any right hereunder cr under any other related document preclude
any other or further exercise thereof or the exercise of any other right. The
rights and remedies of each party provided herein and in other related
documents (i) are cumulative and are in addition to, and not exclusive or in
lieu of, any rights or remedies provided by law (except as otherwise expressly
set forth herein) and (ii) are not conditioned or contingent on any attempt by
such party to exercise any of its rights under any other related document
against the other party or any other entity.
9.7 No Other Representations or Warranties. This
Agreement contains all of the representations and warranties of the parties
hereto in respect of the transaction set forth herein. There are no other
representations or warranties as to such transaction other than those expressly
set forth herein.
9.8 Governing Law. This Agreement shall be construed and
the obligations of the parties hereunder shall be determined in accordance with
the laws of the State of New York (without regard to any conflict of laws
provisions thereof) and applicable federal law.
9.9 Notices. (a) All demands, notices, requests,
consents, and communications hereunder shall be in writing and shall be deemed
to have been duly given when personally delivered, or delivered by messenger or
telecopy (with confirmation by personal delivery or delivery by messenger) to
the parties at the following addresses, or such other addresses as may be
furnished hereafter by notice in writing:
<PAGE> 18
18
<TABLE>
<S> <C>
Seller: The Sakura Bank, Limited
------- 277 Park Avenue
New York, New York 10172
Attn: Mr. Mitsugu Kai
Telecopy: (212) 888-7651
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: John M. Forelle
Telecopy: (212) 455-2502
Buyer: Cornerstone Properties Inc.
------ 31 West 52nd Street
Suite 1600
New York, NY 10019
Attn: President
Telecopy: (212) 474-7199
Escrow Agent: Simpson Thacher & Bartlett
------------- 425 Lexington Avenue
New York, New York 10017
Attn: John M. Forelle
Telecopy: (212) 455-2502
</TABLE>
9.10 Integration. This Agreement, together with the
exhibits hereto, the documents delivered or executed in connection herewith,
and any amendments entered into in accordance with Section 9.6 above,
constitute the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements,
understandings or representations pertaining to the subject matter hereof,
whether oral or written. There are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth or incorporated herein.
9.11 Captions and Headings. The section captions and
headings in this Agreement are for convenience only and are not intended to be
full or accurate descriptions of the contents thereof. They shall not be
deemed to be part of this Agreement and in no way define, limit, extend or
describe the scope or intent of any provisions hereof.
9.12 Severability. The invalidity, illegality or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, all of
which shall remain in full force and effect.
9.13 Jurisdiction. Each party to this Agreement hereby
irrevocably consents to the personal jurisdiction of the
<PAGE> 19
19
courts of the State of New York and of the United States of America sitting in
the Southern District of New York in any action to enforce, interpret, construe
or apply this Agreement or any provision hereof or any other instrument,
agreement or document delivered in connection with this Agreement, and also
hereby irrevocably waives any defense of improper venue or forum non conveniens
to any such action brought in either of those courts. Each party further
irrevocably agrees that any action to enforce, interpret, apply or construe any
provision of this Agreement will be brought only in either of those courts and
not in any other court.
9.14 Service of Process by Mail. Each party hereby
irrevocably consents to the service by certified or registered mail, return
receipt requested, to be sent to its address for receipt of notices under this
Agreement, of any process in any action to enforce, interpret or construe any
provision of this Agreement.
9.15 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
9.16 No Third Party Beneficiaries. This Agreement is
intended to benefit only, and it may only be enforced by, the parties hereto
and their respective successors and assigns. No other person shall be deemed a
beneficiary of, or may enforce, this Agreement or any provision hereof or any
document or instrument delivered pursuant hereto.
SECTION 10. Escrow Agent.
10.1 Rights and Obligations of Escrow Agent. The parties
to this Agreement hereby agree that:
(a) The Escrow Agent is authorized to comply with and
obey any and all court orders, judgments or decrees relating to the
transactions described herein, and, if the Escrow Agent obeys or complies with
any such order, judgment or decree, it shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding that any such order, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated or found to have been
entered without jurisdiction and notwithstanding that any such orders,
judgments or decrees shall be inconsistent with the terms of this Agreement;
(b) In consideration of the acceptance of this Agreement
by the Escrow Agent, Seller and Buyer, jointly and severally, agree to
indemnify and hold the Escrow Agent harmless from and against any liability
(including cost, expenses and
<PAGE> 20
20
attorney's fees) it may incur by reason of its acceptance and holding of the
Earnest Money and the Additional Earnest Money and its acts and omissions in
connection therewith, except to the extent that any such liability is the
result of the Escrow Agent's gross negligence or willful misconduct, and all
parties further agree that the terms of this subsection 10.1(b) shall survive
the termination of this Agreement;
(c) without limiting the foregoing, the Escrow Agent may,
on notice to the parties, take such affirmative steps as it may, at its option,
elect in order to terminate its duties as the Escrow Agent including, but not
limited to, the deposit of the Earnest Money and the Additional Earnest Money
(if any) with a court of competent jurisdiction and the commencement of an
action to do so, the costs of which shall be borne by the parties (other than
the Escrow Agent). Upon the taking by the Escrow Agent of the actions
described in this subsection, the Escrow Agent shall be released of and from
all liability hereunder, except such liability as may have previously arisen
out of the gross negligence or willful misconduct of the Escrow Agent, wherein
liability shall survive the termination of this Loan Sales Agreement. Further,
in the event Escrow Agent terminates its duties as Escrow Agent, then the
Seller shall have the authority to appoint a successor Escrow Agent reasonably
acceptable to Buyer;
(d) Except for the Escrow Agent's gross negligence or
willful misconduct, the Escrow Agent shall not be responsible or liable in any
manner whatsoever for the sufficiency, correctness, genuineness or validity of
any notice or demand given to it or for the form of execution of any such
notice or demand, or for the identification, authority or rights of any person
executing, depositing or giving the same or for the terms and conditions of any
notice or demand pursuant to which the parties may act;
(e) The Escrow Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and shall
not incur any liability: (i) in acting upon any signature, notice, demand,
request, waiver, consent, receipt or other paper or document believed by the
Escrow Agent to be genuine and the Escrow Agent may assume that any person
purporting to give it any notice on behalf of any party in accordance with the
provisions hereof has been duly authorized to do so (provided, however, that
the Escrow Agent may not assume that any party or its representative is
authorized to give notice on behalf of any other party) or (ii) in otherwise
acting or failing to act under this Agreement, except in the case of Escrow
Agent's gross negligence or willful misconduct. Nothing contained in this
Agreement shall be deemed or construed to create a fiduciary duty on the Escrow
Agent in favor of any other party.
<PAGE> 21
21
IN WITNESS WHEREOF, Seller, Buyer and Escrow Agent have executed this
Agreement as of the date first set forth above by the respective signatures of
their duly authorized representatives.
SELLER:
THE SAKURA BANK, LIMITED,
NEW YORK BRANCH
By: /s/ TAMIHIRO KAWAUCHI
-------------------------
Name: TAMIHIRO KAWAUCHI
Title: Senior Vice President
& Head of Real Estate/Project
Finance Dept.
BUYER: Cornerstone Properties Inc.
BY: /s/ RODNEY C. DIMOCK /s/ THOMAS A. NYE
--------------------- --------------------
Rodney C. Dimock Thomas A. Nye
Executive Vice Vice President
President
ESCROW AGENT:
SIMPSON THACHER & BARTLETT
By: /s/ JOHN M. TORELLE
--------------------
Name: JOHN M. TORELLE
Title:
<PAGE> 22
PROMISSORY NOTE
$39,000,000
New York, New York
March 24, 1987
FOR VALUE RECEIVED, the undersigned, TOWER 56 PARTNERS, a New York
general partnership (the "Borrower", which term includes any of its successors
or assigns) hereby unconditionally promises to pay to the order of The Taiyo
Kobe Bank, Ltd., New York Branch (the "Bank", which term includes any of its
successors or assigns) at the office of The Taiyo Kobe Bank, Ltd., New York
Branch located at 350 Park Avenue, New York, New York 10022, which is acting as
the authorized agent of all the holders of an interest in the Notes (in such
capacity, the "Agent") in lawful money of the United States of America and in
immediately available funds, the principal amount of THIRTY-NINE MILLION
DOLLARS ($39,000,000) on March 24, 1997. The undersigned further agrees to pay
interest in lawful money of the United States of America in immediately
available funds at such office on the unpaid principal amount hereof until such
amount shall become due and payable (whether at the stated maturity, by
acceleration or otherwise) at a rate per annum of 8.8% and thereafter at the
Default Rate (as defined below). Interest shall be payable semi-annually in
arrears on each September 24 and March 24, commencing on the first such date to
occur after the date hereof, and upon the due date and payment in full of the
unpaid principal amount hereof (whether at maturity, by prepayment,
acceleration or otherwise). This Note is not subject to prepayment prior to
March 24, 1996. On or after March 24, 1996, this Note may be prepaid in whole,
but not in part, at any time at the option of the Borrower on 10 days'
irrevocable notice to the Bank provided that such prepayment is accompanied by
interest accrued on this Note to the date of prepayment and the premium
calculated in accordance with Exhibit A to this Note.
If any payment on this Note becomes due and payable on a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
or required by law to close, the maturity thereof shall be extended to the next
succeeding business day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
Terms used in this Note which are defined in the Mortgage described below shall
have the meanings given to them therein.
<PAGE> 23
2
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorsee or otherwise, hereby
waive presentation for payment, demand, notice of nonpayment or dishonor,
protest and notice of protest.
As used herein, "Default Rate" means at any time (i) if the interest
rate swap referred to in paragraph (ii) of Exhibit A to this Note is in effect
at such time a per annum rate of interest equal to 10.8% and (ii) if such
interest rate swap is not in effect at such time, a fluctuating per annum rate
of interest equal to the Bank's prime rate of interest in New York, New York
plus 2%.
Anything to the contrary notwithstanding, Bank shall not charge, take
or receive, and Borrower shall not be obligated to pay to Bank, any amounts
constituting interest on the principal amount from time to time outstanding in
excess of the maximum rate permitted by applicable law.
If any installment of interest on this Note is not paid within ten
days of the date such installment is due, the Borrower will pay to the Bank a
late charge equal to the lesser of (i) 4% of the amount of such installment of
interest or (ii) the maximum amount permitted by applicable law.
The Bank shall look solely to the Mortgaged Property, the Leases and
any other collateral now or hereafter constituting security for the payment of
the Note or for the performance of any of the agreements, obligations,
covenants and warranties contained herein or in the Mortgage, and no other
property or assets of the Borrower or any of the Borrower's partners, officers,
directors, shareholders or principals, disclosed or undisclosed, shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of the remedies of the Bank, or for any payment required to be made under this
Note or under the Mortgage, or for the performance of any of the agreements,
obligations, covenants or warranties contained herein or therein; provided,
however, that the foregoing provisions of this paragraph shall not (a)
constitute a waiver of the Debt evidenced by this Note or secured by the
Mortgage, (b) limit the right of the Bank to name Borrower as a party defendant
in any action or suit for foreclosure and sale under the Mortgage, so long as
no judgment in the nature of a personal judgment shall be enforced against the
Borrower or any of the Borrower's partners, officers, directors, shareholders
or principals,
<PAGE> 24
3
disclosed or undisclosed, or (c) affect in any way the validity of any guaranty
of payment of this Note or the Mortgage, or of all or any of the obligations
evidenced by this Note or secured by the Mortgage.
This Note shall be governed by and construed in accordance with the
laws of the State of New York.
This Note is secured as provided in the Mortgage and Mortgage
Consolidation, Modification, Extension, Spreader and Security Agreement (the
"Mortgage") dated March 24, 1987 among the Borrower, the Bank, The Hokkaido
Takushoku Bank, Ltd., New York Branch and The Taiyo Kobe Bank, Ltd., New York
Branch, __________. Reference is hereby made to the Mortgage for a description
of the properties and assets in which liens, security interests and/or other
encumbrances have been granted, the nature and extent of the security, the
terms and conditions upon which the liens, security interests and/or other
encumbrances were granted and the rights of the Bank and the undersigned in
respect thereof.
Upon the occurrence of any one or more of the Events of Default
specified in the Mortgage, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided
therein. This Note is subject to prepayment upon the occurrence of certain
casualty and condemnation events specified in the Mortgage. Upon any such
prepayment, interest accrued on this Note to the date of prepayment, together
with the premium calculated in accordance with Exhibit A to this Note, shall
also be due and payable.
TOWER 56 PARTNERS
By: MAZAL AMERICAN PARTNERS
By: GEZINT CORPORATION
By: LARRY JAY WYMAN
--------------------------
Executive Vice President
<PAGE> 25
EXHIBIT A
The premium for the Note shall be determined as provided
below:
(i) The premium shall be equal to the greater of (1) zero
or (2) the Swap Replacement Cost.
(ii) The Swap Replacement Cost shall be determined on the
Business Day next preceding the date of prepayment (the "Determination
Date") by Salomon Brothers Inc or its successors ("SBI") and, subject
to the provisions of subparagraph (v) below, shall be equal to the
algebraic sum of
(1) the principal amount of the Note times a
percentage equal to the discounted value (as hereinafter
provided) of the product of (a) a fraction the numerator of
which is the number of days from and including the
Determination Date to the next scheduled floating rate payment
date under the Swap (as defined below) and the denominator of
which is 360, times (b) the amount by which (x) the current
rate per annum (as determined by SBI as of 11:00 a.m. on the
date on which the Note is to be redeemed or is otherwise paid
(the "Redemption Date")) for "LIBOR" (as defined in the Code
of Standard Wording, Assumptions and Provisions for Swaps,
1986 Edition) for the number of months from the Determination
Date to the next scheduled floating rate interest payment date
under the Swap exceeds (y) the floating rate under the Swap
for the current floating rate period under the Swap (such
product being discounted on an actual/360 day basis from the
next scheduled floating rate interest payment date under the
Swap to the Determination Date on the basis of such current
rate per annum);
plus
(2) for each remaining scheduled fixed interest
payment date under the Swap, the principal amount of the Note
times a percentage equal to the discounted value (as
hereinafter provided) of one-half of the amount by which (a)
the fixed interest rate under the Swap exceeds (b) the current
rate per annum (as determined by SBI as provided in (iii)
below as of 11:00 a.m. on the
<PAGE> 26
2
Determination Date) for a dollar interest rate swap for the
same floating rate and having the same remaining payment dates
and maturity date as the Swap, and assuming the
creditworthiness, determined to the reasonable satisfaction of
the Bank, of the other swap counterparty (each such result
being discounted on a semiannual 30/360 day basis from the
applicable scheduled fixed interest payment date under the
Swap to the Redemption Date on the basis of such current rate
per annum for a dollar interest rate swap).
For purposes of the foregoing, the term "Swap" shall mean a U.S.
dollar interest rate swap having a notional amount equal to the
principal amount of the Note and having the same fixed and floating
interest rates, payment dates and maturity date as the interest rate
swaps provided for in the interest rate swap agreements entered into
between Salomon Brother Inc and the original purchaser of the Note.
(iii) The Swap Replacement Cost shall be evidenced by a
written statement from SBI delivered by the Borrower to the Bank,
which statement shall (a) set forth the calculations and
determinations of the Swap Replacement Cost made by SBI, (b) state
that the current rate per annum determined by SBI pursuant to clause
(2)(b) of subparagraph (ii) above represents the highest bid at which
SBI would actually consummate on the Determination Date the dollar
interest rate swap referred to in such clause, (c) include a statement
to the effect that SBI has considered current swap market conditions
and believes that its determination of the Swap Replacement Cost is
representative of other bids that could be obtained from reputable
institutions who regularly participate in swap transactions, and (d)
be conclusive absent manifest error.
(iv) Notwithstanding the foregoing, in the event SBI shall
cease to be active as a swap dealer or shall be unwilling to make the
determinations and provide the written statement contemplated above,
such determinations and written statement may be obtained by the
Borrower from The First Boston Corporation, Morgan Guaranty Trust
Company of New York, Bankers Trust Company or other company acceptable
to the Bank.
(v) Notwithstanding the provisions of subparagraphs (i)
through (iv) above, if the Swap
<PAGE> 27
3
Replacement Cost as determined under such subparagraph shall be
greater than zero the Swap Replacement Cost shall nevertheless be
deemed to be zero if the Borrower elects to cause to be substituted
for all the fixed rate counterparties under the Swap another party or
parties who are satisfactory to the floating rate counterparties under
the Swap, and such substitute party or parties shall have assumed in
writing the obligations thereafter accruing of the fixed rate
counterparties under such Swap.
<PAGE> 28
ALLONGE TO NOTE
ALLONGE to that certain Promissory Note dated as of March 24,
1987 in the original principal amount of $39,000,000, executed by Tower 56
Partners, a New York general partnership, in favor of The Taiyo Kobe Bank,
Ltd., New York Branch.
Pay to the order of Cornerstone Properties Inc., a Nevada
corporation, having an address at 31 West 52nd Street, Suite 1600, New York,
New York 10019 ("Cornerstone"). This Allonge is made without recourse and
without any representation or warranty of any kind whatsoever, express or
implied, or by operation of law, except to the extent explicitly set forth in
that certain Loan Sale Agreement dated as of November 21, 1995 between The
Sakura Bank Ltd., New York Branch, as agent, and Cornerstone.
Dated as of December 19, 1995
THE SAKURA BANK, LTD., NEW YORK
BRANCH (formerly known as The Mitsui
Taiyo Kobe Bank, Ltd., New York
Branch, successor by merger to The
Taiyo Kobe Bank, Ltd., New York
Branch)
By: /s/ TAMIHIRO KAWAUCHI
------------------------------
Name: Tamihiro Kawauchi
Title: Senior Vice President
& Head of Real Estate/
Project Finance Dept.
<PAGE> 1
EXHIBIT 10.59
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
BETWEEN
ARICO AMERICA REALESTATE
INVESTMENT COMPANY
AND
DEUTSCHE BANK AG LONDON
--------------------------------
DATED AS OF AUGUST 8, 1995
--------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Definitions and Principles of Con-
struction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Principles of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.01. The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.02. The Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.03. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3. Prepayments; Payments; Net Payments . . . . . . . . . . . . . . . . . . . . . 8
3.01. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.02. Mandatory Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.03. Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.01. Execution of Agreement; Note . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.02. No Default; Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.03. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.04. Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Representations, Warranties and Agree-
ments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.01. Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.02. Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . 10
5.03. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.04. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.05. Financial Statements; Financial Condition;
Undisclosed Liabilities; etc . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.06. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.07. True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
- ------------------
(1) This Table of Contents is provided for convenience only and is not a part
of the attached Credit Agreement.
(i)
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.11. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12. Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.13. Specified Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.01. Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.02. Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . 15
6.03. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.04. Compliance with Statutes, etc . . . . . . . . . . . . . . . . . . . . . . . . 16
6.05. Performance of obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.06. Sale of Specified Properties . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.02. Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.03. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.04. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.01. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.02. Representations, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.03. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.04. Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . 19
8.05. Bankruptcy, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.06. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.07. Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.01. Payment of Expenses, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.02. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.04. Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.05. No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 22
9.06. Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.07. Governing Law; Submission to Jurisdiction;
Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.08. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.10. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.11. Table of Content; Descriptive Headings . . . . . . . . . . . . . . . . . . . . 24
9.12. Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.13. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.14. Domicile of Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
EXHIBIT A Form of Note
EXHIBIT B Intentionally Omitted
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXHIBIT C Form of Officer's Certificate of the
Borrower
EXHIBIT D Form of Pledge Agreement
SCHEDULE I Consolidated Tangible Net Worth Sample
Calculation
SCHEDULE 5.16 Existing Indebtedness
SCHEDULE 7.03 Certain Permitted Liens
</TABLE>
(iii)
<PAGE> 5
CREDIT AGREEMENT, dated as of August in 1995, between ARICO
AMERICA REALESTATE INVESTMENT COMPANY, a corporation organized and existing
under the laws of Nevada (the "Borrower"), and DEUTSCHE BANK AG LONDON, a
branch licensed to do business under the laws of the United Kingdom of a
banking corporation organized under the laws of the Federal Republic of Germany
(the "Bank").
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Bank is willing to make available the credit facility provided
for herein;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions and Principles of Construction.
1.01. Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" shall mean, with respect to any Person, any other
Person (other than an individual) directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such Person.
A, Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Applicable Lending Office" shall mean the office of the Bank
located at the address listed opposite its name on the signature page attached
hereto or such other office, branch, Subsidiary or Affiliate of the Bank as the
Bank may from time to time specify as such to the Borrower.
"Bank" shall have the meaning provided in the first paragraph
of this Agreement.
<PAGE> 6
"Bankruptcy Law" shall have the meaning provided in Section
8.05.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing Date" shall have the meaning provided in Section
2.01.
"Business Day" shall mean any day except Saturday, Sunday co
any day which shall be in New York City and/or London a legal holiday or a day
on which banking institutions are authorized or required by law or other
government action to close.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect ' at
the date of this Agreement and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with generally accepted accounting
principles in the United States.
"Consolidated Tangible Net Worth" shall mean, as to any
Person, the consolidated stockholders' equity of such Person and its
Subsidiaries, less the amount of all intangible items, including, without
limitation, goodwill, franchises, licenses, patents, trademarks, trade names,
copyrights, service marks, brand names, write-ups of assets ; provided,
however, that in determining the consolidated stockholders' equity of such
Person and its Subsidiaries for purposes hereof, any real property assets of
such Person or Subsidiaries shall be valued at their respective fair market
values determined in accordance with the appraisal obtained pursuant to Section
6.01(e)(iii) hereof. A sample calculation of the Borrower's Consolidated
Tangible Net Worth is attached hereto as Schedule I.
"Credit Documents" shall mean this Agreement, the Note and the
Pledge Agreement.
"Custodian" shall have the meaning provided in Section 8.05.
-2-
<PAGE> 7
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Effective Date" shall have the meaning provided in Section
9.10.
"Event of Default" shall have the meaning provided in Section
8.
"FIRREA" shall mean the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended.
"Indebtedness" shall mean, as to any Person, without
duplication, (a) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money or for the deferred purchase price
of property or services; (b) the face amount of all letters of credit issued
for the account of such Person and all drafts drawn thereunder, provided that
no such letters of credit shall be considered Indebtedness to the extent the
same are used to secure indebtedness described in (a) above; (c) all
liabilities secured by any Lien on any property owned by such Person, whether
or not such liabilities have been assumed by such Person; (d) the aggregate
amount required under generally accepted accounting principles to be
capitalized under leases under which such Person is the lessee; and (e) all
guaranties and similar contingent obligations of such Person.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement and any
lease in the nature thereof).
"Loan" shall have the meaning provided in Section 2.01.
"Net Cash Proceeds" shall mean, with respect to any sale or
refinancing of a Specified Property, the cash proceeds resulting therefrom net
of (i) actual cash expenses of such sale or refinancing (including, without
limitation, real property transfer taxes, brokerage fees, if any, and payment
of principal, premium and interest of Indebtedness other than the Loan required
to be repaid as a result of such
-3-
<PAGE> 8
sale or refinancing) and (ii) incremental income taxes paid or payable as a
result thereof; provided, however, that any proceeds of the sale or refinancing
of a Specified Property which are deposited in escrow in connection with such
sale or refinancing or are otherwise made contingent upon the occurrence or
non-occurrence of some subsequent event shall not constitute "Net Cash
Proceeds" until the same are released from escrow or are otherwise
unconditionally received by Borrower or the applicable Subsidiary.
"Norwest Center" shall mean the real property and improvements
owned by NWC Limited Partnership and located at Sixth and Marquette Streets,
Minneapolis, Minnesota.
"Note" shall have the meaning provided in Section 2.02.
"Notice Office" shall mean the office of the Bank located at
the address listed opposite its name on the signature page attached hereto or
such other office as the Bank may hereafter designate in writing as such to the
Borrower.
"NWC Limited Partnership" shall mean NWC Limited Partnership,
a Minnesota limited partnership, and its successors and assigns.
"Partnerships" shall mean, collectively, NWC Limited
Partnership and Third and University Limited Partnership.
"Partnership Interests" shall mean, at any time, the
partnership interests (whether general or limited) held by the Borrower or any
of its Subsidiaries in each of NWC Limited Partnership and Third and University
Limited Partnership.
"Permitted Corporate Indebtedness" shall mean the Indebtedness
of Borrower described on Schedule 5.16 hereto.
"Permitted Non-Recourse Indebtedness" shall mean Indebtedness
of any Subsidiary of the Borrower other than the Partnerships or any
partnership other than the Partnerships of which the Borrower or any Subsidiary
is a partner which (i) is non-recourse to such Subsidiary and to the Borrower
and every other Subsidiary of the Borrower (subject to such exceptions to such
non-recourse character as are then customary :in the marketplace), (ii) is
incurred for the purpose of financing or refinancing assets owned or to be
-4-
<PAGE> 9
acquired by such Subsidiary, (iii) is not secured by any assets of either of
the Partnerships, (iv) is borrowed on an arm's length basis from a Person that
is not an Affiliate of the Borrower or any Subsidiary of the Borrower, and (v)
is in a principal amount not greater than 60% of the fair market value as of
the closing of such Indebtedness of the assets notwithstanding, any
Indebtedness that does not satisfy the condition specified in clause (v) above
shall nonetheless constitute Permitted Non-Recourse Indebtedness if (A) such
Indebtedness otherwise satisfies the conditions set forth in clauses (i)
through (iv) above and (B) such Indebtedness refinances not more than 100% of
the then outstanding principal amount of an Indebtedness which constituted
Permitted Non-Recourse Indebtedness at the time such Indebtedness was incurred.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or
instrumentality thereof.
"Pledge Agreement" shall have the meaning provided in Section
4.04.
"Reportable Event" shall mean an event described in Section
4043(b) of ERISA with respect to a Plan as to which the 30-day notice
requirement has not been waived by the PBGC.
"SEC" shall have the meaning provided in Section 6.01(e).
"Secured Creditors" shall have the meaning provided in the
Pledge Agreement.
"Specified Property" shall mean each of the Norwest Center and
the Washington Mutual Tower.
"Specified Property Non-Recourse Indebtedness" shall mean
Indebtedness of a Partnership which (i) is non-recourse to such Partnership and
to the Borrower and every other Subsidiary of the Borrower (subject to such
exceptions to such non-recourse character as are as are then customary in the
marketplace), (ii) is outstanding or is incurred for the purpose of financing
or refinancing the Specified Property owned by such Partnership, (iii) is
secured only by the Specified Property owned by such Partnership, (iv) is
borrowed on an arm's length basis from a Person that is not
-5-
<PAGE> 10
an Affiliate of such Partnership, the Borrower or any other Subsidiary of the
Borrower, (iv) if incurred after the date hereof, is in an amount not greater
than 60% of the fair market value as of the closing of such Indebtedness of the
Specified Property securing such Indebtedness, and (v) if incurred after the
date hereof, the Net Cash Proceeds of which, to the extent paid or payable to
the Borrower, are applied in accordance with Section 3.02 hereof. The
foregoing notwithstanding, any Indebtedness that does not satisfy the condition
specified in clause (iv) above shall nonetheless constitute Specified Property
Non-Recourse Indebtedness if (A) such Indebtedness otherwise satisfies the
conditions set forth in clauses (i), (ii), (iii) and (v) above and (B) such
Indebtedness refinances not more than 100% of the then outstanding principal
amount of an Indebtedness which constituted Specified Property lion-Recourse
Indebtedness at the time such Indebtedness was incurred.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting rower by reason of
the happening of any contingency) is at the time owned by such Person and/or
one or more Subsidiaries of such Person and (ii) any partnership, association,
joint venture or other entity in which such Person and/or one or more
Subsidiaries of such Person has at least a 50% equity interest at the time.
"Third and University Limited Partnership" shall mean Third
and University Limited Partnership, a Washington limited partnership, and its
successors and assigns.
"United States" and "U.S." shall teach mean the United States
of America.
"Washington Mutual Tower" shall mean the real property and
improvements owned by Third and University Limited Partnership and located at
1201 Third Avenue, Seattle, Washington 98101.
1.02. Principles of Construction. (a) All references to
sections, schedules and exhibits are to sections, schedules and exhibits in or
to this Agreement unless otherwise specified. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall
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<PAGE> 11
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
(b) All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles in the United States in conformity with those used in the
preparation of the financial statements referred to in Section 5.05(a).
Section 2. Amount and Terms of Credit.
2.01. The Loan. Subject to and upon the terms and
conditions herein set forth, the Bank agrees to make a term loan to the
Borrower in the principal amount of $32,500,000 (the "Loan") on August 8, 1995
(the "Borrowing Date").
2.02. The Note. The Borrower's obligation to pay the
principal of, and interest on, the Loan shall be evidenced by a promissory note
duly executed and delivered Ly the Borrower substantially in the form of
Exhibit A with blanks appropriately completed in conformity herewith (the
"Note"). The Note shall (i) be in a stated principal amount of $32,500,000,
(ii) mature on December 31, 2003, (iii) bear interest as provided in Section
2.03, (iv) be subject to mandatory repayment as provided in section 3.02 and
(v) be entitled to the benefits of this Agreement and the other Credit
Documents. The Bank will note on its internal records the amount of each
payment in respect thereof and, prior to any transfer of the Note, will endorse
on the reverse side thereof the outstanding principal amount of the Loan
evidenced thereby. Failure to make any such notation shall not affect the
Borrower's obligations in respect of the Loan.
2.03. Interest. (a) The unpaid principal amount of the
Loan shall bear interest from the Borrowing Date until the maturity thereof
(whether by acceleration or otherwise) at a rate per annum equal to five
percent (5.00%).
(b) Overdue principal and, to the extent permitted by
law, overdue interest in respect of the Loan and any other overdue amount
payable by the Borrower hereunder shall be payable on demand and shall bear
interest at a rate per annum equal to 2% per annum in excess of the rate
provided for in Section 2.03(a).
(c) Interest on the Loan shall accrue from and
including the Borrowing Date to but excluding the date of any repayment
thereof and shall be payable in arrears on the first day of each June and
December, on the date of any
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<PAGE> 12
prepayment thereof (on the amount prepaid) and at maturity (whether by
acceleration or otherwise).
(d) All computations of interest hereunder shall be
made in accordance with Section 9.06(b).
Section 3. Prepayments; Payments; Net Payments.
3.01. Optional Prepayments. The Borrower shall have the
right to prepay the Loan in whole or in part (in the principal amount of
$1,000,000 or any integral multiple of $250,000 in excess thereof) at any time
and from time to time on any Business Day upon the giving of written notice (or
telephonic notice promptly confirmed in writing) to the Bank of its intent to
make such prepayment, the prepayment date (which shall be a Business Day) and
the principal amount of the Loan to be prepaid. Such notice shall be given by
the Borrower no later than 10:00 A.M. (London, England time) two Business Days
prior to the date of such prepayment. All prepayments shall be accompanied by
accrued interest on the principal amount being repaid to the date of payment.
3.02. Mandatory Repayment. (a) The Borrower shall repay
the outstanding principal amount of the Loan on December 31, 2003.
(b) The Borrower shall, on the Business Day after the
date of receipt by the Borrower (whether pursuant to a partnership distribution
or otherwise) of cash proceeds from any sale or refinancing of a Specified
Property, repay the Loan in an amount equal to 100% of the Net Cash Proceeds
from such sale or refinancing which are paid or payable to the Borrower or any
of its Subsidiaries pursuant to the terms of the agreement of limited
partnership of NWC Limited Partnership or Third and University Limited
Partnership, as applicable.
3.03. Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or the Note
shall be made to the Bank not later than 12:00 Noon (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Bank's account with Deutsche Bank AG, New York Branch or such other account as
the Bank may advise to the Borrower from time to time. Any payments made under
this Agreement or the Note which are made later than 12:00 Noon (New York time)
on the date when due shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder or under the Note
shall be stated to be due on
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<PAGE> 13
a day which is not a Business Day, the due date thereof shall be extended to
the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable at the applicable rate during such extension.
Section 4. Conditions Precedent. The obligation of the Bank
to make the Loan is subject to the satisfaction of the following conditions:
4.01. Execution of Agreement; Note. On or before the
Borrowing Date (a) the Effective Date shall have occurred and (b) there shall
have been delivered to the Bank the Note executed by the Borrower in the
amount, maturity and as otherwise provided herein.
4.02. No Default; Representations and Warranties. Both
before and after giving effect to the making of the Loan (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on and
as of the Borrowing Date.
4.03. Opinion of Counsel. The Bank shall have received
from Shearman & Sterling, counsel to the Borrower, an opinion addressed to it
and dated the Borrowing Date, in form and substance reasonably satisfactory to
the Bank.
4.04. Pledge Agreement. On or before the Borrowing Date,
the Borrower shall have duly authorized, executed and delivered a Pledge
Agreement in the form of Exhibit D (as modified, amended or supplemented from
time to time, the "Pledge Agreement") and the Pledge Agreement shall be in full
force and effect.
Section 5. Representations, Warranties and Agreements. In
order to induce the Bank to enter into this Agreement and to make the Loan, the
Borrower makes the following representations, warranties and agreements as of
the Effective Date, which shall survive the execution and delivery of this
Agreement and the Note and the making of the Loan:
5.01. Corporate Status. The Borrower (i) is a duly
organized and validly existing corporation in good standing under the laws of
the State of Nevada, (ii) has the power and authority to own its property and
assets and to transact the business in which it is engaged and (iii) is duly
qualified as a foreign corporation and in good standing
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<PAGE> 14
in each jurisdiction where the ownership, leasing or operation of property or
the conduct of its business requires such qualification. The Borrower has
elected to be taxed as a "real estate investment trust" as defined in Section
856 of the Code and each Subsidiary of the Borrower is a "qualified real estate
investment 'trust subsidiary" as defined in Section 856(i)(2) of the Code.
5.02. Corporate Power and Authority. The Borrower has
the corporate power to execute, deliver and perform the terms and provisions of
each of the Credit Documents and has taken all necessary corporate action to
authorize the execution, delivery and performance by it of each of the Credit
Documents. The Borrower has duly executed and delivered each of the Credit
Documents, and each Credit Document constitutes its legal, valid and binding
obligation enforceable in accordance with its terms.
5.03. No Violation. Neither the execution, delivery or
performance by the Borrower of the Credit Documents, nor compliance by it with
the terms and provisions thereof, (i) will contravene any provision of any law,
statute, rule or regulation or any order, writ, injunction or decree of any
court or governmental instrumentality, in each case, applicable to the Borrower
or any of its Subsidiaries or any of its or their respective assets, (ii) will
conflict or be inconsistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of the Borrower or either of the
Partnerships pursuant to the terms of any indenture, mortgage, deed of trust,
credit agreement, loan agreement, partnership agreement or any other agreement,
contract or instrument to which the Borrower, any of it Subsidiaries or either
of the Partnerships is a party or by which it or any of its property or assets
is bound or to which it may be subject or (iii) will violate any provision of
the Articles of Incorporation or By-Laws of the Borrower or the certificate of
limited partnership or agreement of limited partnership of either of the
Partnerships.
5.04. Governmental Approvals. No order, consent,
approval, license, authorization or validation of, or filing (other than such
filings pursuant to the Uniform Commercial Code as are required to be made
pursuant to the Pledge Agreement), recording or registration with (except as
have been obtained or made prior to the Effective Date), or exemption by, any
governmental or public body or authority,
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<PAGE> 15
or any subdivision thereof, is required to authorize, or is required in
connection with, (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of
any Credit Document.
5.05. Financial Statements; Financial Condition; Unclosed
Liabilities; etc. (a) The balance sheet of the Borrower at December 31, 1994,
and the related statements of income, retained earnings and cash flow of the
Borrower for the fiscal year ended on such date and heretofore furnished to the
Bank present fairly the financial condition of the Borrower at the date of such
balance sheet for such fiscal year. Such balance sheet and financial
statements have been prepared in accordance with generally accepted accounting
principles and practices consistently applied. Since December 31, 1994 there
has been no material adverse change in the business, operations, property,
assets, condition (financial or otherwise) or prospects of the Borrower.
(b) Except as fully reflected in the balance sheet and
financial statements delivered pursuant to Section 5.05(a), there were as of
the Effective Date no liabilities or obligations with aspect to the Borrower of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, would be
material to the Borrower. As of the Effective Date the Borrower does not know
of any basis for the assertion against it of any liability or obligation of any
nature whatsoever that is not fully reflected in the balance sheet and
financial statements delivered pursuant to Section 5.05(a) which, either
individually or in the aggregate, could be material to the Borrower.
5.06. Litigation. There are no actions, suits or
proceedings pending or, to the best knowledge of the Borrower, threatened (i)
with respect to any Credit Document or (ii) that are reasonably likely to
affect, materially and adversely, the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower.
5.07. True and Complete Disclosure. All factual
information (taken as a whole) heretofore or contemporaneously furnished by or
on behalf of the Borrower in writing to the Bank (including without limitation
all information contained in the Credit Documents) for purposes of or in
connection with this Agreement or any transaction contemplated herein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of the
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<PAGE> 16
Borrower in writing to the Bank will be, true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not materially misleading at such time in light of the
circumstances under which such information was provided.
5.08. Use of Proceeds. All proceeds of the Loan shall be
used by the Borrower to refinance the existing $32,500,000 loan previously made
by an Affiliate of the Bank to the Borrower.
5.09. Compliance with Statutes, etc. The Borrower is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls), except such non-compliances
as would not, in the aggregate, have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or prospects
of the Borrower.
5.10. Partnerships. Each of the Partnerships (i) is a
duly formed and validly existing limited partnership under the laws of the
jurisdiction of its formation, (ii) is qualified to do business in each
jurisdiction where the ownership of its properties or the conduct of its
business requires such qualification, and (iii) has full power and authority to
own its properties and conduct is business as currently conducted and owned.
Each of the Partnerships has good title in fee to the Specified Property owned
by it. The certificate of limited partnership and agreement of limited
partnership of each of 'the Partnerships are in full force and effect in
accordance with their respective terms and have not been modified or amended
except as disclosed to the Bank prior to the date hereof. ARICO-Seattle, Inc.,
a wholly-owned Subsidiary of the Borrower, is a general partner in Third and
University Limited Partnership, holding at 50% general partnership interest
therein, and the only other general partner in Third and University Limited
Partnership is 1212 Second Avenue Limited Partnership, holding at 49% general
partnership interest therein. The sole limited partner in Third and University
Limited Partnership is 1212 Second Avenue Limited Partnership, holding a 1%
limited partnership interest therein. ARICO-Minneapolis, Inc., it wholly-owned
Subsidiary of the Borrower, is a general partner in NWC Limited Partnership,
holding a 50% general partnership
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<PAGE> 17
interest therein, and Sixth & Marquette Limited Partnership is the only other
general partner and the sole limited partner in NWC Limited Partnership,
holding a 49% general partnership interest and a 1% limited partnership
interest therein. Pursuant to the agreement of limited partnership of each of
the Partnerships, a wholly-owned Subsidiary of the Borrower is entitled to
receive as a priority distribution 100% of the Net Cash Proceeds of any sale or
refinancing of the Specified Property owned by the related Partnership, in the
case of Third and University Limited Partnership, up to an aggregate amount
equal to $100,000,000, and (ii) in the case of KWC Limited Partnership, up to
an aggregate amount equal to $92,300,000. No consent, approval, authorization
or waiver is required to be obtained from any partner in either of the
Partnerships in connection with the execution and delivery of the Credit
Documents or the transactions contemplated in the Credit Documents.
5.11. Indebtedness. Except as set forth in Schedule
5.16, after giving effect to the transactions contemplated in the Credit
Documents, neither the Borrower nor any of its Subsidiaries has any outstanding
Indebtedness other than the Loan and, (i) in the case of any Subsidiaries of
the Borrower (including the Partnerships), other than commercially reasonable
amounts of trade indebtedness incurred in the ordinary course of business, (ii)
in the case of any Subsidiaries of the Borrower other than the Partnerships,
other than Permitted Non-Recourse Indebtedness, and (iii) in the case of the
Partnerships, other than Specified Property Non-Recourse Indebtedness.
5.12. Pledge Agreement. The security interests created
in favor of the Bank, as Pledgee, for the benefit of the Secured Creditors
under the Pledge Agreement constitute first priority perfected security
interests in the proceeds of the Partnership Interests described in the Pledge
Agreement, subject to no security interests of any other Person. No filings or
recordings are required in order to perfect (or maintain the perfection or
priority of) the security interests created in the proceeds of the Partnership
Interests under the Pledge Agreement other than the filing of Uniform
Commercial Code financing statements as provided in the Pledge Agreement.
5.13. Specified Properties. Each of the Partnerships
shall pursue the sale of the Specified Property owned by it at such time as the
applicable Partnership determines in good faith that market conditions warrant
such sale, and at such time the Borrower, as a direct or indirect
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<PAGE> 18
general partner in each of the Partnerships, intends to take commercially
reasonable actions to identify potential purchasers and consummate such sales;
provided, however, that the Borrower does not hereby represent or warrant that
any such sale or sales will be so consummated.
Section 6. Affirmative Covenants. The Borrower covenants and
agrees that until the Loan and the Note, together with interest thereon, and
all other obligations incurred hereunder and thereunder, are paid in full:
6.01. Information Covenants. The Borrower will furnish
to the Bank:
(a) Quarterly Financial Statements. Within 60 days
after the close of each quarterly accounting period (other than the
fourth such period) in each fiscal year of the Borrower, the
Borrower's Form 10-Q under the Securities Exchange Act of 1934, as
amended, for such quarterly accounting period.
(b) Annual Financial Statements. (i) Within 120 days
after the close of each fiscal year of the Borrower, the Borrower's
Form 10-K under the Securities Exchange Act of 1934, as amended, for
such fiscal year, and (ii) when available, (A) the Borrower's Annual
Report for such fiscal year and (B) the Borrower's general ledger
report for such fiscal year showing the assets and liabilities of the
Borrower and its Subsidiaries for such fiscal year.
(c) Officer's Certificate. At the time of the delivery
of the financial statements provided for in Section 6.01 (b), a
certificate of the chief financial officer or treasurer of the
Borrower setting forth the calculations required to establish whether
the Borrower was in compliance with the minimum Consolidated Tangible
Net Worth covenant set forth in Section 7.02 as at the end of such
fiscal year, such calculation to be based, inter, alia, upon an
appraisal of all real property owned by the Borrower and its
Subsidiaries prepared in accordance with FIRREA by a duly licensed
M.A.I. appraiser reasonably satisfactory to the Bank, which appraisal
shall be addressed to the Bank and delivered to the Bank together with
such certificates
(d) Notice of Default or Litigation. Promptly, and in
any event within ten days after an officer of the Borrower obtains
knowledge thereof, notice of (i) the
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<PAGE> 19
occurrence of any event which constitutes a Default or Event of
Default and (ii) any other event which is likely, materially and
adversely to affect the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower or any
of its Subsidiaries.
(e) Other Reports and Filing. Promptly, copies of all
financial information, proxy materials and other information and
reports, if any, which the Borrower shall file with the Securities and
Exchange Commission or any governmental agencies substituted therefor
(the "SEC").
(f) Other Information. From time to time, such other
information or documents (financial or otherwise) as the Bank may
reasonably request.
6.02. Books, Records and Inspections. The Borrower will,
and will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with generally
accepted accounting principles and all requirements of law shall be made of
all-dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each of its Subsidiaries to, permit officers and
designated representatives of the Bank to visit and inspect, upon reasonable
notice and under guidance of officers of the Borrower or such Subsidiary, any
of the properties of the Borrower or such Subsidiary, and to examine the books
of record and account of the Borrower or such Subsidiary and discuss the
affairs, finances and accounts of the Borrower or such Subsidiary with, and be
advised as to the same by, its and their officers, all at such reasonable times
and intervals and to such reasonable extent as the Bank may request.
6.03. Maintenance of Property. The Borrower will, and
will cause each of its Subsidiaries to, keep all property useful and necessary
in its respective business in good working order and condition, and will
enforce, and will cause each of its Subsidiaries to enforce, all material
obligations of all property managers under management agreements to which the
Borrower or any, such Subsidiary is a party, and will enforce, and will cause
each of its Subsidiaries to enforce, all material obligations of the general
partner or managing partner in all partnerships and joint ventures in which the
Borrower or any such Subsidiary is a partner.
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<PAGE> 20
6.04. Compliance with Statutes, etc. The Borrower will,
and will cause each of its Subsidiaries to, comply with (i) all applicable
statutes, regulations and orders of, and all applicable restrictions imposed
by, all governmental bodies, domestic or foreign, in respect of the conduct of
its business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), and (ii) other than with respect to documentation evidencing and/or
securing Permitted Non-Recourse Indebtedness, the provisions of all material
agreements (including partnership agreements, joint venture agreements, loan
agreements, easements, covenants and restrictions) applicable to the Borrower
or such Subsidiary or any of its assets, in each case, except such
non-compliances as could not, in the aggregate, have a material adverse effect
on the business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
6.05. Performance of Obligations. Except with respect to
the documentation evidencing and/or securing Permitted Non-Recourse
Indebtedness, the Borrower will, and will cause each of its Subsidiaries to,
perform all of its obligations under the terms of each mortgage, indenture,
security agreement and other debt instrument by which it is bound, except such
non-performances as could riot, in the aggregate, have a material adverse
effect on the business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries
taken as a whole.
6.06. Sale of Specified Properties. The Borrower shall,
and shall cause any Subsidiary of the Borrower holding a Partnership Interest
in a Partnership to, pursue the sale of the Specified Properties at such time
as such Persons determine in good faith that market conditions warrant such
sale, and at such time the Borrower shall, and shall cause any Subsidiary of
the Borrower holding a Partnership Interest in a Partnership to, use
commercially reasonable efforts consistent with the Borrower's or such
Subsidiary's obligations as a partner in such Partnership to cause the sale of
each Specified Property.
Section 7. Negative Covenants. The Borrower covenants and
agrees that until the Loan and the Note, together with interest thereon, and
all other obligations incurred hereunder and thereunder, are paid in full:
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<PAGE> 21
7.01. Consolidation, Merger, Sale of Assets, etc. The
Borrower will not, and will not permit any of its Subsidiaries owning any
Partnership Interests or either of the Partnerships to, wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or consolidation
where the Borrower, such Subsidiary or such Partnership is not the surviving
entity, or convey, sell, lease or otherwise dispose of (or agree to do any of
the foregoing at any future time) all or any substantial part of its property
or assets, other than the sale or refinancing of a Specified Property, provided
that any such refinancing constitutes Specified Property Non-Recourse
Indebtedness, and provided, further that the Net Cash Proceeds of any such sale
or refinancing which are paid or payable to the Borrower are applied in
accordance with Section 3.02. Notwithstanding anything herein to the contrary,
(i) the Borrower shall not, and shall not permit any Subsidiary of the Borrower
to, transfer, pledge, hypothecate, assign or otherwise dispose of, directly or
indirectly, any of the Partnership Interests or the proceeds therefrom other
than pursuant to the Pledge Agreement, and (ii) the Borrower shall not cease to
own 100% of the interests in any Subsidiary of the Borrower that is the owner
of any Partnership Interests.
7.02. Minimum Net Worth. The Borrower will not permit
its Consolidated Tangible Net Worth to be less than $200,000,000 at any time
during the tern of the Loan.
7.03. Liens. The Borrower will not, and will not permit
any of its Subsidiaries to, create, assume or permit to exist any Lien on or
with respect to any of its property or assets or the proceeds thereof
(including, without limitation, the Partnership Interests and proceeds thereof)
now owned or hereafter acquired except (i) Liens in favor of the Bank; (ii)
other Liens incidental to the conduct of its business or the ownership of its
property and assets which were not incurred in connection with the borrowing of
money or the obtaining of advances of credit and which do not materially impair
the use thereof in the operation of its business; (iii) Liens for taxes or
other governmental charges which are not delinquent or which are being
contested in good faith and for which a reserve shall have been established in
accordance *with generally accepted accounting principles; (iv) Liens on
property or assets of a Subsidiary to secure obligations of such Subsidiary to
the Borrower or another Subsidiary; (v) any Lien placed upon property at the
time of acquisition to secure all or a portion of the lease payments with
respect thereto, provided the relevant lease is listed on Schedule 7.03
attached hereto; (vi) any Lien placed upon
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<PAGE> 22
property at the time of acquisition to secure all or a portion of the purchase
price thereof or the lease payments with respect thereto, provided that (a)
such Lien shall not encumber any other property and (b) the aggregate amount of
Indebtedness secured by all such Liens and any Liens permitted by clause (vii)
of this Section 7.03 does not violate the proviso of clause (ii) of Section
7.04; (vii) any Lien renewing, extending or refunding any Lien permitted by
clause (vi) of this Section 7.03, provided that the principal amount secured is
not increased, and the Lien is not extended to other property; and (viii) any
Lien securing Permitted Non-Recourse Indebtedness or Specified Property
Non-Recourse Indebtedness.
7.04. Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, incur, assume or permit to exist any
Indebtedness except (i) Indebtedness evidenced by the Note, (ii) Indebtedness
secured by Liens permitted by the provisions of clauses (v), (vi) or (vii) of
Section 7.03 or unsecured and incurred in connection with the purchase or
leasing of assets, provided that the aggregate principal amount of all such
Indebtedness permitted by the provisions of clauses (vi) and (vii) of Section
7.03 shall not exceed $1,000,000 at any time outstanding, (iii) unsecured
Indebtedness to commercial banks in an amount not in excess of $2,500,000 at
any time outstanding, (iv) Indebtedness of any of its Subsidiaries owed to the
Borrower or another of its Subsidiaries, (v) Permitted Non-Recourse
Indebtedness and Specified Property Non-Recourse Indebtedness and (vi)
Permitted Corporate Indebtedness.
7.05. Partnership Agreements. The Borrower will not, and
will not permit any of its Subsidiaries to, suffer or permit the amendment,
modification or termination of the certificate of limited partnership or
agreement of limited partnership of either of the Partnerships without the
prior written consent of the Bank, which consent shall not be unreasonably
withheld or delayed if such amendment, modification or termination could not
reasonably be expected to have an adverse affect on the condition (financial or
otherwise) of the Borrower or any of its Subsidiaries, the ability of the
Borrower to perform its obligations under the Credit Documents or the rights of
the Bank under the Credit Documents.
Section 8. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default");
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<PAGE> 23
8.01. Payments. The Borrower shall (i) default in the
payment when due of any principal of the Loan or the Note or (ii) default, and
such default shall continue unremedied for five or more days, in the payment
when due of any interest on the Loan or the Note or any other amounts owing
hereunder or thereunder; or
8.02. Representations, etc. Any representation, warranty
or statement made by the Borrower herein or in any certificate delivered
pursuant hereto shall prove to be untrue in any material respect on the date as
of which made or deemed made; or
8.03. Covenants. The Borrower shall (i) default in the
due performance or observance by it of any term, covenant or agreement
contained in Section 6.01(d) (i) or 7 or (ii) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Sections 8.01 and 8.02 and clause (i) of this Section 8.03) contained in
this Agreement and such default shall continue unremedied for a period of 30
days after written notice to the Borrower by the Bank; or
8.04. Default Under Other Agreements. The Borrower or
any of its Subsidiaries shall (i) default in any payment of any Specified
Property Non-Recourse Indebtedness or Permitted Corporate Indebtedness beyond
the period of grace (not to exceed 30 days), if any, provided in the instrument
or agreement under which such Indebtedness was created or (ii) default in the
observance or performance of any agreement or condition relating to any
Specified Property Non-Recourse Indebtedness or Permitted Corporate
Indebtedness or contained in any instrument co agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause (determined without regard to whether any
notice is required) , any such Indebtedness to become due prior to its stated
maturity; or any Specified Property Non-Recourse Indebtedness or Permitted
Corporate Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable, or required to be prepaid other than by at
regularly scheduled required prepayment, prior to the stated maturity thereof;
or
8.05. Bankruptcy, etc. The Borrower or any of the
Borrower's Subsidiaries, pursuant to or within the meaning of title 11 of the
United States Code or any similar Federal,
-19-
<PAGE> 24
state or foreign law for the relief of debtors (herein referred to as
"Bankruptcy Law"), commences a voluntary case, admits in writing its inability
to pay its debts generally as they become due, consents to the appointment of
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law (herein referred to as a "Custodian") of it or for all or
substantially all of its property or makes a general assignment for the benefit
of its creditors, or has an involuntary case filed against it, or a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that
is for relief against the Borrower or any of the Borrower's Subsidiaries in an
involuntary case, appoints a Custodian of the Borrower or any of the Borrower's
Subsidiaries for all or substantially all of such Person's property or orders
the liquidation of the Borrower or any of the Borrower's Subsidiaries, and such
involuntary case, order or decree remains unstayed and in effect for more than
60 days; or
8.06. Judgements. One or more judgments or decrees (not
paid or fully covered by insurance) shall be entered against the Borrower or
any of its Subsidiaries involving one or more liabilities (not paid or fully
covered by insurance) in the aggregate for the Borrower and its Subsidiaries of
$1,000,000 or more, and all such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days after the
entry thereof; or
8.07. Pledge Agreement. (a) The Pledge Agreement shall
cease to be in full force and effect, or shall cease to give the Bank the
Liens, rights, powers and privileges purported to be created thereby in favor
of the Bank, or (b) the Borrower shall default in the due performance or
observance of any tern, covenant or agreement on its part to be performed or
observed pursuant to the Pledge Agreement; then, and in any such event, and at
any time thereafter, if any Event of Default shall then be continuing, the Bank
may, by written notice to the Borrower, without prejudice to the rights of the
Bank to enforce its claims against the Borrower (provided, that, if an Event of
Default specified in Section 8.05 shall occur with respect to the Borrower, the
results which would occur upon the giving of written notice by the Bank to the
Borrower as specified below shall occur automatically without the giving of any
such notice), declare the principal of and any accrued interest in respect of
the Loan and the Note and all obligations owing hereunder and thereunder to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other
-20-
<PAGE> 25
notice of any kind, all of which are hereby waived by the Borrower.
Section 9. Miscellaneous.
9.01. Payment of Expenses, etc. The Borrower shall: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Bank in connection with the
preparation, negotiation, execution and enforcement of this Agreement and the
documents and instruments referred to herein (including, without limitation,
the reasonable fees and disbursements of counsel for the Bank) ; (ii) pay and
hold the Bank harmless from and against any and all present and future stamp
and other similar taxes with respect to the foregoing matters and save the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to the Bank)
to pay such taxes; and (iii) indemnify the Bank, its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses and disbursements incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of, any investigation, litigation or other proceeding (whether or not
the Bank is a party thereto) related to the entering into and/or performance of
this Agreement or the use of the proceeds of the Loan hereunder or the
consummation of any transactions contemplated herein, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such liabilities, obligations, losses, etc., to the extent
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified).
9.02. Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, the
Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by the Bank (including without
limitation by branches and agencies of the Bank wherever located) to or for the
credit or the account of the
-21-
<PAGE> 26
Borrower against and on account of the obligations and liabilities of the
Borrower to the Bank under this Agreement, irrespective of whether the Bank
shall have made any demand hereunder and although such obligations, liabilities
or claims, or any of them, shall be contingent or unmatured.
9.03. Notices. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopier or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the
Borrower, at its address specified opposite its name on the signature page
hereof; and if to the Bank, at its Notice Off ice; or, as to the Borrower or
the Bank, at such other address as shall be designated by such party in a
written notice to the other parties hereto. All such notices and
communications shall, when mailed, telegraphed, telexed, telecopied, or cabled
or sent by overnight courier, be effective when deposited in the mails,
delivered to the telegraph company, cable company or overnight courier, as the
case may be, or sent by telex or telecopier.
9.04. Benefit of Agreement. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided that the Borrower may
not assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Bank. The Bank may at any time (i) grant
participations in or (ii) transfer or assign any or all of its rights hereunder
or under the Note; provided, however, that the Bank shall notify the Borrower
promptly after taking any such action. If the Bank transfers or assigns all or
a part of its rights hereunder or under the Note to any other Person, any
reference to the Bank in this Agreement or the Note, as the case may be, shall
thereafter refer to the Bank and to such other Person to the extent of their
respective interests.
9.05. No Waiver; Remedies Cumulative. No failure or
delay on the part of the Bank exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
the Borrower and the Bank shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Credit Document expressly
provided are cumulative and not exclusive of any rights,
-22-
<PAGE> 27
powers or remedies which the Bank would otherwise have. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of
the rights of the Bank to any other or further action in any circumstances
without notice or demand.
9.06. Calculations; Computations. (a) The financial
statements to be furnished to the Bank pursuant hereto shall be made and
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved (except as
set forth in the notes thereto or as otherwise disclosed in writing by the
Borrower to the Bank) ; provided, however, that, except as otherwise
specifically provided herein, all computations; determining compliance *with
Section 7 shall utilize accounting principles and policies. in conformity with
those used to prepare the historical financial statements delivered to the Bank
pursuant to Section 5.05(a).
(b) All computations of interest hereunder shall be
made on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest is payable.
9.07. Governing Law; Submission to Jurisdiction; Venue.
(a) This Agreement and the other Credit Documents and the rights and
obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the State of New York. Any legal
action or proceeding against the Borrower with respect to this Agreement or the
other Credit Documents may be brought in the courts of the State of New York or
of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, the Borrower hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Borrower further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address set forth
opposite its signature below, such service to become effective 30 days after
such mailing. Nothing herein shall affect the right of the Bank to serve
process in any other manner permitted by law or to commence legal proceedings
or otherwise proceed against the Borrower in any other jurisdiction.
-23-
<PAGE> 28
(b) The Borrower hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement or the Note brought in the courts referred to in clause (a) above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
9.08. Severability. In case any one or more of the
provisions contained in this Agreement or in the Note should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
9.09. Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
9.10. Effectiveness. This Agreement shall become
effective on the date (the "Effective Date") on which the parties hereto shall
have signed a copy of this Agreement (whether the same or different copies).
9.11. Table of Contents; Descriptive Headings. The table
of contents and the headings of the several sections and subsections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
9.12. Amendment or Waiver. Neither this Agreement nor
the Note nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the Bank.
9.13. Survival. All indemnities set forth herein
including, without limitation, in Sections 2.04, 2.05, 3.04 and 9.01 shall
survive the execution and delivery of this Agreement and the Note and the
making and repayment of the Loan.
9.14. Domicile of Loan. The Bank may transfer or assign
any or all of its rights and obligations hereunder, and/or carry the Loan at,
to or for the account of any office, branch, agency, Subsidiary or Affiliate of
the Bank,
-24-
<PAGE> 29
provided such action results in no additional cost or expense to the Borrower.
9.15 Assignment by Borrower. The Borrower may not
assign or otherwise transfer any or all of its rights and obligations hereunder
to any Person without first obtaining the prior written consent of the Bank.
* * * * * * *
-25-
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
31 West 52nd Street ARICO AMERICA REALESTATE
New York, New York 10019 INVESTMENT COMPANY
Attn: President
Tel: (212) 474-7109
Fax: (212) 474 7199 By /s/ KEVIN MAHONEY
-------------------------------
Kevin Mahoney
Vice-President
By /s/ THOMAS P. LOFTUS
-------------------------------
Thomas P. Loftus
Vice-President
6 Bishopsgate DEUTSCHE BANK AG LONDON
London, England EC2P2AT
Attn: Mr. Robert Bain
Tel: 971-7838
Fax: 971-7735
By /s/ DR. DIRK KREKELER
-------------------------------
Dr. Dirk Krekeler
Attorney-in-fact
-26-
<PAGE> 31
EXHIBIT A
TERM NOTE
$32,500,000 August 8, 1995
FOR VALUE RECEIVED, Arico America Realestate Investment
Company, a corporation organized and existing under the laws of Nevada (the
"Borrower"), hereby promises to pay to the order of Deutsche Bank AG London, a
branch licensed to do business under the laws of the United Kingdom of a
banking corporation organized under the laws of the Federal Republic of Germany
(the "Bank"), in lawful money of the United States of America in immediately
available funds, at the account of the bank at Deutsche Bank AG, New York
Branch, located at 31 West 52nd Street, New York, New York 10019, on December
31, 2003, the principal sum of THIRTY TWO MILLION FIVE HUNDRED THOUSAND AND
00/100 United States dollars or, if less, the unpaid principal amount of the
Loan (as defined in the hereinafter defined Agreement) outstanding on such
date.
The Borrower also promises to pay interest on the unpaid
principal amount of the Loan in like money at such office from the date hereof
until the Loan is paid at the rate and at the times provided in the Agreement,
and to make prepayments on the dates required, and in the manner provided, by
the Agreement.
This Note is the Note referred to in the Credit Agreement
dated as of August 8, 1995 between the Borrower and the Bank (as from time to
time in effect, the "Agreement"), and is entitled to 'the benefits thereof and
of the other Credit Documents (as defined in the Agreement). In case an Event
of Default (as defined in the Agreement) shall occur and be continuing, the
principal of and accrued interest on this Note may be declared to be due and
payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
<PAGE> 32
EXHIBIT A
Page 2
This Note shall be construed in accordance with and be
governed by the law of the State of New York.
ARICO AMERICA REALESTATE
INVESTMENT COMPANY
By
--------------------------
Kevin Mahoney
Vice-President
By
--------------------------
Thomas P. Loftus
Vice-President
<PAGE> 33
EXHIBIT B
INTENTIONALLY OMITTED
<PAGE> 34
EXHIBIT C
Officers' Certificate
I, the undersigned, [President/Vice-President] of Arico
America Realestate Investment Company, a corporation organized and
existing under the laws of Nevada (the "Borrower"), DO HEREBY CERTIFY
that:
1. This Certificate is furnished in connection with the
Credit Agreement, dated as of August 8, 1995, between the Borrower and Deutsche
Bank AG London (such Credit Agreement, as in effect on the date of this
Certificate, being herein called the "Credit Agreement"). Unless otherwise
defined herein capitalized terms used in this Certificate have the meanings
assigned to those terms in the Credit Agreement.
2. The persons named below have been duly elected, have
duly qualified as and at all time since ____________________(1) (to and
including and date hereof) have been officers of the Borrower, holding the
respective offices below set opposite their names, and the signatures below set
opposite their names are their genuine signatures.
<TABLE>
<CAPTION>
Name(2) Office Signature
----------- ----------- ---------
<S> <C> <C>
___________ ___________ _________
___________ ___________ _________
</TABLE>
3. Attached hereto as Exhibit A is a copy of the Articles
of Incorporation of the Borrower as filed in the Office of the Secretary of the
State of Nevada on __________, 19___, together with all amendments thereto
adopted through the date hereof.
4. Attached hereto as Exhibit B is a true and correct copy
of the By-Laws of the Borrower as in effect on
- -----------------------
(1) Insert a date prior to the time of any corporate action relating to the
Credit Agreement.
(2) Include name, office and signature of each officer who will sign any Credit
Document, including the officer who will sign the certification at the end of
this certificate.
<PAGE> 35
EXHIBIT C
Page 2
___________(3), together with all amendments thereto adopted through the date
hereof.
5. Attached hereto as Exhibit c: is at true and correct
copy of resolutions duly adopted by the Board of Directors of the Borrower at a
meeting on __________, at which a quorum was present and acting throughout,
which resolutions have not been revoked, modified, amended or rescinded and are
still in full force and effect. Except as attached hereto as Exhibit C, no
resolutions have been adopted by the Board of Directors of the Borrower which
deal with the execution, delivery or performance of any of the Credit
Documents.
6. On the date hereof, the representations and warranties
of the Borrower contained in the Credit Agreement are true and correct, both
before and after giving effect to the Loan to be made on the date hereof and
the application of the proceeds thereof.
7. On the date hereof, no Default or Event of Default has
occurred and is continuing or would result from the Loan to be made on the date
hereof or from the application of the proceeds thereof.
8. I know of no proceeding for the dissolution or
liquidation of the Borrower or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th day
of August, 1995.
ARICO AMERICA REALESTATE
INVESTMENT COMPANY
---------------------------
Name:
Title:
I, the undersigned, [Secretary/Assistant Secretary] of the
Borrower, DO HEREBY CERTIFY that:
- ------------------
(3) Insert same date as in paragraph 2 of this certificate.
<PAGE> 36
EXHIBIT C
Page 3
1. [Insert name of person making the above certifications]
is the duly elected and qualified _______________of the Borrower and the
signature above is his genuine signature.
2. The certifications made; by [Name] in items 2, 3, 4 and
5 above are true and correct.
3. I know of no proceeding for the dissolution or
liquidation of the Borrower or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th day
of August, 1995.
ARICO AMERICA REALESTATE
INVESTMENT COMPANY
---------------------------
Name:
Title:
<PAGE> 37
EXHIBIT D
FORM OF PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of August 8, 1995 (as
amended, modified or supplemented from time to time, this "Agreement") , made
by ARICO-SEATTLE, INC., a Delaware corporation ("Seattle") and
ARICO-MINNEAPOLIS, INC., a Delaware corporation ("Minneapolis", and together
with Seattle, the "Pledgors"), in favor of DEUTSCHE BANK AG LONDON (the
"Pledgee"). Except as otherwise defined herein, terms used herein and defined
in the Credit Agreement (as defined below) shall be used herein as therein
defined.
W I T N E S S E T H :
WHEREAS, ARICO America Realestate Investment Company ("ARICO")
and the Pledgee have entered into a Credit Agreement, dated as of August 8,
1995, providing for the making of the Loan to ARICO, as contemplated therein
(as used herein, the term "Credit Agreement" means the Credit Agreement
described above in this paragraph, as the same may be amended, modified or
supplemented from time to time);
WHEREAS, each Pledgor is a wholly-owned subsidiary of ARICO,
and as such, will receive material benefits as a result of the making of the
Loan;
WHEREAS, Seattle is the owner of a 50% general partnership
interest in Third and University Limited Partnership;
WHEREAS, Minneapolis is the owner of a 50% general partnership
interest in NWC Limited Partnership;
WHEREAS, it is a condition precedent to the making of the Loan
under the Credit Agreement that the Pledgors shall have executed and delivered
to the Pledgee this Agreement; and
WHEREAS, the Pledgors desire to execute this Agreement to
satisfy the conditions described in the preceding paragraph;
<PAGE> 38
EXHIBIT D
Page 2
NOW, THEREFORE, in consideration of the benefits accruing to
the Pledgors, the receipt and sufficiency of which are hereby acknowledged, the
Pledgors hereby make the following representations and warranties to the
Pledgee and hereby covenant and agree with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by
the Pledgors for the benefit of the Pledgee to secure:
(i) the full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of all obligations
and liabilities (including, without limitation, indemnities, fees and
interest thereon) of ARICO and/or either of the Pledgors owing to the
Pledgee, now existing or hereafter incurred under, arising out of or
in connection with any Credit Document and the due performance and
compliance by ARICO and each of the Pledgors with the terms of each
such Credit Document (all such obligations or liabilities under this
clause (i), being herein collectively called the "Credit Document
Obligations");
(ii) any and all reasonable sums advanced by the Pledgee
in order to preserve the Collateral (as hereinafter defined) or
preserve its security interest in the Collateral;
(iii) in the event of any proceeding for the collection
or enforcement of any indebtedness, obligations, or liabilities
referred to in clauses (i) and (ii) above, after an Event of Default
(such term, as used in this Agreement, shall mean any Event of Default
under, and as defined in, the Credit Agreement and shall in any event
include, without limitation, any payment default (after the expiration
of any applicable grace period) of any Obligations (as defined below))
shall have occurred and be continuing, the reasonable expenses of
retaking, holding, preparing for sale or lease, selling or otherwise
disposing or realizing on the Collateral, or of any exercise by the
Pledgee of its rights hereunder, together with reasonable attorneys'
fees and court costs; and
<PAGE> 39
EXHIBIT D
Page 3
(iv) all amounts paid by any Indemnitee to which such
Indemnitee has the right to reimbursement under Section 9 of this
Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (iv) of this Section 1 being herein collectively called the
"Obligations."
2. DEFINITION OF PARTNERSHIP INTERESTS, PROCEEDS, ETC.
Seattle hereby represents and warrants that, as of the date hereof, it owns a
50% general partnership interest in Third and University Limited Partnership.
Minneapolis hereby represents and warrants that, as of the date hereof, it owns
a 50% general partnership interest in NWC Limited Partnership. As used herein,
the term "Partnership Interest" shall mean the entire partnership interest
(whether general or limited) at any time owned by either of the Pledgors in
either of the Partnerships. As used herein, the term "Proceeds" shall mean all
Net Cash Proceeds paid or payable to either Pledgor by virtue of its ownership
of a Partnership Interest in connection with the sale or refinancing of a
Specified Property.
3. GRANT OF SECURITY INTEREST, ETC. To secure the
Obligations and for the purposes set forth in Section 1, each Pledgor hereby
pledges and grants to the Pledgee a first priority continuing security interest
in, and as part of such grant and pledge, hereby transfers and assigns to the
Pledgee, all Proceeds of the Partnership Interests (the "Collateral").
4. DIVIDENDS AND OTHER DISTRIBUTIONS. All
distributions in respect of the Partnership Interests other than distributions
of Proceeds shall be paid to, and may be retained by, the Pledgors. Upon the
occurrence and during the continuance of an Event of Default, all subsequent
distributions of Proceeds in respect of the Partnership Interests shall be paid
directly to the Pledgee and retained by it as part of the Collateral. Upon the
occurrence and during the continuance of an Event of Default, the Pledgee shall
also be entitled to receive directly, and to retain as part of the Collateral
to be held and applied in the manner set forth in this Agreement:
<PAGE> 40
EXHIBIT D
Page 4
(i) all other Proceeds (other than cash) paid or
distributed by way of dividend or distribution, as the case may be, in
respect of the Partnership Interests; and
(ii) all other property which may be paid in respect of
the Collateral by reason of any consolidation, merger, conveyance of
assets, liquidation or similar partnership reorganization of either of
the Partnerships.
5. REMEDIES-IN CASE OF EVENT OF DEFAULT. In case an
Event of Default shall have occurred and be continuing, the Pledgee, subject to
Section 8 of the Credit Agreement, shall be entitled to exercise all of the
rights, powers and remedies (whether vested in it by this Agreement or by law)
for the protection and enforcement of its rights in respect of the Collateral,
and the Pledgee shall be entitled, without limitation, to exercise the
following rights:
(i) to receive all amounts payable in respect of the
Collateral payable to either of the Pledgors under Section 4; and
(ii) at any time or from time to 'time. to sell, assign
and deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell (except as set forth in the proviso below) or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by the Pledgor), for cash, on credit or for
other property, for immediate or future delivery without any
assumption of credit risk, and for such price or prices and on such
terms as the Pledgee in its absolute discretion may determine;
provided, that at least 10 days" notice of the time and place of any
such sale shall be given to the relevant Pledgor. Each Pledgor hereby
waives and releases to the fullest extent permitted by law any right
or equity of redemption with respect to the Collateral, whether before
or after sale hereunder, and all rights, if any, of marshalling the
Collateral and any other security for the Obligations or otherwise.
At any such sale, unless prohibited by
<PAGE> 41
EXHIBIT D
Page 5
applicable law, the Pledgee may bid for and purchase all or any part
of the Collateral so sold free from any such right or equity of
redemption. To the extent permitted by applicable law, the Pledgee
shall not be liable for failure to collect or realize upon any or all
of the Collateral or for any delay in so doing nor shall it be under
any obligation to take any action whatsoever with regard thereto.
6. REMEDIES, ETC., CUMULATIVE. Each right, power and
remedy of the Pledgee provided for in this Agreement or now or hereafter
existing at law or in equity or by statute shall be cumulative and concurrent
and shall be in addition to every other such right, power or remedy. The
exercise or beginning of the exercise by the Pledgee of any one or more of the
rights, powers or remedies provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee of all such other rights, powers
or remedies, and no failure or delay on the part of the Pledgee to exercise any
such right, power or remedy shall operate as a waiver thereof.
7. APPLICATION OF PROCEEDS. (a) All moneys collected
by the Pledgee upon any sale or other disposition of the Collateral pursuant to
the terms of this Agreement, together with all other moneys received by the
Pledgee hereunder, shall be applied as follows:
(i) first, to the payment cd all Obligations owing to
the Pledgee or any Indemnitee (as defined in Section 9) of the type
described in clauses (ii), (iii) and (iv)of Section I of this
Agreement;
(ii) second, to the extent moneys remain after the
application pursuant to the preceding clause (i) , to the payment of
all obligations owing to the Pledgee of the type described in clause
(i) of Section 1 of this Agreement; and
(iii) third, to the extent moneys remain after the
application pursuant to the preceding clauses (i) and (ii) and
following the termination of this Agreement pursuant to Section 19
hereof, to the relevant Pledgor or, to the extent directed by such
Pledgor or a court
<PAGE> 42
EXHIBIT D
Page 6
of competent jurisdiction, to whomever may be lawfully entitled to
receive such surplus.
(b) It is understood and agreed that ARICO shall remain
liable to the extent of any deficiency between the amount of the proceeds of
the Collateral hereunder and the aggregate amount of the outstanding
Obligations.
8. PURCHASERS OF COLLATERAL. Upon any sale of the
Collateral by the Pledgee hereunder (whether by virtue of the power of sale
herein granted, pursuant to judicial process or otherwise) , the receipt of the
Pledgee or the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold, and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Pledgee or such officer or be answerable in any
way for the misapplication or nonapplication thereof.
9. INDEMNITY. Each Pledgor agrees (i) to indemnify
and hold harmless the Pledgee and its successors, assigns, employees and agents
(hereinafter referred to individually as, an "Indemnitee" and, collectively as
"Indemnities") from and against any and all claims, demands, losses, judgments
and liabilities of whatsoever kind or nature, and (ii) to reimburse each
Indemnitee for all reasonable costs and expenses, including reasonable
attorneys' fees, growing out of or resulting from this Agreement or the
exercise of any right or remedy granted to it hereunder except, with respect to
clauses (i) and (ii) above, for those arising from such Indemnitee's gross
negligence or willful misconduct In no event shall any Indemnitee be liable, in
the absence of gross negligence or willful misconduct on its part, for any
matter or thing in connection with this Agreement other than to account for
moneys actually received by it in accordance with the terms hereof. If and to
the extent that the obligations of either Pledgor under this Section 9 are
unenforceable for any reason, such Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law. The indemnity obligations of the Pledgors
contained in this Section 9 shall continue in full force and effect
notwithstanding the full payment of the Note issued under the Credit Agreement
and the payment of all other Obligations and notwithstanding the discharge
thereof.
<PAGE> 43
EXHIBIT D
Page 7
10. PLEDGEE NOT BOUND. (a) The Pledgee shall not be
obligated to perform or discharge any obligation of either Pledgor as a result
of the collateral assignment hereby effected.
(b) The acceptance by the Pledgee of this Agreement,
with all the rights, powers, privileges and authority so created, shall not at
any time or in any event obligate the Pledgee to appear in or defend any action
or proceeding relating to the Collateral to which it is not a party, or to take
any action hereunder or thereunder, or to expend any money or incur any
expenses or perform or discharge any obligation, duty or liability under or
with respect to the Collateral.
11. FURTHER ASSURANCES. The Pledgors agree that they
will join with the Pledgee in executing and, at the Pledgors' own expense, file
and refile under the UCC such financing statements, continuation statements and
other documents in such offices as the Pledgee may deem necessary or
appropriate and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral and hereby authorize
the Pledgee to file financing statements and amendments thereto relative to all
or any part of the Collateral without the signature of the Pledgors where
permitted by law, and agree to do such further acts and things and to execute
and deliver to the Pledgee such additional conveyances, assignments, agreements
and instruments as the Pledgee may reasonably require or deem advisable to
carry into effect the purposes of this Agreement or to further assure and
confirm unto the Pledgee its rights, powers and remedies hereunder.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGORS.
Each Pledgor represents, warrants and covenants that:
(i) Such Pledgor will defend the Pledgee's right, title and
interest in and to the Partnership Interests owned by such Pledgor and
in and to the. Collateral pledged by it pursuant hereto or in which
it has granted a security interest pursuant hereto against the claims
and demands of all other persons whomsoever, and such Pledgor
covenants and agrees that it will have like title to and right to
pledge any other property at
<PAGE> 44
EXHIBIT D
Page 8
any time hereafter pledged by such Pledgor to the Pledgee as
collateral hereunder and will likewise defend the right thereto and
the security interest therein of the Pledgee.
(ii) Such Pledgor is the legal and beneficial owner of
and has good title to the Partnership Interests owned by it and the
Proceeds of such Partnership Interests and has good title to all of
the Collateral pledged by it pursuant hereto or in which it has
granted a security interest pursuant hereto, free and clear of all
claims, pledges, liens, encumbrances and security interests of every
nature whatsoever, except such as are created pursuant to this
Agreement and Liens permitted pursuant to Section 7.03 of the Credit
Agreement, and has the unqualified right to pledge and grant a
security interest in the same as herein provided without the consent
of any other Person, firm or entity which has not been obtained.
(iii) Such Pledgor has full power, authority and legal
right to pledge the Proceeds pledged by it pursuant to this Agreement.
(iv) Such Pledgor will not sell, assign, or otherwise
dispose of, grant any option with respect to, or mortgage, pledge,
grant a security interest in or otherwise encumber any of the
Collateral or any of the Partnership Interests owned by it (or any
interest in any of the foregoing) , or suffer any of the same to
exist; and any sale, assignment, option, mortgage, pledge, security
interest or other encumbrance or disposition of any nature whatsoever
made in violation of this covenant shall be a nullity and of no force
and effect, and upon demand of the Pledgee, shall forthwith be
cancelled or satisfied by an appropriate instrument in writing.
(v) The pledge and assignment of the Proceeds pursuant
to this Agreement, together with the relevant filings or recordings
(which filings and recordings have been made), creates a valid,
perfected and continuing first priority security interest in such
Proceeds, subject to no prior lien or encumbrance or to any agreement
purporting to grant to any third party a
<PAGE> 45
EXHIBIT D
Page 9
lien or encumbrance on the property or assets of the Pledgor which
would include the Collateral (other than Liens permitted pursuant to
Section 7.03 of the Credit Agreement).
(vi) There are no currently effective financing
statements under the UCC covering any property which is now or
hereafter may be included in the Collateral and such Pledgor will not,
without the prior written consent of the Pledgee, execute and, until
the Termination Date, there will not ever be on file in any public
office, any enforceable financing statement or statements covering
-any or all of the Collateral, except financing statements filed or to
be filed in favor of the Pledgee as secured party.
(vii) Such Pledgor shall give the Pledgee prompt notice
of any written claim relating to the Collateral. Such Pledgor shall
deliver to the Pledgee a copy of each other demand, notice or document
received by it which may adversely affect the Pledgee's interest in
the Collateral promptly upon, but in any event within 10 days after,
such Pledgor's receipt thereof.
(viii) Such Pledgor shall not withdraw as a general
partner of the relevant Partnership, or file or pursue or take any
action which may, directly or indirectly, cause a dissolution or
liquidation of ox with respect to the relevant Partnership or seek a
partition of any property of the relevant Partnership, except as may,
be permitted pursuant to the Credit Agreement.
(ix) The chief executive office and principal place of
business of each Pledgor and the sole location where the records of
the Pledgor with respect to the Collateral are kept are located at the
address set forth in the Credit Agreement for ARICO. Neither Pledgor
shall move its chief executive office, principal place of business, or
such location of records unless (x) it shall have given to the Pledgee
not less than 30 days, prior written notice of its intention so to do,
clearly describing such new location and providing such other
information in connection therewith as the Pledgee may reasonably
<PAGE> 46
EXHIBIT D
Page 10
request and (y) with respect to such new location, it shall have taken
all action, reasonably Satisfactory to the Pledgee, to maintain the
security interest of the Pledgee in the Collateral intended to be
granted hereby at all times fully perfected and in full force and
effect.
(x) As of the date hereof, such Pledgor neither has or
operates nor has had or operated in any jurisdiction within the five
year period preceding the date of this Agreement under Any name except
its legal name as set forth on the signature pages hereto. Such
Pledgor shall not change its legal name or assume or operate in -any
jurisdiction under any trade, fictitious or other name unless (x) it
shall have given to the Pledgee not less than 30 days' prior written
notice of its intention so to do, clearly describing such new name and
the jurisdictions in which such new name shall be used and providing
such other information in connection therewith as the Pledgee may
reasonably request and (y) with respect to such new name, it shall
have taken all action, reasonably satisfactory to the Pledgee, to
maintain the security interest of the Pledgee in the Collateral
intended to be granted hereby at all times fully perfected and in full
force and effect.
13. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The
obligations of the Pledgors under this Agreement shall be absolute and
unconditional and shall remain in full force and effect (subject to the
provisions of Section 15 hereof) without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
Credit Document or other agreement or instrument; (ii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iii) any
limitation on any party's liability or obligations under any Credit Document or
other instrument or agreement or any invalidity or unenforceability, in whole
or in part, of any Credit Document or other instrument or agreement or any term
thereof; or (iv) any bankruptcy, insolvency, reorganization, composition,
<PAGE> 47
EXHIBIT D
Page 11
adjustment, dissolution, liquidation or other like proceeding relating to the
ARICO, either Pledgor, or any of their respective subsidiaries or affiliates,
or any action taken with respect to this Agreement or any other Credit Document
by any trustee or receiver, or by any court, in any such proceeding, whether or
not either Pledgor shall have notice or knowledge of any of the foregoing.
14. TERMINATION. After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 9 hereof shall
survive such termination) and the Pledgee, at the request and expense of the
Pledgors, will promptly execute and deliver to the Pledgors a proper instrument
or instruments (including UCC termination statements con form UCC-3 or
analogous form) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the Collateral of
the Pledgor as may be in the possession of the Pledgee and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Note is no longer outstanding (and the Loan has been paid in
full) and all other Obligations (other than any indemnities described in the
Credit Agreement and Section 9 hereof which are not then due and payable) have
been paid in full.
15. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by first class
rail, postage prepaid, addressed:
(a) if to either Pledgor, care of ARICO at its address
set forth in the Credit Agreement; and
(b) if to the Pledgee, at its address set forth in the
Credit Agreement;
<PAGE> 48
EXHIBIT D
Page 12
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
16. WAIVER: AMENDMENT. None of the terms and
conditions of this Agreement may be changed, waived, modified or varied in any
manner whatsoever unless in writing duly signed by the Pledgors and the
Pledgee.
17. MISCELLANEOUS. This Agreement shall be binding
upon the successors and assigns of the Pledgors and shall inure to the benefit
of and be enforceable by the Pledgee and its successors and assigns. THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for
purposes of reference only and shall not limit or define the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which shall constitute one instrument.
18. LIMITED OBLIGATIONS. The obligations of the
Pledgors hereunder in respect of the obligations may only be enforced against
the Pledgors (or either of them) to the extent of their respective interests in
the Collateral, and no other property or assets of either of the Pledgors shall
be available to the Pledgee for satisfaction of the Obligations other than the
Collateral.
* * *
IN WITNESS WHEREOF, the Pledgors and the Pledgee have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
ARICO-MINNEAPOLIS, INC.
By
--------------------------
Kevin Mahoney
Vice-President
By
--------------------------
Thomas P. Loftus
Vice-President
<PAGE> 49
EXHIBIT D
Page 13
ARICO-SEATTLE, INC.
By
--------------------------
Kevin Mahoney
Vice-President
By
--------------------------
Thomas P. Loftus
Vice-President
DEUTSCHE BANK AG LONDON
By
---------------------------
Dr. Dirk Krekeler
Attorney-in-Fact
<PAGE> 50
SCHEDULE I
ARICO AMERICA REALESTATE INVESTMENT
COMPANY AND SUBSIDIARIES SCHEDULE OF CURRENT VALUE BASIS ASSETS,
LIABILITIES AND REVALUATION EQUITY
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS:
One Norwest Center $167,000
Norwest Center 236,000
Washington Mutual Tower 207,415
---------------
610,415
Cash and cash equivalents 17,238
Tenant and other receivables 1,906
Other notes receivable 6,159
Other assets 7,325
---------------
Total Assets $643,043
---------------
LIABILITIES:
Long-term debt 128,467
Borrowings under lines of credit 229,845
Accrued interest 7,469
Accrued real estate taxes 9,027
Shareholders' distribution payable 3,840
Accounts payable, accrued expenses and other liabilities 3,218
---------------
Total Liabilities 381,866
Minority interest 43,972
EQUITY:
Paid-in capital 110,237
Accumulated deficit (26,311)
Revaluation equity 133,279
---------------
Total Equity 217,205
---------------
Total Liabilities and Equity $643,043
===============
See Accompanying notes
</TABLE>
<PAGE> 51
SCHEDULE I
PAGE 2
ARICO AMERICA REALESTATE INVESTMENT
COMPANY AND SUBSIDIARIES
NOTES TO SCHEDULE OF CURRENT VALUE BASIS
ASSETS, LIABILITIES AND REVALUATION EQUITY
1. CURRENT VALUE REPORTING
ARICO America Realestate Investment Company and Subsidiaries (the
"Company") interests in investment property have appreciated in value
and, accordingly, their aggregate current values exceed their
aggregate historical cost basis net book values determined in
conformity with generally accepted accounting principles. The Current
Value Basis Schedule of Assets, Liabilities and Revaluation Equity
(the "Schedule") is not intended to present the current liquidation
value of assets and liabilities of the Company or its net assets taken
as a whole.
The process for estimation the current values of the Company's assets
and liabilities reflected in the Schedule requires significant
estimates and judgments by management. These estimates and judgments
are made based on information and assumptions considered by management
to be adequate and appropriate in the circumstances; however, they are
not subject to precise quantification or verification and may change
from time to time as economic and market factors, and management's
evaluation of them, change.
Shareholders' equity on a current value basis was approximately
$217,205,000 or $16.40 per share of common stock at December 31, 1994.
The Schedule and notes thereto should be read in connection with the
audited historical cost financial statements as of December 31, 1994,
dated March 8, 1995.
2. BASES OF VALUATION
INVESTMENT PROPERTY - The current value of the Company's interest
property is the Properties' appraised values as determined by an
independent appraisal firm, National Valuation Consultants, Inc. of
Denver, Colorado. The purpose of an appraisal is to estimate the
current value of a property as of a specific date which is held for
the long term benefit of operating cash flows. Because of the inherent
uncertainties of real estate appraised values, the amounts reflected
in the Schedule could vary from the amounts that could be realized in
a sales transaction and those differences may be material.
DEBT - Debt is carried at the same amount as in the historical cost
basis balance sheet since the interest rates on the existing debt
represent rates that management believes are currently offered for
long-term financing. The carrying amount of the debt has been adjusted
for the fair values of existing interest rate swap agreements, used to
reduce interest rate risk.
OTHER ASSETS AND LIABILITIES - Cash and cash equivalents, accrued
interest, accrued real estate taxes and shareholders' distribution
payable are carried at the same amounts as in the historical cost
basis balance sheet as these amounts approximate the current value.
Other asset and liability accounts have been adjusted on the schedule
to remove the effects of straight-lining of rental income and to
remove all other deferred expenses and unearned income recorded on the
historical cost Financial Statements. Other notes receivable has been
adjusted to reflect the fair value of the "HCL" note receivable based
on interest rates of similar instruments. Additionally, the estimated
real estate taxes receivable from tenants in 1995, based on taxes
incurred in 1994, has been included in other assets because such
amounts have not been reflected in the appraisal of Norwest Center.
Minority interest was calculated based on the share of the proceeds
the minority shareholders would receive from the sale of the
Properties at the estimated market values, as defined in the
partnership agreement.
<PAGE> 52
SCHEDULE 5.16
1. $12,000,000 Revolving Credit Line from Deutsche Bank AG to
Arico America Realestate Investment Company.
2. $9,667,000 Promissory Note by Arico America Realestate
Investment Company to Hines Colorado Limited. Such Promissory Note is
unsecured, bears interest at an annual rate equal to the lesser of 8% and one
(1) year LIBOR plus fifty (50) basis points and will mature five (5) years
after execution. Subject, however, to accelerate maturity after thirty-six (36)
months.
<PAGE> 53
SCHEDULE 7.03
NONE
<PAGE> 1
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF EARNINGS
PER SHARE FOR THE YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Earnings Per Share
------------------
Primary Fully Diluted
------- -------------
<S> <C> <C> <C>
1. Proceeds upon exercise of options 12,333,750 12,333,750
2. Proceeds upon exercise of
convertible preferred stock - 50,000,000
3. Market price of shares
Closing: 12/31/95 $ - $ 14.61
Average: 9/30/95-12/31/95 $ 14.45 $ -
4. Treasury shares that could be repurchased (Options) 853,547 844,199
5. Option shares outstanding 862,500 862,500
6. Common stock equivalent shares (Excess 8,953 18,301
shares under option over Treasury
shares that could be repurchased)
7. Treasury shares that could be repurchased (Preferred) - 3,422,313
8. Convertible preferred shares outstanding - 3,030,303
9. Common stock equivalent shares (Excess - antidilutive
shares under convertible preferred over Treasury
shares that could be repurchased)
1O. Weighted average number of shares outstanding 15,909,805 15,909,805
11. Net loss for the period $(13,574,000) $ (13,574,000)
12. Less: Dividends in arrears applicable to $ (1,458,333) $ -
the preferred stock
13. Net loss applicable to common shares $(15,032,333) $ (13,574,000)
14. Loss per share $ (0.94) antidilutive
15. Reported loss per share $ (0.94) $ (0.94)
</TABLE>
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Berthold T. Wetteskind, a director of Cornerstone Properties Inc.
(the "Company"), do hereby constitute and appoint John S. Moody and Thomas P.
Loftus, and each of them, my true and lawful attorneys-in-fact and agents, to
do any and all acts and things and to execute any and all instruments which
said attorney and agent may deem necessary or advisable to enable the Company
to comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing under the said Securities
Exchange Act of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Annual Report"), including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign for, on behalf of and in the name of the undersigned as a director of the
Company, such Annual Report and any amendments thereto filed with the
Securities and Exchange Commission and any instrument or document filed as part
of, an exhibit to, or in connection with said Annual Report or amendments
thereto; and the undersigned does hereby ratify and confirm as his own act and
deed all that said attorneys-in-fact and agents shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 25th day of March, 1996.
/s/ Berthold T. Wetteskind
--------------------------
Berthold T. Wetteskind
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Dr. Karl-Ludwig Hermann, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody and Thomas P.
Loftus, and each of them, my true and lawful attorneys-in-fact and agents, to
do any and all acts and things and to execute any and all instruments which
said attorney and agent may deem necessary or advisable to enable the Company
to comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing under the said Securities
Exchange Act of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Annual Report"), including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign for, on behalf of and in the name of the undersigned as a director of the
Company, such Annual Report and any amendments thereto filed with the
Securities and Exchange Commission and any instrument or document filed as part
of, an exhibit to, or in connection with said Annual Report or amendments
thereto; and the undersigned does hereby ratify and confirm as his own act and
deed all that said attorneys-in-fact and agents shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 25th day of March, 1996.
/s/ Karl-Ludwig Hermann
---------------------------
Karl-Ludwig Hermann
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Mr. Blake Eagle, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody and Thomas P.
Loftus, and each of them, my true and lawful attorneys-in-fact and agents, to
do any and all acts and things and to execute any and all instruments which
said attorney and agent may deem necessary or advisable to enable the Company
to comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing under the said Securities
Exchange Act of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Annual Report"), including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign for, on behalf of and in the name of the undersigned as a director of the
Company, such Annual Report and any amendments thereto filed with the
Securities and Exchange Commission and any instrument or document filed as part
of, an exhibit to, or in connection with said Annual Report or amendments
thereto; and the undersigned does hereby ratify and confirm as his own act and
deed all that said attorneys-in-fact and agents shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 25th day of March, 1996.
/s/ Blake Eagle
---------------
Blake Eagle
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Hans C. Mautner, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody and Thomas P.
Loftus, and each of them, my true and lawful attorneys-in-fact and agents, to
do any and all acts and things and to execute any and all instruments which
said attorney and agent may deem necessary or advisable to enable the Company
to comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing under the said Securities
Exchange Act of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Annual Report"), including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign for, on behalf of and in the name of the undersigned as a director of the
Company, such Annual Report and any amendments thereto filed with the
Securities and Exchange Commission and any instrument or document filed as part
of, an exhibit to, or in connection with said Annual Report or amendments
thereto; and the undersigned does hereby ratify and confirm as his own act and
deed all that said attorneys-in-fact and agents shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 25th day of March, 1996.
/s/ Hans C. Mautner
-------------------
Hans C. Mautner
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Dr. Rolf-E. Breuer, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody and Thomas P.
Loftus, and each of them, my true and lawful attorneys-in-fact and agents, to
do any and all acts and things and to execute any and all instruments which
said attorney and agent may deem necessary or advisable to enable the Company
to comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing under the said Securities
Exchange Act of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Annual Report"), including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign for, on behalf of and in the name of the undersigned as a director of the
Company, such Annual Report and any amendments thereto filed with the
Securities and Exchange Commission and any instrument or document filed as part
of, an exhibit to, or in connection with said Annual Report or amendments
thereto; and the undersigned does hereby ratify and confirm as his own act and
deed all that said attorneys-in-fact and agents shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 25th day of March, 1996.
/s/ Rolf-E Breuer
-----------------
Dr. Rolf-E Breuer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,740
<SECURITIES> 0
<RECEIVABLES> 5,738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,718
<PP&E> 604,180
<DEPRECIATION> 175,167
<TOTAL-ASSETS> 586,089
<CURRENT-LIABILITIES> 17,828
<BONDS> 369,600
0
50,000
<COMMON> 181,477
<OTHER-SE> (42,121)
<TOTAL-LIABILITY-AND-EQUITY> 586,089
<SALES> 0
<TOTAL-REVENUES> 92,387
<CGS> 0
<TOTAL-COSTS> 98,099
<OTHER-EXPENSES> 3,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,467
<INCOME-PRETAX> (9,129)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,129)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,445)
<CHANGES> 0
<NET-INCOME> (13,574)
<EPS-PRIMARY> (0.94)
<EPS-DILUTED> (0.94)
</TABLE>
