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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1997
or
/ / 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
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CORNERSTONE PROPERTIES INC.
(Exact name of Registrant as specified in its Charter)
NEVADA 74-2170858
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation and organization)
126 EAST 56TH STREET
NEW YORK, NEW YORK
(Address of principal executive offices)
10022
(Zip Code)
(212) 605-7100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED:
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Common Stock, no par value New York Stock Exchange
Dusseldorf Stock Exchange
Frankfurt Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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 26, 1998: $1,794,658,239.
Number of shares of Common Stock outstanding as of March 26, 1998: 98,015,196.
Index of Exhibits: See Item 14(c) page 52.
DOCUMENTS INCORPORATED BY REFERENCE:
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Part of Form 10-K
into which
incorporated
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Proxy Statement for Annual Meeting of Stockholders to be held May 20, 1998....................... Part III
</TABLE>
Total Number of Pages: 60
Exhibit Index: Page 49
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Cornerstone Properties Inc. ("Cornerstone" or the "Company") is a
self-advised real estate investment trust ("REIT") which owns, through
subsidiaries, interests in 19 Class A office properties comprising nearly 11
million rentable square feet (collectively, the "Properties," and each interest,
a "Property"). The Properties are located in ten major metropolitan areas
throughout the United States: Atlanta, Boston, Charlotte, suburban Chicago,
Denver, Minneapolis, New York City, Pittsburgh, Seattle and Washington, D.C. and
surrounding suburbs. All of the Properties were built between 1979 and 1991,
with the exception of the Pittsburgh Property, which was substantially renovated
in 1988. The Company's strategy is to own Class A office properties in prime
Central Business District ("CBD") locations and major suburban office markets in
U.S. metropolitan areas. Class A office properties are generally considered to
be those that have the most favorable locations and physical attributes, command
premium rents and experience the highest tenant retention rates within their
markets. The Company recently formed an umbrella limited partnership real estate
investment trust ("UPREIT"), which will allow the Company to acquire properties
in transactions that will provide sellers with tax-deferred treatment of capital
gains. As part of the UPREIT formation, all of the Company's interests in the
Properties are held by or through a Delaware limited partnership, Cornerstone
Properties Limited Partnership (the "Operating Partnership"), of which the
Company is the sole general partner. The Company currently owns directly or
indirectly 99.17% of the outstanding units of partnership interest in the
Operating Partnership (excluding certain preferred units owned by the Company).
The Company focuses its professional and executive staff on the execution of
its acquisition and management strategy, including market research, budgeting,
leasing, capital planning, finance and asset management. The Company engages
prominent regional or national third-party management companies to provide
day-to-day property management functions at the local level. The Company
believes that its use of third-party property managers offers a flexible,
cost-efficient and demonstrably effective means for managing a national office
portfolio, as historically its Properties have consistently outperformed their
respective submarkets Class A property rent and occupancy levels. In all cases,
the Company retains full responsibility for capital planning, budgeting,
leasing, major tenant relationships, financing and strategic initiatives with
respect to its Properties.
As a major owner of Class A office properties, management believes that the
Company is well positioned to capitalize on the expected improvement in the
fundamentals for office property markets in the United States. Management also
believes that the Company can continue to use its portfolio of premium quality
assets, proven access to multiple sources of debt and equity capital and
efficient management structure to expand nationally through the use of UPREIT
unit transactions and stock-for-asset transactions.
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 Tower 56, 126 East
56th Street, New York, New York 10022.
BUSINESS OBJECTIVES
BUSINESS STRATEGY
The Company's primary objective is to maximize long-term stockholder value
through growth in funds from operations ("FFO") per share and through
appreciation in the value of its holdings. The Company's strategies to
accomplish this objective are to:
- Seek external growth by acquiring additional Class A office properties
with local submarket and asset characteristics consistent with the
Properties currently in its portfolio; and
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- Generate internal growth by aggressively maintaining, managing and leasing
its Properties, increasing rent, maintaining high occupancy and tenant
retention levels and maximizing current returns and long-term value.
EXTERNAL GROWTH STRATEGY
The Company will continue to pursue significant growth in its asset base to
the extent that appropriate Class A office properties and financing are
available on attractive terms. The Company will continue to implement its
external growth strategies by acquiring properties and portfolios of properties
with the following characteristics:
- CLASS A OFFICE PROPERTIES. The Company believes that its strategy of
investing in and owning Class A office properties has the following
benefits: (i) Class A properties can currently be acquired at prices that
produce attractive yields for the Company and are accretive to earnings;
(ii) Class A properties typically maintain higher occupancies because,
when overall vacancy rates are rising, tenants often take the opportunity
to relocate to better located and higher quality buildings; and (iii)
Class A properties generally attract tenants with strong credit, resulting
in a more stable source of cash flow.
- MAJOR METROPOLITAN AREAS. The Company intends to continue targeting
properties located in the CBDs and major suburban submarkets of major
metropolitan areas. Target markets typically exhibit underlying economic,
demographic and employment trends that lead to the positive net absorption
of Class A office space. The Company also expects future acquisitions to
be concentrated in submarkets where high barriers to entry reduce the
likelihood that new office space will be constructed; such barriers to
entry may include a limited supply of attractive building sites and
significant regulatory constraints on new development.
- DISCOUNT TO REPLACEMENT COST. The Company expects to continue acquiring
properties at discounts to replacement cost that possess one or more
competitive advantages, such as a superior location, quality construction,
high-quality tenancy, efficient floorplates and modern building systems.
Because Class A properties being considered for acquisition by the Company
are at prices below replacement cost, the opportunity exists for the
Company to enhance property performance and operating income, thereby
increasing asset values, before potentially competitive new construction
is justified in most markets.
- UPREIT UNIT TRANSACTIONS AND STOCK-FOR-ASSET SWAPS. The Company believes
that opportunities exist for it to grow its asset base and increase
earnings through UPREIT unit transactions and stock-for-asset swaps with
major institutional owners of property. For example, a number of major
pension funds and life insurance companies have publicly announced
initiatives to exchange portfolios of direct real estate holdings for
securities of publicly traded companies in order to improve portfolio
diversification, liquidity and overall investment returns. The Company
believes that the very high quality of the Properties and its intended
future acquisitions should make the Company an attractive vehicle for swap
transactions and afford access to a broader range of acquisition
opportunities.
INTERNAL GROWTH STRATEGY
The Company believes that its existing portfolio offers opportunities for
growth through the Company's active and aggressive asset management program,
which emphasizes maintaining a strong market position based on superior asset
quality and tenant service. The Company will continue to implement its internal
growth strategies through the following:
- RENTAL RATE INCREASES. Based on its own historical activities and
knowledge of its local marketplaces, the Company believes that occupancy
levels and net rents in most of its submarkets are increasing
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but, on average, that net rents must still rise significantly in order to
justify and finance new construction. The Company believes that these
market dynamics should enable it to realize rental rate increases without
facing potentially competitive new construction. Ultimately, the Company
believes that its high-quality assets will continue to compete very
effectively even when market rents rise sufficiently to justify new
construction.
- MAINTENANCE. The Company places strong emphasis on programs for regular
maintenance of the Properties as well as periodic refurbishment,
renovation and redevelopment where such investment provides attractive
returns and cash flow growth. Higher maintenance levels generally allow
building systems to operate more efficiently, thereby reducing operating
expenses to a level which is lower than that of competing properties. In
addition, many of the Company's capital and maintenance expenditures, such
as the upgrading of a building's electrical system, are designed to
produce ongoing operational efficiencies in order to increase cash flow
and long-term value.
- PROACTIVE LEASING PROGRAM. The Company believes that retention of existing
tenants, and the leasing of additional space to those tenants, is
important to a property's stability and enhances its cash flow and value
over time. Maximizing tenant retention reduces the cost of lease rollovers
and rental revenue fluctuations by removing "down" periods between tenant
occupancies and reducing the "up front" costs (tenant improvements and
leasing commissions) of signing leases. Therefore, the Company's senior
management focuses significant attention on negotiating lease terms for
prospective new tenants and on working with existing tenants to negotiate
lease renewals that meet the tenant's changing space needs.
FINANCING STRATEGY
The Company believes that in order to continue to maximize the value of its
stockholders' equity and to execute its growth strategies, it is essential to
implement and periodically review a diversified financing strategy that: (i)
incorporates long-term, secured and unsecured corporate debt; (ii) minimizes
exposure to fluctuations of interest rates; and (iii) maintains maximum
flexibility to manage the Company's short-term cash needs. Furthermore, the
Company believes that its capital structure will be conducive to and allow
flexibility for the aggressive growth that the Company seeks to achieve. The
Company anticipates employing the following strategies to enhance stockholder
value:
- ACCESS TO MULTIPLE CAPITAL SOURCES. Because of the high quality of its
assets, the Company believes that it has several competitive advantages in
its ability to access equity capital from several different sources on
attractive terms. This financial flexibility should enable the Company to
choose from among several equity alternatives and to select the capital
source that best meets the Company's needs at that time. The Company
expects to continue to access capital from the most cost-efficient
sources, including public and private equity and debt.
- PRUDENT LEVERAGE. The Company will use leverage prudently to take
advantage of what it believes to be the positive spread between the total
return on investment and the cost of debt financing in the Class A office
property market. Historically, the Company has employed somewhat higher
levels of leverage than property companies holding assets of lesser
quality, since the Company's high-quality assets and tenancy have
generally produced occupancy rates, rent levels and income streams that
are higher and more stable than those associated with lower quality
assets. The Company believes that its use of leverage has been and will
continue to be consistent with its ownership of very high-quality assets
in which a large portion of its tenants carry investment-grade long-term
debt ratings. Approximately 34% of its Full Service Straight-Line Rent (as
defined herein) is received from tenants which carry investment-grade
long-term debt ratings.
- CREDIT FACILITY. The Company has obtained a three-year, $350 million
unsecured credit facility (the "Revolving Credit Facility") from Bankers
Trust Company and The Chase Manhattan Bank. The Revolving Credit Facility
has been and will continue to be used for the acquisition of additional
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properties as well as for general working capital purposes. Borrowings
under the Revolving Credit Facility bear interest at a rate between 1.10%
and 1.40% above the London Interbank Offered Rate ("LIBOR"), depending
upon the Company's ratio of total debt to asset value at the time of
borrowing.
- REDEPLOYMENT OF ASSETS. The Company periodically reviews its portfolio of
Properties to determine whether any assets are inconsistent with its
long-term business objectives and should, therefore, be sold and the
proceeds therefrom applied to the acquisition of more suitable assets. The
Company currently intends to sell The Frick Building and a parcel of land,
but no assurance can be given that the Company will be able to locate a
willing buyer or sell the Properties at an attractive price.
RECENT DEVELOPMENTS
From January 1, 1997 through March 26, 1998, the Company has completed more
than $1.4 billion of real estate investments, consisting of 12 Class A office
properties containing approximately 6.2 million rentable square feet and one
undeveloped parcel of land (collectively the "Acquired Properties"). With the
purchase of the Acquired Properties, the Company increased its investments in
real estate by approximately 192%.
1997 AND 1998 COMPLETED ACQUISITIONS
Information regarding 1997 and 1998 acquisitions is as of March 26, 1998.
527 MADISON AVENUE. On February 14, 1997, Cornerstone acquired 527 Madison
Avenue in Midtown Manhattan, New York for approximately $67 million. Constructed
in 1986, 527 Madison Avenue is a 26-story Class A office building with
approximately 211,000 square feet of office space, 5,000 square feet of first
floor retail space and an underground parking facility for approximately 50
vehicles.
DIHC PORTFOLIO. After receiving stockholder approval on October 27, 1997,
the Company acquired (the "DIHC Acquisition") interests in nine Class A office
properties, comprising approximately 4.5 million rentable square feet in
Alexandria, Virginia (3 Properties), Atlanta (2 Properties), Boston (2
Properties), Charlotte and Washington, D.C., as well as an undeveloped parcel of
land in Chicago (collectively the "DIHC Properties") and certain secured and
unsecured loans.
The DIHC Acquisition was effected by the Company purchasing all of the
outstanding stock of certain direct and indirect subsidiaries of Dutch
Institutional Holding Company, Inc. ("DIHC") that owned interests in the DIHC
Properties, together with certain loans to such subsidiaries held by Stichting
Pensioenfonds Voor de Gezondheid Geestelijke en Maatschappelijke Belangen
("PGGM"). DIHC is a wholly-owned subsidiary of PGGM. As consideration for the
DIHC Acquisition, PGGM and DIHC together received approximately $1.06 billion,
consisting of approximately 34 million shares of Common Stock (approximately 41%
of the outstanding shares of the Company at that time), approximately $260
million in cash and $250 million in promissory notes. Below is a brief property
description of the nine Properties described above:
191 PEACHTREE STREET. Located in downtown Atlanta, 191 Peachtree Street is a
50-story Class A multi-tenant office building containing 1,221,000 square feet.
Attached to the building is a 16-story parking deck with 1,386 spaces.
MARKET SQUARE. Located in Washington D.C., Market Square comprises two free
standing Class A office buildings which are mirror images of each other. Each
building contains eight floors of office space, a plaza and a concourse level,
plus four floors of condominium residential units. The condominium residential
units are owned separately. The total area of the Market Square property is
689,000 square feet and a four level below grade parking garage with 777 spaces.
Of this total area, 631,000 square feet is office space and 58,000 square feet
is retail space.
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500 BOYLSTON STREET. Located in the Back Bay submarket of Boston, 500
Boylston Street is a 25-story Class A office building with approximately 650,000
square feet of office space and approximately 65,000 square feet of first and
second floor retail space. Parking for 1,000 cars is shared with 222 Berkeley
Street and is located three levels below grade.
222 BERKELEY STREET. Located in the Back Bay submarket of Boston, 222
Berkeley Street is a 22-story Class A office building with approximately 485,000
square feet of office space and approximately 46,000 square feet of first and
second floor retail space. Parking for 1,000 cars is shared with 500 Boylston
Street and is located three levels below grade.
CHARLOTTE PLAZA. Located in the Uptown district of Charlotte's CBD,
Charlotte Plaza is a 27-story, Class A office building with approximately
613,000 square feet of office space and an eight-level, 863 space parking
garage.
200 GALLERIA. Part of a four-office building complex containing a total of
over 1.5 million square feet of space, 200 Galleria, which is located in
northwest Atlanta, is a 20-story Class A office building with approximately
433,000 square feet of office space. The building is connected to a seven-level,
2,551-car parking garage which serves both the 200 and 300 Galleria buildings.
11 CANAL CENTER, 99 CANAL CENTER AND TRANSPOTOMAC PLAZA 5. These three
buildings are located within two adjacent office complexes in the waterfront
office district of Alexandria, Virginia. The four-story building at 11 Canal
Center contains 70,000 square feet and the six-story building at 99 Canal Center
contains 138,000 square feet. The buildings have access to an underground
parking facility that is shared with the other buildings of the Canal Center
Complex in which 187 spaces are allocated to 11 Canal Center and 370 spaces are
allocated to 99 Canal Center. TransPotomac Plaza 5 is a ten-story, triangular
office building with 96,000 net rentable square feet. Underground parking is
allocated between the five-building, three-acre complex with TransPotmac Plaza 5
receiving an allocation of 222 spaces.
SIXTY STATE STREET. On December 31, 1997, Cornerstone purchased the second
mortgage on this 38-story, 823,000 square foot Class A office building in the
heart of Boston's CBD for $131.5 million. The building has an underground
parking facility capable of accommodating 215 vehicles. The mortgage is a cash
flow mortgage through which all of the economic benefits (subject to the first
mortgage) will inure to the Company. The $78.4 million first mortgage on the
Property has been recorded as an $89.6 million liability as a result of its
above-market interest rate. The Company controls all major decisions regarding
the Property's management and leasing.
CORPORATE 500 CENTRE. On January 28, 1998, the Company purchased Corporate
500 Centre in Deerfield, Illinois. This Property consists of four Class A office
buildings with approximately 679,000 rentable square feet. The consideration
paid for this Property was approximately $135 million in cash and approximately
$15 million in UPREIT units, priced at $18.50 per unit, for a total purchase
price of approximately $150 million.
The Company has undertaken the DIHC Acquisition and the other recent
acquisitions in order to solidify the Company's status as a leading Class A
office REIT, and to further its objective of growing its earnings and asset base
by acquiring high-profile Class A office properties in major real estate markets
nationwide. Additional benefits of these acquisitions are expected to include:
(i) accretive effects to the Company's earnings; (ii) strong expansion of the
Company's existing presence in Boston, New York and suburban Chicago; (iii)
establishment of initial market presence in Atlanta, Charlotte and Washington,
D.C.; (iv) significant improvement in overall rent roll and a leveling of the
Company's lease expiration schedule; and (v) improvement of operating margins by
almost doubling the size of the Company's asset base while reducing the
projected increases in corporate overhead on a percentage basis.
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OTHER RECENT DEVELOPMENTS
INITIAL U.S. PUBLIC OFFERING. On April 21, 1997, the Company completed the
initial public offering of 16,100,000 new shares of Common Stock at a price of
$14.00 per share. The Company's Common Stock is listed on the New York Stock
Exchange. The shares were sold by a group of underwriters led by Merrill Lynch.
The Company received net proceeds of approximately $207.8 million ($225.4
million gross proceeds less an underwriting discount of approximately $14.1
million and expenses of approximately $3.5 million).
CONVERSION OF PREFERRED STOCK. On July 25, 1997, all of the outstanding
shares of 8% Cumulative Convertible Preferred Stock and 8% Cumulative
Convertible Preferred Stock, Series A, of the Company (collectively, the "8%
Preferred Stock"), which were held by the New York State Teachers' Retirement
System ("NYSTRS") and Rodamco N.V. (together with its subsidiaries, "Rodamco"),
respectively, were converted into 6,896,550 and 4,586,210 shares of Common
Stock, respectively.
TERMS OF THE REVOLVING CREDIT FACILITY. On October 27, 1997, Bankers Trust
Company and The Chase Manhattan Bank provided the Company with the $350 million
Revolving Credit Facility for acquisitions and general working capital purposes
as well as the issuance of letters of credit. The Revolving Credit Facility was
amended and restated on January 20, 1998. The interest rate on the line of
credit depends on the Company's leverage ratio at the time of borrowing and will
be at a spread of 1.10% to 1.40% over LIBOR. The letters of credit will be
priced at the applicable Eurodollar credit spread. The line of credit expires on
October 27, 2000.
AMENDMENTS OF RESTATED ARTICLES OF INCORPORATION. On October 27, 1997, the
stockholders of the Company approved the adoption of three amendments to the
Company's Restated Articles of Incorporation (the "Articles of Incorporation").
One amendment (the "REIT Amendment") added new provisions to the Articles of
Incorporation that are designed to cause the Company to become a "domestically
controlled REIT" under the Code. Status as a domestically controlled REIT may be
beneficial to certain stockholders who are nonresident alien individuals,
foreign corporations, foreign partnerships, foreign trust or foreign estates
("Non-U.S. Stockholders") and who hold or have held substantial positions in the
Common Stock. The REIT Amendment provides that shares of the Company's capital
stock may not be transferred by any U.S. Person (as defined) to any person if
such transfer would cause a Non-U.S. Person (as defined) to become the direct or
indirect owner of more than 3% of the value of the outstanding shares of any
class of capital stock of the Company. The other two amendments amended the
Articles of Incorporation to (i) increase the number of authorized shares of
Common Stock from 100,000,000 to 250,000,000 and (ii) include a provision
clarifying the mechanics of settling trades on the New York Stock Exchange.
TOWER 56. On January 5, 1998, the Company purchased the participation
rights in the cash flow and residual value of Tower 56 from the former
participants for 307,692 shares of Common Stock. All cash flow and the residual
value of Tower 56 will now inure to the Company.
FORMATION OF UPREIT. On January 20, 1998, the Company formed an umbrella
limited partnership or UPREIT. As part of the UPREIT formation, substantially
all of the Company's interests in the Properties are held by or through the
Operating Partnership, a Delaware limited partnership, of which the Company is
the sole general partner. The Company currently owns directly or indirectly
99.17% of the outstanding units of partnership interest ("UPREIT units") in the
Operating Partnership (excluding certain preferred units owned by the Company).
The purpose of forming an UPREIT is to create an acquisition vehicle attractive
to sellers whose sale of properties to the Company in exchange for UPREIT units
may be characterized as a tax-deferred capital contribution rather than a
taxable sale.
SECONDARY PUBLIC OFFERING. On February 6, 1998, the Company completed a
secondary public offering of 14,375,000 shares of Common Stock at $18.25 per
share. The shares were placed in the United States through a syndicate of seven
investment banks led by Merrill Lynch & Co. Net proceeds to the Company
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were approximately $247.9 million ($262,343,750 gross proceeds less an
underwriting discount of $13,728,125 and expenses of approximately $750,000).
The net proceeds were used to repay the Company's acquisition line of credit and
for working capital purposes.
REGULATORY COMPLIANCE
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances released on, above, under
or in such property. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. The costs of such removal or remediation could be
substantial. Additionally, the presence of such substances, or the failure to
properly remediate such substances, may adversely affect the owner's ability to
borrow using such real estate as collateral. All of the Properties had
environmental site assessments conducted by independent environmental
consultants and have been inspected for hazardous materials as part of the
Company's acquisition inspections. None of the assessments have revealed any
environmental conditions requiring material expenditures for remediation. No
assurance can be given that these assessments or the Company's inspections have
revealed all environmental liabilities and problems relating to its Properties.
The Company believes that it is in compliance in all material respects with
all federal, state and local laws regarding hazardous or toxic substances. To
date, compliance with federal, state and local environmental protection
regulations has not had a material effect upon the Company. However, there can
be no assurance that costs of investigating and remediating environmental
matters with respect to properties currently or previously owned by the Company
or properties that the Company may acquire in the future, or other expenditures
or liabilities (including claims by private parties) resulting from hazardous
substances present in, on, under or above such properties or resulting from
circumstances or other actions or claims relating to environmental matters, will
not have a material adverse effect on the Company and its ability to make
distributions to stockholders.
OTHER REGULATIONS
The Properties are, and properties that the Company may acquire in the
future will be, subject to various other federal, state and local regulatory
requirements such as local building codes and other similar regulations. Failure
to comply with these requirements could result in the imposition of fines by
governmental authorities or awards of damages to private litigants. The Company
believes that the Properties are currently in substantial compliance with all
applicable regulatory requirements. Although no material expenditures are
contemplated at this time in order to comply with any such laws or regulations,
there can be no assurance that these requirements will not be changed or that
new requirements will not be imposed that would require significant
unanticipated expenditures by the Company, which could have an adverse effect on
the Company and its ability to make distributions to stockholders. Similarly,
changes in laws increasing the potential liability for environmental conditions
existing on the Properties may result in significant unanticipated expenditures,
which could adversely affect the Company and its ability to make distributions
to stockholders.
YEAR 2000 COMPLIANCE
In the ordinary course of business, the Company is in the process of
acquiring new accounting and property management software that will eliminate
year 2000 software concerns at the corporate level. The new software is expected
to be installed by the fourth quarter of 1998. Management is in the process of
completing a survey with all of its property managers to make sure there are no
year 2000 issues at any of the property management firms that manage its
properties. Currently, Cornerstone is not aware of any
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year 2000 issues that would have a material effect on the financial position,
results of operations and liquidity of its business.
TAX STATUS
ADVERSE CONSEQUENCES OF THE FAILURE TO MAINTAIN QUALIFICATION AS A REIT
The Company believes that it has operated so as to qualify as a REIT under
Section 856(c) of the Internal Revenue Code of 1986, as amended (the "Code"),
commencing with its taxable year ended December 31, 1983. However, no assurance
can be given that the Company will be able to continue to operate in a manner
enabling it to remain so qualified. Qualification as a REIT involves the
application of highly technical and complex Code provisions that have only a
limited number of judicial and administrative interpretations, and the
determination of various factual matters and circumstances not entirely within
the Company's control may have an impact on its ability to maintain its
qualification as a REIT. For example, in order to qualify as a REIT, at least
95% of the Company's gross income in any year must be derived from qualifying
sources, and the Company must make distributions to stockholders aggregating
annually at least 95% of its REIT taxable income (excluding net capital gains).
In addition, no assurance can be given that new legislation, regulations issued
by the United States Treasury Department (the "Treasury Regulations") under the
Code, administrative interpretations or court decisions will not significantly
change the tax laws with respect to the Company's qualification as a REIT or the
federal income tax consequences of such qualification.
As a condition to maintaining status as a REIT, the Code and the Treasury
Regulations promulgated thereunder contain a requirement (the "Five or Fewer
Requirement") that, during the second half of each taxable year, not more than
50% in value of the REIT's outstanding stock be owned, directly or indirectly,
by five or fewer individuals (defined in the Code to include certain specified
entities). For this purpose, stock that is held by most entities, such as a
corporation, partnership, limited liability company or pension plan, is treated
as held proportionately by their shareholders, partners, members or
beneficiaries, as the case may be, rather than by such entities. In addition,
the Company's Articles of Incorporation contain restrictions on share ownership
that are designed to prevent violation of the Five or Fewer Requirement.
Therefore, the Company believes that it is unlikely that five or fewer
"individuals" would be considered to own more than 50% of the outstanding
shares.
If the Company fails to maintain its qualification as a REIT, or is found
not to have qualified as a REIT for any prior year, the Company would not be
entitled to deduct dividends paid to its stockholders and would be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, the Company would also be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. This treatment would reduce amounts
available for investment or distribution to stockholders because of the
additional tax liability to the Company for the year or years involved. In
addition, the Company would no longer be required by the Code to make any
distributions. As a result, disqualification of the Company as a REIT could have
a material adverse effect on the Company and its ability to make distributions
to stockholders. To the extent that distributions to stockholders have been made
in anticipation of the Company's qualifying as a REIT, the Company might be
required to borrow funds or to liquidate certain of its investments to pay the
applicable tax.
EFFECT OF DISTRIBUTION REQUIREMENTS
To maintain its status as a REIT, the Company is required each year to
distribute to its stockholders at least 95% of its REIT taxable income
(excluding net capital gains). In addition, the Company is subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by it with respect to any calendar year are less than the sum of 85% of its
ordinary income and 95% of its capital gain net income for the calendar year
plus any amount of such income not distributed in prior years. Although the
8
<PAGE>
Company anticipates that cash flow from operations will be sufficient to enable
it to pay its operating expenses and meet the distribution requirements
discussed above, there can be no assurance that this will be the case, and it
may be necessary for the Company to incur borrowings or otherwise obtain funds
to satisfy the distribution requirements associated with maintaining its
qualification as a REIT. In addition, differences in timing between the receipt
of income and the payment of expenses in arriving at the taxable income of the
Company could require the Company to incur borrowings or otherwise obtain funds
to meet the distribution requirements that are necessary to maintain its
qualification as a REIT. There can be no assurance that the Company will be able
to borrow funds or otherwise obtain funds if and when necessary to satisfy such
requirements.
THE TAXPAYER RELIEF ACT OF 1997
The Taxpayer Relief Act of 1997 (the "1997 Tax Act") contains significant
changes to (a) the requirements for qualification as a REIT, (b) the taxation of
capital gains of individuals, trusts and estates and (c) the taxation of REITs
and their stockholders. Such changes are effective for the Company's taxable
years beginning on or after January 1, 1998. The 1997 Tax Act contains a number
of new rules and technical provisions that reduce the risk that a REIT will
inadvertently fail to qualify as a REIT. The Company does not believe that the
changes with respect to the 1997 Tax Act will significantly or adversely affect
its ability to continue to operate as a REIT.
COMPETITION
The leasing of real estate is highly competitive. The Company's Properties
compete for tenants with similar properties located in its markets primarily on
the basis of location, rent charged, services provided and the design and
condition of the improvements. The Company also experiences competition when
attempting to acquire equity interests in desirable real estate, including
competition from domestic and foreign financial institutions, other REIT's, life
insurance companies, pension trusts, trust funds, partnerships and individual
investors.
See "Item 2. Properties" for market information on each of the markets in
which the Company owns Properties.
EMPLOYEES
The Company currently has 27 employees.
9
<PAGE>
ITEM 2. PROPERTIES
TABLE OF PROPERTIES
The following table summarizes certain information about the Properties
owned as of December 31, 1997.
<TABLE>
<CAPTION>
REMAINING
COMPANY'S TOTAL NUMBER AVERAGE
PROPERTY NAME YEAR PERCENT RENTABLE OCCUPANCY OF LEASE TERM
AND LOCATION CONSTRUCTED INTEREST SQUARE FEET RATE LEASES (IN YEARS)
- ------------------ ------------- --------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
One Norwest Center 1983 100% 1,188,000 99% 46 8.3
Denver, Colorado
Norwest Center(1) 1988 50% 1,118,000 98% 32 11.5
Minneapolis,
Minnesota
Washington Mutual 1988 50% 1,155,000 97% 95 4.7
Tower(2)(3)
Seattle,
Washington
125 Summer Street 1989 100% 464,000 99% 26 3.0
Boston,
Massachussetts
Tower 56(4) 1983 100% 162,000 98% 42 3.1
New York, New
York
One Lincoln Centre 1986 100% 297,000 96% 42 2.2
Oakbrook
Terrace, IL
The Frick 1902 100% 341,000 89% 72 3.9
Building(5)
Pittsburgh, PA
527 Madison 1986 100% 216,000 100% 18 5.4
Avenue(6)
New York, NY
191 Peachtree 1991 80% 1,221,000 95% 37 8.2
Street(7)(8)
Atlanta, Georgia
Market 1990 59% 689,000 95% 46 7.2
Square(7)(9)
Washington, D.C.
500 Boylston 1988 91.5% 715,000 100% 12 6.3
Street(7)(10)
Boston,
Massachussetts
222 Berkeley 1991 91.5% 531,000 100% 28 6.3
Street(7)(10)
Boston,
Massachussetts
Charlotte Plaza(7) 1982 100% 613,000 94% 43 6.8
Charlotte, North
Carolina
200 Galleria(7) 1985 100% 433,000 91% 56 3.6
Atlanta, Georgia
11 Canal Center(7) 1986 100% 70,000 84% 6 8.5
Alexandria,
Virginia
<CAPTION>
PROPERTY NAME LARGEST
AND LOCATION TENANT
- ------------------ ------------------------------
<S> <C>
One Norwest Center Norwest Bank Denver N.A.
Denver, Colorado Newmont Gold Company Teletech,
Inc.
Norwest Center(1) Norwest Corporation
Minneapolis, Faegre & Benson
Minnesota KPMG Peat Marwick
Washington Mutual Perkins Coie
Tower(2)(3) Washington Mutual
Seattle, Karr Tuttle Campbell
Washington
125 Summer Street Deloitte & Touche
Boston, BTM Capital Corp.
Massachussetts Burns & Levinson
Tower 56(4) Cornerstone Properties
New York, New ICC Associates, L.P.
York United Bank of Kuwait
One Lincoln Centre Superior Bank FSB
Oakbrook Microsoft Corporation
Terrace, IL Arthur Andersen LLP
The Frick Meyer, Darragh, Buckler,
Building(5) Bebenek & Eck
Pittsburgh, PA Sable, Makaroff & Gudsky
527 Madison The Sumitomo Trust
Avenue(6) & Banking Co., Ltd.
New York, NY W.P. Stewart Co., Inc.
Hill Samuel New York, Inc.
191 Peachtree Wachovia Bank
Street(7)(8) King & Spalding
Atlanta, Georgia Powell, Goldstein,
Frazer & Murphy
Market Fulbright & Jaworski
Square(7)(9) Edison Electric Institute
Washington, D.C. Reid & Preist
Sherman & Sterling
500 Boylston Massachussetts Financial
Street(7)(10) Services
Boston, The New England Life
Massachussetts Towers Perrin Forster &
Crosby, Inc.
222 Berkeley Houghton Mifflin
Street(7)(10) Saga International Holidays
Boston, Oracle Corporation
Massachussetts
Charlotte Plaza(7) First Union
Charlotte, North Parker Poe
Carolina Adams & Bernstein
200 Galleria(7) Liberty Mutual Group
Atlanta, Georgia
11 Canal Center(7) Robbins Gioa
Alexandria, Veda Inc.
Virginia
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
REMAINING
COMPANY'S TOTAL NUMBER AVERAGE
PROPERTY NAME YEAR PERCENT RENTABLE OCCUPANCY OF LEASE TERM
AND LOCATION CONSTRUCTED INTEREST SQUARE FEET RATE LEASES (IN YEARS)
- ------------------ ------------- --------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
99 Canal Center(7) 1986 100% 138,000 99% 18 3.6
Alexandria,
Virginia
TransPotomac Plaza 1983 100% 96,000 99% 11 4.9
5(7)
Alexandria,
Virginia
Sixty State 1979 100% 823,000 98% 42 8.9
Street(11)
Boston,
Massachusetts
--- ------------- --- --- ---
--- ------------- --- --- ---
83% 10,270,000 97% 672 6.9
--- ------------- --- --- ---
--- ------------- --- --- ---
<CAPTION>
PROPERTY NAME LARGEST
AND LOCATION TENANT
- ------------------ ------------------------------
<S> <C>
99 Canal Center(7) Lowe, Price, LeBlanc & Becker
Alexandria, Howard, Needles, Tannen &
Virginia Bergendoff
National District Attorney's
Association
TransPotomac Plaza Cities In Schools
5(7) The Onyx Group
Alexandria, Larson & Taylor
Virginia
Sixty State Hale & Dorr
Street(11) The Pioneer Group, Inc.
Boston, ITT/Sheraton
Massachusetts
</TABLE>
- ------------------------
Table of Properties Footnotes
(1) While the Company's stated interest in the partnership which owns Norwest
Center is 50%, its economic interest in the Property is significantly larger
because of priority distributions it receives on its invested capital base.
For the twelve months ended December 31, 1997, the Company's share of
earnings and cash distributions from the partnership which owns Norwest
Center was 79.3%.
(2) While the Company's stated interest in the partnership which owns Washington
Mutual Tower is 50%, its economic interest in the Property is significantly
larger because of priority distributions it receives on its invested capital
base. For the twelve months ended December 31, 1997, the Company received
100% of the cash distributions from the partnership which owns Washington
Mutual Tower.
(3) Includes the Galland and Seneca Buildings.
(4) The Company's headquarters are located at Tower 56.
(5) The Property was substantially renovated in 1988.
(6) The Property was acquired by the Company in February 1997.
(7) Property acquired in the DIHC Acquisition.
(8) While the Company's stated interest in the partnership which owns 191
Peachtree Street is 80%, its economic interest is significantly larger since
it has acquired the first mortgage note on the Property, in the amount of
$145 million which earns interest at 9.375%, and will receive a priority
distribution on its acquired capital base. In addition, in 1996 and 1997,
the partner in the transaction, CH Associates, Ltd., received an annual
incentive distribution of $250,000 which, the Company expects, it will
continue to receive under the partnership agreement through February 28,
2000, with the Company receiving the remainder of the cash flow of the
Property.
(9) At December 31, 1997, the Company owned the two loans on Market Square. In
January 1998, the Company acquired partnership interests with a stated
interest of approximately 59% in the partnerships which own Market Square
with the option to purchase an additional 1%. The Company's economic
interest is significantly larger since it has acquired the first mortgage
note on the Property in the amount of $181 million which earns interest at
9.75% and will receive a priority distribution on its acquired capital base.
During 1996, the Company received 100% of the cash flow from the Property.
(10) Distributions of cash flow and sales and refinancing proceeds are shared in
proportion to the Company's 91.5% partnership interest and Hines Interest
Limited Partnership and/or its affiliates' ("Hines") 8.5% partnership
interest.
(11) The Company acquired the second mortgage on the Property on December 31,
1997. Since it is currently projected that all the economic benefits
(subject to the first mortgage) from the Property inure to the Company, it
will be accounted for as an equity investment.
11
<PAGE>
TENANTS
The Company's tenants include local, regional, national and international
companies engaged in a wide variety of businesses. The following table sets
forth, as of December 31, 1997, information concerning the ten largest tenants
(ranked by Full Service Straight-Line Rent as of that date) occupying the
Properties. "Full Service Straight-Line Rent" is Straight-Line Rent plus
Recoveries. "Straight-Line Rent" means the average of all Actual Rents required
to be paid through the term of the lease calculated in accordance with GAAP.
"Actual Rent" is actual stated fixed rent received on a net or gross basis.
"Recoveries" are the actual recovery of operating expenses in net lease
buildings or the actual recovery of operating expense escalations in gross lease
buildings. Full Service Straight-Line Rent does not reflect any increases or
decreases in monthly rental rates or any lease expirations that are scheduled to
occur or that may occur after December 31, 1997 or the cost of any leasing
commissions or tenant improvements.
<TABLE>
<CAPTION>
FULL SERVICE
STRAIGHT-LINE RENT
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
STRAIGHT-LINE PERCENT SCHEDULED LEASE
TENANT RENT RECOVERIES AMOUNT OF TOTAL EXPIRATION DATE
- -------------------------------------- -------------- ------------- -------------- --------------- -----------------------
Norwest Corporation (1)(3)............ $ 20,512,000 $ 10,717,000 $ 31,229,000 11% Jan-99 14,000
Aug-01 7,000
Jul-03 143,000
Jul-13 402,000
Aug-18 451,000
------------
1,017,000
Massachusetts Financial Services(1)... 9,853,000 4,482,000 14,335,000 5% Feb-03 359,000
Wachovia Bank(1)...................... 8,921,000 3,396,000 12,317,000 4% Dec-08 382,000
Hale & Dorr(1)........................ 7,345,000 3,596,000 10,941,000 4% Jun-13 273,000
King & Spalding(1).................... 8,031,000 2,605,000 10,636,000 4% Mar-06 306,000
The New England Life(1)............... 5,102,000 2,688,000 7,790,000 3% Sep-08 213,000
Powell Goldstein Frazer & Murphy(1)... 5,365,000 1,808,000 7,173,000 2% Jan-06 199,000
Fullbright & Jaworski(2).............. 4,371,000 1,693,000 6,064,000 2% Jun-10 123,000
First Union(2)(4)..................... 5,566,000 153,372 5,719,372 2% Mar-99 50,000
Aug-00 23,000
Mar-01 23,000
Aug-01 46,000
Sep-02 22,000
Aug-08 46,000
Mar-09 23,000
Mar-10 47,000
Mar-11 48,000
Apr-14 4,000
------------
332,000
Perkins Coie (2)...................... 5,129,000 424,000 5,553,000 2% Dec-98 2,000
Jul-98 7,000
Jul-04 199,000
------------
208,000
-------------- ------------- --------------
$ 80,195,000 $ 31,562,372 $ 111,757,372 38% 3,412,000
--
--
-------------- ------------- --------------
-------------- ------------- --------------
Total Portfolio................... $ 226,558,000 $ 68,548,000 $ 295,106,000
-------------- ------------- --------------
-------------- ------------- --------------
</TABLE>
- ------------------------
(1) Net Lease.
(2) Gross Lease.
(3) Norwest Corporation includes Norwest Corporation and Norwest Bank Denver
N.A.
(4) The 332,000 square feet of space includes 115,000 square feet currently
leased to another tenant, which will be leased by First Union commencing
September 1, 1998.
12
<PAGE>
NET RENT AND NET EFFECTIVE RENT
The following tables show the average annual Base Rent and the average
annual Net Effective Rent (each as defined below) per square foot occupied for
each of the Properties for the periods presented during which such Property was
owned by the Company. "Base Rent" as used herein means Actual Rent less
Recoveries. "Net Effective Rent" as used herein means (i) Actual Rent determined
for each year on a straight-line basis through the term of the lease, less (ii)
the amount of operating expenses net of Recoveries and the amortization of
deferred leasing costs (tenant improvements, leasing commissions, takeover
obligations and other tenant inducements).
AVERAGE ANNUAL BASE RENT (PER SQUARE FOOT OCCUPIED)
<TABLE>
<CAPTION>
TOTAL
BLDG.
SQ. FT. 1997 1996 1995 1994 1993 1992
---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
One Norwest Center................................... 1,188,000 $ 12.46 $ 12.08 $ 11.78 $ 11.61 $ 12.05 $ 12.35
Norwest Center....................................... 1,118,000 $ 18.29 $ 17.94 $ 17.82 $ 17.25 $ 17.56 $ 16.02
Washington Mutual Tower.............................. 1,155,000 $ 15.77 $ 15.98 $ 16.17 $ 15.27 $ 15.34 $ 15.26
125 Summer Street.................................... 464,000 $ 21.27 $ 23.24 $ 22.48
Tower 56............................................. 162,000 $ 22.76 $ 20.45
One Lincoln Centre................................... 297,000 $ 19.60 $ 18.56
Frick................................................ 341,000 $ 10.50 $ 11.24
527 Madison.......................................... 216,000 $ 36.55 $ 35.47
191 Peachtree Street................................. 1,221,000 $ 21.07
500 Boylston Street.................................. 715,000 $ 25.89
222 Berkeley Street.................................. 531,000 $ 16.68
Charlotte Plaza...................................... 613,000 $ 9.35
200 Galleria......................................... 433,000 $ 12.92
11 Canal Center...................................... 70,000 $ 14.11
99 Canal Center...................................... 138,000 $ 14.49
TransPotomac Plaza 5................................. 96,000 $ 12.55
---------- --------- --------- --------- --------- --------- ---------
Wtd Avg Occ--Portfolio............................... 8,758,000 $ 17.46 $ 16.99 $ 16.06 $ 14.65 $ 14.93 $ 14.51
---------- --------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- --------- ---------
</TABLE>
AVERAGE ANNUAL NET EFFECTIVE RENTS (PER SQUARE FOOT OCCUPIED)
<TABLE>
<CAPTION>
TOTAL
BLDG.
SQ. FT. 1997 1996 1995 1994 1993 1992
---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
One Norwest Center................................... 1,188,000 $ 11.66 $ 10.80 $ 10.56 $ 10.25 $ 10.59 $ 10.92
Norwest Center....................................... 1,118,000 $ 17.23 $ 17.43 $ 17.31 $ 17.00 $ 17.27 $ 17.48
Washington Mutual Tower.............................. 1,155,000 $ 12.02 $ 11.80 $ 11.83 $ 11.03 $ 10.84 $ 10.43
125 Summer Street.................................... 464,000 $ 20.00 $ 22.27 $ 23.33
Tower 56............................................. 162,000 $ 21.56 $ 21.17
One Lincoln Centre................................... 297,000 $ 19.76 $ 19.70
Frick................................................ 341,000 $ 10.47 $ 11.69
527 Madison.......................................... 216,000 $ 36.89 $ 30.99
191 Peachtree Street................................. 1,221,000 $ 24.26
500 Boylston Street.................................. 715,000 $ 26.08
222 Berkeley Street.................................. 531,000 $ 18.08
Charlotte Plaza...................................... 613,000 $ 9.76
200 Galleria......................................... 433,000 $ 13.52
11 Canal Center...................................... 70,000 $ 14.72
99 Canal Center...................................... 138,000 $ 15.00
TransPotomac Plaza 5................................. 96,000 $ 14.29
---------- --------- --------- --------- --------- --------- ---------
Wtd Avg Occ--Portfolio............................... 8,758,000 $ 17.28 $ 15.43 $ 14.37 $ 12.69 $ 12.83 $ 12.88
---------- --------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- --------- ---------
</TABLE>
13
<PAGE>
LEASE EXPIRATIONS
The following table sets forth certain categories of information relating to
lease expirations for all of Properties owned as of December 31, 1997.
<TABLE>
<CAPTION>
PROPERTY 1998 1999 2000 2001 2002 2003
- ----------------------------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
One Norwest Center(1)........ Square feet expiring(3) 49,000 sf 69,000 sf 144,000 55,000 sf 110,000 sf 146,000 sf
Straight-Line rent(4) $363,000 $639,000 sf $592,000 $1,042,000 $2,115,000
Straight-Line rent per sq. ft. $7.41 $9.26 $1,212,000 $10.76 $9.47 $14.49
Recoveries(5) $292,000 $411,000 $8.42 $330,000 $658,000 $890,000
Full service St-Line rent(6) $655,000 $1,050,000 $854,000 $922,000 $1,700,000 $3,005,000
Full service St-Line rent per $13.37 $15.22 $2,066,000 $16.76 $15.45 $20.58
sq. ft. 2.98% 4.78% $14.35 4.20% 7.75% 13.69%
% Full service St-Line rent $22.00 9.41%
Asking market rent per sq. 7 6 6 11 2
ft.(7) 8
No. of tenant leases
expiring(8)
Norwest Center(1)............ Square feet expiring 61,000 sf 50,000 sf 104,000 2,000 sf 53,000 sf 179,000 sf
Straight-Line rent $573,000 $775,000 sf $35,000 $455,000 $2,726,000
Straight-Line rent per sq. ft. $9.39 $15.50 $1,655,000 $17.50 $8.58 $15.23
Recoveries $866,000 $697,000 $15.91 $32,000 $776,000 $2,733,000
Full service St-Line rent $1,439,000 $1,472,000 $1,579,000 $67,000 $1,231,000 $5,459,000
Full service St-Line rent per $23.59 $29.44 $3,234,000 $33.50 $23.23 $30.50
sq. ft. 3.71% 3.80% $31.10 0.17% 3.17% 14.08%
% Full service St-Line rent $35.00 8.34%
Asking market rent per sq. ft. 14 4 1 3 1
No. of tenant leases expiring 4
Washington Mutual Tower(2)... Square feet expiring 140,000 191,000 40,000 sf 52,000 sf 106,000 sf 172,000 sf
Straight-Line rent sf sf $730,000 $1,097,000 $2,322,000 $3,592,000
Straight-Line rent per sq. ft. $2,722,000 $3,617,000 $18.25 $21.10 $21.91 $20.88
Recoveries $19.44 $18.94 $28,000 $36,000 $59,000 $211,000
Full service St-Line rent $192,000 $174,000 $758,000 $1,133,000 $2,381,000 $3,803,000
Full service St-Line rent per $2,914,000 $3,791,000 $18.95 $21.79 $22.46 $22.11
sq. ft. $20.81 $19.85 3.04% 4.55% 9.56% 15.27%
% Full service St-Line rent 11.70% 15.22%
Asking market rent per sq. ft. $31.00 9 11 7 5
No. of tenant leases expiring 33 24
125 Summer Street(2)......... Square feet expiring 9,000 sf 171,000 118,000 9,000 sf 125,000 sf 16,000 sf
Straight-Line rent $219,000 sf sf $139,000 $3,310,000 $318,000
Straight-Line rent per sq. ft. $24.33 $5,847,000 $4,001,000 $15.44 $26.48 $19.88
Recoveries $42,000 $34.19 $33.91 $132,000 $145,000 $154,000
Full service St-Line rent $261,000 $1,243,000 $522,000 $271,000 $3,455,000 $472,000
Full service St-Line rent per $29.00 $7,090,000 $4,523,000 $30.11 $27.64 $29.50
sq. ft. 1.59% $41.46 $38.33 1.66% 21.11% 2.88%
% Full service St-Line rent $38.00 43.32% 27.64%
Asking market rent per sq. ft. 6 2 4 2
No. of tenant leases expiring 5 6
Tower 56(2).................. Square feet expiring 15,000 sf 33,000 sf 17,000 sf 42,000 sf 28,000 sf 5,000 sf
Straight-Line rent $568,000 $1,375,000 $682,000 $1,776,000 $1,338,000 $194,000
Straight-Line rent per sq. ft. $37.87 $41.67 $40.12 $42.29 $47.79 $38.80
Recoveries $13,000 $20,000 $1,000 $16,000 $12,000 $6,000
Full service St-Line rent $581,000 $1,395,000 $683,000 $1,792,000 $1,350,000 $200,000
Full service St-Line rent per $38.73 $42.27 $40.18 $42.67 $48.21 $40.00
sq. ft. 9.00% 21.60% 10.57% 27.74% 20.90% 3.10%
% Full service St-Line rent $54.00
Asking market rent per sq. ft. 5 8 7 10 8 2
No. of tenant leases expiring
One Lincoln Centre(1)........ Square feet expiring 64,000 sf 41,000 sf 93,000 sf 3,000 sf 79,000 sf 1,000 sf
Straight-Line rent $1,248,000 $660,000 $1,932,000 $54,000 $1,707,000 $16,000
Straight-Line rent per sq. ft. $19.50 $16.10 $20.77 $18.00 $21.61 $16.00
Recoveries $461,000 $375,000 $721,000 $25,000 $722,000 $11,000
Full service St-Line rent $1,709,000 $1,035,000 $2,653,000 $79,000 $2,429,000 $27,000
Full service St-Line rent per $26.70 $25.24 $28.53 $26.33 $30.75 $27.00
sq. ft. 21.55% 13.05% 33.45% 1.00% 30.62% 0.34%
% Full service St-Line rent $30.00
Asking market rent per sq. ft. 14 7 13 1 6 1
No. of tenant leases expiring
Frick Building(2)............ Square feet expiring 18,000 sf 39,000 sf 74,000 sf 42,000 sf 35,000 sf 55,000 sf
Straight-Line rent $377,000 $798,000 $1,502,000 $801,000 $641,000 $1,070,000
Straight-Line rent per sq. ft. $20.94 $20.46 $20.30 $19.07 $18.31 $19.45
Recoveries $26,000 $18,000 $23,000 $-- $1,000 $19,000
Full service St-Line rent $403,000 $816,000 $1,525,000 $801,000 $642,000 $1,089,000
Full service St-Line rent per $22.39 $20.92 $20.61 $19.07 $18.34 $19.80
sq. ft. 6.54% 13.24% 24.75% 13.00% 10.42% 17.67%
% Full service St-Line rent $22.00
Asking market rent per sq. ft. 14 16 19 6 10 3
No. of tenant leases expiring
<CAPTION>
2008
AND
PROPERTY 2004 2005 2006 2007 BEYOND TOTAL
- ----------------------------- --------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
One Norwest Center(1)........ 118,000 76,000 sf 406,000 sf 1,173,000 sf
sf $1,127,000 $6,421,000 $14,849,000
$1,338,000 $14.83 $15.82 $12.66
$11.34 $463,000 $2,495,000 $7,100,000
$707,000 $1,590,000 $8,916,000 $21,949,000
$2,045,000 $20.92 $21.96 $18.71
$17.33 7.24% 40.62% 100.00%
9.32%
2 2 46
2
Norwest Center(1)............ 119,000 527,000 sf 1,095,000 sf
sf $13,738,000 $22,035,000
$2,078,000 $26.07 $20.12
$17.46 $8,271,000 $16,742,000
$1,788,000 $22,009,000 $38,777,000
$3,866,000 $41.76 $35.41
$32.49 56.76% 100.00%
9.97%
2 32
3
Washington Mutual Tower(2)... 270,000 13,000 sf 138,000 sf 1,122,000 sf
sf $242,000 $2,653,000 $23,446,000
$6,471,000 $18.62 $19.22 $20.90
$23.97 $5,000 $272,000 $1,460,000
$483,000 $247,000 $2,925,000 $24,906,000
$6,954,000 $19.00 $21.20 $22.20
$25.76 0.99% 11.74% 100.00%
27.92%
1 1 95
4
125 Summer Street(2)......... 10,000 sf 458,000 sf
$275,000 $14,109,000
$27.50 $30.81
$19,000 $2,257,000
$294,000 $16,366,000
$29.40 $35.73
1.80% 100.00%
1 26
Tower 56(2).................. 10,000 sf 150,000 sf
$451,000 $6,384,000
$45.10 $42.56
$7,000 $75,000
$458,000 $6,459,000
$45.80 $43.06
7.09% 100.00%
2 42
One Lincoln Centre(1)........ 281,000 sf
$5,617,000
$19.99
$2,315,000
$7,932,000
$28.23
100.00%
42
Frick Building(2)............ 11,000 sf 24,000 sf 298,000 sf
$195,000 $664,000 $6,048,000
$17.73 $27.67 $20.30
$-- $27,000 $114,000
$195,000 $691,000 $6,162,000
$17.73 $28.79 $20.68
3.16% 11.21% 100.00%
1 3 72
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PROPERTY 1998 1999 2000 2001 2002 2003
- ----------------------------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
No. 527 Madison(2)........... Square feet expiring 22,000 sf 2,000 sf 10,000 sf 78,000 sf 22,000 sf
Straight-Line rent $1,146,000 $108,000 $380,000 $4,511,000 $821,000
Straight-Line rent per sq. ft. $52.09 $54.00 $38.00 $57.83 $37.32
Recoveries $146,000 $12,000 $11,000 $553,000 $14,000
Full service St-Line rent $1,292,000 $120,000 $391,000 $5,064,000 $835,000
Full service St-Line rent per $58.73 $60.00 $39.10 $64.92 $37.95
sq. ft. 10.85% 1.01% 3.28% 42.52% 7.01%
% Full service St-Line rent $53.00
Asking market rent per sq. ft. 4 1 2 1 2
No. of tenant leases expiring
191 Peachtree Street(1)...... Square feet expiring 20,000 sf 2,000 sf 10,000 sf 139,000 45,000 sf 3,000 sf
Straight-Line rent $198,000 $23,000 $127,000 sf $682,000 $49,000
Straight-Line rent per sq. ft. $9.90 $11.50 $12.70 $2,672,000 $15.16 $16.33
Recoveries $130,000 $10,000 $87,000 $19.22 $364,000 $13,000
Full service St-Line rent $328,000 $33,000 $214,000 $1,218,000 $1,046,000 $62,000
Full service St-Line rent per $16.40 $16.50 $21.40 $3,890,000 $23.24 $20.67
sq. ft. 0.89% 0.09% 0.58% $27.99 2.82% 0.17%
% Full service St-Line rent $26.00 10.51%
Asking market rent per sq. ft. 6 1 5 7 1
No. of tenant leases expiring 6
Market Square(2)............. Square feet expiring 63,000 sf 13,000 sf 48,000 sf 91,000 sf 10,000 sf 11,000 sf
Straight-Line rent $2,084,000 $379,000 $1,414,000 $3,541,000 $318,000 $445,000
Straight-Line rent per sq. ft. $33.08 $29.15 $29.46 $38.91 $31.80 $40.45
Recoveries $31,000 $105,000 $339,000 $607,000 $12,000 $99,000
Full service St-Line rent $2,115,000 $484,000 $1,753,000 $4,148,000 $330,000 $544,000
Full service St-Line rent per $33.57 $37.23 $36.52 $45.58 $33.00 $49.45
sq. ft. 7.51% 1.72% 6.22% 14.72% 1.17% 1.93%
% Full service St-Line rent $44.00
Asking market rent per sq. ft. 6 2 7 8 4 2
No. of tenant leases expiring
500 Boylston(1).............. Square feet expiring 73,000 sf 16,000 sf 400,000 sf
Straight-Line rent $2,438,000 $300,000 $10,682,000
Straight-Line rent per sq. ft. $33.40 $18.75 $26.71
Recoveries $896,000 $83,000 $4,849,000
Full service St-Line rent $3,334,000 $383,000 $15,531,000
Full service St-Line rent per $45.67 $23.94 $38.83
sq. ft. 12.22% 1.40% 56.92%
% Full service St-Line rent $41.00
Asking market rent per sq. ft. 4 3 3
No. of tenant leases expiring
222 Berkeley Street(1)....... Square feet expiring 25,000 sf 50,000 sf 70,000 sf 114,000 sf
Straight-Line rent $458,000 $839,000 $1,980,000 $2,190,000
Straight-Line rent per sq. ft. $18.32 $16.78 $28.29 $19.21
Recoveries $279,000 $627,000 $773,000 $1,392,000
Full service St-Line rent $737,000 $1,466,000 $2,753,000 $3,582,000
Full service St-Line rent per $29.48 $29.32 $39.33 $31.42
sq. ft. 4.60% 9.15% 17.18% 22.36%
% Full service St-Line rent $41.00
Asking market rent per sq. ft. 5 5 6 7
No. of tenant leases expiring
Charlotte Plaza(2)........... Square feet expiring 30,000 sf 60,000 sf 26,000 sf 69,000 sf 50,000 sf 17,000 sf
Straight-Line rent $495,000 $1,188,000 $421,000 $1,176,000 $878,000 $310,000
Straight-Line rent per sq. ft. $16.50 $19.80 $16.19 $17.04 $17.56 $18.24
Recoveries $15,000 $10,000 $6,000 $12,000 $19,000 $15,000
Full service St-Line rent $510,000 $1,198,000 $427,000 $1,188,000 $897,000 $325,000
Full service St-Line rent per $17.00 $19.97 $16.42 $17.22 $17.94 $19.12
sq. ft. 4.86% 11.41% 4.07% 11.31% 8.54% 3.09%
% Full service St-Line rent $22.00
Asking market rent per sq. ft. 11 5 2 1 10 2
No. of tenant leases expiring
200 Galleria(2).............. Square feet expiring 41,000 sf 24,000 sf 71,000 sf 61,000 sf 170,000 sf 11,000 sf
Straight-Line rent $801,000 $488,000 $1,485,000 $1,279,000 $3,335,000 $208,000
Straight-Line rent per sq. ft. $19.54 $20.33 $20.92 $20.97 $19.62 $18.91
Recoveries $33,000 $18,000 $59,000 $17,000 $155,000 $--
Full service St-Line rent $834,000 $506,000 $1,544,000 $1,296,000 $3,490,000 $208,000
Full service St-Line rent per $20.34 $21.08 $21.75 $21.25 $20.53 $18.91
sq. ft. 10.14% 6.15% 18.77% 15.75% 42.42% 2.53%
% Full service St-Line rent $27.00
Asking market rent per sq. ft. 12 4 15 12 10 1
No. of tenant leases expiring
<CAPTION>
2008
AND
PROPERTY 2004 2005 2006 2007 BEYOND TOTAL
- ----------------------------- --------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
No. 527 Madison(2)........... 8,000 sf* 6,000 sf 27,000 sf 33,000 sf 208,000 sf
$1,140,000 $277,000 $1,119,000 $1,613,000 $11,115,000
$142.50 $46.17 $41.44 $48.88 $53.44
$6,000 $3,000 $2,000 $47,000 $794,000
$1,146,000 $280,000 $1,121,000 $1,660,000 $11,909,000
$143.25 $46.67 $41.52 $50.30 $57.25
9.62% 2.35% 9.41% 13.94% 100.00%
1 1 4 2 18
191 Peachtree Street(1)...... 34,000 sf 17,000 sf 506,000 sf 382,000 sf 1,158,000 sf
$762,000 $292,000 $13,396,000 $8,921,000 $27,122,000
$22.41 $17.18 $26.47 $23.35 $23.42
$251,000 $143,000 $4,293,000 $3,396,000 $9,905,000
$1,013,000 $435,000 $17,689,000 $12,317,000 $37,027,000
$29.79 $25.59 $34.96 $32.24 $31.97
2.74% 1.17% 47.77% 33.26% 100.00%
3 5 2 1 37
Market Square(2)............. 27,000 sf 177,000 47,000 sf 9,000 sf 156,000 sf 652,000 sf
$977,000 sf $1,695,000 $363,000 $5,144,000 $22,640,000
$36.19 $6,280,000 $36.06 $40.33 $32.97 $34.72
$85,000 $35.48 $650,000 $6,000 $1,773,000 $5,534,000
$1,062,000 $1,827,000 $2,345,000 $369,000 $6,917,000 $28,174,000
$39.33 $8,107,000 $49.89 $41.00 $44.34 $43.21
3.77% $45.80 8.32% 1.31% 24.55% 100.00%
28.77%
3 2 3 5 46
4
500 Boylston(1).............. 10,000 sf 213,000 sf 712,000 sf
$129,000 $5,102,000 $18,651,000
$12.90 $23.95 $26.20
$121,000 $2,688,000 $8,637,000
$250,000 $7,790,000 $27,288,000
$25.00 $36.57 $38.33
0.92% 28.55% 100.00%
1 1 12
222 Berkeley Street(1)....... 252,000 sf 19,000 sf 530,000 sf
$3,642,000 $472,000 $9,581,000
$14.45 $24.84 $18.08
$3,137,000 $233,000 $6,441,000
$6,779,000 $705,000 $16,022,000
$26.90 $37.11 $30.23
42.31% 4.40% 100.00%
3 2 28
Charlotte Plaza(2)........... 111,000 11,000 sf 1,000 sf 10,000 sf 189,000 sf 574,000 sf
sf $231,000 $24,000 $214,000 $3,001,000 $10,205,000
$2,267,000 $21.00 $24.00 $21.40 $15.88 $17.78
$20.42 $-- $-- $-- $191,000 $298,000
$30,000 $231,000 $24,000 $214,000 $3,192,000 $10,503,000
$2,297,000 $21.00 $24.00 $21.40 $16.89 $18.30
$20.69 2.20% 0.23% 2.04% 30.39% 100.00%
21.87%
1 1 1 6 43
3
200 Galleria(2).............. 3,000 sf 11,000 sf 392,000 sf
$76,000 $262,000 $7,934,000
$25.33 $23.82 $20.24
$-- $12,000 $294,000
$76,000 $274,000 $8,228,000
$25.33 $24.91 $20.99
0.92% 3.33% 100.00%
1 1 56
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PROPERTY 1998 1999 2000 2001 2002 2003
- -------------------- ---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
11 Canal Center(2).. Square feet expiring 3,000 sf 2,000 sf 2,000 sf 5,000 sf
Straight-Line rent $67,000 $40,000 $37,000 $120,000
Straight-Line rent per sq. ft. $22.33 $20.00 $18.50 $24.00
Recoveries $-- $1,000 $-- $--
Full service St-Line rent $67,000 $41,000 $37,000 $120,000
Full service St-Line rent per $22.33 $20.50 $18.50 $24.00
sq. ft. $27.00 4.71% 2.88% 2.60% 8.43%
% Full service St-Line rent
Asking market rent per sq. ft. 1 1 1 1
No. of tenant leases expiring
99 Canal Center(2).. Square feet expiring 6,000 sf 5,000 sf 27,000 sf 61,000 sf 22,000 sf 16,000 sf
Straight-Line rent $63,000 $78,000 $567,000 $1,569,000 $555,000 $400,000
Straight-Line rent per sq. ft. $10.50 $15.60 $21.00 $25.72 $25.23 $25.00
Recoveries $-- $6,000 $13,000 $80,000 $18,000 $11,000
Full service St-Line rent $63,000 $84,000 $580,000 $1,649,000 $573,000 $411,000
Full service St-Line rent per $10.50 $16.80 $21.48 $27.03 $26.05 $25.69
sq. ft. 1.88% 2.50% 17.26% 49.08% 17.05% 12.23%
% Full service St-Line rent $27.00
Asking market rent per sq. ft. 3 2 2 5 2 4
No. of tenant leases expiring
Transpotomac Square feet expiring 20,000 sf 2,000 sf 2,000 sf 15,000 sf 26,000 sf
Plaza(2).......... Straight-Line rent $348,000 $43,000 $33,000 $280,000 $567,000
Straight-Line rent per sq. ft. $17.40 $21.50 $16.50 $18.67 $21.81
Recoveries $1,000 $-- $-- $-- $1,000
Full service St-Line rent $349,000 $43,000 $33,000 $280,000 $568,000
Full service St-Line rent per $17.45 $21.50 $16.50 $18.67 $21.85
sq. ft. 18.47% 2.28% 1.75% 14.81% 30.05%
% Full service St-Line rent $24.00
Asking market rent per sq. ft. 3 1 1 1 2
No. of tenant leases expiring
Sixty State Square feet expiring 26,000 sf 34,000 sf 3,000 sf 29,000 sf 153,000 sf 90,000 sf
Street(2)......... Straight-Line rent $593,000 $809,000 $74,000 $872,000 $3,306,000 $2,061,000
Straight-Line rent per sq. ft. $22.81 $23.79 $24.67 $30.07 $21.61 $22.90
Recoveries $131,000 $106,000 $5,000 $40,000 $1,572,000 $124,000
Full service St-Line rent $724,000 $915,000 $79,000 $912,000 $4,878,000 $2,185,000
Full service St-Line rent per $27.85 $26.91 $26.33 $31.45 $31.88 $24.28
sq. ft. 2.71% 3.42% 0.30% 3.41% 18.25% 8.17%
% Full service St-Line rent $39.00
Asking market rent per sq. ft. 5 9 1 3 6 1
No. of tenant leases expiring
- ---------------------------------------------------------------------------------------------------------------------------------
All Properties Square feet expiring(3) 682,000 sf 805,000 sf 789,000 sf 820,000 sf 1,131,000 sf 1,144,000 sf
Total............. Straight-Line rent(4) $14,694,000 $18,033,000 $16,255,000 $22,411,000 $22,766,000 $25,007,000
Straight-Line rent per sq. ft. $21.55 $22.40 $20.60 $27.33 $20.13 $21.86
Recoveries(5) $3,554,000 $3,915,000 $4,249,000 $3,871,000 $5,906,000 $9,149,000
Full service St-Line rent(6) 18,248,000 $21,948,000 $20,504,000 $26,282,000 $28,672,000 $34,156,000
Full service St-Line rent per $26.76 $27.26 $25.99 $32.05 $25.35 $29.86
sq. ft. 6.18% 7.44% 6.95% 8.91% 9.72% 11.57%
% Full service St-Line rent
Asking market rent per sq. 152 104 102 81 98 32
ft.(7)
No. of tenant leases
expiring(8)
<CAPTION>
2008
AND
PROPERTY 2004 2005 2006 2007 BEYOND TOTAL
- -------------------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
11 Canal Center(2).. 5,000 sf 42,000 sf 59,000 sf
$116,000 $1,042,000 $1,422,000
$23.20 $24.81 $24.10
$-- $-- $1,000
$116,000 $1,042,000 $1,423,000
$23.20 $24.81 $24.12
8.15% 73.23% 100.00%
1 1 6
99 Canal Center(2).. 137,000 sf
$3,232,000
$23.59
$128,000
$3,360,000
$24.53
100.00%
18
Transpotomac 18,000 sf 9,000 sf 92,000 sf
Plaza(2).......... $411,000 $206,000 $1,888,000
$22.83 $22.89 $20.52
$-- $-- $2,000
$411,000 $206,000 $1,890,000
$22.83 $22.89 $20.54
21.75% 10.90% 100.00%
2 1 11
Sixty State 96,000 sf 35,000 sf 32,000 sf 308,000 sf 806,000 sf
Street(2)......... $2,623,000 $1,085,000 $925,000 $7,932,000 $20,280,000
$27.32 $31.00 $28.91 $25.75 $25.16
$182,000 $45,000 $320,000 $3,926,000 $6,451,000
$2,805,000 $1,130,000 $1,245,000 $11,858,000 $26,731,000
$29.22 $32.29 $38.91 $38.50 $33.17
10.49% 4.23% 4.66% 44.36% 100.00%
8 2 4 3 42
- -----------------------------------------------------------------------------------------------------------------
All Properties 817,000 sf 239,000 sf 627,000 sf 634,000 sf 2,209,000 sf 9,897,000 sf
Total............. $18,507,000 $7,713,000 $17,581,000 $12,654,000 $50,937,000 $226,558,000
$22.65 $32.27 $28.04 $19.96 $23.06 $22.89
$3,660,000 $1,997,000 $5,002,000 $4,272,000 $22,973,000 $68,548,000
$22,167,000 $9,710,000 $22,583,000 $16,926,000 $73,910,000 $295,106,000
$27.13 $40.63 $36.02 $26.70 $33.46 $29.82
7.51% 3.29% 7.65% 5.74% 25.05% 100.00%
32 14 12 22 23 672
</TABLE>
16
<PAGE>
- ------------------------
Lease Expiration Schedule Footnotes
(1) Net Lease building.
(2) Gross Lease building.
(3) The total square footage expiring in any particular year.
(4) Straight-line rent is the average of all lease payments required to be made
through the term of the lease as required under Generally Accepted
Accounting Principles.
(5) The actual recovery of operating expenses as of December 31, 1997 in net
lease buildings and the recovery of operating expense escalations in gross
lease buildings.
(6) Full Service Straight-Line Rent is Straight-Line Rent plus Recoveries.
(7) Asking market rent is the average initially quoted rent to prospective
tenants in each building. All market rents shown are on full service basis.
(8) The number of tenant leases expiring in each year.
17
<PAGE>
RETENTION
The following table sets forth the Company's tenant retention on expiring
leases since January 1, 1993. The analysis is based upon the percentage of
expiring leases in the applicable building with a tenant or subtenant being
retained in the expiring space, or an existing tenant expanding into the
expiring space. A tenant lease is added to the retention schedule at the time a
lease extension is signed with the tenant, or the tenant notifies the Company of
an option being exercised.
<TABLE>
<CAPTION>
1993 1994
--------------------------------- ---------------------------------
SQ FT SQ FT SQ FT SQ FT
RETAINED EXPIR. RET % RETAINED EXPIR. RET %
--------- --------- ----- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
One Norwest.................... 126,511 154,615 82% 93,962 94,981 99%
Norwest........................ 24,832 37,806 66% 16,293 26,317 62%
WMT............................ 90,230 130,010 69% 127,334 153,645 83%
125 Summer.....................
Tower 56.......................
One Lincoln Centre.............
Frick Building.................
527 Madison....................
191 Peachtree Street...........
500 Boylston Street............
222 Berkeley Street............
Charlotte Plaza................
200 Galleria...................
11 Canal Center................
99 Canal Center................
TransPotomac Plaza 5...........
-- --
--------- --------- --------- ---------
Weighted....................... 241,573 322,431 75% 237,589 274,943 86%
<CAPTION>
1995
--------------------------
SQ
FT SQ FT
RETAINED EXPIR. RET %
-- --------- -----
<S> <C> <C>
One Norwest....................64,627 71,364 91%
Norwest........................22,762 23,792 96%
WMT............................29,547 44,742 66%
125 Summer.....................
Tower 56.......................
One Lincoln Centre.............
Frick Building.................
527 Madison....................
191 Peachtree Street...........
500 Boylston Street............
222 Berkeley Street............
Charlotte Plaza................
200 Galleria...................
11 Canal Center................
99 Canal Center................
TransPotomac Plaza 5...........
--
-- ---------
Weighted.......................116,936 139,898 84%
</TABLE>
<TABLE>
<CAPTION>
1996 1997
--------------------------------- ----------------------------------
SQ FT SQ FT SQ FT SQ FT
RETAINED EXPIR. RET % RETAINED EXPIR. RET %
--------- --------- ----- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
One Norwest.......................................... 43,601 72,903 60% 266,021 313,612 85%
Norwest.............................................. 4,336 9,777 44% 205,749 234,260 88%
WMT.................................................. 86,956 106,250 82% 182,194 207,738 88%
125 Summer........................................... 95,816 96,658 99% 41,252 62,218 66%
Tower 56............................................. 46,003 53,762 86% 37,027 50,679 73%
One Lincoln Centre................................... 35,320 42,099 84%
Frick Building....................................... 99,570 115,743 86%
527 Madison.......................................... 5,980 20,587 29%
191 Peachtree Street................................. -- -- --
500 Boylston Street.................................. -- 3,005 0%
222 Berkeley Street.................................. -- -- --
Charlotte Plaza...................................... 2,974 6,390 47%
200 Galleria......................................... 10,672 21,725 49%
11 Canal Center...................................... -- 8,889 0%
99 Canal Center...................................... -- -- --
TransPotomac Plaza 5................................. -- -- --
--
--------- --------- --------- ---------- ---
Weighted............................................. 276,712 339,350 82% 873,113 1,046,936 83%
Five year total...... 82.6%
---
---
</TABLE>
18
<PAGE>
MARKET DATA
BOSTON
The Company has four Properties in Downtown Boston: 125 Summer Street, 500
Boylston Street, 222 Berkeley Street and Sixty State Street. The Company,
through a wholly-owned subsidiary, holds the fee interest in 125 Summer Street,
which is managed by Hines pursuant to a management contract that, after December
1998, may be terminated upon 30 days' notice. Hines currently owns 349,650
shares of the Company's Common Stock. Each of 500 Boylston Street and 222
Berkeley Street is owned by a separate partnership in which the Company owns a
91.5% interest and Hines owns an 8.5% interest. Cash flow, excess financing and
sales proceeds are shared on a pro rata basis between the Company and Hines with
respect to each such partnership. The Company consolidates its investment in
both partnerships. In addition, through buy-sell agreements that become
effective in 2007 with respect to each partnership, either the Company or Hines
will have the right to withdraw from the partnership by offering to the other
its entire interest in the partnership, or if such offer is not accepted, the
right to buy the other partner's entire interest in the partnership and gain
full control in the underlying asset. The Company holds the second mortgage on
Sixty State Street, behind a first mortgage in the amount of $78.5 million.
The Company believes that the economic fundamentals of the Boston area are
strong. The Boston metropolitan area has one of the healthiest economies in the
northeast and is the growth leader among the largest industrial markets in the
region. As of March 31, 1997, Boston, with a population of 5.8 million people,
was the fifth largest MSA in the nation. The median per capita personal income
in 1995 for the greater Boston area was $27,361, which was 18% above the
national level.
Led by an expanding financial services industry and a revitalized high
technology sector, the economic expansion of Boston has been broad based. Much
of the city's success has come from the strength of its internal resources such
as a highly skilled labor pool, a focus on research and development, local
capital sources and a host of firms that have become dominant in their
respective industries. During the late 1980s and early 1990s, the Boston economy
slowed and the national recession dominated the area. Over the last ten years,
office employment in Boston grew at an average annual rate of approximately
2.0%, compared to approximately 2.7% at the national level. The past few years
have seen continued diversification of the economy and increases in total
employment. For the year ended March 31, 1997, office employment in Boston grew
5.7%, compared to 4.4% nationwide. The services and the finance, insurance and
real estate ("FIRE") sectors dominated local growth, expanding 4.4% and 2.2%,
respectively, compared to 4.3% and 1.8%, respectively, at the national level.
Torto Wheaton Research ("Torto Wheaton") forecasts a 2.1% average annual
increase in office employment for both the Boston MSA and the nation over the
next ten years.
As of September 30, 1997, the metropolitan Boston office market contained
approximately 105 million square feet of space, over 50% of which was built
after 1980. The Downtown submarket, where all of the Boston Properties are
located, comprised 48.9 million square feet of office space and consists of
seven individual submarkets. Approximately 31 million square feet, or 63% of
Downtown office space, is classified as Class A office space. As of September
30, 1997, the Downtown submarket had an overall occupancy rate of 95.4%, and
with a Class A occupancy rate of 96.9%, had one of the top five Class A
occupancy rates in the nation. During the second quarter of 1997, the newly
renovated 590,000 square foot 28 State Street building returned to the market.
This property was 85% leased within six months of its completion.
Both 125 Summer Street and Sixty State Street are located in the Financial
District of the Downtown submarket. As of September 30, 1997, the Financial
District consisted of 30 million square feet of office space, approximately 70%
of which was Class A space, and had overall and Class A occupancy rates of 96.1%
and 97.1%, respectively.
The Company's other two Boston assets, 222 Berkeley Street and 500 Boylston
Street, are located in the Back Bay area of the Downtown submarket. As of
September 30, 1997, the Back Bay area contained
19
<PAGE>
10.9 million square feet of office space, 7.0 million of which was Class A, and
had overall and Class A occupancy rates of 96.5% and 96.6%, respectively.
According to Torto Wheaton's second quarter 1997 forecast, demand will
continue to outpace supply over the next two years in the Downtown Boston office
market with approximately 614,000 square feet of new office space entering the
market and approximately 966,000 square feet of net absorption expected during
the period.
WASHINGTON, D.C.
The Company has four Properties located in the metropolitan Washington, D.C.
area: Market Square, in the East End of Washington, D.C., and 11 Canal Center,
99 Canal Center and TransPotomac Plaza 5 located within two adjacent office
complexes in the waterfront office district of Alexandria, Virginia. The Company
holds the first mortgage on the Market Square Property and has an option to
purchase an 85.7% interest in Market Square Associates, the partnership that,
together with Crow-Pennsylvania Avenue Limited Partnership, owns a 70% interest
in Avenue Associates along with Western Associates Limited Partnership. Avenue
Associates holds the fee title to Market Square. Trammell Crow Real Estate
Services, Inc. manages this Property under a long-term management agreement. The
Company holds title to 11 Canal Center, 99 Canal Center and TransPotomac Plaza 5
through three wholly-owned subsidiaries. These Properties are managed by Faison
and Associates, Inc.
The Company believes that the economic fundamentals of the Washington, D.C.
area are positive. As of March 31, 1997, Washington, D.C. had a metropolitan
statistical area ("MSA") population of 4.6 million people, making it the seventh
largest in the country. The MSA includes the District of Columbia, Suburban
Maryland and Northern Virginia. The mean per capita personal income in 1994 for
the MSA was $27,762, which was 33.4% above the national level.
The Washington, D.C. MSA enjoyed very rapid growth and diversification
during the 1980s, with private sector industries such as high tech, health
services, telecommunications and biotechnology leading the way. The MSA recorded
an annual office growth rate of approximately 2.7% over the last ten years. For
the year ending March 31, 1997, office employment in the MSA increased 2.7%,
compared to an increase of 4.4% observed nationwide. Over the next decade, Torto
Wheaton forecasts an average annual MSA office employment growth of 2.2%,
compared to 2.1% for the nation.
The East End submarket, where Market Square is located, doubled in size over
the last decade to 24 million square feet of office space. The tenant base in
the East End is dominated by services firms, particularly law firms and trade
associations. As of September 30, 1997, East End contained approximately 14.8
million square feet of Class A office space, almost as much Class A office space
as all other District markets combined. The East End area also includes many
government agencies (12% share of the Class A market), several hotels, the old
retail corridor and the city's convention center. The MCI Center, a new sports
arena located in the center of the East End, will host the professional
basketball and hockey teams of Washington, D.C. and is expected to revitalize
the surrounding Gallery Place area.
As of September 30, 1997, the metropolitan Washington, D.C. market contained
207.4 million square feet of office space, approximately 63% of which had been
built after 1980. The East End submarket, where Market Square is located,
contained approximately 24 million square feet of space, over 60% of which was
Class A office space, and had overall and Class A occupancy rates of 89.1% and
95.2%, respectively. According to Torto Wheaton's second quarter 1997 forecast,
the East End submarket is expected to tighten over the next two years, with
approximately 950,000 square feet of new office supply entering the submarket
and approximately 1.4 million square feet of net absorption projected for the
period.
Northern Virginia, where 11 and 99 Canal Center and TransPotomac Plaza 5 are
located, is a relatively new market. Approximately 50% of the 83.7 million
square feet of office space has been built since 1980. The real estate industry
in Northern Virginia has made a significant recovery from the collapse of the
market in the late 1980s, and as of September 30, 1997, Northern Virginia had a
95.7% overall occupancy
20
<PAGE>
rate. While the exodus of tenants from Washington, D.C. drove the Suburban
market's early recovery and development, recent growth has been due to the
transformation of Northern Virginia into one of the nation's top high-tech
areas.
As of September 30, 1997, the Northern Virginia office market contained 83.7
million square feet of space. The Alexandria submarket, where the Company's
Properties are located, contained approximately 4.6 million square feet of
office space, 2.9 million of which was Class A, and had overall and Class A
occupancy rates of 91.7% and 90.0%, respectively. According to Torto Wheaton's
second quarter 1997 forecast, supply is expected to outpace demand in the
Alexandria submarket over the next two years with approximately 354,000 square
feet of new office space entering the market and net absorption of approximately
146,000 square feet expected for the period.
ATLANTA
The Company has two Properties, 200 Galleria and 191 Peachtree Street,
located in the Atlanta market. The Company holds the fee interest in 200
Galleria through a wholly-owned subsidiary. This Property is managed by CK
Atlanta Office Management, Inc. The Company holds the first mortgage on 191
Peachtree Street and an 80% partnership interest in One Ninety One Peachtree
Associates, the partnership which owns this Property. The Company's interest in
One Ninety One Peachtree Associates is accounted for on the equity method, as
the Company has substantial control over major decisions, as well as the right
to become managing general partner. In 1996 and 1997, the minority partner
received an annual incentive distribution of $250,000 which, the Company
expects, it will continue to receive under the partnership agreement through
February 28, 2000, with the Company receiving the remaining cash flow. Through a
buy-sell agreement that becomes effective in 2002, either the Company or the
minority partner will have the right to withdraw from the partnership by
offering to the other its entire interest in the partnership, or if such offer
is not accepted, the right to buy the other partner's entire interest in the
partnership and gain full control of the asset.
The Company believes economic fundamentals in the Atlanta market are
positive. Atlanta is the political capital of Georgia and is considered the
economic capital of the Southeast region. As of March 31, 1997, Atlanta, with a
population of approximately 3.6 million, was the tenth largest metropolitan area
in the nation. The MSA's median per capita personal income of $24,960 in 1995
was 8% above the national level.
Atlanta's pro-business attitudes and highly-skilled workforce continue to be
recognized on a national and global level. Over 400 of the Fortune 500
industrial and service companies are represented in the city. Major employers
include Delta Airlines, AT&T, Bell South, Lockheed International Systems and
Turner Broadcasting System. Over the last ten years, office employment in
Atlanta has grown at an average annual rate of approximately 4.9%, compared to
approximately 2.7% for the nation. For the year ended March 31, 1997, office
employment grew 6.5% in Atlanta, compared to 4.4% nationally. In the past year,
services and retail trade have been the engines for local growth, increasing at
a rate of 8.2% and 7.7%, respectively, compared to increases of 4.3% and 2.1%
observed nationwide. According to Torto Wheaton, Atlanta's office employment
growth over the next ten years will continue to outpace employment growth
nationwide. Torto Wheaton forecasts a 2.9% average annual increase in Atlanta's
office employment, compared to 2.1% nationwide.
As of September 30, 1997, the metropolitan Atlanta office market contained
total office space of 95.4 million square feet. The Downtown submarket, where
191 Peachtree Street is located, contained approximately 15.5 million square
feet of office space, of which over 70%, or 11 million square feet, was Class A
space. Meanwhile, the overall and Class A occupancy rates for the Downtown
submarket were 83.1% and 87.3%, respectively.
According to the Torto Wheaton's second quarter 1997 forecast, the Downtown
market will continue to tighten over the next two years, with demand expected to
outpace supply. Torto Wheaton projects
21
<PAGE>
660,000 square feet of new supply for the Downtown market over the next two
years, with more than one million square feet of net absorption projected for
the period.
As of September 30, 1997, the Northwest submarket, where 200 Galleria is
located, contained approximately 18.2 million square feet of office space, of
which 56%, or 10.2 million was Class A office space. The overall and Class A
occupancy rates for Northwest Atlanta were 91.4% and 90.7%, respectively.
According to Torto Wheaton's second quarter 1997 forecast, 2.2 million square
feet of new supply will enter the submarket over the next two years, with
approximately 1.4 million square feet of total net absorption forecasted for the
period.
CHICAGO
The Company has two Properties in the Suburban Chicago area, as well as a
parcel of unimproved land in Downtown Chicago. The Company holds the fee
interest in One Lincoln Centre through a wholly-owned subsidiary. This Property
is managed by Hines pursuant to a management contract that may be terminated
upon 30 days' notice. The Company has entered into a definitive agreement to
purchase Corporate 500 Centre.
The Company believes the economic fundamentals of the Suburban Chicago
markets are strong. As of March 31, 1997, the population of the Chicago MSA was
7.8 million, making it the third largest in the country. As of 1995, the median
per capita personal income for the MSA was $27,309, which was 18% above the
national level. The Chicago area has a diversified economic base, which is
supported by a number of prospering industries, including brokerage firms, air
travel, electronics, insurance, retail and printing/publishing. This diversity
has helped reduce vulnerability to economic swings, creating a stable economy.
Overall office employment has grown at an annual rate of nearly 3% over the last
ten years. For the year ending March 31, 1997, office employment in the Chicago
MSA grew by a rate of 3.8%, compared to a 4.4% growth rate observed nationwide.
As of September 30, 1997, the Chicago MSA contained 188 million square feet
of space, 50% of which was built after 1980. Approximately 57% of the MSA's
office space is located Downtown, with the remainder located in the outlying
suburbs. As of September 30, 1997, Suburban Chicago's 80 million square foot
office market had an occupancy rate of 89.9%, compared to the Downtown rate of
86.1%. The Suburban Class A market, which consisted of 30 million square feet of
space, posted a 93.1% occupancy rate. As of September 30, 1997, the Oak Brook
submarket, where One Lincoln Centre is located, contained 26 million square feet
of office space, 10.2 million of which is Class A office space, and had overall
and Class A occupancy rates of 90.7% and 91.9%, respectively. The Lake County
submarket, where Corporate 500 Centre is located, contained six million square
feet of office space, 2.8 million of which was Class A office space, and had
overall and Class A occupancy rates of 92% and 94.3%, respectively.
New office development has returned to the Suburban Chicago market, with
Torto Wheaton's second quarter 1997 forecast calling for approximately five
million square feet to be added over the next two years. According to the same
forecast, demand is expected to lag behind supply over the same period with net
absorption just reaching over four million square feet.
NEW YORK CITY
The Company has two Properties in New York City: Tower 56 and 527 Madison
Avenue. The Company, through separate wholly-owned subsidiaries, holds the fee
interest in both of these Properties. Both Properties are managed by HRO
International Ltd. ("HRO") pursuant to management contracts that may be
terminated upon 30 days' notice.
The Company believes that the economic fundamentals of the New York City
area are positive. As of March 31, 1997, the population of the New York MSA was
8.65 million people, making it the second largest MSA in the nation. The mean
per capita personal income for 1994 for the MSA was $27,975, which was 34.4%
above the national level.
22
<PAGE>
Over the last ten years, the New York MSA sustained significant employment
losses, mainly in the financial services area, due to the nationwide recession.
The average office employment growth during this period decreased approximately
0.5% annually, compared to average annual increases of approximately 2.7%
nationwide. The national economic recovery, coupled with stellar gains on Wall
Street, caused the MSA to post a 3.1% gain in office employment for the year
ending March 31, 1997. Over the next ten years, Torto Wheaton forecasts office
employment to increase by an average of 0.6% annually compared to 2.1%
nationwide. Key factors supporting a positive view of the New York City market
include: (1) a strong local economy resulting from significant growth in
financial services, entertainment and tourism; (2) historically low crime
levels; (3) a highly educated workforce with a mean per capita income 34.3%
higher than the national average; (4) major barriers to entry, including a lack
of well-located building sites and the high cost of building new office space;
and (5) the continued trend in the market to redevelop obsolete office space for
alternative uses.
Midtown market leasing has been driven by numerous small to mid-size office
tenants in the legal, communications, entertainment and financial advisory
sectors. These firms have provided sufficient growth to partially offset net
losses from corporate restructuring and financial services consolidation.
However, due to a significant number of large tenants signing long-term leases
over the past few years, smaller transactions are expected to continue to
dominate leasing activity through 1999, when tenants who signed 10-year leases
in new buildings built in the late 1980s return to the market.
As of September 30, 1997, the Manhattan office market contained
approximately 347 million square feet of space. The Midtown submarket, where the
Properties are located, contained approximately 244 million square feet of
space, 183 million, or 75%, of which is Class A space, and had overall and Class
A occupancy rates of 93.1% and 94.1%, respectively. 4 Times Square, a 1.5
million square foot office tower, is currently under construction in the Times
Square area of Midtown Manhattan. The building, expected to be completed in
1999, is heavily pre-leased to two large tenants.
The Midtown office market is comprised of 12 individual submarkets. Tower 56
is located within Midtown's Park/Lexington market, while 527 Madison is located
within the Madison Avenue submarket. As of September 30, 1997, Class A occupancy
in the Park/Lexington and Madison Avenue submarkets was 95.1% and 94.0%,
respectively.
CHARLOTTE
The Company has one Property, Charlotte Plaza, located in Uptown Charlotte.
The Company holds the fee interest in this Property through two wholly-owned
subsidiaries. The Property is managed by Trammell Crow SE, Inc.
The Company believes the economic fundamentals of the Charlotte area are
positive. Charlotte is the financial services and distribution hub of the
Carolina region and is the largest metropolitan area between Atlanta and
Washington, D.C., with a population of 1.34 million as of March 31, 1997. The
median per capita personal income in 1995 for the MSA was $22,777, which was 2%
below the national average.
Fifty-three of the Fortune 100 companies are represented within the CBD of
Uptown Charlotte. The majority of these firms are involved in the finance,
insurance and real estate industries. Major employers include Duke Power
Company, IBM Corporation, NationsBank Corporation, First Union Corporation,
Southern Bell Telephone and state and local government agencies. Over the last
ten years, office employment in Charlotte grew at an annual average rate of
approximately 5.4%, compared to approximately 2.7% at the national level. Over
the year ended March 31, 1997, Charlotte's office employment growth continued to
outpace the nation's, increasing 5.9%, compared to 4.4% nationally. During the
same period, the services and government sectors' employment levels increased
6.6% and 5.8%, respectively. Over the next decade, Torto Wheaton anticipates
annual average office employment growth of 3.5% and 2.1% at the local and
national levels, respectively.
As of September 30, 1997, the Charlotte MSA contained total office space of
21.5 million square feet, approximately 65% of which was built after 1980. The
Uptown submarket, where Charlotte Plaza is
23
<PAGE>
located, contained 9.3 million square feet of office space, 5.9 million of which
was Class A, and had overall and Class A occupancy rates of 95.2% and 96.6%,
respectively.
According to Karnes Research, Uptown Charlotte is currently experiencing a
multi-tenant office building boom. Transamerica Square, a 490,000 square foot
building, was completed in 1997 and was 100% leased as of September 30, 1997. In
addition, the IJL Financial Center (700,000 square feet) and 525 North Tryon
(415,000 square feet) are currently under construction for 1998 delivery. Three
First Union Center (912,000 square feet), to be developed by Childress Klein and
anchored by First Union, is scheduled to break ground in 1998 and to be
completed in late 1999. While these new projects are heavily pre-leased, these
significant additions will cause the Uptown office market to soften. Over the
next two years, approximately two million square feet of new inventory will be
delivered, with total net absorption of just over one million square feet.
DENVER
The Company has one Property, One Norwest Center, located in Downtown
Denver. One Norwest Center is owned by 1700 Lincoln Limited, in which the
Company owns a 90% partnership interest through its wholly-owned subsidiary,
ARICO-Denver, Inc., and a 10% partnership interest through its wholly-owned
subsidiary, 1700 Lincoln Inc. This Property is managed by Hines.
The Company believes economic fundamentals in the Denver market are
positive. Key factors supporting a positive view of the Denver market include:
(1) an expanding local economy; (2) improving office occupancy rates in Downtown
Denver when certain extraordinary effects are excluded; and (3) the lack of new
construction of office space in the CBD. Historically, the financial district in
Downtown Denver has been a major hub for many financial institutions in the
Rocky Mountain region. The Denver population was 1.89 million as of March 31,
1997, making it the 27th largest MSA in the country. As of 1995, the median per
capita income for the MSA was $25,501, which was 10% above the national level.
The Denver area has experienced strong growth in office employment fueled by
a mix of technological, communications and financial service firms, as well as
businesses engaged in tourism and miscellaneous business services. Office
employment in the Denver area grew at an average annual rate of approximately
4.0% during the last ten years, compared to approximately 2.7% nationwide. For
the year ended March 31, 1997, office employment in the Denver area grew 4.3%,
as compared to a national average rate of 4.4%. Over the next decade, Torto
Wheaton forecasts annual average office employment growth of 2.7% for the Denver
area compared to 2.1% nationally.
As of September 30, 1997, the Denver MSA contained 66.3 million square feet
of total office space, approximately 63% of which had been built after 1980.
This increase in inventory was largely due to increased interest in oil and gas
exploration in the Rocky Mountain Region. The Downtown submarket, where One
Norwest Center is located, contained approximately 21.4 million square feet of
office space, 11 million of which was Class A space, and had overall and Class A
occupancy rates of 90.4% and 93.1%, respectively. According to the second
quarter 1997 Torto Wheaton forecast, over one million square feet of new supply
is expected to enter the submarket over the next two years, with approximately
1.4 million square feet of net absorption projected for the period.
MINNEAPOLIS
The Company has one Property, Norwest Center, located in the Minneapolis
market. Norwest Center is owned by NWC Limited Partnership ("NWC"), a
partnership in which the Company owns a 50% general partnership interest. Sixth
& Marquette Limited Partnership ("S&M") owns a 50% partnership interest in NWC.
The general partner of S&M is also a Minnesota limited partnership in which
Gerald D. Hines, individually, and entities affiliated with Gerald D. Hines are
directly or indirectly the sole general partners. The Company has the right, at
its sole discretion, to become the managing general partner of NWC. Norwest
Center is managed by Hines.
24
<PAGE>
The Company believes the economic fundamentals of the Minneapolis office
market are strong. As of March 31, 1997, the population of the Minneapolis MSA
was 2.79 million people, making it the 14th largest MSA in the nation. In 1995,
the median per capita income for the MSA was $26,314, which was 13% above the
national average.
The economic base of the Minneapolis-St. Paul area is well diversified. The
metropolitan economy includes a broad foundation of income-producing trades
including agribusiness, computer/high technology systems, machinery
manufacturing, graphic arts, government, medical, and educational institutions.
This diversification has helped prevent any major out-migrations during the past
and has led to general stability and low unemployment rates. Office employment
has been strong during the last ten years, in part because of the area's
reputation as a desirable place for corporate relocations. As of September 1996,
a total of 32 Fortune 500 companies were headquartered in the Minneapolis-St.
Paul area. Over the past ten years, office employment in the MSA grew an average
of approximately 3.4% annually, compared to approximately 2.7% at the national
level. For the year ending March 31, 1997, office employment growth slowed at
the local level, increasing 2.0% compared to 4.4% nationally. The Torto Wheaton
second quarter 1997 forecast calls for annual average office employment growth
of 2.1% at both the local and national levels.
As of September 30, 1997, the Minneapolis MSA contained 51.2 million square
feet of total office space, approximately 55% of which has been built after
1980. The Minneapolis CBD, where Norwest Center is located, contained
approximately 20.6 million square feet of office space, 12.9 million of which
was Class A space, and, with overall and Class A occupancy rates of 93.5% and
96.1%, respectively, had one of the top five Class A occupancy rates in the
nation. There is currently 1.5 million square feet of office space under
construction in two Downtown towers with both buildings expected to be 100%
occupied by single tenants. An additional office tower of approximately 900,000
square feet is planned for a 1998 groundbreaking, with over 50% of that project
already leased to large tenants. Over the next two years, Torto Wheaton
forecasts approximately 1.4 million square feet of net absorption in the
submarket.
PITTSBURGH
The Company has one Property, The Frick Building, located in Downtown
Pittsburgh. The Company, through a wholly-owned subsidiary, holds the fee
interest in this Property. This Property is managed by The Galbreath Company
pursuant to a management contract that may be terminated upon 30 days' notice.
Since the late 1970s, the Pittsburgh MSA has shifted its concentration from
a manufacturing economy to a more diversified economic base. In addition to its
strength in heavy industry, the city is now recognized as a major finance,
business, health care, research and educational center. As a result of
Pittsburgh's transition from a manufacturing-based economy to a diversified one,
its population steadily declined through the 1970s and 1980s. The population
began to stabilize as of 1990, and the current population is approximately 2.5
million.
Pittsburgh is the seventh largest corporate headquarters location in the
United States. Nine Fortune 500 companies have their headquarters in Pittsburgh,
including USX Corporation, PPG Industries and the H.J. Heinz Company. The
Pittsburgh area is known as one of the largest and most productive centers of
scientific and technological innovation in the nation.
As of December 31, 1997, the Pittsburgh MSA contained 37.3 million square
feet of office space. The Pittsburgh CBD, where The Frick Building is located,
contained approximately 24.3 million square feet of office space, approximately
14.6 million of which was Class A office space, and had overall and Class A
occupancy rates of 84.5% and 89.4%, respectively.
SEATTLE
The Company has one Property, Washington Mutual Tower, located in the
Seattle market. The project site (the "Project Site") comprises Washington
Mutual Tower and Block 6 ("Block 6"), which consists of a six-level underground
parking facility for 810 cars; an adjacent historic brick building (the Brooklyn
Building); three levels of restaurants, shops and service businesses; and, to
protect sight lines from
25
<PAGE>
Washington Mutual Tower, two masonry office buildings located across the
street--the Galland and Seneca Buildings--master leased by Third and University
Limited Partnership ("Third Partnership") through 2005 from Samis Land Company.
Wright Runstad & Company has a subordinated equity interest in Washington Mutual
Tower and manages the Property for Third Partnership.
The Project Site is owned by Third Partnership. The Company owns, through a
wholly-owned subsidiary, a 50% general partnership interest in Third
Partnership. Third Partnership is the successor in interest as lessee under a
13-year lease, expiring in 2005, of the Galland and Seneca Buildings. In
general, the Company shares revenues equally with its partner, 1212 Second
Avenue Limited Partnership ("1212 Partnership") and also receives certain
preference returns. In addition, the Company also receives cash flow that is not
shared with 1212 Partnership and is currently due a cumulative preference
deficit. The Company holds the right, at its sole discretion, to elect to become
the managing general partner of Third Partnership. 1212 Partnership, originally
the sole general partner, is now the managing general partner with the
obligation to manage and operate Third Partnership's business.
The Company believes that economic fundamentals in the Seattle market are
strong. As of March 31, 1997, the population of the Seattle MSA was 2.27
million, making it the 21st largest in the country. The MSA's median per capita
personal income in 1995 was $28,329, which was 22% above the national level.
Annual office employment growth in the Seattle area has outpaced the nation over
the last ten years, increasing approximately 4.7% on average, compared to
approximately 2.7% at the national level. For the year ended March 31, 1997,
local office employment grew 7.3%, compared to 4.4% nationally. Seattle's job
base has become increasingly diversified over the last 15 years, thus reducing
its dependence on the Boeing Company as an employer. In addition, the Seattle
CBD has one of the highest Class A office occupancy rates in the nation (97% as
of September 30, 1997). The Torto Wheaton forecast calls for healthy office
employment growth over the next decade, with a 3.3% average annual growth rate
for the MSA compared to 2.1% for the nation.
The economy in the Seattle and surrounding Puget Sound area is fairly well
diversified. The largest employment sector is the services sector, accounting
for approximately 27% of the total non-agricultural employment in the region.
The next largest employment sector is wholesale and retail trade with
approximately 25% of total non-agricultural employment. Forest products, pulp,
paper, aircraft, ships and seafood products are recognized as the traditional
components of the region's economic base. Several services, such as
transportation, engineering and finance, are also exported and thus considered
base industries. An increasing share of software and durable goods is also
exported, making these industries significant contributors to the economic base.
The area has consistently experienced relatively low unemployment in recent
years, with rates below the national average, but did experience slight
decreases in employment due to layoffs at Boeing during the early 1990s.
As of September 30, 1997, the Seattle MSA contained a total inventory of
54.0 million square feet of office space, approximately 61% of which was built
after 1980. The Seattle CBD, where Washington Mutual Tower is located, contained
approximately 16 million square feet of the metropolitan inventory and 13
million square feet of Class A office space, and, with overall and Class A
occupancy rates of 95% and 97.1%, respectively, had one of the top five Class A
occupancy rates in the nation. According to the second quarter 1997 Torto
Wheaton forecast, the Seattle CBD office market is expected to tighten over the
next two years, with absorption outpacing supply by a ratio in excess of 2:1.
The Torto Wheaton forecast calls for approximately 620,000 square feet of new
inventory to be added to the CBD over the next two years, with absorption
totaling approximately 1.4 million square feet.
26
<PAGE>
SPECIFIC PROPERTY
The following Properties had net book values equal to 10% or more of the
Company's total assets or aggregate gross revenues as of December 31, 1997.
ONE NORWEST CENTER
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, 1,004-vehicle parking facility. One Norwest Center is located in
downtown Denver -- the major business, financial, government and cultural center
for the Rocky Mountain region. In downtown Denver, 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.
Historically, this financial district has been a major hub for many financial
institutions in the Rocky Mountain region.
One Norwest Center is owned by 1700 Lincoln Limited ("Lincoln") in which the
Company owns a 90 percent general partnership interest through its wholly-owned
subsidiary, ARICO-Denver, Inc., and a 10 percent general partnership interest
through its wholly-owned subsidiary, 1700 Lincoln Inc. The Property is managed
by Hines.
MARKET INFORMATION
See Market Data--Denver above.
HISTORICAL OCCUPANCY RATES
As of the dates noted, the following percentage of the net rentable area in
One Norwest Center was leased at the average Net Effective Rent per square foot
set forth below:
<TABLE>
<CAPTION>
AVERAGE NET
EFFECTIVE
PERCENTAGE LEASED RENT PER SQUARE
AS OF AT PERIOD END FOOT
- -------------------------------------------------------------------------- --------------------- -------------------
<S> <C> <C>
December 31, 1997......................................................... 99% $ 11.66
December 31, 1996......................................................... 99 10.80
December 31, 1995......................................................... 98 10.56
December 31, 1994......................................................... 96 10.25
December 31, 1993......................................................... 96 10.59
</TABLE>
PRINCIPAL TENANTS
The following table lists the principal tenants of One Norwest Center as of
December 31, 1997:
<TABLE>
<CAPTION>
RENTABLE SQUARE FEET
PRINCIPAL ----------------------
BUSINESS PERCENT OF
TENANT ACTIVITY TOTAL TOTAL(1)
- ------------------------------------------------------------------- ---------------------- --------- -----------
<S> <C> <C> <C>
Norwest Bank Denver N.A............................................ Banking 565,943 48%
Newmont Gold Company............................................... Mining 116,467 10%
Teletech Telecommunications, Inc................................... Telecommunications
Services 71,558 6%
--------- ---
Total.............................................................. 753,968 64%
--------- ---
--------- ---
</TABLE>
- ------------------------
(1) Calculated based on a total of 1,187,852 rentable square feet as of December
31, 1997.
27
<PAGE>
LEASE EXPIRATIONS
See Lease Expiration Schedule above.
NORWEST CENTER
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. Norwest Center is located at the center of
downtown Minneapolis, at the intersection of Seventh Street South and Marquette
Avenue. The main business entrance to the building is on Seventh Street South,
opposite the IDS Center, a prominent landmark in the Twin Cities. Pedestrian
access is also available from Sixth Street South and Marquette Avenue; a grand
ceremonial entrance to the building on Sixth Street South incorporates a rotunda
and retail banking function.
MARKET INFORMATION
See Market Data--Minneapolis above.
THE PARTNERSHIP
Norwest Center is owned by NWC Limited Partnership ("NWC"), a partnership in
which the Company owns a 50 percent general partnership interest through its
wholly-owned subsidiary ARICO-Minneapolis, Inc. Sixth and Marquette Limited
Partnership ("S&M") owns a 49 percent managing general partnership interest and
a 1 percent limited partnership interest in NWC. The managing general partner of
NWC is currently S&M. 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 affiliated with Gerald D. Hines are directly
or indirectly the sole general partners. The Company has the right, at its sole
discretion, to become the managing general partner of NWC. Norwest Center is
managed by Hines.
Under the partnership agreement governing NWC, the managing general partner
has the right to manage and operate NWC's business. Until certain cash flow
levels have been achieved for two consecutive years (the "NWC Preference
Period"), S&M and the Company each hold a 50 percent interest in NWC. After the
NWC Preference Period ends, the Company will be entitled to hold a 60 percent
interest (subject to increases in the Company's interest that may result from
early termination of the NWC Preference Period), and S&M a 40 percent interest.
The Company does not expect the Preference Period to end in the foreseeable
future.
During the NWC Preference Period, the Company is entitled to receive an
annual preference return (the "NWC Preference Return") equal to 7 percent of its
capital base, which is $92.3 million as of December 31, 1997. The NWC 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 NWC Preference Return then due, the amount of such
deficiency shall accumulate and shall bear interest at the rate of 7 percent,
compounded annually. Currently, there is no accrued deficiency outstanding on
the NWC Preference Return.
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 percent to the Company and 50 percent to S&M during the NWC
Preference Period.
28
<PAGE>
HISTORICAL OCCUPANCY RATES
As of the dates noted, the following percentage of the net rentable area in
Norwest Center was leased at the average Net Effective Rent per square foot set
forth below:
<TABLE>
<CAPTION>
AVERAGE NET
EFFECTIVE
PERCENTAGE LEASED RENT PER SQUARE
AS OF AT PERIOD END FOOT
- -------------------------------------------------------------------------- --------------------- -------------------
<S> <C> <C>
December 31, 1997......................................................... 98% $ 17.23
December 31, 1996......................................................... 100 17.43
December 31, 1995......................................................... 100 17.31
December 31, 1994......................................................... 100 17.00
December 31, 1993......................................................... 100 17.27
</TABLE>
PRINCIPAL TENANTS
The following table lists the principal tenants of Norwest Center as of
December 31, 1997:
<TABLE>
<CAPTION>
RENTABLE SQUARE FEET
PRINCIPAL ----------------------
BUSINESS PERCENT OF
TENANT ACTIVITY TOTAL TOTAL(1)
- ---------------------------------------------------------------------------- ------------- --------- -----------
<S> <C> <C> <C>
Norwest Corporation......................................................... Banking 451,079 40%
Faegre & Benson............................................................. Legal 195,918 18%
KPMG Peat Marwick........................................................... Accounting 75,152 7%
--------- ---
Total................................................................. 722,149 65%
--------- ---
--------- ---
</TABLE>
- ------------------------
(1) Calculated based on a total of 1,118,062 rentable square feet as of December
31, 1997.
LEASE EXPIRATIONS
See Lease Expiration Schedule above.
WASHINGTON MUTUAL TOWER
Washington Mutual Tower is a 55-story, granite and glass office tower
containing approximately 1,155,000 square feet of net rentable area (including
the Galland and Seneca Buildings described below). Washington Mutual Tower is
located in the heart of the downtown Seattle central business district (the
"Seattle CBD"), at 1201 Third Avenue, with unobstructed views of Puget Sound.
The project site (the "Project Site") is comprised of Washington Mutual Tower
and Block 6 ("Block 6") which consists of a 6-level underground parking garage
for 810 cars; an adjacent historic brick building (the Brooklyn Building); three
levels of restaurants, shops and service businesses; and, to protect sight lines
from Washington Mutual Tower, two masonry office buildings located across the
street -- the Galland and Seneca Buildings -- master leased by Third and
University Limited Partnership ("Third Partnership") through 2005 from Samis
Land Company. Wright Runstad & Company has a subordinated equity interest in
Washington Mutual Tower and manages the Property for Cornerstone.
MARKET INFORMATION
See Market Data--Seattle above.
THE PARTNERSHIP
The Project Site is owned by Third Partnership. The Company owns, through
its wholly-owned subsidiary ARICO-Seattle, Inc., a 50 percent general
partnership interest in Third Partnership, 1212
29
<PAGE>
Second Avenue Limited Partnership, a Washington limited partnership ("1212
Partnership"), currently holds a 49 percent managing general partnership
interest and a 1 percent limited partnership interest in Third Partnership.
Third Partnership is the successor in interest as lessee under a 13-year lease,
expiring in 2005, of the Galland and Seneca Buildings.
The Company holds the right, at its sole discretion, to elect to become the
managing general partner of Third 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 & Co. is the sole general partner of
WRALP. The majority of the limited partners of 1201 and WRALP are current or
former employees or other affiliates of Wright Runstad & Co.
Until certain cash flow levels have been achieved for two consecutive years
(the "Washington Preference Period"), 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, (iii) the
payment of debt service and (iv) the Washington Preference Return (defined
below), will be distributed 50 percent to the Company and 50 percent to 1212
Partnership. The Washington Preference Period is expected to continue for the
foreseeable future. During the Washington Preference Period, the Company is also
entitled to receive an annual preference return (the "Washington Preference
Return") equal to 8 percent of its capital base, which was $100 million as of
December 31, 1997. The Washington Preference Return is cumulative, and if
operating revenues, adjusted for payment of operating costs, capital
expenditures, debt service and for amounts due from 1212 Partnership and a
subsidiary of the Company under the partnership agreement, are insufficient to
fund the distribution of any Washington Preference Return then due, the amount
of such deficiency shall accumulate and shall bear interest at the rate of 8
percent, compounded annually. As of December 31, 1997, the Company is due a
cumulative preference deficit, including accrued interest, of approximately $8.7
million which will be reduced as cash flow becomes available. On a priority
basis to the Washington Preference Return described above, the Company also
receives a 9.53 percent return on an additional equity investment of $47 million
made in September 1995. The Company is entitled to receive this return through
September 30, 2003, at which time the rate of return will adjust based on
conditions in the interest rate markets.
HISTORICAL OCCUPANCY RATES
As of the dates noted, the following percentage of the net rentable area in
Washington Mutual Tower was leased at the average Net Effective Rent per square
foot set forth below:
<TABLE>
<CAPTION>
AVERAGE NET
EFFECTIVE
PERCENTAGE LEASED RENT PER SQUARE
AS OF AT PERIOD END FOOT
- ------------------------------------------------------ --------------------- -------------------
<S> <C> <C>
December 31, 1997..................................... 97% $ 12.02
December 31, 1996..................................... 97 11.80
December 31, 1995..................................... 97 11.83
December 31, 1994..................................... 97 11.03
December 31, 1993..................................... 96 10.84
</TABLE>
30
<PAGE>
PRINCIPAL TENANTS
The following table lists the principal tenants of Washington Mutual Tower
and Block 6 as of December 31, 1997:
<TABLE>
<CAPTION>
RENTABLE SQUARE
FEET
PRINCIPAL -------------------
BUSINESS PERCENT OF
TENANT ACTIVITY TOTAL TOTAL(1)
- ---------------------------------------- --------- ------- ----------
<S> <C> <C> <C>
Perkins Coie............................ Legal 199,982 17%
Washington Mutual....................... Banking 181,066 16%
Karr Tuttle Campbell.................... Legal 50,574 4%
------- ---
Total............................. 431,622 37%
------- ---
------- ---
</TABLE>
- ------------------------
(1) Calculated based on a total of 1,154,560 rentable square feet as of December
31, 1997.
LEASE EXPIRATIONS
See Lease Expiration Schedule above.
191 PEACHTREE STREET
191 Peachtree Street, located in downtown Atlanta, is a 50-story
multi-tenant office building containing 1,221,000 square feet. The Property is
very high quality and is widely regarded as the best building in Downtown
Atlanta. The project was completed in 1991 and designed by John Burgee and
Philip Johnson. Attached to the building is a 16-story parking deck with 1,386
spaces. 191 Peachtree Street was developed on approximately 2 acres of land, of
which approximately 1.5 acres is owned and approximately one-half acre under the
parking facility is leased for a 99-year term expiring in 2087 with a 99-year
renewal option.
191 Peachtree Street is located in the heart of Atlanta's CBD, also referred
to as Downtown. Peachtree Street is a major corridor through the CBD from which
development radiates. The Property is located on the east side of Peachtree
Street between Ellis Street and International Boulevard, and extends to
Peachtree Center Avenue. The topography of the site slopes down to the east,
with both the Peachtree Street and Peachtree Center Avenue entrances at street
grade.
MARKET INFORMATION
See Market Data--Atlanta above.
OWNERSHIP STRUCTURE
THE MORTGAGE. Cornerstone holds the first mortgage on the Property in the
amount of $145 million. The mortgage earns interest at a rate of 9.375% and
matures on February 28, 2008. The loan will be interest only through March 1,
1998 and, thereafter, will require principal payments based on a 30-year
amortization schedule.
31
<PAGE>
THE PARTNERSHIP. Cornerstone has a 80% interest in One Ninety One Peachtree
Associates, the partnership which owns this Property. The Company's interest in
One Ninety One Peachtree Associates is accounted for on the equity method, as
the Company has substantial control over major decisions, as well as the right
to become managing general partner. Through February 28, 2000, the minority
partner in the transaction C-H Associates, LTD (CHA) will receive an Incentive
Distribution (as defined) of $250,000 per annum. This payment will be made out
of net cash flow after the payment of the first mortgage loan described above.
Cornerstone will receive the remaining cash flow up to the amount of an
Undistributed Preferred Return, defined in the partnership agreement for the
Property. Should cash flow be insufficient to repay the Undistributed Preferred
Return, the remainder will earn interest at a rate increasing over the next nine
years from 7.25% to 11.5%; at December 31, 1997, the cumulative undistributed
preferred return was $15,281,555. Through a buy-sell agreement that becomes
effective in 2002, either the Company or the minority partner will have the
right to withdraw from the partnership by offering to the other its entire
interest in the partnership, or if such offer is not accepted, the right to buy
the other partner's entire interest in the partnership and gain full control of
the asset.
THE GROUND LEASE. A small portion of the site that is below the parking
structure is subject to a long-term ground lease from the Ritz Carlton (see
above). As part of the ground lease agreement, the Ritz Carlton has its ballroom
located in the basement of 191 Peachtree Street.
HISTORICAL OCCUPANCY RATES
As of December 31, 1997 the Property was 95% leased at an average Net
Effective Rent of $24.26 per square foot.
PRINCIPAL TENANTS
The following table lists the principal tenants of 191 Peachtree Street as
of December 31, 1997:
<TABLE>
<CAPTION>
RENTABLE SQUARE FEET
PRINCIPAL ----------------------
BUSINESS PERCENT OF
TENANT ACTIVITY TOTAL TOTAL(1)
- -------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Wachovia Bank................................................................... Banking 382,000 31%
King & Spalding................................................................. Legal 306,000 25%
Powell, Goldstein, Frazer & Murphy.............................................. Legal 125,220 10%
--------- ---
Total........................................................................... 813,220 66%
--------- ---
--------- ---
</TABLE>
- ------------------------
(1) Calculated based on a total of 1,221,000 rentable square feet as of December
31, 1997.
LEASE EXPIRATIONS
See Lease Expiration Schedule above.
500 BOYLSTON STREET
500 Boylston Street, a 25-story, Class A office building containing a total
rentable area of 715,000 square feet, was designed by the team of John Burgee
Architects and Philip Johnson. The project shares a full city block with 222
Berkeley Street, and together, the two buildings are considered the premier
buildings in the Back Bay submarket of Boston. 500 Boylston is comprised of
642,000 square feet of office area on floors three through twenty-five, 8,000
square feet of storage space, and 65,000 square feet of retail area on floors
one and two. Parking for 1,000 cars is shared with 222 Berkeley Street and is
located on three levels below grade. The 500 Boylston Street site contains
approximately 137,000 square feet of land area or 3.15 acres, with approximately
500 feet of frontage on Boylston Street.
32
<PAGE>
500 Boylston Street is located in the Back Bay submarket of Boston. The 500
Boylston Street and 222 Berkeley Street complex occupies a city block bounded by
Boylston Street on the north, St. James Avenue on the south, Clarendon Street on
the west and Berkeley Street on the east. Development of the Back Bay has
historically been subject to restrictive zoning ordinances, aimed at preserving
the character of the area and concentrating commercial development along the
"High Spine", of which Boylston Street is the center. Companies like John
Hancock Mutual Life Insurance, Boston Edison, Bain & Co., Liberty Mutual Life
Insurance and The New England are all headquartered in this submarket.
MARKET INFORMATION
See Market Data--Boston above.
THE PARTNERSHIP
Cornerstone has a 91.5% interest in Five Hundred Boylston West Venture, the
partnership which owns the fee simple title to the Property. The remaining 8.5%
interest is owned by Boylston West 1986 Associates Limited Partnership
("Hines"). Cash flow, excess financing and sales proceeds are shared on a pro
rata basis between the partners with respect to each partnership interest. The
Company consolidates its investment in the partnership which owns 500 Boylston
Street. In addition, through buy-sell agreements that become effective in 2007
with respect to each partner, either the Company or Hines will have the right to
withdraw from the partnership by offering to the other its entire share in the
partnership, or if such offer is not accepted, the right to buy the other
partner's entire interest in the partnership and gain full control in the
underlying asset. The Property is managed by Hines under a long-term management
agreement.
HISTORICAL OCCUPANCY RATES
As of December 31, 1997 the Property was 100% leased at an average Net
Effective Rent of $26.08 per square foot.
PRINCIPAL TENANTS
The following table lists the principal tenants of 500 Boylston Street as of
December 31, 1997:
<TABLE>
<CAPTION>
RENTABLE SQUARE FEET
----------------------
PERCENT OF
TENANT PRINCIPAL BUSINESS ACTIVITY TOTAL TOTAL(1)
- --------------------------------------------- --------------------------------------------- --------- -----------
<S> <C> <C> <C>
Massachusetts Financial Services............. Financial Services 359,000 50%
New England Financial........................ Insurance/Financial Services 213,000 30%
Towers, Perrin, Forster & Crosby............. Human Resources Consulting 44,000 6%
--------- ---
Total.................................... 616,000 86%
--------- ---
--------- ---
</TABLE>
- ------------------------
(1) Calculated based on a total of 715,000 rentable square feet as of December
31, 1997.
33
<PAGE>
LEASE EXPIRATIONS
See Lease Expiration Schedule above.
SIXTY STATE STREET
Sixty State Street, a 38-story, Class A office building containing a total
rentable area of 823,000 square feet, was designed by Skidmore, Owings & Merrill
Architects. The project is located on the northeast corner of State and Congress
Streets and is considered one of the premier office buildings in Boston's
Financial District. The exterior facade consists of granite and reflective
glass. The building's irregular shape yields 11 sides and thus, substantial
window-office space. Built in 1978 on a 1.35-acre site, the building has three
levels of below grade parking capable of accommodating 215 vehicles. The project
has benefited from substantial renovation projects and meticulous maintenance
and therefore looks and operates like a new building.
The project is well located and convenient to all forms of public
transportation and scores of cultural attractions. Most notably, the building
overlooks the adjacent Faneuil Hall Market Place and the Government Center
Transit Station. In addition, its location provides convenient commuter access
from Boston's suburbs. A Houlihan's restaurant and a white tablecloth-dining
club called The Bay Tower Club provide additional amenities to the project.
The ground under Sixty State Street is leased to the leasehold owner,
Marshall Field, through December 28, 2067. The lease payments on the ground
lease are $398,896 per annum throughout the term.
MARKET INFORMATION
See Market Data--Boston above.
OWNERSHIP STRUCTURE
On December 31, 1997, Cornerstone purchased the second mortgage on Sixty
State Street. The mortgage is a cash flow mortgage through which all the
economic benefits/risks (subject to the first mortgage) will inure to the
Company. The Company controls all major decisions regarding management and
leasing. The total purchase price for the second mortgage was $131.5 million.
The $78.4 million first mortgage on the Property has been recorded by the
Company as an $89.6 million liability as a result of its above-market interest
rate. Cornerstone will account for the transaction as an equity investment in
real estate.
HISTORICAL OCCUPANCY RATES
As of December 31, 1997 the Property was 98% leased.
PRINCIPAL TENANTS
The following table lists the principal tenants of Sixty State Street as of
December 31, 1997:
<TABLE>
<CAPTION>
RENTABLE SQUARE FEET
----------------------
PERCENT OF
TENANT PRINCIPAL BUSINESS ACTIVITY TOTAL TOTAL(1)
- --------------------------------------------- --------------------------------------------- --------- -----------
<S> <C> <C> <C>
Hale & Dorr.................................. Legal 273,000 33%
The Pioneer Group, Inc....................... Financial Services 141,000 17%
ITT/Sheraton................................. Hospitality 90,000 11%
--------- ---
Total.................................... 504,000 61%
--------- ---
--------- ---
</TABLE>
- ------------------------
(1) Calculated based on a total of 823,000 rentable square feet as of December
31, 1997.
34
<PAGE>
LEASE EXPIRATIONS
See Lease Expiration Schedule above.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Company is subject to tenant and
property related claims. It is the opinion of management, after consultation
with outside counsel, that the resolution of these claims will not have a
material effect on the financial position or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of stockholders of the Company was held on October 27,
1997 for the purpose of considering and voting upon the following matters:
(1) a proposal to approve the Company's purchase (the "DIHC Acquisition") of
the DIHC Properties and certain secured and unsecured loans from PGGM and
DIHC in exchange for up to 34,187,500 shares of the Company's Common
Stock (approximately 41% of the Company's Common Stock at such time),
$259,548,000 in cash and promissory notes for $250,000,000 pursuant to
that certain Stock Purchase Agreement, dated as of August 18, 1997,
between the Company and DIHC and that certain Loan Purchase Agreement,
dated as of August 18, 1997, between the Company and PGGM (the "DIHC
Acquisition Proposal");
(2) a proposal to amend the Articles of Incorporation to include new
provisions designed to cause the Company to become a "domestically
controlled REIT" under U.S. tax laws (the "Acquisition Amendment
Proposal");
(3) a proposal to amend the Articles of Incorporation to increase the number
of authorized shares of Common Stock from 100,000,000 to 250,000,000 (the
"Authorized Shares Amendment Proposal"); and
(4) a proposal to amend the Articles of Incorporation to include a provision
clarifying the mechanics of settling trades on the New York Stock
Exchange (the "NYSE Amendment Proposal" and collectively, the
"Proposals").
The holders of record of the Company's Common Stock at the close of business
on September 22, 1997 (the "Record Date") were entitled to vote at the Special
Meeting. On the Record Date, there were 48,856,742 shares of Common Stock
outstanding, each of which was entitled to one vote with respect to each
Proposal. Approval of the DIHC Acquisition Proposal required the affirmative
vote of a majority of the votes cast, provided that the total votes cast
represented over 50% in interest of the outstanding shares of Common Stock on
the Record Date. Approval of the other Proposals required the affirmative vote
of a majority of outstanding shares of Common Stock. All of the Proposals were
approved. The following table sets forth the voting results with respect to each
Proposal:
<TABLE>
<CAPTION>
NO. OF VOTES NO. OF VOTES NO. OF
PROPOSAL CAST FOR CAST AGAINST ABSTENTIONS
- ----------------------------------------------------- ------------ ------------ -----------
<S> <C> <C> <C>
DIHC Acquisition..................................... 35,123,908 136,803 143,031
Acquisition Amendment................................ 35,240,796 93,315 69,631
Authorized Share Amendment........................... 33,157,214 2,168,132 78,396
NYSE Amendment....................................... 40,792,510 29,584 56,550
</TABLE>
35
<PAGE>
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 New York,
Frankfurt and Dusseldorf Stock Exchanges. Quotations of the Common Stock in
New York are made in United States Dollars. Quotations in Dusseldorf and
Frankfurt are made in Deutsche Marks. On April 21, 1997, Cornerstone
completed its initial U.S. public offering of 16.1 million shares of Common
Stock at $14 per share. The high and low sales prices on the New York Stock
Exchange for each quarter of 1997 in which the Company was listed were as
follows:
SALES PRICE
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
- ---------------------------------------------------------------------------
2nd Quarter............................................................... $ 15.38 $ 14.25
3rd Quarter.............................................................. $ 19.50 $ 15.25
4th Quarter.............................................................. $ 20.00 $ 17.69
</TABLE>
The high and low sales prices (in Deutsche Marks) on the Frankfurt Stock
Exchange for each quarter of 1996 and 1997 were as follows:
SALES PRICE
<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C> <C>
1996
- --------------------------------------------------------------------
1st Quarter........................................................ DM22.70 DM20.10
2nd Quarter....................................................... DM20.80 DM20.00
3rd Quarter....................................................... DM22.55 DM20.50
4th Quarter....................................................... DM24.70 DM22.10
1997
- --------------------------------------------------------------------
1st Quarter........................................................ DM28.25 DM23.90
2nd Quarter....................................................... DM27.50 DM24.80
3rd Quarter....................................................... DM33.80 DM26.20
4th Quarter....................................................... DM34.50 DM29.00
</TABLE>
The high and low sales prices (in Deutsche Marks) on the Dusseldorf Stock
Exchange for each quarter of 1996 and 1997 were as follows:
SALES PRICE
<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C> <C>
1996
- --------------------------------------------------------------------
1st Quarter........................................................ DM22.50 DM20.30
2nd Quarter....................................................... DM20.80 DM20.10
3rd Quarter....................................................... DM22.55 DM20.50
4th Quarter....................................................... DM24.30 DM21.10
1997
- --------------------------------------------------------------------
1st Quarter........................................................ DM28.20 DM23.40
2nd Quarter....................................................... DM26.70 DM24.70
3rd Quarter....................................................... DM33.60 DM26.40
4th Quarter....................................................... DM34.50 DM29.50
</TABLE>
36
<PAGE>
The closing quotation of the Company's Common Stock on March 26, 1998 was
U.S. $18 5/16 on the New York Stock Exchange, DM32.8 on the Frankfurt Stock
Exchange and DM32.8 on the Dusseldorf Stock Exchange.
As of March 26, 1998, there were approximately 127 holders of record of the
Common Stock.
For 1997, Cornerstone paid distributions to its shareholders of $0.60 per
share on January 31, 1997 (to stockholders of record as of December 30, 1996);
$0.30 per share on April 30, 1997 (to stockholders of record as of March 21,
1997); $0.30 per share on July 31, 1997 (to stockholders of record as of June
20, 1997); $0.30 per share on October 31, 1997 (to stockholders of record as of
September 19, 1997); and $0.14 per share on November 26, 1997 (to stockholders
of record as of October 31, 1997).
The Company intends to continue to pay cash distributions to its
stockholders. It is expected that distributions will be made on a quarterly
basis in 1998 and, in accordance with the Company's qualification as a REIT,
will be equal to at least 95% of the Company's taxable income. The Company
intends that at least 85% of all distributions from income earned during any
taxable year will be made prior to the end of such taxable year. No assurance
can be given as to the amounts of future distributions since they are subject to
the Company's funds from operations, earnings, financial condition, and such
other factors as the Board of Directors deem relevant.
On January 31, 1997, April 30, 1997 and July 31, 1997, through a dividend
reinvestment plan available to all German shareholders, the Company issued
243,907, 141,733 and 175,796 shares of Common Stock, respectively, to such
shareholders and received proceeds of approximately $3,717,000, $2,228,000 and
$2,640,000, respectively. Such shares were not registered under the Securities
Act of 1933, as amended (the "Securities Act") and were issued and sold to
persons outside the United States.
On July 25, 1997, the Company issued 6,896,550 and 4,586,210 shares of
Common Stock to NYSTRS and Rodamco, respectively, upon conversion of all the
outstanding shares of the Company's 8% Cumulative Convertible Preferred Stock
and 8% Cumulative Convertible Preferred Stock, Series A which were held by
NYSTRS and Rodamco, respectively. Such shares were not registered under the
Securities Act and were issued to NYSTRS and Rodamco in an exempt transaction
pursuant to Section 3(a)(9) of the Securities Act.
On October 28, 1997, as part of the consideration paid by the Company in
connection with the DIHC Acquisition, the Company issued 34,185,500 shares of
Common Stock to DIHC and PGGM. See "Recent Developments--DIHC Portfolio." Such
shares were not registered under the Securities Act and were offered and sold to
DIHC and PGGM in a private offering pursuant to Section 4(2) of the Securities
Act. Subsequently, all of these shares were registered under the Securities Act
pursuant to the Company's shelf registration statement (No. 333-47149) which
became effective on March 10, 1998.
37
<PAGE>
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>
1997 1996 1995 1994 1993(1)
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA:
Real estate investments before
accumulated depreciation......................... $ 2,187,525 $ 799,662 $ 706,988 $ 571,831 $ 576,764
Total assets....................................... 2,051,481 766,180 586,089 477,996 515,792
Long-term debt..................................... 706,178 400,142 369,600 130,500 141,638
Credit facility debt............................... 187,000 -- -- 236,467 235,677
Total liabilities.................................. 940,062 442,375 403,927 400,640 407,964
Redeemable preferred stock......................... $ -- $ 162,743 $ -- $ -- $ --
OPERATING DATA:
Revenues........................................... $ 173,911 $ 116,908 $ 92,387 $ 85,574 $ 65,827
Expenses........................................... 134,041 106,646 90,427 88,084 70,361
Gain (loss) on interest rate swap.................. 99 4,278 (7,672) -- --
Minority interest.................................. 2,368 1,519 3,417 3,899 1,214
Extraordinary loss................................. 54 3,925 4,445 581 --
Net income (loss).................................. $ 37,547 $ 9,096 ($ 13,574) ($ 6,990) ($ 5,748)
Net income
per common share............................... $ 0.63 $ 0.19 ($ 0.94) ($ 0.53) ($ 0.43)
Dividends declared
Per common share............................... $ 1.04 $ 1.20 $ 1.16 $ 1.16 $ 1.15
Payments to stockholders:
OTHER DATA:
Cash Flow from:
Operations..................................... $ 65,922 $ 34,522 $ 20,036 $ 28,968 $ 20,077
Investing...................................... (462,837) (57,259) (135,527) (1,762) 13,240
Financing...................................... 306,842 129,800 110,725 (33,141) (24,137)
Funds From Operations(2)........................... $ 68,308 $ 34,719 $ 21,424 $ 15,562 $ 20,525
</TABLE>
- ------------------------
(1) Effective December 31, 1993, the financial statements of NWC have been
consolidated with the financial statements of the Company.
(2) Funds From Operations ("FFO") is a calculation which is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") and is not
indicative of either net income or cash flow from operations as calculated
in accordance with GAAP. The Company makes certain additional adjustments to
FFO which are not contemplated in the NAREIT definition as disclosed in Item
7 of this Form 10-K.
See Item 7 below for a discussion of the selected financial data.
38
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Selected Consolidated
Financial and Operating Data set forth above and the Consolidated Financial
Statements and Notes included herein.
When used in the following discussion, the words "believes", "anticipates",
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties, which could
cause actual results to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions of these forward-looking
statements, which may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
CONSOLIDATION. Cornerstone's principal source of income is rental revenues
received through its investment in eleven fee simple investments and five
controlled real estate partnerships. The $28.4 million increase in Net Income is
due to the following changes described in the captions below in more detail: an
increase in total Property Income of $24.3 million; and an increase in interest
and other income of $8.7 million; these amounts are partially offset by an
increase in interest expense of $2.2 million; an increase in general and
administrative expenses of $1.2 million; a decrease in gain on interest rate
swaps of and extraordinary losses of $0.4 million; and an increase in minority
interest of $0.8 million.
PROPERTY RESULTS. For the years ended December 31, 1997, 1996, and 1995
property results can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Office and Parking Rentals.............................. $ 159,828 $ 111,494 $ 88,548
Less:
Building Operating Expenses........................... 35,962 24,578 19,233
Real Estate Taxes..................................... 25,560 19,610 12,297
Depreciation and Amortization......................... 30,978 24,317 22,572
-------- -------- -------
Total Operating Expenses................................ 92,500 68,505 54,102
-------- -------- -------
Total Property Income................................... $ 67,328 $ 42,989 $ 34,446
-------- -------- -------
-------- -------- -------
</TABLE>
The increase in Property Income from 1996 to 1997 of $24.3 million was due
to an increase in Office and Parking Rentals at One Norwest Center due to lease
buyouts ($0.7 million) and higher net rentals ($0.6 million); an increase in
Property Income at Norwest Center due to increased real estate tax recoveries
($2.2 million); an increase in Property Income at Washington Mutual Tower due to
higher garage income and lower depreciation ($0.8 million); a full year of
operations for Tower 56 as compared to approximately eight months in 1996 ($0.6
million); a full year of operations for One Lincoln Centre as compared to
approximately two months in 1996 ($3.4 million); a full year of operations for
the Frick Building as compared to approximately two months in 1996 ($1.8
million); and increased Property Income due to the acquisition of 527 Madison
Avenue in February ($4.9 million) and the acquisition of the DIHC Portfolio in
October ($10.7 million). These amounts are partially offset by a decrease in
Property Income for 125 Summer Street due to a large roll down in gross rents,
higher real estate taxes and higher depreciation ($1.4 million).
39
<PAGE>
The increase in Property Income from 1995 to 1996 of $8.5 million was due to
a full year of operations for 125 Summer Street as compared to two months of
operations in 1995 ($6.7 million); the acquisition of Tower 56 ($1.6 million),
One Lincoln Centre ($0.5 million), and the Frick Building ($0.3 million) during
1996; an increase in the income of Washington Mutual Tower due to the retirement
of certain deferred leasing costs in 1995 ($1.0 million). These amounts are
partially offset by a decrease in the income of Norwest Center due to an
increase in real estate taxes ($1.6 million).
INTEREST AND OTHER INCOME. Interest and other income was $14,083,000 in
1997, $5,414,000 in 1996, and $3,839,000 in 1995. These amounts primarily
consist of interest earned from short-term investments, interest earned on
mortgage notes receivable, notes receivable from partners, and income from the
advisory contracts.
The 1997 increase in interest and other income of $8.7 million from 1996 is
due to the increase in interest earned on notes receivable of approximately $2.5
million due to the purchase of the first mortgage note and "Buffer Loan" on
Market Square, increased advisory fees of $0.3 million, increased other income
of $0.3 million, and larger working capital balances available for short-term
investment causing interest income on short-term investments to increase by $5.6
million.
The 1996 increase in interest and other income of $1.6 million from 1995 is
due to the interest earned on the Tower 56 mortgage notes receivable of
approximately $1.1 million, increased advisory fees of $0.1 million, increased
management fees of $0.2 million, increased interest and other income of $0.2
million.
INTEREST EXPENSE. Interest expense incurred by Cornerstone relating to its
financing activities was $33,977,000, $31,734,000, and $30,722,000, for 1997,
1996, and 1995, respectively.
The increase in 1997 from 1996 of approximately $2.2 million is primarily
due to an increase of $0.4 million due to a full year of interest expense on the
Tower 56 debt in 1997 as compared to approximately eight months in 1996, the
$250.0 million of purchase money loans associated with the purchase of the DIHC
Portfolio giving rise to $3.2 million of interest expense, increased borrowings
under the Company's line of credit giving rise to $0.9 million of increased
expense, and increased amortization of $0.3 million. These increases are
partially offset by a decrease in interest expense on the Term Loan due to
repayment in March of $1.2 million, a reduction in other interest expense of
$0.5 million, and interest expense savings resulting from the refinancing of the
One Norwest Center debt of $0.9 million.
The increase in 1996 from 1995 of approximately $1.0 million is primarily
due to the interest expense on the Tower 56 debt of $0.9 million, a full year of
interest expense on the 125 Summer Street debt of $3.3 million, increased
interest expense due to the sale of the Norwest Center note of $0.1 million, and
interest expense on the Hines note of $0.8 million. These increases are
partially offset by a decrease in interest expense due to the refinancing of the
Washington Mutual Tower debt of $1.5 million, decreased interest expense on the
Term Loan due to the interest rate reduction of $0.7 million, interest expense
savings resulting from the refinancing of the One Norwest Center debt of $0.9
million, and a reduction of amortization of deferred financing costs of $1.0
million.
GENERAL AND ADMINISTRATIVE EXPENSES. The aggregate amount of Cornerstone's
general and administrative expenses has increased to $7,564,000 in 1997 from
$6,407,000 in 1996 and $5,603,000 in 1995. The increase of $1.2 million in 1997
from 1996 is due to a $0.16 million increase in staff salaries, a $0.16 million
increase in incentive compensation, a $0.1 million increase in profit sharing,
and a $0.14 million increase in the cost of producing the annual report. The
remaining variance of $0.64 million is due to variances in numerous
miscellaneous expense items all of which are less than $0.1 million in size. The
increase in 1996 from 1995 of $0.8 million was due to a full year of
expenditures as a self-administered company.
NET GAIN (LOSS) ON INTEREST RATE SWAPS. 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 net gain of $4,278,000 in 1996
represents an unrealized mark to market gain of $7,403,000 on the forward
interest rate swap partially offset by an extraordinary loss of $3,925,000.
$3,125,000 is due to the termination of a swap relating to the
40
<PAGE>
refinancing of One Norwest Center. The remainder of the realized extraordinary
loss of $800,000 in 1996 is due to certain write-offs of deferred financing
costs and other costs relating to the refinancing of One Norwest Center.
Effective January 16, 1997, the forward swap agreement was terminated for a
total cost of $170,000, giving rise to $99,000 of income in 1997.
MINORITY INTEREST. The increase in minority interest from 1996 to 1997 of
$0.8 million is due to an increase of $0.4 million at Norwest Center due to
higher earnings, and $0.4 million on the DIHC Portfolio.
The decrease in minority interest from 1995 to 1996 of $1.9 million is due
to the purchase of the 10% minority interest in One Norwest Center of $1.6
million and the reduction in the partners' share of earnings from Norwest Center
of $0.3 million.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
CASH FLOW PROVIDED BY (USED ENDED FOR THE YEAR ENDED ENDED
IN) (IN THOUSANDS): DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
- ------------------------------------------------------- ----------------- ------------------ -----------------
<S> <C> <C> <C>
Operating activities................................... $ 65,922 $ 34,522 $ 20,036
Investing activities................................... (462,837) (57,259) (135,527)
Financing activities................................... 306,842 129,800 110,725
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The increase in cash provided by operating activities of $31.4 million is
mainly due to the $28.4 million increase in Net Income. The $28.4 million
increase in Net Income is due to the following changes described in the captions
above in more detail: an increase in total Property Income of $24.3 million; and
an increase in interest and other income of $8.7 million; these amounts are
partially offset by an increase in interest expense of $2.2 million; an increase
in general and administrative expenses of $1.2 million; a decrease in gain on
interest rate swaps of and extraordinary losses of $0.4 million; and an increase
in minority interest of $0.8 million.
Other factors contributing to the increase were a $7.0 million increase in
depreciation and amortization due to the acquisition of additional properties,
plus a $4.3 million decrease in the unrealized gain on interest rate swaps due
to the unwind of the swap in 1997, a $6.3 million increase in the change in
interest payable, a $0.8 million increase in minority interest, and a $4.6
million increase in the change in accounts payable. These amounts are offset by
a $3.9 million reduction in extraordinary losses due to the refinancing of One
Norwest Center, a $1.6 million reduction in the change in prepaid rent and a
$14.5 million reduction due to the change in tenant receivables.
The increase in additions to investment properties is due to the net cash
investment in the DIHC Portfolio, 527 Madison Avenue, and Sixty State Street as
compared to the acquisition of One Lincoln Centre being the only cash
acquisition in 1996.
The increase in cash provided by financing activities of $177.0 million is
due to the following: common equity offering in 1997 providing $225.4 million in
net proceeds; $187.0 million of borrowings under the credit facility in 1997;
the repayment of $97.3 million of debt in 1996 in excess of 1997 due to the
refinancing of the One Norwest Center mortgage; the receipt of $7.1 million more
proceeds under the dividend reinvestment plan in 1997 than 1996; a reduction in
swap termination payments of $6.6 million; and a decrease in restricted cash of
$2.5 million, due to an escrow deposit for the benefit of a mortgage holder
arising from the prepayment of rent by a major tenant in 1996. These amounts are
offset by the $140.0 million preferred offering in 1996; the $32.5 million
repayment of the Deutsche Bank term loan; the $116.0 million of mortgage
proceeds received from One Norwest Center and Tower 56 in 1996; increased
minority distributions of $0.2 million due to the additional partnership
investments; increased issuance costs of $15.6 million; and increased
distributions to stockholders of $44.6 million.
41
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The increase in cash provided by operating activities of approximately $14.5
million is primarily due to the $22.7 million increase in Net Income of the
Company. This amount is increased by the $0.9 million increase in depreciation
and amortization expense, the $0.6 million increase in deferred compensation
resulting from the amortization of the stock grants, the $5.0 million increase
in accounts payable, accrued expenses and other liabilities due to higher
accrued real estate taxes, and the $1.7 million reduction in unbilled rental
revenue due to the aging of tenant leases. This amount is decreased by the $12.0
million change in cash flow as a result of the interest rate swap valuation, the
$0.5 million decrease in extraordinary loss from debt refinancing and the
approximately $1.9 million reduction in minority interest due to the purchase of
the 10% minority interest in One Norwest Center and lower earnings at Norwest
Center, the $1.9 million increase in tenant and other receivables resulting from
a reduction of prepaid expenses and the accrual of real estate tax recoveries at
One Lincoln Centre, and a decrease in accrued interest payable of $0.1 million.
The reduction in cash used in investing activities of approximately $78.3
million is due to the purchase of One Lincoln Centre for $50.1 million, $2.7
million of additional costs relating to the foreclosure on Tower 56, $3.9
million of deferred leasing costs and $0.5 million of additional costs relating
to 125 Summer Street in 1996 as compared to the purchase of 125 Summer Street
for $105.0 million and the purchase of the Tower 56 mortgage notes receivable
for $30.5 million in 1995.
The increase in cash provided by financing activities of approximately $19.1
million is primarily due to the financing of Tower 56 for $18.0 million.
COVERAGE RATIOS. Interest coverage for the year ended December 31, 1997 was
2.11 times as compared to 1.29 times at December 31, 1996. The increase was due
mainly to a reduction of the percentage of liabilities to total assets from 55%
to 46%.
Fixed charge coverage was 1.62 times for the year ended December 31, 1997,
as compared to 1.11 times for the year ended December 31, 1996. The increase was
due to the reduction of the percentage of liabilities to total assets described
above.
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 notes.
Also on August 4, 1995, 3,030,303 preferred shares were issued to Deutsche
Bank for gross proceeds of $50.0 million. The preferred shares are 7 percent
cumulative and convertible into common stock at $16.50 per share any time after
August 4, 2000. 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
stockholders, Cornerstone received proceeds of approximately $2,840,000 and
issued an additional 207,302 shares of common stock to stockholders.
On August 31, 1996, through a dividend reinvestment plan available to all
stockholders, Cornerstone received proceeds of approximately $4,016,000 and
issued an additional 300,589 shares of common stock to stockholders.
On November 8, 1996, through a merger of subsidiaries, the Company issued
$66.5 million (458,621 shares) of 8% Cumulative Convertible Preferred Stock,
Series A, in exchange for $40.0 million cash and the Frick Building. The
preferred shares were converted into the Company's common stock at a conversion
42
<PAGE>
price of $14.50 per share. The proceeds were used to acquire One Lincoln Centre
in Oakbrook Terrace, Illinois.
On November 22, 1996, the Company issued $100.0 million (689,655 shares) of
8% Cumulative Convertible Preferred Stock. The preferred shares were convertible
into the Company's common stock at a conversion price of $14.50 per share.
Portions of the proceeds were used to acquire 527 Madison Avenue in New York on
February 14, 1997 and to repay the Deutsche Bank term loan.
On January 31, 1997, through a dividend reinvestment plan available to all
shareholders, Cornerstone received proceeds of approximately $3,717,000 and
issued an additional 243,907 shares of common stock to stockholders.
On April 21, 1997, the Company received $225,400,000 gross proceeds from the
public placement of 16,100,000 new shares of common stock at a price of $14.00
per share and listed on the New York Stock Exchange through underwriters led by
Merrill Lynch & Co. The net proceeds were used as partial consideration for the
purchase of the DIHC Portfolio.
On April 30, 1997, through a dividend reinvestment plan available to its
German stockholders, Cornerstone received proceeds of approximately $2,228,000
and issued an additional 141,733 shares of common stock to stockholders.
On July 31, 1997, through a dividend reinvestment plan available to its
German stockholders, Cornerstone received proceeds of approximately $2,640,000
and issued an additional 175,796 shares of common stock to stockholders.
On October 27, 1997, the Company increased the authorized shares from
115,000,000 shares of capital stock, without par value, to 265,000,00 shares of
capital stock, without par value, of which 15,000,000 shares are preferred stock
and 250,000,000 shares are common stock.
On October 28, 1997, as consideration for the acquisition of the DIHC
Portfolio, Cornerstone issued 34,185,500 shares of common stock to DIHC and PGGM
as compensation for the acquisition of interests in nine Class A office
buildings and an undeveloped parcel of land.
On October 31, 1997, through a dividend reinvestment plan available to its
German stockholders, Cornerstone received proceeds of approximately $2,518,000
and issued an additional 134,577 shares of common stock to stockholders.
FUNDS FROM OPERATIONS
The Company calculates Funds from Operations ("FFO") based upon guidance
from the National Association of Real Estate Investment Trusts ("NAREIT"). 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. Previously, the Company had adjusted FFO by the
unrealized gain (loss) on interest rate swaps since the swaps were used to hedge
future interest rate risk.
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 Company believes that FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flows from operating
activities, financing activities and investing activities, it provides investors
an understanding of the ability of the Company to incur and service debt and to
make capital expenditures. For cash flows from operating, financing, and
investing activities see the Consolidated Statements of Cash Flows included in
the Consolidated Financial Statements, which are part of this report.
For comparability purposes, the amounts reported in FFO for 1995 differ from
those previously reported to adjust for the revisions to the FFO calculation
recently adopted by the Board of Governors of NAREIT. Additionally, the Company
no longer reports free and deferred rents as an adjustment to FFO since this is
not part of the industry standard. Therefore, included in FFO for 1997, 1996,
and 1995 are $2,697,000, $993,000, and $2,058,000, respectively, of
Cornerstone's share of free and deferred rents.
43
<PAGE>
The table below sets forth the adjustments that were made to the net income
(loss) of the Company for the last three years in the calculation of FFO (in
thousands):
<TABLE>
<CAPTION>
FUNDS FROM OPERATIONS (A)
--------------------------------
<S> <C> <C> <C>
1997 1996 1995
--------- --------- ----------
Net income (loss)........................................... $ 37,547 9,096 ($ 13,574)
NAREIT Adjustments:
Depreciation and amortization............................. 30,978 24,317 22,572
Unrealized (gain) loss.................................... (99) (4,278) 7,672
Extraordinary losses...................................... 54 3,925 4,445
Minority interest adjustments............................. (1,551) (2,011) (1,617)
Other Adjustments:
Amortization on rent notes................................ 1,379 1,242 1,119
Real estate tax adjustment................................ -- 2,428 807
--------- --------- ----------
FUNDS FROM OPERATIONS....................................... 68,308 34,719 21,424
--------- --------- ----------
Preferred Dividends......................................... (10,160) (5,153) (1,449)
--------- --------- ----------
FUNDS FROM OPERATIONS
AVAILABLE FOR COMMON SHARES............................... $ 58,148 $ 29,566 $ 19,975
--------- --------- ----------
--------- --------- ----------
</TABLE>
- ------------------------
(A) Although the Company believes that this table is a full and fair
presentation of the Company's FFO, similarly captioned items may be defined
differently by other REITs, in which case direct comparisons may not be
possible.
The increase in FFO from 1996 to 1997 of approximately $33.6 million is due
to the $28.4 million increase in Net Income due to the following changes
described in the captions above in more detail: an increase in total Property
Income of $24.3 million; and an increase in interest and other income of $8.7
million; these amounts are partially offset by an increase in interest expense
of $2.2 million; an increase in general and administrative expenses of $1.2
million; a decrease in gain on interest rate swaps and extraordinary losses of
$0.4 million; and an increase in minority interest of $0.8 million.
The following factors also contributed to the increase: a $6.7 million
increase in depreciation and amortization due to new property acquisitions, plus
a $4.2 million reduction in unrealized gain on interest rate swaps, plus a $0.5
million reduction in minority adjustments and a $0.1 million increase in rent
note amortization. These amounts are partially offset by the $3.9 million
decrease in extraordinary losses from refinancing One Norwest Center and the
$2.4 million real estate tax adjustment relating to Norwest Center in 1996.
The increase in FFO from 1995 to 1996 of approximately $13.3 million is due
to a full year of operations for 125 Summer Street as compared to two months of
operations in 1995 ($8.7 million); the acquisition of Tower 56 ($2.2 million),
One Lincoln Centre ($0.7 million), and the Frick Building ($0.4 million) during
1996; the increase in interest and other income of $1.6 million, and the
decrease in minority interest of $1.5 million. The increase in interest expense
of $1.0 million and the increase in general and administrative expenses of
approximately $0.8 million offset these amounts.
The Company will seek to continue increasing FFO and the value of its
property portfolio by acquiring additional properties that the Company believes
will produce favorable returns. As part of its ongoing business, the Company
periodically engages in discussions with public and private real estate entities
regarding possible portfolio or asset acquisitions or business combinations.
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 $54.0 million
and accrued interest of approximately $11.0 million for a purchase price of
$30.15 million. The carrying amount of the mortgage notes receivable at December
31,
44
<PAGE>
1995 includes the purchase price, closing adjustments, and related acquisition
costs. The existing owner, Tower 56 Partners, had agreed to a "pre-packaged"
bankruptcy plan through which it would transfer title of Tower 56 to Cornerstone
during the second quarter of 1996. At the time of the transfer, Cornerstone made
a payment of approximately $2.1 million to two of the partners of Tower 56
Partners. Additionally, HRO International, an affiliate of Tower 56 Partners,
manages the building under a five year management agreement for a fee of 3% of
gross revenues and receives one-third of the cash flow above that which provides
Cornerstone a 9% 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% cumulative internal rate of return. On January 5, 1998, Cornerstone
purchased all of HRO International's participation rights described above for a
total of 307,692 common shares. HRO will continue to manage the building for the
same fee under a contract that is cancelable with thirty days' notice.
On October 27, 1997, Cornerstone purchased a $181.0 million 9.75% first
mortgage note on Market Square for total consideration of $194.0 million giving
rise to an effective interest rate of 8.6%. The loan matures on December 1,
2007. Additionally, the Company receives amortization based on a twenty-five
year schedule.
On October 27, 1997, Cornerstone purchased a Buffer Loan, with accrued
principal and interest of $46.2 million, payable from the partnership which owns
Market Square. The Buffer Loan accrues interest at a rate of 11% per annum and
is payable from cash flow, refinancing or sales proceeds from Market Square in
excess of the first mortgage.
MORTGAGE INDEBTEDNESS
On December 31, 1997, the Company purchased the second mortgage on Sixty
State Street in Boston which it consolidates on its balance sheet. The property
has a first mortgage in the amount of approximately $78.4 million, which matures
in January 2005. The loan requires amortization based on a 30 year schedule and
bears interest at a rate of 9.5%. Since the interest rate was above market rates
for similar loans at the time the Company purchased the building the Company has
booked the loan at $89.6 million, giving rise to an effective interest rate of
6.84%.
On October 27,1997, the Company entered into four mortgage loans with PGGM
and its wholly owned subsidiary DIHC (together "PGGM") as purchase money
financing for the DIHC Portfolio. The mortgages, which are cross-collateralized,
encumber the Dearborn Land, TransPotomac Plaza 5, Charlotte Plaza, 527 Madison
Avenue, One Lincoln Centre, 200 Galleria, and the first mortgage note on Market
Square, total $250.0 million, are interest only, with no prepayment rights.
The first loan is a $10.0 million note at zero percent interest; the
interest rate on the loan will increase to 7.28% upon the sale of the Dearborn
Land. The loan matures in October 2000.
The second note is a $55.0 million note at 7.28% interest, which matures in
October 2000. Upon repayment of this note and the $10.0 million note described
above, PGGM will release the liens on the Dearborn Land, TransPotomac Plaza 5,
and Charlotte Plaza.
The third note is a $65.0 million note at 7.47%, which is due in October
2004. Upon repayment of this note, PGGM will release the liens on 527 Madison
Avenue and One Lincoln Centre.
The fourth note is a $120.0 million note at 7.54%, which is due in October
2007. Upon repayment of this note, PGGM will release the liens on Market Square
and 200 Galleria.
On August 2, 1996, the Company refinanced its $98.0 million Interest-Bearing
Notes, collateralized by One Norwest Center, by entering into a $98.0 million
Deed of Trust and Mortgage Notes with Massachusetts Mutual Life Insurance
Company, Connecticut General Life Insurance Company, and American General Life
Insurance Company. The Mortgage Notes bear interest at a rate of 7.50% and
mature on July 1, 2001. Additionally, the Company is required to make payments
of principal based upon a thirty-year amortization schedule. Upon the closing of
the mortgage debt, Cornerstone paid a prepayment penalty of approximately $2.0
million (Extraordinary loss) to the Interest-Bearing Noteholders. Unamortized
Interest-Bearing Notes financing costs of approximately $0.2 million
(Extraordinary loss) were written-off in connection with the refinancing.
45
<PAGE>
Cornerstone was obligated to pay to Deutsche Bank New York Branch, for an
interest rate swap agreement used to fix the interest rates on the
Interest-Bearing Notes, an amount equal to 0.752% on a notional amount of $107.0
million throughout the term of the Interest-Bearing Notes. This amount was
treated as a yield adjustment on the long-term debt and has been included in
interest expense. On August 2, 1996, this swap was terminated at an approximate
cost of $1.5 million, which was treated as an extraordinary loss.
As protection against market interest rates rising prior to the maturity of
the Interest Bearing Notes, on September 29, 1993, Cornerstone entered into a
forward interest rate swap agreement with Deutsche Bank AG. The interest rate
swap agreement was revised as part of the refinancing of One Norwest Center. The
forward interest rate swap agreement was for a fixed rate of 7.14% on a notional
amount of $92.8 million for a period of five years beginning July 1, 2001.
Effective January 16, 1997, this forward swap was terminated.
On April 25, 1996, the Company, through its wholly-owned subsidiary
CStone-New York, Inc., executed a promissory note with Northwestern Mutual Life
Insurance Company and received proceeds of $18.0 million. The Tower 56 loan
bears interest at a rate of 7.674% with a 30-year principal amortization and
matures on April 24, 2003. The loan is collateralized by a first mortgage on
Tower 56 and assignment of all leases and rents. The proceeds of the loan were
used to replenish working capital.
OTHER INDEBTEDNESS.
On August 8, 1995, the existing $32.5 million term loan was extended through
December 31, 2003 and assigned to Deutsche Bank AG London at an interest rate of
5%. The term loan had a $32.5 million balance at December 31, 1996 and 1995. The
loan was prepaid on March 18, 1997, since, under its terms, it was required to
be prepaid upon Cornerstone's initial public offering in the United States.
Effective January 1, 1996, in connection with the acquisition of the 10%
minority interest in 1700 Lincoln Limited, the Company entered into a $12.9
million convertible promissory note payable to Hines Colorado Limited ("HCL").
The note payable pays monthly interest only at the lesser of 8.11% or LIBOR plus
50 basis points. The note is convertible at the option of HCL into shares of
common stock at $14.30 per share after January 1, 1997. At maturity of the note
on January 1, 2001, Cornerstone has the right to redeem the note in exchange for
common shares of the Company at the lower of the market price or $14.30 per
share.
At December 31, 1996, Cornerstone had a $10.0 million revolving line of
credit with Bankers Trust Company. The line was available for general corporate
and acquisition purposes at a rate equivalent to an adjusted Eurodollar rate.
The line was also available for the issuance of standby letters of credit at a
rate of 0.15% and expired on November 7, 1997. At December 31, 1996, none of the
credit line had been drawn upon.
On October 27, 1997, the Company entered into a three-year, $350.0 million
acquisition line of credit syndicated by Bankers Trust and The Chase Manhattan
Bank. The line bears interest at a rate of LIBOR plus 1.10% to 1.40% depending
on the Company's then current leverage ratio. Borrowings under the facility at
December 31, 1997 were $187.0 million at an average interest rate of 8.12%. The
line is also available for the issuance of standby letters of credit.
STOCKHOLDERS' DISTRIBUTIONS.
Cornerstone intends to distribute at least 95% of its taxable income to
maintain its qualification as a REIT. The Company 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 1997,
Cornerstone paid distributions to its shareholders of $0.60 per share on January
31, 1997 (to stockholders of record as of December 30, 1996); $0.30 per share on
April 30, 1997 (to stockholders of record as of
46
<PAGE>
March 21, 1997); $0.30 per share on July 31, 1997 (to stockholders of record as
of June 20, 1997); $0.30 per share on October 31, 1997 (to stockholders of
record as of September 19, 1997); and $0.14 per share on November 26, 1997 (to
stockholders of record as of October 31, 1997).
LIQUIDITY.
At December 31, 1997, the Company had $24,730,000 in cash and cash
equivalents and $1,903,000 in restricted cash. Restricted cash is being held by
the Mortgage Servicer for the One Norwest Center and Washington Mutual Tower
mortgage loans, representing real estate tax and insurance escrows. In addition,
Cornerstone anticipates it will receive distributions from real estate
partnerships and rents under tenant leases on a monthly basis that will be used
to cover normal operating expenses and pay distributions to its stockholders.
At December 31, 1997 Cornerstone had $187.0 million outstanding of its
$350.0 million line of credit. The line of credit is available for general
corporate purposes and was repaid in full with the Company's secondary equity
offering in February 1998. The line of credit contains certain restrictive
covenants including; (i) a limitation on the Company's dividend to 90% of funds
from operations and 110% of cash available for distribution; (ii) total
liabilities to total property asset value cannot exceed 55%; (iii) adjusted
EBITDA to interest expense may not be less than 2.25 to 1.00; (iv) fixed charge
coverage may not be less than 1.75 to 1.00; and (v) total property asset value
to secured indebtedness may not be less than 2.50 to 1.00.
Additionally, under the terms of its agreement with PGGM and DIHC,
Cornerstone may not borrow funds if such borrowing would increase the ratio of
the Company's total debt to market capitalization above 45%.
Based upon its cash reserves and other sources of funds, Cornerstone has
sufficient liquidity to meet its cash requirements for the foreseeable future.
OTHER MATTERS.
The Company is not aware of any environmental issues at any of its
properties. The Company believes it has sufficient insurance coverage at each of
its properties. The Company's leases with the majority of its tenants require
the tenants to pay most operating expenses and increases in common area
maintenance expenses, which reduces the Company's exposure to increases in costs
and operating expenses resulting from inflation.
In the ordinary course of business, the Company is in the process of
acquiring new accounting and property management software that will eliminate
year 2000 software concerns at the corporate level. The new software is expected
to be installed by the fourth quarter of 1998. Management is in the process of
completing a survey with all of its property managers to make sure there are no
year 2000 issues at any of the property management firms that manage its
properties. Currently, Cornerstone is not aware of any year 2000 issues that
would have a material effect on the financial position, results of operations,
and liquidity of its business.
Norwest Corporation and its subsidiary, Norwest Bank Denver N.A., tenants of
the Company, provided approximately 20%, 26%, and 31% of office and parking
rentals for the years ended December 31, 1997, 1996, and 1995, respectively.
Included in deferred tenant receivables is approximately $31,349,000 and
$28,014,000 due from Norwest Corporation at December 31, 1997 and 1996,
respectively.
Four of the Company's 18 Properties are located in the Downtown Boston
market and account for approximately 29% of the Company's office and parking
rentals as of December 31, 1997. This concentration of assets makes the Company
particularly vulnerable to adverse changes in economic conditions in the Boston
metropolitan area. A significant decline in these economic conditions could have
a material adverse effect on the Company.
47
<PAGE>
During 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"), No. 131 "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"), and No. 132 "Employers' Disclosures About Pensions
and Other Postretirement Benefits" ("SFAS 132"), which are effective for fiscal
years beginning after December 15, 1997.
SFAS 130 specifies the presentation and disclosure requirements for
reporting comprehensive income which includes those items which have been
formerly reported as a component of stockholders' equity. SFAS 131 establishes
the disclosure requirements for reporting segment information. SFAS 132 changes
the financial statement disclosure requirements for pensions and other
postretirement benefits.
Management believes that, when adopted, SFAS 130, 131, and 132 will not have
a significant impact on the Company's financial statements.
SUBSEQUENT EVENTS.
On January 5, 1998, the Company purchased the participation rights in the
cash flow and residual value of Tower 56 from the former participants for
307,692 shares of Common Stock. All cash flow and the residual value of Tower 56
will now inure to the Company.
On January 13, 1998, the Company declared a dividend of $0.30 per common
share, payable on February 27, 1998 to all stockholders of record as of January
30, 1998.
On January 20, 1998, the Company formed an UPREIT. The Company and its
subsidiaries transferred to the operating partnership, or entities wholly-owned
by the operating partnership, substantially all of the Company's Properties. The
Company is the sole general partner of the operating partnership and also holds
limited partnership interests therein. The purpose of forming an UPREIT
structure is to create an acquisition vehicle attractive to sellers whose sale
of properties to the Company in exchange for UPREIT units may be characterized
as a tax-deferrable capital contribution rather than a taxable sale.
On January 28, 1998, the Company purchased Corporate 500 Centre in
Deerfield, Illinois. Constructed between 1986 and 1990, Corporate 500 Centre
consists of four Class A office buildings, comprising approximately 680,000
rentable square feet. The total purchase price of the Property was approximately
$150.0 million, approximately $15.0 million of which was paid in UPREIT units
priced at $18.50 per unit. The Company financed a portion of the costs to
acquire the Property with $51.0 million drawn under its Revolving Credit
Facility and an $80.0 million mortgage loan from Bankers Trust Company at an
interest rate of LIBOR plus 100 basis points. The mortgage loan will mature on
July 20, 2002. The Company has also entered into an interest rate swap agreement
with Bankers Trust Company that has effectively fixed the interest rate on the
mortgage loan at 6.63%.
On February 6, 1998, the Company completed a secondary public offering of
14,375,000 shares of Common Stock at $18.25 per share. The shares were placed in
the United States through a syndicate of seven investment banks led by Merrill
Lynch & Co. Net proceeds to the Company were approximately $247.9 million
($262,344,000 gross proceeds less an underwriting discount of $13,728,125 and
expenses of approximately $750,000). The net proceeds were used to repay the
Company's acquisition line of credit and for working capital purposes.
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.
48
<PAGE>
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 May 20, 1998, 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.
The following documents are filed as part of this annual report:
<TABLE>
<CAPTION>
PAGE NUMBER
--------------
<S> <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, 1997 and 1996........................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995........ F-4
Consolidated Statements of Stockholders' Investment for the years ended December 31, 1997, 1996
and 1995......................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995........ F-6
Notes to Consolidated Financial Statements........................................................ F-7 to F-18
Schedule III...................................................................................... F-19 to F-26
Schedule IV....................................................................................... F-27
</TABLE>
(b) Reports on Form 8-K:
1. Form 8-K/A dated January 22, 1997
Item 7-- Financial Statements and Exhibits. Financial statements
reflecting the acquisition of Tower 56 and One Lincoln Centre.
2. Form 8-K dated January 29, 1997
Item 5-- Other Events. Board of Directors approval to acquire 527
Madison Avenue for approximately $67 million
Item 7-- Financial Statements and Exhibits. Agreement of Sale and
Purchase of 527 Madison Avenue
49
<PAGE>
3. Form 8-K/A dated February 21, 1997
Item 2-- Acquisition or Disposition of Assets. Clarification on the
Frick Building acquisition.
Item 7-- Financial Statements and Exhibits. Clarification on the pro
forma financial statements of One Lincoln Centre and Tower 56.
4. Form 8-K/A dated February 24, 1997
Item 7-- Financial Statements and Exhibits. Financial statements
reflecting the acquisition of 527 Madison Avenue.
5. Form 8-K/A dated March 10, 1997
Amendment of the report of Ernst & Young LLP, Independent Auditors,
contained in the Company's 8-K/A dated February 24, 1997.
6. Form 8-K dated July 28, 1997
Item 5-- Other Events. Conversion of NYSTERS and RODAMCO preferred
stock.
Item 7-- Financial Statements and Exhibits. Press release announcing
conversion of NYSTERS and RODAMCO preferred stock.
7. Form 8-K dated August 21, 1997
Item 5-- Other Events. Agreement of Cornerstone Properties Inc. and
Dutch Institution Holding Company, Inc. to merge their trophy
office properties.
Item 7-- Financial Statements and Exhibits. Press release announcing
agreement of Cornerstone Properties Inc. and Dutch Institution
Holding Company, Inc. to merge their trophy office properties
as well as supplemental information regarding the merger.
8. Form 8-K/A dated September 18, 1997
Item 7-- Financial Statements and Exhibits. Certain combined financial
statements as of June 30, 1997 for One Ninety One Peachtree
Tower, Market Square Office Building, Five Hundred Boylston
Street Office Building, Two Twenty Two Berkeley Street Office
Building, Charlotte Office Tower, 200 Galleria, 99 Canal
Center, 11 Canal Center, Transpotomac Plaza, Building Five and
the Dearborn Land.
9. Form 8-K dated October 30, 1997
Item 2-- Acquisition or Disposition of Assets. Shareholder approval of
Dutch Institutional Holding Company, Inc. Acquisition and
Acquisition of Dutch Institutional Holding Company, Inc.
Portfolio.
Item 7-- Financial Statements and Exhibits. Press releases announcing
shareholder approval of Dutch Institutional Holding Company,
Inc. Acquisition and Acquisition of Dutch Institutional Holding
Company, Inc. Portfolio.
10. Form 8-K dated December 3, 1997
Item 5-- Other Events. Resignation of Dr. Rolf-E. Breuer as Chairman of
the Board and election of John Moody as Chairman of the Board.
Item 7-- Financial Statements and Exhibits. Press release announcing
the resignation of Dr. Rolf-E. Breuer as Chairman of the Board
and election of John Moody as Chairman of the Board.
50
<PAGE>
11. Form 8-K dated December 19, 1997
Item 7-- Financial Statements and Exhibits. Certain combined financial
statements as of September 30, 1997 for One Ninety One
Peachtree Tower, Market Square Office Building, Five Hundred
Boylston Street Office Building, Two Twenty Two Berkeley Street
Office Building, Charlotte Office Tower, 200 Galleria, 99 Canal
Center, 11 Canal Center, Transpotomac Plaza, Building Five and
the Dearborn Land.
12. Form 8-K dated January 14, 1998
Item 2-- Acquisition or Disposition of Assets. Acquisition of Sixty
State Street and Corporate 500 Centre.
Item 7-- Financial Statements and Exhibits. Financial statements
reflecting the acquisition of Sixty State Street and Corporate
500 Centre. Press release announcing the acquisition of Sixty
State Street and Corporate 500 Centre.
13. Form 8-K dated February 5, 1998
Item 5-- Other Events. Pricing of public offering of 12.5 million
shares of common stock at $18.50 per share.
Item 7-- Financial Statements and Exhibits. Press release announcing
the pricing of a public offering of 12.5 million shares of
common stock at $18.50 per share.
14. Form 8-K dated March 27, 1998
Item 7-- Financial Statements and Exhibits. Supplemental Information to
Fourth Quarter 1997 Earnings Release.
15. Form 8-K dated March 27, 1998
Item 5-- Other Events. Cornerstone's intent to acquire interests in two
California Properties. Cornerstone's fourth quarter and fiscal
year 1997 results.
Item 7-- Financial Statements and Exhibits. Press releases announcing
Cornerstone's intent to acquire interests in two California
Properties and Cornerstone's fourth quarter and fiscal year
1997 results.
51
<PAGE>
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.
<TABLE>
<S> <C> <C>
CORNERSTONE PROPERTIES INC.
(Registrant)
/s/ JOHN S. MOODY
---------------------------------------------
John S. Moody
CEO, DIRECTOR AND CHAIRMAN OF THE BOARD
</TABLE>
Dated: March 30, 1998
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.
Chief Executive Officer,
/s/ JOHN S. MOODY Director and Chairman of
- ------------------------------ the Board
John S. Moody (Principal Executive
Officer)
Chief Administrative
/s/ THOMAS P. LOFTUS Officer, Secretary and
- ------------------------------ Controller
Thomas P. Loftus (Principal Accounting
Officer)
Senior Vice President and
/s/ KEVIN P. MAHONEY Chief Financial Officer
- ------------------------------ (Principal Financial
Kevin P. Mahoney Officer)
*/S/ CECIL D.
CONLEE
- ------------------------------ Director
Cecil D. Conlee
*/S/ GEORGE A.
DAVIS
- ------------------------------ Director
George A. Davis
*/S/ BLAKE
EAGLE
- ------------------------------ Director
Blake Eagle
*/S/ DR. KARL-LUDWIG
HERMANN
- ------------------------------ Director
Dr. Karl-Ludwig Hermann
*/S/ HANS C.
MAUTNER
- ------------------------------ Director
Hans C. Mautner
*/S/ DR. LUTZ
MELLINGER
- ------------------------------ Director
Dr. Lutz Mellinger
*/S/ GERALD
RAUENHORST
- ------------------------------ Director
Gerald Rauenhorst
59
<PAGE>
<TABLE>
<C> <S>
*/S/ MICHAEL J.G.
TOPHAM
- ------------------------------ Director
Michael J.G. Topham
*/S/ DICK VAN DEN
BOS
- ------------------------------ Director
Dick van den Bos
*/S/ JAN VAN DER
VLIST
- ------------------------------ Director
Jan van der Vlist
</TABLE>
- ------------------------
* By John S. Moody, as Attorney-in-Fact for the persons indicated
Dated: March 30, 1998
60
<PAGE>
CORNERSTONE PROPERTIES INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders 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, 1997 and 1996, and for each of the three years in
the period ended December 31, 1997, 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 financing statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cornerstone
Properties Inc. and Subsidiaries as of December 31, 1997 and 1996 and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1997, 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, present fairly, in all material
respects, the information required to be included therein.
New York, New York Coopers & Lybrand L.L.P.
February 24, 1998
F-2
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
(DOLLAR AMOUNTS IN
THOUSANDS)
ASSETS
Investments, at cost: (Notes 1, 2 and 4)
Land............................................................................. $ 260,542 $ 68,395
Buildings, leasehold interests and improvements.................................. 1,559,085 612,567
Mortgage notes receivable, inclusive of $13,065,000 unamortized premium.......... 240,253 --
Deferred lease costs............................................................. 127,645 118,700
------------ ----------
2,187,525 799,662
Less: Accumulated depreciation and amortization.................................. 229,652 198,686
------------ ----------
Total investments.............................................................. 1,957,873 600,976
Cash and cash equivalents (Note 1)................................................. 24,730 114,803
Restricted cash (Note 3)........................................................... 1,903 4,426
Other deferred costs, net of accumulated amortization of $1,998,000 and
$1,140,000....................................................................... 5,728 3,562
Deferred tenant receivables (Notes 1 and 11)....................................... 38,531 34,747
Tenant and other receivables, net (Note 1)......................................... 7,584 2,405
Notes receivable................................................................... 1,652 2,911
Other assets....................................................................... 13,480 2,350
------------ ----------
TOTAL ASSETS....................................................................... $ 2,051,481 $ 766,180
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Long-term debt, inclusive of $11,209,000 unamortized premium (Note 4).............. $ 706,178 $ 400,142
Credit facility (Note 5)........................................................... 187,000 --
Accrued interest payable........................................................... 4,134 1,082
Accrued real estate taxes payable.................................................. 13,401 13,222
Common Stockholders' distribution payable.......................................... -- 12,366
Accounts payable and accrued expenses.............................................. 18,363 6,468
Unearned revenue and other liabilities............................................. 10,986 9,095
------------ ----------
TOTAL LIABILITIES.................................................................. 940,062 442,375
------------ ----------
Minority Interest (Note 1)......................................................... 15,420 (17,478)
------------ ----------
Commitments and Contingencies (Notes 2, 4, 5, 7 and 13)
Redeemable Preferred Stock; (1997-344,828; 1996-1,493,104) shares authorized;
(1997-0; 1996-1,148,276) shares issued and outstanding; $166,500,000 redemption
value (Note 6)................................................................... -- 162,743
------------ ----------
Stockholders' Investment (Note 7)
7% Cumulative Convertible Preferred Stock, $16.50 stated value; 15,000,000 shares
authorized; 3,030,303 shares issued and outstanding............................ 50,000 50,000
Common Stock, no par value; 250,000,000 shares authorized; (1997-83,191,819;
1996-20,609,754) shares issued and outstanding
Paid-in capital.................................................................... 1,048,187 160,577
Accumulated deficit................................................................ -- (30,789)
Deferred compensation.............................................................. (2,188) (1,248)
------------ ----------
TOTAL STOCKHOLDERS' INVESTMENT..................................................... 1,095,999 178,540
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT..................................... $ 2,051,481 $ 766,180
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Office and parking rentals.................................................. $ 159,828 $ 111,494 $ 88,548
Interest and other income................................................... 14,083 5,414 3,839
---------- ---------- ----------
TOTAL REVENUES.......................................................... 173,911 116,908 92,387
---------- ---------- ----------
EXPENSES
Building operating expenses................................................. 35,962 24,578 19,233
Real estate taxes........................................................... 25,560 19,610 12,297
Interest expense............................................................ 33,977 31,734 30,722
Depreciation and amortization............................................... 30,978 24,317 22,572
General and administrative.................................................. 7,564 6,407 5,603
---------- ---------- ----------
TOTAL EXPENSES.......................................................... 134,041 106,646 90,427
---------- ---------- ----------
39,870 10,262 1,960
---------- ---------- ----------
OTHER INCOME (EXPENSES)
Net gain (loss) on interest rate swaps (Note 8)............................. 99 4,278 (7,672)
Minority Interest........................................................... (2,368) (1,519) (3,417)
---------- ---------- ----------
Income (loss) before extraordinary item....................................... 37,601 13,021 (9,129)
Extraordinary loss............................................................ (54) (3,925) (4,445)
---------- ---------- ----------
NET INCOME (LOSS)............................................................. $ 37,547 $ 9,096 $ (13,574)
---------- ---------- ----------
---------- ---------- ----------
INCOME APPLICABLE TO PREFERRED STOCK.......................................... $ (10,160) $ (5,153) $ (1,449)
---------- ---------- ----------
---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK.................................. $ 27,387 $ 3,943 $ (15,023)
---------- ---------- ----------
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER COMMON SHARE...................... $ 0.63 $ 0.39 $ (0.67)
---------- ---------- ----------
---------- ---------- ----------
EXTRAORDINARY LOSS PER COMMON SHARE........................................... $ -- $ (0.20) $ (0.27)
---------- ---------- ----------
---------- ---------- ----------
BASIC NET INCOME (LOSS) PER COMMON SHARE (NOTES 1 AND 9)...................... $ 0.63 $ 0.19 $ (0.94)
---------- ---------- ----------
---------- ---------- ----------
DILUTED NET INCOME (LOSS) PER COMMON SHARE (NOTES 1 AND 9).................... $ 0.63 $ 0.19 $ (0.94)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OUTSTANDING PAID-IN OUTSTANDING PAID-IN ACCUMULATED DEFERRED
SHARES CAPITAL SHARES CAPITAL DEFICIT COMPENSATION TOTAL
----------- --------- ----------- --------- ------------ ------------- ---------
Balance, January 1, 1995............ 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
Common Stock Distributions
($1.16/shr)....................... -- (18,485) -- -- -- -- (18,485)
----------- --------- ----------- --------- ------------ ------------- ---------
BALANCE, DECEMBER 31, 1995.......... 19,959,515 $ 181,477 3,030,303 $ 50,000 $ (39,885) $ (2,236) $ 189,356
Common Stock issued for 10%
Partnership purchase.............. 349,650 5,000 -- -- -- -- 5,000
Restricted Stock Grant Vesting...... -- -- -- -- -- 988 988
Net Income.......................... -- -- -- -- 9,096 -- 9,096
Dividend Reinvestment, net of $212
in stock issuance costs........... 300,589 3,804 -- -- -- -- 3,804
Preferred Stock Distributions....... -- (5,153) -- -- -- -- (5,153)
Common Stock Distributions
($1.20/shr)....................... -- (24,551) -- -- -- -- (24,551)
----------- --------- ----------- --------- ------------ ------------- ---------
BALANCE, DECEMBER 31, 1996.......... 20,609,754 $ 160,577 3,030,303 $ 50,000 $ (30,789) $ (1,248) $ 178,540
Common Stock Proceeds, net of
$17,204 in stock issuance costs... 16,100,000 208,196 -- -- -- -- 208,196
Preferred Stock Conversion.......... 11,482,760 162,515 -- -- -- -- 162,515
Dividend Reinvestment, net of $295
in stock issuance costs........... 696,013 10,808 -- -- -- -- 10,808
PGGM and DIHC Stock (Note 2)........ 34,185,500 547,000 -- -- -- -- 547,000
Restricted Stock Grants............. 107,292 1,761 -- -- -- (1,868) (107)
Restricted Stock Grant Vesting...... -- -- -- -- -- 928 928
Net Income.......................... -- -- -- -- 37,547 -- 37,547
Option Exercise..................... 10,500 150 -- -- -- -- 150
Preferred Stock Distributions....... -- (10,160) -- -- -- -- (10,160)
Common Stock Distributions
($1.04/shr)....................... -- (32,660) -- -- (6,758) -- (39,418)
----------- --------- ----------- --------- ------------ ------------- ---------
BALANCE, DECEMBER 31, 1997.......... 83,191,819 $1,048,187 3,030,303 $ 50,000 $ -- $ (2,188) $1,095,999
----------- --------- ----------- --------- ------------ ------------- ---------
----------- --------- ----------- --------- ------------ ------------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLAR AMOUNTS IN THOUSANDS)
(NOTE 16)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................... $ 37,547 $ 9,096 $ (13,574)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization............................................. 31,826 24,801 23,877
Deferred compensation amortization........................................ 928 988 434
Unrealized (gain) loss on interest rate swaps............................. -- (4,278) 7,672
Net gain on interest rate swaps........................................... (99) -- --
Extraordinary loss........................................................ 54 3,925 4,446
Unbilled rental revenue................................................... (3,015) (1,408) (3,088)
Increase (decrease) in accrued interest payable........................... 3,052 (3,245) (3,142)
Minority interest share of income......................................... 2,368 1,519 3,417
Increase in tenant and other receivables and other assets................. (16,920) (2,461) (564)
Increase in accounts payable, accrued expenses and other liabilities...... 10,181 5,585 558
---------- ---------- ----------
Total adjustments......................................................... 28,375 25,426 33,610
---------- ---------- ----------
Net cash provided by operating activities................................. 65,922 34,522 20,036
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property............................................ (464,096) (58,501) (137,403)
Repayment of notes receivable............................................... 1,259 1,242 2,068
Loan to a property manager.................................................. -- -- (192)
---------- ---------- ----------
Net cash used in investing activities..................................... (462,837) (57,259) (135,527)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock offering......................................... 225,400 -- 90,448
Proceeds from preferred stock offering...................................... -- 140,000 50,000
Borrowings under mortgage loans............................................. -- 116,000 239,100
Borrowings (repayments) under credit facility............................... 187,000 -- (236,467)
Repayment of term loan...................................................... (32,500) -- --
Repayments under mortgage loans............................................. (1,094) (98,384) --
Proceeds from dividend reinvestment plan.................................... 11,104 4,016 2,840
Net payments for swap terminations and prepayment costs..................... (216) (6,804) (2,453)
Decrease (increase) in restricted cash...................................... 2,524 (33) 339
Stock and debt issuance costs............................................... (20,715) (5,154) (6,788)
Distributions to minority partners.......................................... (2,717) (2,503) (3,970)
Distributions to preferred stockholders..................................... (10,160) (5,153) --
Distributions to common stockholders........................................ (51,784) (12,185) (22,324)
---------- ---------- ----------
Net cash provided by financing activities................................. 306,842 129,800 110,725
---------- ---------- ----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.............................. (90,073) 107,063 (4,766)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................. 114,803 7,740 12,506
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR........................................ $ 24,730 $ 114,803 $ 7,740
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. NATURE OF COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE COMPANY'S BUSINESS
Cornerstone Properties Inc. ("Cornerstone" or the "Company") is a
self-advised equity real estate investment trust ("REIT") which owns, through
subsidiaries, interests in 18 Class A office properties ("Properties")
encompassing approximately 10.3 million rentable square feet. The Company was
formed in May 1981 as ARICO America Realestate Investment Company, a Nevada
corporation, to invest in major commercial real estate projects in North
America.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Cornerstone,
its wholly-owned qualified REIT subsidiaries and controlled partnerships. NWC
Limited Partnership ("NWC"), Third and University Limited Partnership ("Third
Partnership"), Two Twenty Two Berkeley Venture ("222 Berkeley"), Five Hundred
Boylston West Venture ("500 Boylston") and One Ninety One Peachtree Associates
("191 Peachtree") have been consolidated since Cornerstone has a majority
interest in the economic benefits and is or has the right to become managing
general partner at its sole discretion. All significant intercompany balances
and transactions have been eliminated in consolidation.
INVESTMENT PROPERTY
The costs of the buildings, garages, leasehold interests 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.
Cornerstone and the controlled partnerships hold the Properties for
long-term investment and such investments are carried at cost less accumulated
depreciation. Whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable (such as a significant adverse
action by a regulator or a significant physical change in the property), the
Company's policy is to assess any impairment in value by making a comparison of
the current and projected cash flows of each property over its remaining useful
life (undiscounted and without interest charges) to the carrying amount of each
property. Such carrying amount would be adjusted, if necessary, to estimated
fair value to reflect the impairment in value of the property. No significant
adjustments have been made in the accompanying financial statements.
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. Marketing costs
(which include sales facility costs, model office costs, building models, etc.)
and leasing 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.
F-7
<PAGE>
OTHER DEFERRED COSTS
Costs incurred in the underwriting and issuance of long-term debt, revolving
lines of credit and 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. Deferred organization and start-up
costs related to investments in real estate partnerships are being amortized
over a period of 60 months. As part of the October 27, 1997 acquisition (see
Note 2), the Company purchased several management contracts to which Dutch
Institutional Holding Company, Inc. ("DIHC") was a party. The price paid for
these contracts is being amortized over four years.
PREMIUM ON MORTGAGE NOTES
The premium on mortgage notes is amortized using the effective interest
method over the life of the related mortgage note.
REVENUE RECOGNITION
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. Expense reimbursement and
escalation income for the years ended December 31, 1997, 1996 and 1995 was
approximately $36,990,000, $28,230,000 and $20,716,000, respectively.
An allowance for doubtful accounts of approximately $268,000 and $105,000
has been recorded at December 31, 1997 and 1996, respectively, relating to
tenant and other receivables. Bad debt expense totaled approximately $221,000
and $40,000 during 1997 and 1996, respectively.
INTEREST RATE SWAP AGREEMENTS
The Company accounts for its interest rate swap agreements as hedges if the
swap is designated as a hedge and effectively reduces the exposure to the
Company of market interest rate changes. Changes in the market value of these
interest rate swap agreements are deferred and recognized in income at the
expiration or termination of the underlying debt. Forward interest rate swap
agreements that do not meet hedge criteria are accounted for using
mark-to-market accounting, recognizing any unrealized gain or loss on the
instrument in the period in which it is outstanding. When swaps are extinguished
at the same time as the underlying debt instrument, the cost to extinguish the
swap is treated as extraordinary gain or loss. When a swap remains in place
after the underlying instrument matures, it is accounted for on a mark-to-market
basis. The swap termination is accounted for as ordinary gain or loss when it is
extinguished with no underlying debt instrument in place.
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 REIT
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 stockholders in computing its taxable income. All taxable
earnings and profits of Cornerstone since inception have been distributed to the
stockholders.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
financial statement presentation.
F-8
<PAGE>
INCOME (LOSS) PER COMMON SHARE
During the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS
128"). SFAS 128 specifies the computation, presentation and disclosure
requirements for earnings per share.
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, 1997 and 1996, Cornerstone had on deposit with major
financial institutions substantially all of its 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.
MINORITY INTEREST
Minority Interest represents the Company's partner's capital account
balances in NWC, Third Partnership, 222 Berkeley, 500 Boylston and 191
Peachtree. Debit balances in certain of these capital accounts originated
through special cash distributions in excess of the partner's share of income in
accordance with certain provisions of the respective partnership agreements.
Realizability of the debit balances is continually monitored by analyzing pro
forma sales proceeds calculations, whose terms are specified in the respective
partnership agreements.
RECENTLY ISSUED ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"), No. 131 "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131") and No. 132 "Employers' Disclosures About Pensions and
Other Postretirement Benefits" ("SFAS 132"), which are effective for fiscal
years beginning after December 15, 1997.
SFAS 130 specifies the presentation and disclosure requirements for
reporting comprehensive income which includes those items which have been
formerly reported as a component of stockholders' equity. SFAS 131 establishes
the disclosure requirements for reporting segment information. SFAS 132 changes
the financial statement disclosure requirements for pensions and other
postretirement benefits.
Management believes that, when adopted, SFAS 130, 131 and 132 will not have
a significant impact on the Company's financial statements.
ESTIMATES AND RISKS
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 recoverability and depreciable lives of investment property and the
recoverability of deferred tenant receivables. Actual results could differ from
those estimates.
In the ordinary course of business, the Company is in the process of
acquiring new accounting and property management software that will eliminate
year 2000 software concerns at the corporate level. The new software is expected
to be installed by the fourth quarter of 1998. Management is in the process of
completing a survey with all of its property managers to make sure there are no
year 2000 issues at any of the property management firms that manage its
properties. Currently, Cornerstone is not aware of any year 2000 issues that
would have a material effect on the financial position or results of operations
of the Company.
F-9
<PAGE>
2. PROPERTIES
The following table summarizes Cornerstone's interest in real estate
investments at December 31, 1997:
<TABLE>
<CAPTION>
COMPLETED/ NET RENTABLE OWNERSHIP
PROPERTY LOCATION ACQUIRED SQUARE FEET % LEASED INTEREST NOTES
- ------------------------------ ------------------------------ ----------- ------------ ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
One Norwest Center............ Denver, Colorado 1983 1,188,000 99% 100%
Norwest Center................ Minneapolis, Minnesota 1988 1,118,000 98% 50% A
Washington Mutual Tower....... Seattle, Washington 1988 1,155,000 97% 50% B
125 Summer Street............. Boston, Massachusetts 1989/1995 464,000 99% 100%
Tower 56...................... New York, New York 1983/1996 162,000 98% 100%
One Lincoln Centre............ Oakbrook Terrace, Illinois 1986/1996 297,000 96% 100%
The Frick Building............ Pittsburgh, Pennsylvania 1902/1996 341,000 89% 100%
527 Madison Avenue............ New York, New York 1986/1997 216,000 100% 100% C
191 Peachtree Street.......... Atlanta, Georgia 1991/1997 1,221,000 95% 80% D,E,F
Market Square................. Washington, D.C. 1990/1997 689,000 95% 59% D,G
500 Boylston Street........... Boston, Massachussetts 1988/1997 715,000 100% 91.5% D,H
222 Berkeley Street........... Boston, Massachusetts 1991/1997 531,000 100% 91.5% D,H
Charlotte Plaza............... Charlotte, North Carolina 1982/1997 613,000 94% 100% D
200 Galleria.................. Atlanta, Georgia 1985/1997 433,000 91% 100% D
11 Canal Center............... Alexandria, Virginia 1986/1997 70,000 84% 100% D
99 Canal Center............... Alexandria, Virginia 1986/1997 138,000 99% 100% D
TransPotomac Plaza 5.......... Alexandria, Virginia 1983/1997 96,000 99% 100% D
Sixty State Street............ Boston, Massachusetts 1979/1997 823,000 98% 100% I,J
</TABLE>
(A) While the Company's stated interest in the partnership which owns Norwest
Center is 50%, its economic interest in the Property is significantly larger
due to priority distributions it receives on its invested capital base. For
the twelve months ended December 31, 1997, the Company's share of earnings
and cash distributions from the partnership which owns Norwest Center was
79.3%.
(B) While the Company's stated interest in the partnership which owns Washington
Mutual Tower is 50%, its economic interest in the Property is significantly
larger due to priority distributions it receives on its invested capital
base. For the twelve months ended December 31, 1997, the Company received
100% of the cash distributions from the partnership which owns Washington
Mutual Tower.
(C) On February 14, 1997, Cornerstone, through its wholly-owned subsidiary,
CStone-527 Madison, Inc., purchased 527 Madison Avenue in Midtown Manhattan,
New York for approximately $67 million. The acquisition was financed with
the proceeds from the Company's offering of Preferred Stock, completed in
November 1996.
(D) On October 27, 1997, the Company acquired interests in nine Class A office
properties comprising approximately 4.5 million rentable square feet in
Alexandria, Virginia (3 properties), Atlanta (2 properties), Boston (2
properties), Charlotte and Washington, D.C., as well as an undeveloped
parcel of land in Chicago (collectively, the "DIHC Properties"). The Company
acquired the DIHC Properties for a purchase price of approximately $1.06
billion, consisting of approximately 34 million shares of Common Stock,
approximately $260 million in cash and $250 million in promissory notes. The
cash portion of the acquisition was financed with proceeds from the
Company's IPO and $54 million from its Revolving Credit Facility. Financial
results from October 27, 1997 through December 31, 1997 for the DIHC
Properties are included in the accompanying consolidated financial
statements.
(E) While the Company's stated interest in the partnership which owns 191
Peachtree Street is 80%, its economic interest is significantly larger since
it has acquired the first mortgage note on the property in the amount of
$145 million which earns interest at 9.375% and will receive a priority
distribution on its acquired capital base. In addition, in 1996 and 1997,
the partner in the transaction, CH Associates, Ltd., received an annual
incentive distribution of $250,000, which, the Company expects, it will
continue to receive under the partnership agreement through February 28,
2000, with the Company receiving the remainder of the cash flow of the
property.
(F) The partnership which owns 191 Peachtree Street has a ground lease agreement
for a portion of the land upon which the project has been constructed. The
agreement requires annual payments of $5,000
F-10
<PAGE>
through January 31, 1998, $45,000 through January 31, 2002 and $75,000
through January 31, 2008. Thereafter, the annual rent increases $2,500 per
year until the expiration date of January 31, 2087. The partnership records
ground rental expense relating to this agreement on a straight-line basis.
The ground lease is renewable for an additional 99 years.
(G) At December 31, 1997, the Company owned the two loans on Market Square. In
January 1998, the Company acquired partnership interests with a stated
interest of approximately 59% in the partnerships which own Market Square
with the option to purchase an additional 1%. The Company's economic
interest is significantly larger since it has acquired the first mortgage
note on the property in the amount of $181 million which earns interest at
9.75% and will receive a priority distribution on its acquired capital base.
In addition, the Company acquired a "buffer loan", with accrued principal
and interest of $46.2 million, which accrues interest at a rate of 11% per
annum and is payable from cash flow, refinancing or sales proceeds from
Market Square in excess of the first mortgage. During 1996, the Company
received 100% of the cash flow from the property.
(H) Distributions of cash flow and sales and refinancing proceeds are shared in
proportion to the Company's 91.5% partnership interest and Hines Interest
Limited Partnership and/or its affiliates' ("Hines") 8.5% partnership
interest.
(I) On December 31, 1997, Cornerstone purchased the second mortgage on Sixty
State Street located in the heart of Boston's Central Business District. The
mortgage is a cash flow mortgage through which all the economic
benefits/risks (subject to the first mortgage) will inure to the Company.
The Company will control all major decisions regarding management and
leasing. The total purchase price for the second mortgage was $131.5
million. The $78.4 million first mortgage on the property has been recorded
by the Company as an $89.6 million liability as a result of its above-market
interest rate. Cornerstone will account for the transaction as an equity
investment in real estate.
(J) The second mortgage, which the Company holds, relates only to the
improvements on Sixty State Street in Boston. The ground under Sixty State
Street is leased to the leasehold owner, Marshall Field, through December
28, 2067. The lease payments on the ground lease are $398,896 per annum
throughout the term.
The future minimum lease payments to be received by the Company under
noncancellable operating leases as of December 31, 1997 are as follows (Dollar
amounts in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998............................................................ $ 178,979
1999............................................................ 172,376
2000............................................................ 162,125
2001............................................................ 150,950
2002............................................................ 133,018
Thereafter...................................................... 642,082
---------
Total........................................................... $1,439,530
---------
---------
</TABLE>
3. RESTRICTED CASH
Restricted cash is being held by escrow agents for real estate taxes and
insurance on certain mortgage loans.
F-11
<PAGE>
4. LONG-TERM DEBT
The following table sets forth certain information regarding the
consolidated debt obligations of the Company as of December 31, 1997, including
mortgage obligations relating to the Properties. All of this debt, with the
exception of the Convertible Promissory Note due 2001, is nonrecourse to the
Company. However, notwithstanding the nonrecourse indebtedness, the lender may
have the right to recover deficiencies from the Company in certain
circumstances, including fraud, misappropriation of funds and environmental
liabilities.
<TABLE>
<CAPTION>
INTEREST MATURITY PREPAYMENT
PROPERTY AMORTIZATION RATE DATE PROVISIONS 12/31/97 12/31/96
- ---------------------------------- -------------- ------------ --------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Convertible Promissory Note due Interest only
2001(A)......................... 8.11%max(B) Jan-2001 Not prepayable $12,926,000 $12,926,000
One Norwest Center................ 30 year 7.50 Aug-2001 (C) 96,780,000 97,706,000
Norwest Center.................... Interest only 8.74 Dec-2005 Not prepayable 110,000,000 110,000,000
Washington Mutual Tower........... Interest only 7.53 Nov-2005 (D) 79,100,000 79,100,000
Interest
125 Summer Street................. only(E) 7.20 Jan-2003 (F) 50,000,000 50,000,000
Tower 56.......................... 30 year 7.67 May-2003 (G) 17,742,000 17,910,000
Dearborn Land(H).................. Interest only 0.00(I) Oct-2000 Not prepayable 10,000,000 --
TransPotomac Plaza 5 and Charlotte Interest only
Plaza(H)........................ 7.28 Oct-2000 Not prepayable 55,000,000 --
527 Madison Avenue and One Lincoln Interest only
Centre(H)....................... 7.47 Oct-2004 Not prepayable 65,000,000 --
Market Square(J) and 200 Interest only
Galleria(H)..................... 7.54 Oct-2007 Not prepayable 120,000,000 --
Sixty State Street(K)............. 30 year 6.84 Jan-2005 (L) 89,630,000 --
Corporate(M)...................... Interest only 5.00 -- 32,500,000
----------- -----------
$706,178,000 $400,142,000
----------- -----------
</TABLE>
- ------------------------
(A) The lender, Hines, has the right to convert the note into common stock at a
conversion price of $14.30 per share. At maturity, the Company is entitled
to repay the principal of the note with common stock priced at the lesser of
$14.30 per share or the then existing share price.
(B) Lesser of 30-day LIBOR plus 0.5% or 8.11%.
(C) No prepayment until July 24, 1998. From July 24, 1998 through July 23, 2000,
prepayment fee is greater of 1% of outstanding principal balance or Treasury
Yield Maintenance (as defined). Beginning July 24, 2000, prepayment fee is
Treasury Yield Maintenance. The loan may be repaid at par during last 90
days of loan.
(D) No prepayment rights through September 30, 1998, prepayable thereafter, with
a prepayment fee of the greater of: (1) 1.0% of the outstanding principal
balance or (2) Treasury Yield Maintenance (as defined). Prepayment without
fee for the six months prior to the maturity date.
(E) Interest only payments through January 1, 2001, with a 25-year amortization
schedule thereafter.
(F) Beginning July 1, 1999, prepayment fee is greater of Treasury Yield
Maintenance or 1% of outstanding principal balance. Prepayment without fee
on or after three months prior to maturity date.
(G) Open to prepayment after December 31, 1999 with a prepayment fee of greater
of 1.0% of principal balance or Treasury Yield Maintenance (as defined).
Prepayment without fee during the three months prior to the maturity date.
(H) The four notes arising from the acquisition of DIHC are cross-collateralized
having the effect of forming a "collateral pool" for the underlying notes.
(I) The interest rate on the loan will increase to 7.28% upon the sale of the
Dearborn Land.
(J) The collateral for this loan is a pledge of the $181 million first mortgage
loan on Market Square which the Company purchased from Stichting
Pensioenfonds Voor de Gezondheid Geestelijke en Maatschappelijke Belangen
("PGGM").
(K) While the face amount of the loan is $78,420,000, since the interest rate is
9.5%, the Company has recorded the debt at $89,630,000, which is the market
value of the loan at the time of the closing based upon a market interest
rate for similar quality loans of 6.84%.
(L) Beginning February 1, 2000, the prepayment fee is equal to the greater of 2%
or Treasury Yield Maintenance (as defined). The 2% maximum is reduced by
0.25% per annum thereafter until it reaches 1%. The loan is prepayable
during the last 90 days.
(M) On March 19, 1997, as required under the terms of the agreement, this term
loan was repaid with proceeds from the Company's IPO.
F-12
<PAGE>
The combined aggregate amount of maturities for all long-term borrowings for
1998 through 2002 are $0, $0, $65,000,000, $105,651,000 and $0, respectively.
Since most of the long term debt is property related, there are restrictive
covenants that limit the total amount of indebtedness that can be placed on
individual properties.
5. CREDIT FACILITY
The Company has a $350 million Revolving Credit Facility with Bankers Trust
Company and The Chase Manhattan Bank for acquisitions and general working
capital purposes as well as the issuance of letters of credit. The interest rate
on the line of credit depends on the Company's leverage ratio at the time of
borrowing and will be at a spread of 1.10% to 1.40% over LIBOR or the Prime Rate
at the borrowers option. The letters of credit will be priced at the applicable
Eurodollar credit spread. The line of credit expires on October 27, 2000. As of
December 31, 1997, $187 million of the credit line was outstanding at a rate of
approximately 8.12%. The line of credit contains certain restrictive covenants
including; (i) a limitation on the Company's dividend to 90% of funds from
operations and 110% of cash available for distribution; (ii) total liabilities
to total property asset value cannot exceed 55%; (iii) adjusted EBITDA to
interest expense may not be less than 2.25 to 1.00; (iv) fixed charge coverage
may not be less than 1.75 to 1.00; and (v) total property asset value to secured
indebtedness may not be less than 2.50 to 1.00.
6. REDEEMABLE PREFERRED STOCK
On July 25, 1997, the Redeemable Preferred shares were converted into
11,482,760 shares of common stock. The contractual conversion was based upon
exceeding a $16.00 average common share price for a period of twenty days.
7. STOCKHOLDERS' INVESTMENT
The 7% Cumulative Convertible Preferred Stock is convertible into common
stock at $16.50 per share at any time after August 4, 2000.
On April 22, 1997, Cornerstone completed its initial U.S. public offering
("IPO") of 16.1 million shares of common stock at a price of $14 per share for
gross proceeds of $225.4 million.
The following tables summarize the stock options and restricted stock grants
for certain officers of the Company as of December 31, 1997:
<TABLE>
<CAPTION>
STOCK OPTIONS
<S> <C> <C> <C> <C> <C>
OPTIONS
GRANTED EXERCISE
(NO. OF PRICE OPTIONS OPTIONS
DATE OF GRANT SHARES) (PER SHARE) VESTING EXERCISABLE EXERCISED
- ---------------------- ------------- ------------- ---------------------- ----------- -----------
June, 1995............ 787,500 $ 14.30 20%/yr, 10yr term 304,500 10,500
March, 1997........... 880,000 $ 14.50 20%/yr, 10yr term 0 0
November, 1997........ 70,000 $ 18.44 20%/yr, 10yr term 0 0
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
RESTRICTED STOCK GRANTS
<S> <C> <C> <C>
SHARES
GRANTED VALUE AT GRANT
(NO. OF DATE (PER
DATE OF GRANT SHARES) SHARE) VESTING (A)
- --------------- ------------- --------------- ------------------------------------------------
August, 1995 167,622 $ 14.30 The grant will fully vest with respect to
13.333% on June 30, 1996, 1997, 1998, 1999 and
with respect to 46.668% on June 30, 2000.
March, 1997 100,000 $ 16.40 The grant will fully vest with respect to
13.333% on June 30, 1998, 1999, 2000, 2001 and
with respect to 46.668% on June 30, 2002.
November, 1997 12,500 $ 18.44 The grant will fully vest with respect to
13.333% on June 30, 1998, 1999, 2000, 2001 and
with respect to 46.668% on June 30, 2002.
</TABLE>
- ------------------------
(A) Deferred compensation of approximately $4,265,000 is being amortized
according to the respective amortization schedule for each vesting period
noted above, with the unamortized balance shown as a deduction from
stockholders' investment. Regular dividends are paid on restricted stock.
The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Accordingly, no compensation cost has been
recognized for the options described above since the exercise price equaled the
fair value at the grant date. Had compensation cost for these options been
determined based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, the Company's net income and net income per common
share would have been reduced to the following pro forma amounts (Dollar amounts
in thousands, except per share amounts):
<TABLE>
<CAPTION>
NET INCOME PER
NET INCOME COMMON SHARE
----------- -----------------
<S> <C> <C>
Year ended December 31, 1997......................................................... $ 36,887 $ 0.61
Year ended December 31, 1996......................................................... $ 8,673 $ 0.17
</TABLE>
The Company has computed the value of all stock options using the
Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSUMPTIONS
- ---------------------------------------------------------------------------------------------
Risk-free interest rate...................................................................... 6.56% 6.31%
Assumed dividend yield....................................................................... 7.50% 7.50%
Expected term................................................................................ 6 years 6 years
Assumed volatility........................................................................... 10.0% 10.0%
</TABLE>
8. NET GAIN ON INTEREST RATE SWAPS
The Company had an outstanding swap agreement that was terminated on January
16, 1997 for a total cost of $170,000 resulting in a realized gain of $99,000.
F-14
<PAGE>
9. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share for 1995 and 1996 was restated to reflect
the adoption of SFAS 128. The table sets forth the calculation of income (loss)
per common share for 1997, 1996 and 1995 (Dollar amounts in thousands, except
per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
BASIC DILUTED BASIC DILUTED BASIC DILUTED
---------- ---------- --------- --------- ---------- ----------
Proceeds upon exercise of options.................... $ -- $ 25,162 $ -- $ 12,334 $ -- $ 12,334
Market price of shares average for the respective
year............................................... $ -- $ 17.13 $ -- $ 14.36 $ -- $ 15.26
Treasury shares that could be repurchased
(options).......................................... -- 1,469 -- 859 -- 808
Option shares outstanding............................ -- 1,727 -- 863 -- 863
Weighted common stock equivalent shares (Excess
shares under option over Treasury shares that could
be repurchased).................................... -- 236 -- 4 -- 54
Weighted average common shares outstanding........... 43,572 43,572 20,411 20,411 15,910 15,910
---------- ---------- --------- --------- ---------- ----------
Adjusted weighted average common shares
outstanding........................................ 43,572 43,808 20,411 20,415 15,910 15,964
Net income (loss) for the period..................... $ 37,547 $ 37,547 $ 9,096 $ 9,096 $ (13,574) $ (13,574)
Income applicable to preferred stock................. $ (10,160) $ (10,160) $ (5,153) $ (5,153) $ (1,449) $ (1,449)
---------- ---------- --------- --------- ---------- ----------
Net income (loss) available to common shares......... $ 27,387 $ 27,387 $ 3,943 $ 3,943 $ (15,023) $ (15,023)
Income (loss) per common share....................... $ 0.63 $ 0.63 $ 0.19 $ 0.19 $ (0.94) $ (0.94)
</TABLE>
10. RETIREMENT PLANS
Effective July 1, 1995, the eligible employees of the Company participate in
a noncontributory age-weighted profit sharing plan. The Company's contribution
to such plan was approximately $190,200 and $91,200 for the years ended December
31, 1997 and 1996, respectively.
Effective July 1, 1995, the eligible employees of the Company also
participate in a contributory savings plan 401(k). 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% of contributions up to 5% of such
employee's salary with an annual maximum matching contribution of $4,000 per
employee. The Company's matching contribution was approximately $52,600 and
$46,000 for the years ended December 31, 1997 and 1996, respectively.
F-15
<PAGE>
11. CONCENTRATION
Norwest Corporation and its subsidiary, Norwest Bank Denver N.A., tenants of
the Company, provided approximately 20%, 26% and 31% of office and parking
rentals for the years ended December 31, 1997, 1996 and 1995, respectively.
Included in deferred tenant receivables is approximately $31,349,000 and
$28,014,000 due from Norwest Corporation at December 31, 1997 and 1996,
respectively.
Four of the Company's 18 Properties are located in the Downtown Boston
market and account for approximately 29% of the Company's office and parking
revenues as of December 31, 1997. This concentration of assets makes the Company
particularly vulnerable to adverse changes in economic conditions in the Boston
metropolitan area. A significant decline in these economic conditions could have
a material adverse effect on the Company.
12. RELATED PARTY TRANSACTIONS
The Company has entered into $250 million of mortgage debt with two of its
major stockholders, DIHC and PGGM, as further described in Note 4.
13. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company is subject to tenant and
property related claims. It is the opinion of management, after consultation
with outside counsel, that the resolution of these claims will not have a
material effect on the financial position or results of operations of the
Company.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cornerstone is required to disclose the fair value of financial instruments
for which it is practicable to estimate that value. Except for the items noted
below, the fair value of the Company's financial instruments approximates their
carrying values at December 31, 1997:
NOTES RECEIVABLE
The fair value of the note receivable at December 31, 1997 is approximately
$1,564,000 based on the present value of expected future note payments using a
market discount rate of 6.57%.
LONG-TERM DEBT
The Company determines the fair value based on the discounted future cash
flows at a discount rate that approximates the Company's effective current
borrowing rate:
<TABLE>
<CAPTION>
12/31/97 12/31/97
FAIR VALUE CARRYING VALUE
------------- --------------
<S> <C> <C>
One Norwest Center....................................................... $ 99,504,000 $ 96,780,000
Norwest Center........................................................... 123,701,000 110,000,000
Washington Mutual Tower.................................................. 82,423,000 79,100,000
125 Summer Street........................................................ 50,842,000 50,000,000
Tower 56................................................................. 18,507,000 17,742,000
TransPotomac Plaza 5 and Charlotte Plaza................................. 56,671,000 55,000,000
527 Madison Avenue and One Lincoln Centre................................ 68,070,000 65,000,000
Market Square and 200 Galleria........................................... 127,915,000 120,000,000
</TABLE>
F-16
<PAGE>
15. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following selected pro forma operating data is presented as if the
offerings, sales and conversions of the various securities sold by the Company
(and the application of the proceeds thereof) and the various acquisitions of
the Company that occurred after January 1 of the respective fiscal year had
occurred at January 1 of the respective fiscal year. The pro forma financial
information is presented for informational purposes only and may not be
indicative of results that would have actually occurred had the aforementioned
transactions been consummated at the date indicated. Also, they may not be
indicative of the results that may be achieved in the future.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Pro forma total revenues............................................... $ 322,276,000 $ 315,940,000
Pro forma net income before extraordinary items........................ 85,158,000 81,687,000
Pro forma net income................................................... 85,104,000 77,762,000
Pro forma basic and diluted net income per common share................ 0.83 0.78
</TABLE>
16. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was approximately $30,204,000, $34,590,000 and
$32,609,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
NON-CASH INVESTING AND FINANCING ACTIVITIES
On October 27, 1997, the Company acquired the DIHC Properties for a purchase
price of approximately $1.06 billion, consisting of approximately 34 million
shares of Common Stock at $16.00 per share, approximately $260 million in cash
and $250 million in promissory notes. The Company also recorded a minority
interest of $33 million in connection with this acquisition.
17. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollar amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------
<S> <C> <C> <C> <C>
1997 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------ --------- -----------
Revenues............................................. $ 62,242 $ 38,414 $ 38,268 $ 34,987
Income before extraordinary item..................... 15,881 8,076 8,008 5,636
Extraordinary loss................................... -- -- (28) (26)
Net income........................................... 15,881 8,076 7,980 5,610
Per share data:
Income before extraordinary item................... 0.26 0.18 0.12 0.07
Basic net income per common share.................. 0.26 0.18 0.12 0.07
Diluted net income per common share................ 0.26 0.18 0.12 0.07
1996
Revenues............................................. $ 32,145 $ 29,001 $ 28,338 $ 27,424
Income before extraordinary item..................... 2,185 1,979 1,876 6,981
Extraordinary loss................................... (139) (3,786) -- --
Net income (loss).................................... 2,046 (1,807) 1,876 6,981
Per share data:
Income before extraordinary item................... (0.01) 0.05 0.05 0.30
Extraordinary loss................................. (0.02) (0.18) -- --
Basic net income per common share.................. (0.03) (0.13) 0.05 0.30
Diluted net income per common share................ (0.03) (0.13) 0.05 0.30
</TABLE>
F-17
<PAGE>
18. SUBSEQUENT EVENTS
On January 5, 1998, the Company purchased the participation rights in the
cash flow and residual value of Tower 56 from the former participants for
307,692 shares of Common Stock. All cash flow and the residual value of Tower 56
will now inure to the Company.
On January 13, 1998, the Company declared a dividend of $0.30 per common
share, payable on February 27, 1998 to all stockholders of record as of January
30, 1998.
On January 20, 1998, the Company converted to an umbrella partnership real
estate investment trust ("UPREIT"). The Company and its subsidiaries transferred
to the operating partnership, or entities wholly-owned by the operating
partnership, substantially all of the Company's Properties. The Company is the
sole general partner of the operating partnership and also holds limited
partnership interests therein. The purpose of forming an UPREIT structure is to
create an acquisition vehicle attractive to sellers whose sale of properties to
the Company in exchange for UPREIT units may be characterized as a
tax-deferrable capital contribution rather than a taxable sale.
On January 28, 1998, the Company purchased Corporate 500 Centre in
Deerfield, Illinois. Constructed between 1986 and 1990, Corporate 500 Centre
consists of four Class A office buildings, comprising approximately 680,000
rentable square feet. The total purchase price of the Property was approximately
$150 million, approximately $15 million of which was paid in UPREIT units priced
at $18.50 per unit. The Company financed a portion of the costs to acquire the
Property with $51 million drawn under its Revolving Credit Facility and an $80
million mortgage loan from Bankers Trust Company at an interest rate of LIBOR
plus 100 basis points. The mortgage loan will mature on July 20, 2002. The
Company has also entered into an interest rate swap agreement with Bankers Trust
Company that has effectively fixed the interest rate on the mortgage loan at
6.63%.
On February 6, 1998, the Company completed a secondary public offering of
14,375,000 shares of Common Stock at $18.25 per share. The shares were placed in
the United States through a syndicate of seven investment banks led by Merrill
Lynch & Co. Net proceeds to the Company were approximately $247.9 million
($262,344,000 gross proceeds less an underwriting discount of $13,728,125 and
expenses of approximately $750,000). The net proceeds were used to repay the
Company's acquisition line of credit and for working capital purposes.
F-18
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN D
-------------- COLUMN E
COLUMN C -----------------------------
----------------------------- COST
CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO COMPANY SUBSEQUENT TO AT CLOSE OF PERIOD
COLUMN A COLUMN B ----------------------------- ACQUISITION -----------------------------
- ---------------------------- ------------- BUILDINGS & -------------- BUILDINGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ---------------------------- ------------- ------------ --------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land One Norwest $ 2,900,000 $ 310,494 $ 3,210,494
Center
Buildings & One Norwest $96,780,000 12,903,000 124,686,288 137,589,288
Imp. Center
Def. Lease One Norwest 2,583,000 19,577,093 22,160,093
Costs Center
------------ --------------- -------------- ------------ ---------------
2,900,000 15,486,000 144,573,875 3,210,494 159,749,381
------------ --------------- -------------- ------------ ---------------
Land Norwest Center 18,000,000 18,000,000
Buildings & Norwest Center 110,000,000 32,620,255 108,406,611 141,026,866
Imp.
Def. Lease Norwest Center 992,691 45,812,922 46,805,613
Costs
------------ --------------- -------------- ------------ ---------------
18,000,000 33,612,946 154,219,533 18,000,000 187,832,479
------------ --------------- -------------- ------------ ---------------
Land Washington 21,166,947 6,108 21,173,055
Mutual Tower
Buildings & Washington 79,100,000 38,851,336 106,489,349 145,340,685
Imp. Mutual Tower
Def. Lease Washington 4,301,522 44,953,536 49,255,058
Costs Mutual Tower
------------ --------------- -------------- ------------ ---------------
21,166,947 43,152,858 151,448,993 21,173,055 194,595,743
------------ --------------- -------------- ------------ ---------------
<CAPTION>
COLUMN I
--------------
LIFE ON WHICH
DEPRECIATION
COLUMN F COLUMN G COLUMN H IN
C ------------ --------------- ---------- LATEST INCOME
- ----------- ACCUMULATED DATE OF DATE STATEMENTS IS
DES TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- --------------- ------------ --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Land $ 3,210,494 1988
Buildings & $ 137,589,288 51,800,144 1981 1981-1995 20-35 Years
Imp.
Def. Lease $ 22,160,093 18,524,045 1981-1995 05-10 Years
Costs
--------------- ------------
162,959,875 70,324,189
--------------- ------------
Land $ 18,000,000 1986
Buildings & $ 141,026,866 41,353,569 1986 1986-1995 20-35 Years
Imp.
Def. Lease $ 46,805,613 31,079,183 1986-1995 10-20 Years
Costs
--------------- ------------
205,832,479 72,432,752
--------------- ------------
Land $ 21,173,055 1986-1987
Buildings & $ 145,340,685 37,414,949 1986 1986-1995 08-40 Years
Imp.
Def. Lease $ 49,255,058 36,070,337 1986-1995 01-18 Years
Costs
--------------- ------------
215,768,798 73,485,286
--------------- ------------
</TABLE>
F-19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CORNERSTONE
PROPERTIES
INC.
REAL ESTATE
AND
ACCUMULATED
DEPRECIATION
SCHEDULE
III
(CONTINUED)
DECEMBER
31, 1997
<CAPTION>
COLUMN D
-------------- COLUMN E
COLUMN C -----------------------------
----------------------------- COST
CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO COMPANY SUBSEQUENT TO AT CLOSE OF PERIOD
COLUMN A COLUMN B ----------------------------- ACQUISITION -----------------------------
- ---------------------------- ------------- BUILDINGS & -------------- BUILDINGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ---------------------------- ------------- ------------ --------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land 125 Summer 15,750,000 15,750,000
Street
Buildings & 125 Summer 50,000,000 89,250,000 1,029,087 90,279,087
Imp. Street
Def. Lease 125 Summer 2,528,067 3,842,555
Costs Street
------------ --------------- -------------- ------------ ---------------
15,750,000 89,250,000 3,557,154 15,750,000 94,121,642
------------ --------------- -------------- ------------ ---------------
Land Tower 56 5,528,324 5,528,324
Buildings & Tower 56 17,742,000 25,202,676 2,364,938 27,567,614
Imp.
Def. Lease Tower 56 426,598 1,092,278
Costs
------------ --------------- -------------- ------------ ---------------
5,528,324 25,202,676 2,791,536 5,528,324 28,659,892
------------ --------------- -------------- ------------ ---------------
Land One Lincoln 2,192,079 2,192,079
Centre
Buildings & One Lincoln 65,000,000( (b) 47,757,921 789,322 48,547,243
Imp. Centre
Def. Lease One Lincoln 426,598 565,521
Costs Centre
------------ --------------- -------------- ------------ ---------------
2,192,079 47,757,921 1,215,920 2,192,079 49,112,764
------------ --------------- -------------- ------------ ---------------
<CAPTION>
CORNERSTONE
PROPERTIES
INC.
REAL ESTATE
AND
ACCUMULATED
DEPRECIATIO
SCHEDULE
III
(CONTINUED)
DECEMBER
31, 1997
COLUMN I
--------------
LIFE ON WHICH
DEPRECIATION
COLUMN F COLUMN G COLUMN H IN
C ------------ --------------- ---------- LATEST INCOME
- ----------- ACCUMULATED DATE OF DATE STATEMENTS IS
DES TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- --------------- ------------ --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Land $ 15,750,000 1989 1995
Buildings & $ 90,279,087 4,869,918 1995-1996 40
Imp.
Def. Lease $ 3,842,555 983,194 1996 5-6 Years
Costs
--------------- ------------
109,871,642 5,853,112
--------------- ------------
Land $ 5,528,324 1983 1996
Buildings & $ 27,567,614 992,758 1996 40 Years
Imp.
Def. Lease $ 1,092,278 194,420 1996 1-6 Years
Costs
--------------- ------------
34,188,216 1,187,178
--------------- ------------
Land $ 2,192,079 1986 1996
Buildings & $ 48,547,243 1,363,862 1996 40 Years
Imp.
Def. Lease $ 565,521 70,671 1996 1-6 Years
Costs
--------------- ------------
51,304,843 1,434,533
--------------- ------------
</TABLE>
F-20
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN D
-------------- COLUMN E
COLUMN C -----------------------------
----------------------------- COST
CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO COMPANY SUBSEQUENT TO AT CLOSE OF PERIOD
COLUMN A COLUMN B ----------------------------- ACQUISITION -----------------------------
- ---------------------------- ------------- BUILDINGS & -------------- BUILDINGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ---------------------------- ------------- ------------ --------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land The Frick 2,541,350 2,541,350
Building
Buildings & The Frick 23,958,650 395,292 24,353,942
Imp. Building
Def. Lease The Frick 1,630,772 1,630,772
Costs Building
------------ --------------- -------------- ------------ ---------------
2,541,350 23,958,650 2,026,064 2,541,350 25,984,714
------------ --------------- -------------- ------------ ---------------
Land 527 Madison 21,440,000 -- 21,440,000
Avenue
Buildings & 527 Madison ( (b) 46,642,888 89,562 46,732,450
Imp. Avenue
Def. Lease 527 Madison 746,070 746,070
Costs Avenue
------------ --------------- -------------- ------------ ---------------
21,440,000 46,642,888 835,632 21,440,000 47,478,520
------------ --------------- -------------- ------------ ---------------
Land 191 Peachtree 40,109,700 -- 40,109,700
Street
Buildings & 191 Peachtree 228,961,583 -- 228,961,583
Imp. Street
Def. Lease 191 Peachtree 96,023 96,023
Costs Street
------------ --------------- -------------- ------------ ---------------
40,109,700 228,961,583 96,023 40,109,700 229,057,606
------------ --------------- -------------- ------------ ---------------
<CAPTION>
COLUMN I
--------------
LIFE ON WHICH
DEPRECIATION
COLUMN F COLUMN G COLUMN H IN
C ------------ --------------- ---------- LATEST INCOME
- ----------- ACCUMULATED DATE OF DATE STATEMENTS IS
DES TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- --------------- ------------ --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Land $ 2,541,350 1902 1996
Buildings & $ 24,353,942 721,559 1996 40 Years
Imp.
Def. Lease $ 1,630,772 170,928 1996 01-10 Years
Costs
--------------- ------------
28,526,064 892,487
--------------- ------------
Land $ 21,440,000 1986 1997
Buildings & $ 46,732,450 1,036,420 1997 40 Years
Imp.
Def. Lease $ 746,070 7,336 1997 01-10 Years
Costs
--------------- ------------
68,918,520 1,043,756
--------------- ------------
Land $ 40,109,700 1991 1997
Buildings & $ 228,961,583 1,031,524 1997 40 Years
Imp.
Def. Lease $ 96,023 212 1997 01-10 Years
Costs
--------------- ------------
269,167,306 1,031,736
--------------- ------------
</TABLE>
F-21
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN D
-------------- COLUMN E
COLUMN C -----------------------------
----------------------------- COST
CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO COMPANY SUBSEQUENT TO AT CLOSE OF PERIOD
COLUMN A COLUMN B ----------------------------- ACQUISITION -----------------------------
- ---------------------------- ------------- BUILDINGS & -------------- BUILDINGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ---------------------------- ------------- ------------ --------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land 500 Boylston 45,132,200 -- 45,132,200
Street
Buildings & 500 Boylston 181,573,820 -- 181,573,820
Imp. Street
Def. Lease 500 Boylston 34,558 34,558
Costs Street
------------ --------------- -------------- ------------ ---------------
45,132,200 181,573,820 34,558 45,132,200 181,608,378
------------ --------------- -------------- ------------ ---------------
Land 222 Berkeley 29,262,200 -- 29,262,200
Street
Buildings & 222 Berkeley 118,179,817 -- 118,179,817
Imp. Street
Def. Lease 222 Berkeley 1,650 1,650
Costs Street
------------ --------------- -------------- ------------ ---------------
29,262,200 118,179,817 1,650 29,262,200 118,181,467
------------ --------------- -------------- ------------ ---------------
Land Charlotte Plaza 15,473,600 -- 15,473,600
Buildings & Charlotte Plaza 55,000,000( (c) 62,494,692 15,039 62,509,731
Imp.
Def. Lease Charlotte Plaza 966,732 966,732
Costs
------------ --------------- -------------- ------------ ---------------
15,473,600 62,494,692 981,771 15,473,600 63,476,463
------------ --------------- -------------- ------------ ---------------
<CAPTION>
COLUMN I
--------------
LIFE ON WHICH
DEPRECIATION
COLUMN F COLUMN G COLUMN H IN
C ------------ --------------- ---------- LATEST INCOME
- ----------- ACCUMULATED DATE OF DATE STATEMENTS IS
DES TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- --------------- ------------ --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Land $ 45,132,200 1988 1997
Buildings & $ 181,573,820 815,717 1997 40 Years
Imp.
Def. Lease $ 34,558 -- 1997 01-10 Years
Costs
--------------- ------------
226,740,578 815,717
--------------- ------------
Land $ 29,262,200 1991 1997
Buildings & $ 118,179,817 530,717 1997 40 Years
Imp.
Def. Lease $ 1,650 -- 1997 01-10 Years
Costs
--------------- ------------
147,443,667 530,717
--------------- ------------
Land $ 15,473,600 1982 1997
Buildings & $ 62,509,731 260,352 1997 40 Years
Imp.
Def. Lease $ 966,732 7,031 1997 01-10 Years
Costs
--------------- ------------
78,950,063 267,383
--------------- ------------
</TABLE>
F-22
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN D
-------------- COLUMN E
COLUMN C -----------------------------
----------------------------- COST
CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO COMPANY SUBSEQUENT TO AT CLOSE OF PERIOD
COLUMN A COLUMN B ----------------------------- ACQUISITION -----------------------------
- ---------------------------- ------------- BUILDINGS & -------------- BUILDINGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ---------------------------- ------------- ------------ --------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land 200 Galleria 11,994,400 731,536 12,725,936
Buildings & 200 Galleria 120,000,000( (d) 48,442,938 -- 48,442,938
Imp.
Def. Lease 200 Galleria 437,631 437,631
Costs
------------ --------------- -------------- ------------ ---------------
11,994,400 48,442,938 1,169,167 12,725,936 48,880,569
------------ --------------- -------------- ------------ ---------------
Land 11 Canal Center 2,326,000 -- 2,326,000
Buildings & 11 Canal Center 9,394,394 60,000 9,454,394
Imp.
Def. Lease 11 Canal Center 2,019 2,019
Costs
------------ --------------- -------------- ------------ ---------------
2,326,000 9,394,394 62,019 2,326,000 9,456,413
------------ --------------- -------------- ------------ ---------------
Land 99 Canal Center 4,551,000 -- 4,551,000
Buildings & 99 Canal Center 18,380,332 -- 18,380,332
Imp.
Def. Lease 99 Canal Center 3,953 3,953
Costs
------------ --------------- -------------- ------------ ---------------
4,551,000 18,380,332 3,953 4,551,000 18,384,285
------------ --------------- -------------- ------------ ---------------
<CAPTION>
COLUMN I
--------------
LIFE ON WHICH
DEPRECIATION
COLUMN F COLUMN G COLUMN H IN
C ------------ --------------- ---------- LATEST INCOME
- ----------- ACCUMULATED DATE OF DATE STATEMENTS IS
DES TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- --------------- ------------ --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Land $ 12,725,936 1985 1997
Buildings & $ 48,442,938 201,424 1997 40 Years
Imp.
Def. Lease $ 437,631 -- 1997 01-10 Years
Costs
--------------- ------------
61,606,505 201,424
--------------- ------------
Land $ 2,326,000 1986 1997
Buildings & $ 9,454,394 39,187 1997 40 Years
Imp.
Def. Lease $ 2,019 17 1997 01-10 Years
Costs
--------------- ------------
11,782,413 39,204
--------------- ------------
Land $ 4,551,000 1986 1997
Buildings & $ 18,380,332 76,425 1997 40 Years
Imp.
Def. Lease $ 3,953 33 1997 01-10 Years
Costs
--------------- ------------
22,935,285 76,458
--------------- ------------
</TABLE>
F-23
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN D
-------------- COLUMN E
COLUMN C ------------------------------
------------------------------ COST
CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO COMPANY SUBSEQUENT TO AT CLOSE OF PERIOD
COLUMN A COLUMN B ------------------------------ ACQUISITION ------------------------------
- ------------------------ ------------- BUILDINGS & -------------- BUILDINGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ------------------------ ------------- ------------- --------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land TransPotomac 2,123,800 -- 2,123,800
Plaza 5
Buildings & TransPotomac ( (c) 8,577,318 -- 8,577,318
Imp. Plaza 5
Def. Lease TransPotomac 4,265 4,265
Costs Plaza 5
------------- --------------- -------------- ------------- ---------------
2,123,800 8,577,318 4,265 2,123,800 8,581,583
------------- --------------- -------------- ------------- ---------------
Land Dearborn 10,000,000(a) 19,000,000 2,500 19,002,500
Land
------------- --------------- -------------- ------------- ---------------
19,000,000 -- 2,500 19,002,500 --
------------- --------------- -------------- ------------- ---------------
Land Sixty State -- --
Street
Buildings & Sixty State 89,630,000 221,568,004 -- 221,568,004
Imp. Street
Def. Lease Sixty State --
Costs Street
------------- --------------- -------------- ------------- ---------------
221,568,004 -- -- 221,568,004 221,568,004
------------- ------------- --------------- -------------- ------------- ---------------
Grand Total............. $693,252,000 $ 259,491,600 $ 1,222,636,837 $463,024,613 $ 260,542,238 $ 1,686,729,903
------------- ------------- --------------- -------------- ------------- ---------------
<CAPTION>
COLUMN I
--------------
LIFE ON WHICH
DEPRECIATION
COLUMN F COLUMN G COLUMN H IN
COL ------------- --------------- ---------- LATEST INCOME
- ----------- ACCUMULATED DATE OF DATE STATEMENTS IS
DESCR TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- --------------- ------------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Land $ 2,123,800 1983 1997
Buildings & $ 8,577,318 35,665 1997 40 Years
Imp.
Def. Lease $ 4,265 36 1997 01-10 Years
Costs
--------------- -------------
10,705,383 35,701
--------------- -------------
Land $ 19,002,500 1997
--------------- -------------
19,002,500 --
--------------- -------------
Land $ -- 1979 1997
Buildings & $ 221,568,004 1997 40 Years
Imp.
Def. Lease $ -- 1997 --
Costs
--------------- -------------
--
--------------- -------------
Grand Total $ 1,947,272,141 $ 229,651,633
--------------- -------------
</TABLE>
F-24
<PAGE>
- ------------------------
(a) The four notes arising from the acquisition of DIHC are cross-collateralized
having the effect of forming a "collateral pool" for the underlying notes.
(b) Upon repayment of the principle balance, the lien relating to this property
will be released.
(c) Upon repayment of the principle balance, the lien relating to this property
will be released.
(d) Upon repayment of the principle balance, the lien relating to this property
will be released.
F-25
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III (CONTINUED)
DECEMBER 31, 1997
RECONCILIATION OF "REAL ESTATE AND ACCUMULATED DEPRECIATION"
<TABLE>
<CAPTION>
1997 1996 1995
---------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT IN REAL ESTATE
Balance at beginning of period................................ $ 799,661,640 $ 676,257,618 $ 571,831,104
Additions resulting from consolidation of real estate
partnerships:
Land........................................................ -- -- --
Buildings and improvements.................................. -- -- --
---------------- -------------- --------------
-- -- --
Additions during the period:
Land........................................................ 192,146,936 10,572,247 15,750,000
Deferred lease costs........................................ 9,432,143 5,262,535 409,693
Buildings and improvements.................................. 946,518,418 108,878,526 90,469,121
Deductions during the period:
Retirements and writeoffs................................... 486,996 1,309,286 2,202,300
---------------- -------------- --------------
Balance at end of period...................................... $ 1,947,272,141 $ 799,661,640 $ 676,257,618
---------------- -------------- --------------
---------------- -------------- --------------
ACCUMULATED DEPRECIATION
Balance at beginning of period................................ 198,685,707 175,167,480 154,227,950
Additions resulting from consolidation of real estate
partnerships: -- -- --
Additions charged to operating expenses....................... 31,452,922 24,827,513 23,141,830
Deductions due to retirements and writeoffs................... 486,996 1,309,286 2,202,300
---------------- -------------- --------------
Balance at end of period...................................... $ 229,651,633 $ 198,685,707 $ 175,167,480
---------------- -------------- --------------
---------------- -------------- --------------
</TABLE>
F-26
<PAGE>
CORNERSTONE PROPERTIES INC.
MORTGAGE LOANS ON REAL ESTATE
SCHEDULE IV
DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN H
----------------
COLUMN C PRINCIPAL AMOUNT
----------- COLUMN D COLUMN F COLUMN G OF LOANS SUBJECT
COLUMN A COLUMN B FINAL ----------------- COLUMN E ------------ ---------------- TO DELINQUENT
- ---------------- ------------- MATURITY PERIODIC PAYMENT ----------- FACE AMOUNT CARRYING AMOUNT PRINCIPAL OR
DESCRIPTION INTEREST RATE DATE TERMS PRIOR LIENS OF MORTGAGES OF MORTGAGES INTEREST
- ---------------- ------------- ----------- ----------------- ----------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Market Square
Mortgage(A)... 9.75 % 12/1/07 $ 1,619,435/month 1$80,422,449 $193,487,454
$ 149,424,467
Balloon
Market Square
Buffer Loan
(A)........... n/a n/a n/a $46,285,606 $ 46,285,606
Other........... n/a n/a n/a $ 479,726
RECOCILIATION OF MORTGAGE LOANS ON REAL ESTATE.
Balance at
beginning
of period..... $ --
Additions
during
period:..... 240,252,786
Deductions
during
period:..... --
-----------------
Balance at close
of period..... $ 240,252,786
-----------------
-----------------
<CAPTION>
COLUMN A
- ----------------
DESCRIPTION
- ----------------
<S> <C>
Market Square
Mortgage(A)...
Market Square
Buffer Loan
(A)...........
Other...........
RECOCILIATION OF
Balance at
beginning
of period.....
Additions
during
period:.....
Deductions
during
period:.....
Balance at close
of period.....
</TABLE>
(A) During January 1998 the Company acquired partnership interests in the
partnership which owns Market Square. Upon consolidation of this property,
these notes will be eliminated.
F-27
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
2.3 Agreement and Plan of Merger, dated as of November 7, 1996, among Cornerstone Properties, Inc.,
CStone-Pittsburgh Trust, Frick Building, Inc., and Hexalon Real Estate, Inc., incorporated by reference
to Exhibit 2.1 of the Company's Report on Form 8-K dated December 12, 1996.
3.1(a) Restated Articles of Incorporation of Cornerstone Properties, Inc., as of March 12, 1996, incorporated
by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the year ended December 31,
1996.
3.1(b) Certificate of Amendment of Restated Articles of Incorporation of the Company, dated October 27, 1997,
incorporated by reference to Exhibit 4.2(b) of the Company's Registration Statement on Form S-3 filed
March 2, 1998 (Registration Statement No. 333-47149).
3.5 Bylaws of Cornerstone Properties Inc., as amended as of December 8, 1995, incorporated by reference to
Exhibit 3.5 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
4.1 Specimen Common Stock Certificate, incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-3 filed March 2, 1998 (Registration Statement No. 333-47149).
4.2 Certificate of Voting Powers, Designations, Preferences, Limitations, Restrictions and Relative Rights
of 7% Cumulative Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 10.57
of the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
4.3 Certificate of Designations of the Voting Powers, Designation, Preferences and Relative Participating,
Optional or Other Special Rights and Qualifications, Limitations and Restrictions of 8% Cumulative
Convertible Preferred Stock of the Company, incorporated by reference to Exhibit 4.1 of the Company's
Report on Form 8-K as of December 12, 1996.
4.4 Certificate of the Designations, Voting Powers, Preferences and Relative, Participating, Optional and
Other Special Rights and Qualifications, Limitations and Restrictions of 8% Cumulative Convertible
Preferred Stock, Series A, of Cornerstone Properties Inc., incorporated by reference to Exhibit 4.2 of
the Company's Report on Form 8-K as of December 12, 1996.
10.35 Agreement of Sale and Purchase between 527 Madison Holdings as Seller and Cornerstone Properties, Inc.
as Purchaser pertaining to 527 Madison Avenue, New York, incorporated by reference to Exhibit 2.1 of
the Company's Report on Form 8-K dated January 29, 1997.
10.36 Preferred Stock Purchase Agreement, dated as of November 22, 1996, between Cornerstone Properties,
Inc., and the New York State Teachers' Retirement System, incorporated by reference to Exhibit 2.2 of
the Company's Report on Form 8-K dated December 12, 1996.
10.37 Third Amended and Restated Articles of Limited Partnership of 1700 Lincoln Limited effective as of
April 20, 1989, incorporated by reference to Exhibit 10.37 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
10.38 First Amendment to Third Amended and Restated Articles of Limited Partnership of 1700 Lincoln Limited
dated as of September 28, 1993, incorporated by reference to Exhibit 10.38 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.39 Second Amendment to Third Amended and Restated Articles of Limited Partnership of 1700 Lincoln Limited,
incorporated by reference to Exhibit 10.39 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
10.40 Amended and Restated Articles of Limited Partnership of NWC Limited Partnership effective as of
September 29, 1993, incorporated by reference to Exhibit 10.40 of the Company's Annual Report on Form
10-K for the year ended December 31, 1993.
10.41 Third Amended and Restated Promissory Note between NWC Limited Partnership and NWC Funding Corporation
dated as of September 29, 1993, incorporated by reference to Exhibit 10.41 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
10.47 Deed-In-Lieu Agreement dated as of December 29, 1993 between Block Six Limited Partnership and Third
and University Limited Partnership, incorporated by reference to Exhibit 10.47 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
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, incorporated by reference to Exhibit 10.50 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
10.51 Third Amended and Restated Articles of Limited Partnership of Third and University Limited Partnership,
dated as of September 27, 1995, incorporated by reference to Exhibit 10.51 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10.52 Assignment of Recorded Documents, dated as of April 7, 1995, by NWC Funding Corporation to Norwest
Corporation, incorporated by reference to Exhibit 10.52 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
10.53 Assignment of Documents, dated as of April 7, 1995, by NWC Funding Corporation to Norwest Corporation,
incorporated by reference to Exhibit 10.53 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
10.55 Mortgage and Security Agreement, dated as of December 20, 1995, between CStone-Boston and The
Northwestern Mutual Life Insurance Company, incorporated by reference to Exhibit 10.55 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
10.56 Loan Sale Agreement, dated as of November 21, 1995, between The Sakura Bank, LTD. and Cornerstone
Properties, Inc., incorporated by reference to Exhibit 10.56 of the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
10.59 Credit Agreement, dated as of August 8, 1995, between ARICO America Realestate Investment Company and
Deutsche Bank AG London, incorporated by reference to Exhibit 10.59 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
10.60 Amended and Restated Mortgage and Security Agreement and Amended and Restated Note, dated as of April
25, 1996, between CStone-New York, Inc. and The Northwestern Mutual Life Insurance Company,
incorporated by reference to Exhibit 10.60 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.61 Deed of Trust and Security Agreement, and Promissory Notes, dated July 23, 1996, made by 1700 Lincoln
Limited with Massachusetts Mutual Life Insurance Company, Connecticut General Life Insurance Company
and American General Life Insurance Company, incorporated by reference to Exhibit 10.61 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
10.62 Letter Agreement dated December 5, 1996, with Deutsche Bank AG regarding the $32.5 million Term Loan,
incorporated by reference to Exhibit 10.62 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
10.63 Convertible Promissory Note dated January 1, 1996 made by Cornerstone Properties, Inc., with Hines
Colorado Limited in the amount of $12,925,976.48, incorporated by reference to Exhibit 10.63 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
10.64 Stock Purchase Agreement between DIHC, as seller, and Cornerstone Properties Inc., as purchaser, dated
as of August 18, 1997, incorporated by reference to Annex I to the Company's Proxy Statement on
Schedule 14A, filed September 23, 1997.
10.65 Loan Purchase Agreement between PGGM, as seller, and Cornerstone Properties Inc., as purchaser, dated
August 18, 1997, incorporated by reference to Annex II to the Company's Proxy Statement on Schedule
14A, filed September 23, 1997.
10.66* Assignment of Collateral (DIHC Atlanta, Inc.) dated as of October 27, 1997, executed by PGGM in favor
of Cornerstone, with Allonge.
10.67* Promissory Note dated March 1, 1993, executed by DIHC Atlanta, Inc. ("Atlanta") in favor of DIHC
Finance Corporation ("DIFCO") in the original principal amount of $25,000,000, as assigned to PGGM
pursuant to that certain Assignment of Notes and Security Agreements dated as of August 13, 1997,
executed by and between DIFCO and PGGM.
10.68* Assignment of Collateral (DIHC Peachtree, Inc.) dated as of October 27, 1997, executed by PGGM in favor
of Cornerstone, with Allonge.
10.69* Promissory Note dated March 1, 1993, executed by DIHC Peachtree, Inc. ("Peachtree") in favor of DIHC
Finance Corporation (" DIFCO") in the original principal amount of $25,000,000, as assigned to PGGM
pursuant to that certain Assignment of Notes and Security Agreements dated as of August 13, 1997,
executed by and between DIFCO and PGGM.
10.70* Assignment of Collateral (One Ninety One Peachtree Associates) dated as of October 27, 1997, executed
by PGGM in favor of 191 Finance Associates, L.P., with Allonge.
10.71* "A" Note dated as of February 1, 1988, executed by One Ninety One Peachtree Associates ("191") in favor
of DIHC Finance Corporation ("DIFCO") in the original principal amount of $145,000,000.00, as assigned
by DIFCO to PGGM pursuant to that certain Assignment of Loan Documents dated as of March 1, 1993,
recorded in Deed Book 18244 at page 187, aforesaid records.
10.72* Assignment of Collateral (DIHC Properties I, Inc.) dated as of October 27, 1997, executed by PGGM in
favor of Cornerstone, with Allonge.
10.73* Amended and Restated Promissory Note dated as of November 1, 1994, executed by DIHC Properties I, Inc.
("DIHC I") in favor of PGGM in the principal amount of $33,310,304.78.
10.74* Assignment of Collateral (TransCanal Properties, Inc.) dated as of October 27, 1997, executed by PGGM
in favor of Cornerstone, with Allonge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.75* Amended and Restated Promissory Note dated as of December 31, 1994, executed by TransCanal Properties,
Inc. ("TCP") in favor of PGGM in the principal amount of $7,061,864.65.
10.76* Assignment of Collateral (Canal Center Properties, Inc.) dated as of October 27, 1997, executed by PGGM
in favor of Cornerstone, with Allonge.
10.77* Second Amended and Restated Promissory Note dated as of December 31, 1994, executed by Canal Center
Properties, Inc. ("CCP") in favor of PGGM in the principal amount of $17,963,440.81.
10.78* Assignment of Collateral (Bryce Mountain, Inc) dated as of October 27, 1997, executed by PGGM in favor
of Cornerstone, with Allonge.
10.79* Modified and Restated Note dated as of February 13, 1986, executed by Bryce Mountain, Inc. ("Bryce") in
favor of PGGM in the principal amount of $42,000,000; as modified by that certain Second Modified and
Restated Note dated as of December 1, 1987, as modified by that certain Third Amended and Restated
Promissory Note dated as of December 31, 1994, in the principal amount of $9,001,126.41.
10.80* Assignment of Collateral (DIHC Boylston Corporation) dated as of October 27, 1997, executed by PGGM in
favor of Cornerstone, with Allonge.
10.81* Amended and Restated Promissory Note dated as of July 1, 1994, executed by DIHC Boylston Corporation
("Boylston") in favor of PGGM in the principal amount of $18,461,283.03.
10.82* Assignment of Collateral (DIHC Boylston Back Bay Corporation) dated as of October 27, 1997, executed by
PGGM in favor of Cornerstone, with Allonge.
10.83* Promissory Note dated as of August 15, 1997, executed by DIHC Boylston Back Bay Corporation in favor of
DIHC Finance Corporation ("DIFCO") in the original principal amount of $27,327,000.
10.84* Assignment of Collateral (Five Hundred Boylston West Venture), dated as of October 27, 1997, executed
by PGGM for the benefit of DIHC Boylston Associates, with Allonge.
10.85* Amended and Restated "A" Note dated as of February 10, 1989, executed by Five Hundred Boylston West
Venture ("500") in favor of DIHC Finance Corporation ("DIFCO") in the original principal amount of
$153,650,000; as assigned from DIFCO to PGGM pursuant to that certain Assignment of "A" Note and First
Mortgage and Security Agreement dated as of February 10, 1989, recorded in the Suffolk County Registry
of Deeds Office, Boston, MA, in Book 15439 at page 37, and filed with the Suffolk Registry District of
the Land Court as Document Number 449660.
10.86* Assignment of Collateral (DIHC Berkeley Corporation) dated as of October 27, 1997, executed by PGGM in
favor of Cornerstone, with Allonge.
10.87* Promissory Note dated as of December 31, 1994, executed by DIHC Berkeley Corporation ("Berkeley") in
favor of PGGM in the original principal amount of $44,000,000.
10.88* Assignment of Collateral (DIHC Berkeley Back Bay Corporation) dated as of October 27, 1997, executed by
PGGM in favor of Cornerstone, with Allonge.
10.89* Promissory Note dated as of August 15, 1997, executed by DIHC Berkeley Back Bay Corporation in favor of
DIHC Finance Corporation ("DIFCO") in the original principal amount of $45,080,000.
10.90* Assignment of Collateral (Charlotte Office Tower Associates "A") dated as of October 27, 1997, executed
by PGGM in favor of Cornerstone, with Allonge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.91* Modified and Restated "A" Note dated as of December 21, 1982, executed by Charlotte Office Tower
Associates ("Charlotte") in favor of PGGM in the principal amount of $33,000,000, recorded in Deed Book
4609 at page 841, in the Mecklenburg County, North Carolina Register of Deeds.
10.92* Assignment of Collateral (Charlotte Office Tower Associates "B") dated as of October 27, 1997, executed
by PGGM in favor of Cornerstone, with Allonge.
10.93* Modified and Restated "B" Note dated as of December 21, 1982, executed by Charlotte Office Tower
Associates ("Charlotte") in favor of PGGM in the principal amount of $8,196,549.27, recorded in Deed
Book 4609 at page 876, in the Mecklenburg County, North Carolina Register of Deeds.
10.94* Assignment of Collateral (Avenue Associates Limited Partnership) dated as of October 27, 1997, executed
by PGGM in favor of Cornerstone, with Allonge.
10.95* Promissory Note dated as of July 15, 1987, executed by Avenue Associates Limited Partnership ("AALP")
in favor of DIHC Finance Corporation ("DIFCO") in the original principal amount of $188,491,750.
10.96* Note and Collateral Agency Agreement, dated as of October 27, 1997, executed by and among Cornerstone,
certain of its Subsidiaries, the Lenders, and PGGM, as Administrative Agent.
10.97* Assignment of Promissory Note, dated as of October 27, 1997, executed by DIHC Finance Corporation in
favor of Cornerstone.
10.98* Promissory Note and Loan Agreement dated as of August 15, 1997, in the original principal amount of up
to $41,900,000 with an initial outstanding principal amount of $38,900,000, made by Market Square
Development Investors in favor of DIHC Finance Corporation.
10.99* Promissory Note and Loan Agreement, dated as of January 30, 1998, from Market Square Development
Investors in favor of Cornerstone Market Square LLC, in the original principal amount of $2,908,230.
10.100* Second Amendment to One Ninety One Peachtree Associates Joint Venture Agreement, dated as of October
27, 1997, executed by C-H Associates, Ltd. and DIHC Peachtree Associates.
10.101* Five Hundred Boylston West Venture Amended and Restated Joint Venture Agreement, dated as of October
27, 1997, executed by Boylston West 1986 Associates Limited Partnership and DIHC Boylston Associates.
10.102* Two Twenty Two Berkeley Venture Amended and Restated Joint Venture Agreement, dated as of October 27,
1997, executed by Hines 222 Berkeley Limited Partnership and DIHC Berkeley Associates.
10.103* Second Amended and Restated Joint Venture Agreement of Market Square Development Investors, dated as of
January 30, 1998, between Cornerstone Market Square LLC and DIHC Market Square, Inc.
10.104* Amended and Restated Management and Leasing Agreement, dated as of October 27, 1997, executed by Five
Hundred Boylston West Venture and Hines Interests Limited Partnership.
10.105* Amended and Restated Management and Leasing Agreement, dated as of October 27, 1997, executed by Two
Twenty Two Berkeley Venture and Hines Interests Limited Partnership.
10.106* Real Estate Management and Leasing Agreement, dated as of March 1, 1997, by and among Charlotte Office
Tower Associates and Trammell Crow SE, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.107* Real Estate Management and Leasing Agreement, dated as of January 1, 1996, by and among TransCanal
Properties, Inc. and Faison & Associates, Inc.
10.108* Real Estate Management and Leasing Agreement, dated as of January 1, 1996, by and among Canal Center
Properties, Inc. and Faison & Associates, Inc.
10.109* Management Agreement evidenced by letter from DIHC Management Corporation to Concord Realty Advisors,
Inc., dated as of July 15, 1997.
10.110* Real Estate Management and Leasing Agreement, dated as of July 2, 1995, by and among DIHC Properties I,
Inc. and CK Atlanta Office Management, Inc.
10.111* Residential Management Agreement, dated as of July 15, 1987, by and among Avenue Associates Limited
Partnership and Crow-Washington Office Management Company, Inc.
10.112* Commercial Management Agreement, dated as of July 15, 1987, by and among Avenue Associates Limited
Partnership and Crow-Washington Office Management Company, Inc.
10.113* Management Agreement, dated as of February 1, 1988, by and among One Ninety One Peachtree Associates
and C-H Management Associates.
10.114* Leasing Agreement, dated as of February 1, 1988, by and among One Ninety One Peachtree Associates and
C-H Leasing Associates.
10.115* Operating Agreement of Cornerstone Market Square LLC, dated as of January 20, 1998.
10.116* Real Estate Management and Leasing Agreement, dated as of January 1, 1996, by and among Bryce Mountain,
Inc. and Faison & Associates, Inc.
10.117* Redemption and Acquisition Agreement, dated as of October 27, 1997, executed by Market Square
Development Investors, Dutch Institutional Holding Company, Inc., DIHC Market Square, Inc. and
Cornerstone.
10.118* Agreement of Limited Partnership of Cornerstone Properties Limited Partnership dated as of December 23,
1997.
10.119* Amended and Restated Revolving Credit and Guaranty Agreement dated as of January 20, 1998 among
Cornerstone Properties Inc. and Cornerstone Properties Limited Partnership (the "Borrowers"), the
subsidiaries of the Borrowers (the "Guarantors"), the Lenders, Bankers Trust Company and The Chase
Manhattan Bank.
10.120* Contribution Agreement dated as of December 11, 1997, by and among Corporate 500-Phase I, Corporate
500-Phase II and Cornerstone Properties Inc.
10.121* Agreement of Sale and Purchase dated as of January 22, 1997, between 527 Madison Holdings and
Cornerstone Properties Inc. pertaining to 527 Madison Avenue, New York, New York.
10.122* Pledge of Cash Collateral Agreement dated as of February 13, 1997, by CStone-527 Madison, Inc. in favor
of Bankers Trust Company.
10.123* Note Modification Agreement dated as of February 13, 1997, by and between Bankers Trust Company and 527
Madison Holdings.
10.124* Loan Purchase Agreement as of December 31, 1997, by and between Trust Company of the West, as Trustee
of TCW Realty Fund VA and TCW Realty Fund VB and Cornerstone Properties, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.125* Loan Agreement, Mortgage and Note Modification Agreement dated as of December 31, 1997, by and between
60 State Street Development Company Limited Partnership, John A. Pirovano, William A. Halsey and John
Moody, as the Trustees of 60 State Street Trust, and Cornerstone Properties Inc.
12.1* Statement of Computation of Earnings to Fixed Charges.
20.1 Stockholders' Agreement, dated as of November 22, 1996, by and among Cornerstone Properties, Inc., and
the New York State Teachers' Retirement System together with any other purchasers of 8% Preferred
Stock, incorporated by reference to Exhibit 20.1 of the Company's Report on Form 8-K as of December 12,
1996, incorporated by reference to Exhibit 20.1 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
20.2 Stockholders' Agreement, dated as of November 7, 1996, by and between Cornerstone Properties, Inc., and
Hexalon Real Estate, Inc., and together with any other purchasers of 8% Preferred Stock, Series A,
incorporated by reference to Exhibit 20.2 of the Company's Report on Form 8-K as of December 12, 1996,
incorporated by reference to Exhibit 20.2 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
20.3 Registration Rights and Voting Agreement among PGGM, DIHC and Cornerstone Properties Inc., incorporated
by reference to Annex III to the Company's Proxy Statement on Schedule 14A, filed September 23, 1997.
21* List of Subsidiaries.
23* Consent of Coopers & Lybrand L.L.P.
24.1* Powers of Attorney.
27* For EDGAR filing purposes only, this report contains Exhibit 27, Financial Data Schedule.
</TABLE>
- ------------------------
* Filed herewith.
<PAGE>
Exhibit 10.66
ASSIGNMENT OF COLLATERAL
(DIHC ATLANTA, INC.)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the
Assignor and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
<PAGE>
2
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /S/
---------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in fact
By: /S/
---------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in fact
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /S/
---------------------------------
Name: John S. Moody
Title: President
By: /S/
---------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
<PAGE>
EXHIBIT A
1. Promissory Note dated as of March 1, 1993, executed by DIHC Atlanta,
Inc. ("Atlanta") in favor of DIHC Finance Corporation ("DIFCO") in the
original principal amount of $25,000,000, as assigned to Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke
Belangen ("PGGM") pursuant to that certain Assignment of Notes and
Security Agreements dated as of August 13, 1997, executed by and
between DIFCO and PGGM.
2. Pledge and Security Agreement dated as of March 1, 1993, executed by
Atlanta in favor of DIFCO, as assigned to PGGM pursuant to that certain
Assignment of Notes and Security Agreements dated as of August 13,
1997, executed by and between DIFCO and PGGM.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(DIHC ATLANTA, INC.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee")
without recourse or warranty except as provided for and set forth in that
certain Loan Purchase Agreement dated as of August 18, 1997 executed by and
between Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen and Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /S/
Name: Jan H.W.R. van der Vlist
Title: Attorney-in Fact
By: /S/
Name: Anneke C. van de Puttelaar
Title: Attorney-in fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.67
PROMISSORY NOTE
Principal Sum: $25,000,000 (U.S.) Date: March 1, 1993
Interest Rate: 8.75% Maturity Date: March 1, 1996
FOR VALUE RECEIVED, DIHC ATLANTA, INC., a Georgia corporation ("Maker")
promises to pay to DIHC FINANCE CORPORATION ("Payee"), a Georgia corporation, at
its offices at 200 Galleria Parkway, Suite 2000, Atlanta, Georgia 30339, or
order, or at such other place as may be designated in writing by the holder
hereof, the principal sum of TWENTY-FIVE MILLION and NO/100 DOLLARS
($25,000,000.00) in lawful money of the United States of America, with interest
thereon from the date hereof at the rate of Eight and Three-Fourths Percent
(8.75%) per annum, compounded monthly, such principal and interest to be payable
as follows:
1. Commencing on the first day of April, 1993 and continuing on the
first day of each subsequent calendar month up to and including the first day of
February, 1996, Maker shall pay consecutive monthly installments of principal
and interest in the amount of One Hundred Ninety-Six Thousand Six Hundred
Seventy-Five and 10/100 Dollars ($196,675.10).
2. The entire unpaid principal balance, together with any accrued
interest thereon, shall be due and payable on March 1, 1996 (the "Maturity
Date").
This Note is secured by a Pledge and Security Agreement of even date
herewith (the "Security Instrument") from Maker to Payee by which Maker has
pledged to Payee all of Maker's partnership interest in DIHC Peachtree
Associates, a Georgia general partnership.
<PAGE>
2
If any of the following events of default shall occur and be
continuing: (i) the undersigned defaults in the payment, when due, of any
principal or interest on this Note or any other amount payable hereunder and
fails to remedy such default within twenty (20) days after receipt of written
notice from Payee specifying such default, or (ii) the undersigned defaults in
the due performance of or compliance with any provision of the Security
Instrument for a period of thirty (30) days after receipt of written notice from
Payee specifying such default, or (iii) a bankruptcy, reorganization,
arrangement, insolvency proceeding or case, or any other proceeding looking
toward dissolution or winding-up is instituted by or against the undersigned;
THEREUPON, in any such case, at the option of Payee, Maker shall immediately pay
the principal and interest remaining due and unpaid hereunder, together with all
costs and expenses incurred in connection with the collection or attempted
collection hereof and reasonable attorney's fees actually incurred, whether or
not suite is instituted. Interest shall accrue on such amounts from the date of
such default or occurrence at the "Involuntary Rate" (as hereinafter defined)
compounded monthly until the date such amounts are paid. The "Involuntary Rate"
shall be an annual rate equal to two percent (2%) per annum in excess of the
rate charged from time to time by Trust Company Bank, Atlanta, Georgia, on short
term (90 day) unsecured loans to its preferred customers but in no event in
excess of the then maximum legal rate in Georgia for purposes of determining
usury.
Maker waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof, waives demand, protest, notice of
nonpayment, and any and all lack of
<PAGE>
3
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security for this Note,
acceptance of other security thereof, or any other indulgence of forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
This Note may be prepaid in whole or in part without fee or penalty
(but with accrued interest on the amount so prepaid) at any time, upon Maker
delivering to Payee at least fourteen (14) days prior written notice of the
proposed prepayment.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or forfeiture of
interest. If, by the terms of this Note or any other instrument evidencing,
securing, or relating to this Note, Maker at any time is required or obligated
to pay interest on the principal amount of this Note in an amount or at a rate
in excess of the applicable legal maximum, the interest due to Payee shall be
immediately and automatically reduced to such maximum, the interest payable
shall be computed at such maximum rate, and all prior interest payments in
excess of such lawful maximum shall be immediately and automatically applied at
the time of receipt, in reduction of the principal balance due under this Note.
No delays on the part of Payee in exercising any right hereunder or any
other agreement further evidencing or securing this Note shall operate as a
waiver thereof or
<PAGE>
4
preclude the exercise thereof at any time during the continuance of any default
or during the continuance of a subsequent default.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the laws of the State of
Georgia.
IN WITNESS WHEREOF, Maker has executed this Note effective as of the
date first set forth above.
DIHC ATLANTA, INC.
By /s/ Barrington H. Branch
------------------------------------
Barrington H. Branch, President
Attest /s/ C. Lowell Ball
------------------------------------
C. Lowell Ball, Secretary
[CORPORATE SEAL]
<PAGE>
March 1, 1996
DIHC Atlanta, Inc.
200 Galleria Parkway, Suite 2000
Atlanta, Georgia 30339
Gentlemen:
Reference is made to that Certain Note made as of March 1, 1993 between DIHC
Atlanta, Inc. ("Maker") and DIHC Finance Corporation ("Payee") in the principal
amount of $25,000,000.00 maturing on March 1, 1996.
Said Note presently has an unpaid Principal Balance of $24,428,865.79. This
letter will serve to evidence a mutual agreement between Maker and Payee that
the Maturity Date is hereby extended until March 1, 1999.
All other terms and provisions of Said Note, except as hereby extended, shall
continue in full force and effect.
DIHC FINANCE CORPORATION
By: /s/ Robert T. Sorrentino
-----------------------------
Robert T. Sorrentino
Title: Vice President
Acknowledged and Agreed:
DIHC Atlanta, Inc.
By: /s/ Barrington H. Branch
-----------------------------------------
Barrington H. Branch
Title: President
<PAGE>
ASSIGNMENT OF NOTES AND SECURITY AGREEMENTS
FOR VALUE RECEIVED DIHC FINANCE CORPORATION ("Assignor"), a Georgia
corporation having an office at 200 Galleria Parkway, N.W., Suite 2000, Atlanta,
Georgia 30339, has this day granted, bargained, sold, assigned, transferred and
set over unto STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN, a foundation formed according to the laws of The
Netherlands, having an office at Kroostwey-Noord 149, Zeist, The Netherlands
("Assignee"), all of Assignor's right, title and interest in and to (i) those
certain notes more particularly described on Schedule A annexed hereto and made
a part hereof (such security agreements, as the same may have been hereby
amended or modified, are hereinafter the "Notes"), (ii) those certain security
agreements more particularly described on Schedule B annexed hereto and made a
part hereof (such security agreements, as the same may have been hereto amended
or modified, are hereinafter the "Security Agreements"), and (iii) all other
documents, instruments and agreements delivered to Assignor in connection with
the loans (the "Loans") evidenced by the Notes (such documents, instruments,
agreements, together with the Notes and the Security Agreements, are hereinafter
the "Loan Documents").
TO HAVE AND TO HOLD the Loan Documents unto the Assignee and to the
successors, legal representatives and assigns of the Assignee forever from and
after the date hereof.
AND Assignor represents and warrants that as of the date hereof
there is due and owing in respect of the Loans the outstanding principal amount
of $48,146,965.78 together with interest thereon.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment as of
the 13th day of August 1997.
DIHC FINANCE CORPORATION
ATTEST: By: /s/ Robert T. Sorrentino
--------------------------
Robert T. Sorrentino
Vice President
<PAGE>
COUNTY OF COBB )
) ss.:
STATE OF GEORGIA )
BEFORE ME the undersigned authority personally appeared on this day
Robert T. Sorrentino, to me personally known, who being by me duly sworn did
depose and say that he is the Vice President of DIHC Finance Corporation, the
corporation described in and which executed the foregoing instrument; that he
acknowledged execution of said instrument to be the voluntary act and deed of
said corporation by order of the Board of Directors of said corporation.
WITNESS my hand and official seal this 13th day of August, 1997.
/s/ Patricia P. Williams
------------------------
Notary Public
Notary Public, Fayette County, Georgia
My commission expires December 5, 2000
<PAGE>
Schedule A
(Notes)
1. Promissory Note dated as of March 1, 1993 in the original principal
amount of $25,000,000 made by DIHC Peachtree, Inc. in favor of DIHC Finance
Corporation as amended by letter dated March 1, 1996.
2. Promissory Note dated as of March 1, 1993 in the original principal
amount of $25,000,000 made by DIHC Atlanta, Inc. in favor of DIHC Finance
Corporation, as amended by letter dated March 1, 1996.
<PAGE>
Schedule B
(Security Agreements)
1. Pledge and Security Agreement dated as of March 1, 1993 made by DIHC
Peachtree, Inc. in favor of DIHC Finance Corporation.
2. Pledge and Security Agreement dated as of March 1, 1993 made by DIHC
Atlanta, in favor of DIHC Finance Corporation.
<PAGE>
Exhibit 10.68
ASSIGNMENT OF COLLATERAL
(DIHC PEACHTREE, INC.)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
II. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
IV. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
VI. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
VIII. Nothing in this Assignment shall be construed to give to any
person other than Assignee its successors and assigns any legal or equitable
right, remedy or claim under this Assignment, and this Assignment shall be held
for the sole and exclusive benefit of Assignee and its successors and assigns.
X. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /S/ Jan H. W. R. van der Vlist
----------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in Fact
By: /S/ Anneke C. van de Puttelaar
----------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in fact
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /S/ John S. Moody
----------------------------------
Name: John S. Moody
Title: President
By: /S/ Rodney C. Dimock
----------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
<PAGE>
EXHIBIT A
1. Promissory Note dated as of March 1, 1993, executed by DIHC Peachtree,
Inc. ("Peachtree") in favor of DIHC Finance Corporation ("DIFCO") in the
original principal amount of $25,000,000, as assigned to Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen
("PGGM") pursuant to that
2. Pledge and Security Agreement dated as of March 1, 1993, executed by
Peachtree in favor of DIFCO, as assigned to PGGM pursuant to that certain
Assignment of
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(DIHC PEACHTEE, INC.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee")
without recourse or warranty except as provided for and set forth in that
certain Loan Purchase Agreement dated as of August 18, 1997 executed by and
between Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen and Assignee.
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /S/ Jan H. W. R. van der Vlist
----------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in Fact
By: /S/ Anneke C. van de Puttelaar
----------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.69
PROMISSORY NOTE
Principal Sum: $25,000,000 (U.S.) Date: March 1, 1993
Interest Rate: 8.75% Maturity Date: March 1, 1996
FOR VALUE RECEIVED, DIHC PEACHTREE, INC., a Georgia corporatin
("Maker") promises to pay to DIHC FINANCE CORPORATION ("Payee"), a Georgia
corporation, at its offices at 200 Galleria Parkway, Suite 2000, Atlanta,
Georgia 30339, or order, or at such other place as may be designated in writing
by the holder hereof, the principal sum of TWENTY-FIVE MILLION and NO/100
DOLLARS ($25,000,000.00) in lawful money of the United States of America, with
interest thereon from the date hereof at the rate of Eight and Three-Fourths
Percent (8.75%) per annum, compounded monthly, such principal and interest to be
payable as follows:
1. Commencing on the first day of April, 1993 and continuing on the
first day of each subsequent calendar month up to and including the first day of
February, 1996, Maker shall pay consecutive monthly installments of principal
and interest in the amount of One Hundred Ninety-Six Thousand Six Hundred
Seventy-Five and 10/100 Dollars ($196,675.10).
2. The entire unpaid principal balance, together with any accrued
interest thereon, shall be due and payable on March 1, 1996 (the "Maturity
Date").
This Note is secured by a Pledge and Security Agreement of even date
herewith (the "Security Instrument") from Maker to Payee by which Maker has
pledged to Payee all of Maker's partnership interest in DIHC Peachtree
Associates, a Georgia general partnership.
<PAGE>
2
If any of the following events of default shall occur and be
continuing: (i) the undersigned defaults in the payment, when due, of any
principal or interest on this Note or any other amount payable hereunder and
fails to remedy such default within twenty (20) days after receipt of written
notice from Payee specifying such default, or (ii) the undersigned defaults in
the due performance of or compliance with any provision of the Security
Instrument for a period of thirty (30) days after receipt of written notice from
Payee specifying such default, or (iii) a bankruptcy, reorganization,
arrangement, insolvency proceeding or case, or any other proceeding looking
toward dissolution or winding-up is instituted by or against the undersigned;
THEREUPON, in any such case, at the option of Payee, Maker shall immediately pay
the principal and interest remaining due and unpaid hereunder, together with all
costs and expenses incurred in connection with the collection or attempted
collection hereof and reasonable attorney's fees actually incurred whether or
not suit is instituted. Interest shall accrue on such amounts from the date of
such default or occurrence at the "Involuntary Rate" (as hereinafter defined)
compounded monthly until the date such amounts are paid. The "Involuntary Rate"
shall be an annual rate equal to two percent (2%) per annum in excess of the
rate charged from time to time by Trust Company Bank, Atlanta, Georgia, on short
term (90 day) unsecured loans to its preferred customers but in no event in
excewss of the then maximum legal rate in Georgia for purposes of determining
usury.
Maker waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof, waives demand, protest, notice of
nonpayment, and any and all lack of
<PAGE>
3
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security for this Note,
acceptance of other security thereof, or any other indulgence of forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
This Note may be prepaid in whole or in part without fee or penalty
(but with accrued interest on the amount so prepaid) at any time, upon Maker
delivering to Payee at least fourteen (14) days prior written notice of the
proposed prepayment.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or forfeiture of
interest. If, by the terms of this Note or any other instrument evidencing,
securing, or relating to this Note, Maker at any time is required or obligated
to pay interest on the principal amount of this Note in an amount or at a rate
in excess of the applicable legal maximum, the interest due to Payee shall be
immediately and automatically reduced to such maximum, the interest payable
shall be computed at such maximum rate, and all prior interest payments in
excess of such lawful maximum shall be immediately and automatically applied at
the time of receipt, in reduction of the principal balance due under this Note.
No delays on the part of Payee in exercising any right hereunder or any
other agreement further evidencing or securing this Note shall operate as a
waiver thereof or
<PAGE>
4
preclude the exercise thereof at any time during the continuance of any default
or during the continuance of a subsequent default.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the laws of the State of
Georgia.
IN WITNESS WHEREOF, Maker has executed this Note effective as of the
date first set forth above.
DIHC PEACHTREE, INC.
By /s/ Barrington H. Branch
-----------------------------------
Barrington H. Branch, President
Attest /s/ C. Lowell Ball
-----------------------------------
C. Lowell Ball, Secretary
[CORPORATE SEAL]
<PAGE>
March 1, 1996
DIHC Peachtree, Inc.
200 Galleria Parkway, Suite 2000
Atlanta, Georgia 30339
Gentlemen:
Reference is made to that Certain Note made as of March 1, 1993 between DIHC
Peachtree, Inc. ("Maker") and DIHC Finance Corporation ("Payee") in the
principal amount of $25,000,000.00 maturing on March 1, 1996.
Said Note presently has an unpaid Principal Balance of $24,428,865.79. This
letter will serve to evidence a mutual agreement between Maker and Payee that
the Maturity Date is hereby extended until March 1, 1999.
All other terms and provisions of Said Note, except as hereby extended, shall
continue in full force and effect.
DIHC FINANCE CORPORATION
By: /s/ Robert T. Sorrentino
------------------------------
Robert T. Sorrentino
Title: Vice President
Acknowledged and Agreed:
DIHC Atlanta, Inc.
By: /s/ Barrington H. Branch
---------------------------------
Barrington H. Branch
Title: President
<PAGE>
ASSIGNMENT OF NOTES AND SECURITY AGREEMENTS
FOR VALUE RECEIVED DIHC FINANCE CORPORATION ("Assignor"), a Georgia
corporation having an office at 200 Galleria Parkway, N.W., Suite 2000, Atlanta,
Georgia 30339, has this day granted, bargained, sold, assigned, transferred and
set over unto STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN, a foundation formed according to the laws of The
Netherlands, having an office at Kroostwey-Noord 149, Zeist, The Netherlands
("Assignee"), all of Assignor's right, title and interest in and to (i) those
certain notes more particularly described on Schedule A annexed hereto and made
a part hereof (such security agreements, as the same may have been hereby
amended or modified, are hereinafter the "Notes"), (ii) those certain security
agreements more particularly described on Schedule B annexed hereto and made a
part hereof (such security agreements, as the same may have been hereto amended
or modified, are hereinafter the "Security Agreements"), and (iii) all other
documents, instruments and agreements delivered to Assignor in connection with
the loans (the "Loans") evidenced by the Notes (such documents, instruments,
agreements, together with the Notes and the Security Agreements, are hereinafter
the "Loan Documents").
TO HAVE AND TO HOLD the Loan Documents unto the Assignee and to the
successors, legal representatives and assigns of the Assignee forever from and
after the date hereof.
AND Assignor represents and warrants that as of the date hereof
there is due and owing in respect of the Loans the outstanding principal amount
of $48,146,965.78 together with interest thereon.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment as of
the 13th day of August 1997.
DIHC FINANCE CORPORATION
ATTEST: By: /s/ Robert T. Sorrentino
--------------------------
Robert T. Sorrentino
Vice President
<PAGE>
COUNTY OF COBB )
) ss.:
STATE OF GEORGIA )
BEFORE ME the undersigned authority personally appeared on this day
Robert T. Sorrentino, to me personally known, who being by me duly sworn did
depose and say that he is the Vice President of DIHC Finance Corporation, the
corporation described in and which executed the foregoing instrument; that he
acknowledged execution of said instrument to be the voluntary act and deed of
said corporation by order of the Board of Directors of said corporation.
WITNESS my hand and official seal this 13th day of August, 1997.
/s/ Patricia P. Williams
------------------------
Notary Public
Notary Public, Fayette County, Georgia
My commission expires December 5, 2000
<PAGE>
Schedule A
(Notes)
1. Promissory Note dated as of March 1, 1993 in the original principal
amount of $25,000,000 made by DIHC Peachtree, Inc. in favor of DIHC Finance
Corporation as amended by letter dated March 1, 1996.
2. Promissory Note dated as of March 1, 1993 in the original principal
amount of $25,000,000 made by DIHC Atlanta, Inc. in favor of DIHC Finance
Corporation, as amended by letter dated March 1, 1996.
<PAGE>
Schedule B
(Security Agreements)
1. Pledge and Security Agreement dated as of March 1, 1993 made by DIHC
Peachtree, Inc. in favor of DIHC Finance Corporation.
2. Pledge and Security Agreement dated as of March 1, 1993 made by DIHC
Atlanta, in favor of DIHC Finance Corporation.
<PAGE>
Exhibit 10.70
ASSIGNMENT OF COLLATERAL
(ONE NINETY ONE PEACHTREE ASSOCIATES)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of 191 Finance Associates,
L.P., a Georgia limited partnership, (hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Cornerstone Properties Inc., Assignor has
agreed to transfer all of its right, title and interest in and to the Collateral
to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the
Assignor and Assignee and their respective heirs, successors and assigns.
<PAGE>
2
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia.
<PAGE>
3
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS
VOOR DE GEZONDHEID,
GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN,
a foundation formed
according to the laws of
The Netherlands
Signed, sealed and
delivered in the presence of:
[Signature Illegible] By: /S/
- ---------------------------- ---------------------------------------
Official Witness Name: Jan H.W.R. van der Vlist
Title: Attorney-in fact
/S/
- ------------------------
Notary Public By: /S/
---------------------------------------
Name: Anneke C. van de Puttelaar
My Commission Expires: Title: Attorney-in fact
Patti A. Olson
- ------------------------
[NOTARY SEAL]
Notary Seal, State of New York
No. 4738281
Commission Expires August 31, 1999
ASSIGNEE:
191 FINANCE ASSOCIATES, L.P.,
a Georgia limited partnership
By: Its general partner,
Cornerstone Properties Inc.,
a Nevada corporation
<PAGE>
4
Signed, sealed and
delivered in the presence of: By: /S/
--------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
[Signature Illiegible]
- -----------------------------
Official Witness
Attest: /S/
-----------------------------------
Its: Thomas P. Loftus
/S/ Secretary
- --------------------
Notary Public
My Commission Expires:
Patti A. Olson [CORPORATE SEAL]
- -----------------------------
[NOTARY SEAL]
Notary Public, State of New York
Commission expires August 31, 1999
No. 4738281
Signed, sealed and
delivered in the presence of: By: /S/
-------------------------
Name: John S. Moody
Title: President
[Signature Illegible]
- --------------------------
Official Witness
Attest: /S/
-----------------------------------
Its: Thomas P. Loftus
/S/ Secretary
- ----------------------
Notary Public
Patti A. Olson
My Commission Expires:
August 31, 1999 [CORPORATE SEAL]
[NOTARY SEAL]
Notary Public, State of New York
No. 4738281
<PAGE>
EXHIBIT A
1. "A" Note dated as of February 1, 1988, executed by One Ninety One
Peachtree Associates ("191") in favor of DIHC Finance Corporation
("DIFCO") in the original principal amount of $145,000,000.00, as assigned
by DIFCO to Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen ("PGGM") pursuant to that certain Assignment of
Loan Documents dated as of March 1, 1993, recorded in Deed Book 18244 at
page 187, aforesaid records.
2. First Deed to Secure Debt, Security Agreement and Assignment of Leases and
Rents dated as of February 1, 1988, executed by 191 in favor of DIFCO,
recorded in Deed Book 11305 at page 196, Fulton County, Georgia, Records;
as amended by that certain First Amendment to First Deed to Secure Debt,
Security Agreement and Assignment of Leases and Rents dated as of February
10, 1988, executed by and between 191 and DIFCO, recorded in Deed Book
11321 at page 088, aforesaid records; as further amended by that certain
Second Amendment to First Deed to Secure Debt, Security Agreement and
Assignment of Leases and Rents dated as of April 27, 1988, executed by and
between 191 and DIFCO, recorded in Deed Book 11485 at page 276, aforesaid
records; as assigned by DIFCO to PGGM pursuant to that certain Assignment
of Loan Documents dated as of March 1, 1993, recorded in Deed Book 18244
at page 187, aforesaid records.
3. Assignment of Partnership Interest, Security Agreement and Marshaling
Agreement dated as of February 1, 1988, executed by and between 191, DIFCO
and DIHC Peachtree Associates; as assigned by DIFCO to PGGM pursuant to
that certain Assignment of Loan Documents dated as of October __, 1997.
4. Building Loan Agreement dated as of February 1, 1988, executed by and
between DIFCO and 191; as assigned by DIFCO to PGGM pursuant to that
certain Assignment of Loan Document dated as of March 1, 1993.
5. Agreement Regarding Interest and Charges assigned by DIFCO to PGGM by that
certain Assignment of Loan Documents dated as of March 1, 1993, recorded
in Deed Book 18244 at page 187, aforesaid records.
6. Lawyers Title Insurance Corporation Mortgagee's Title Insurance Policy No.
82-01-945001; as assigned by DIFCO to PGGM pursuant to that certain
Assignment of Loan Documents dated as of November 15, 1992.
<PAGE>
6
ALLONGE
ENDORSEMENT OF NOTE
(ONE NINETY ONE PEACHTREE ASSOCIATES)
Pay to the order of 191 FINANCE ASSOCIATES, L.P. (the "Assignee")
without recourse or warranty except as provided for and set forth in that
certain Loan Purchase Agreement dated as of August 18, 1997 executed by and
between Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen and Assignee.
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /S/
--------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in fact
By: /S/
--------------------------------
Name:Anneke C. can de Puttelaar
Title: Attorney-in fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.71
================================================================================
"A" NOTE
By
ONE NINETY ONE PEACHTREE ASSOCIATES
Payable to the Order of
DIHC FINANCE CORPORATION
dated
As of February 1, 1998
================================================================================
<PAGE>
"A" NOTE
FOR VALUE RECEIVED, ONE NINETY ONE PEACHTREE ASSOCIATES
("Maker"), a general partnership formed pursuant to the partnership laws of the
State of Georgia, consisting of (1) DIHC PEACHTREE ASSOCIATES, a Georgia general
partnership, and (2) C-H ASSOCIATES, LTD., a Georgia limited partnership, and
having an address at Two Ravinia Drive, Suite 1100, Atlanta, Georgia 30346,
promises to pay to DIHC FINANCE CORPORATION, its successors in interest or
assigns ("Payee"), at its office at 200 Galleria Parkway, Suite 2000, Atlanta,
Georgia 30339, or order, or at such other place as may be designated in writing
by the holder hereof, the principal sum of ONE HUNDRED FORTY-FIVE MILLION
DOLLARS ($145,000,000.00), or so much thereof as shall be advanced under this
Note in accordance with the provisions of that certain Building Loan Agreement
(the "Building Loan Agreement") of even date herewith between Maker and Payee,
in lawful money of the United States of America, on the date fifteen (15) years
after the "Permanent Funding Date" (as defined in the Building Loan Agreement),
but in no event later than February 28, 2009 (the "Maturity Date"), and to pay
interest on the unpaid principal balance hereof from the date hereof at the
times and at the applicable rates of interest set forth below.
Until the Permanent Funding Date (as such term is defined in the
Building Loan Agreement), interest shall be computed on the outstanding
principal sum of One Hundred Forty-Five Million Dollars ($145,000,000.00), or so
much thereof as shall have been advanced hereunder, at the rate of eight and
one-half percent (8 1/2%) per annum. On or before the tenth (10th) day of each
calendar month commencing on the first full calendar month after the date hereof
through the Permanent Funding Date, Maker shall pay all accrued and unpaid
interest for
<PAGE>
2
the preceding calendar month, and on the Permanent Funding Date Maker shall pay
all accrued and unpaid interest hereunder through the Permanent Funding Date. To
the extent that loan proceeds are available for such purpose under the Building
Loan Agreement, such payments shall be made from draws made under the Building
Loan Agreement for Interim Financing Costs (as such term is defined in the
Building Loan Agreement).
After the Permanent Funding Date, this Note shall bear interest
at the rate of 9.375% per annum (,the "Permanent Interest Rate"). On or before
the tenth (10th) day of the second full calendar month after the Permanent
Funding Date, Maker shall pay all accrued but unpaid interest for the period
from the Permanent Funding Date through the end of the calendar month after the
calendar month in which the Permanent Funding Date occurs. Thereafter, on or
before the tenth (10th) day of each calendar month thereafter, through and
including the Maturity Date, Maker shall pay all accrued and unpaid interest
accruing during the preceding calendar month. Such monthly dates for payments
hereunder after the Permanent Funding Date shall be referred to hereinafter as
"Monthly Payment Dates". After the Permanent Funding Date, Maker shall make the
following payments hereunder:
(1) On each Monthly Payment Date through and including the fifth
(5th) anniversary of the Permanent Funding Date, interest only at the Permanent
Interest Rate shall be due and payable monthly in arrears;
(2) On each Monthly Payment Date after the fifth (5th)
anniversary of the Permanent Funding Date through and including the Maturity
Date, principal and accrued interest shall be due and payable monthly in equal
installments of principal and interest sufficient to cause
<PAGE>
3
the amortization and payment in full of the entire principal balance outstanding
as of said fifth (5th) anniversary of the Permanent Funding Date over a period
of 360 months.
(3) On the Maturity Date, the outstanding principal balance of
this Note, together with all accrued and unpaid interest thereon, shall be due
and payable.
Maker shall make all payments required under this Note to the
registered holder of this Note as reflected on the books and records of Maker.
Maker shall be required to recognize a new owner of this Note as the new
registered holder of this Note only if the transfer of the ownership interest in
the Note has been disclosed to Maker in a written notice executed by the last
registered holder as reflected in the books and records of Maker. In such case
Maker shall either make an entry on its books and records identifying the new
owner of such interest or, if a new holder surrenders this Note to Maker, Maker
shall either reissue this Note to the new holder or issue a new instrument to
the new holder containing terms and provisions identical to this Note.
Each payment received by Payee on account of this Note shall be
applied in the following order of priority: first, to the curing of any default
(including late charges) hereunder, under the Building Loan Agreement during the
term thereof or under that certain First Deed to Secure Debt and Security
Agreement and Assignment of Leases and Rents (the "Mortgage") of even date
herewith, made by Maker to Payee to secure the payment of this Note or under any
other document executed by Maker pursuant to the terms of this Note, the
Building Loan Agreement, the Mortgage, the "B" Note (as hereinafter defined) or
the "B" Mortgage (as hereinafter defined) as security for this Note (all such
documents and agreements referred to
<PAGE>
4
collectively hereinafter as the "Loan Documents"); second, to interest accruing
at the applicable interest rate on the outstanding principal balance hereof
since the immediately preceding Monthly Payment Date; and third, to the
outstanding principal balance hereof.
If the date on which any payment due hereunder is due and payable
falls on a Saturday, Sunday or legal holiday, then such payment shall be due and
payable on the next succeeding business day.
If any portion of any payment due hereunder (other than at
maturity) is not paid on the date on which it is due, Maker shall pay to Payee,
in addition to all amounts otherwise due and payable under this Note, an amount
equal to two percent (2%) of the unpaid portion of such payment as a late
payment charge, and such amount shall be secured by the Mortgage.
Upon (i) Payee notifying Maker of any monetary default hereunder,
or under that certain "B" Construction Note (the ""B" Note") of even date
herewith executed by Maker in favor of Payee, or under that certain Second Deed
to Secure Debt, Security Agreement and Assignment of Leases and Rents securing
the "B" Note (the ""B" Mortgage"), or under any of the Loan Documents, and the
continuance of such monetary default for a period of twenty (20) days after the
delivery of such written notice of default by Payee to Maker (the "Event of
Default") or (ii) Payee notifying Maker of any non-monetary default hereunder,
under the "B" Note, the "B" Mortgage or any of the Loan Documents, and the
continuance of such default for a period of sixty (60) days after delivery of
such written notice of default by Payee, (or, if such non-monetary default is of
the type that cannot be cured in such period of time, then such additional
period of time as is necessary to cure same, provided Maker promptly commences
to cure same and
<PAGE>
5
thereafter diligently and continually prosecutes to completion the cure of same)
(the "Event of Default"), Maker, at the option of Payee, shall pay the principal
and interest remaining due and unpaid hereunder in accordance with the terms
hereof and of the Mortgage, together with all costs and expenses incurred in
connection with the collection or attempted collection hereof and the protection
of the security hereof or thereof, including attorneys' fees actually incurred
and reasonably set, whether or not suit is instituted. Interest shall accrue on
past due amounts from the date of any Event of Default at the "Involuntary Rate"
(as hereinafter defined) compounded monthly until the date such past due amounts
together with such interest at the Involuntary Rate are paid. The "Involuntary
Rate" shall be:
(1) for any advances, disbursements or moneys advanced by Payee
in accordance with the terms of this Note, the Mortgage, the Building Loan
Agreement or the other Loan Documents in furtherance of protecting the security
hereof or thereof or for any monetary defaults set forth in clause (i) of this
paragraph but prior to any acceleration by Payee of the debt evidenced by this
Note, an annual rate equal to five percent (5%) per annum in excess of the rate
announced from time to time by Trust Company Bank, Atlanta, Georgia as its prime
rate (regardless of whether such rate is actually charged to any particular
customer or group of customers), on the past due amount or the amount so
advanced, as the case may be, but in no event in excess of the then applicable
maximum lawful rate;
(2) in the event the principal amount of this Note and all
interest due hereunder is accelerated by Payee in accordance with terms of this
Note or the Mortgage, an annual rate computed from the date of such acceleration
equal to the greater of (i) fifteen percent
<PAGE>
6
(15%) per annum or (ii) five percent (5%) per annum in excess of the rate
announced from time to time by Trust Company Bank, Atlanta, Georgia as its prime
rate (regardless of whether such rate is actually charged to any particular
customer or group of customers), on the principal and all interest and the
amounts then due and payable, but in no event in excess of the then applicable
maximum lawful rate.
Except as may be specifically set forth herein to the contrary,
Maker (i) waives and renounces any and all exemption rights and the benefit of
all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof except as set forth in the Mortgage,
(ii) waives demand, protest, notice of nonpayment, and any and all lack of
diligence or delays in the collection or enforcement hereof, and (iii) expressly
consents to any extension of time, release of any of the security for this Note,
acceptance of other security therefor, or any other indulgence or forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or any other party.
On or after the Permanent Funding Date, Maker and Payee shall
execute and deliver an estoppel letter confirming the principal amount of this
Note as of such Date and, at the request of Payee, Maker shall execute and
deliver a note in replacement of this Note (upon surrender by Payee to Maker of
this Note) setting forth the then holder of this Note and the principal amount
of this Note then outstanding in the form and substance of this Note except that
the terms hereof relating to the period prior to the Permanent Funding Date
which are no longer applicable shall be deleted. Any failure of Maker to execute
such replacement note complying with the above within thirty (30) days after
delivery by Payee of a request therefor, accompanied
<PAGE>
7
by such replacement note, shall be a default under this Note but shall in no
event affect the validity of this Note.
This note may not be prepaid in whole or in part prior to the
Maturity Date except this Note may be prepaid (i) in whole or in part in the
case of a prepayment upon the application of condemnation proceeds, casualty
insurance proceeds and proceeds from recoveries under title insurance policies
as provided in the Mortgage, or a prepayment of one-half of the "Unused
Construction Funds" (as defined in the Building Loan Agreement) as required by
the terms of the Building Loan Agreement, or (ii) during the six (6) month
period immediately preceding the Maturity Date, or (iii) upon the sale or other
disposition by Maker of its entire interest in the Premises, as defined in the
Mortgage .In the case of any prepayment under clause (ii) or clause (iii) of the
preceding sentence, a prepayment in full (but not in part) shall be permitted
provided that Maker shall give thirty (30) days' prior written notice to Payee
and shall pay a prepayment premium calculated as follows: from the Permanent
Interest Rate there shall be subtracted the interest yield rate, as published in
The Wall Street Journal on the Monthly Payment Date immediately preceding the
prepayment date, for United States Treasury Notes or Bonds maturing on a date
closest to the Maturity Date (the "Treasury Note Rate"). If two or more Treasury
Notes or Bonds mature on the applicable date, then the average of all such Notes
or Bonds shall be used. If The Wall Street Journal is not published on the
Monthly Payment Date immediately preceding the date of prepayment, then the next
published issue of The Wall Street Journal shall be used, provided that if The
Wall Street Journal ceases to publish the interest yield rates described above
or if there is a suspension of publication of The Wall Street Journal extending
<PAGE>
8
from the Monthly Payment Date immediately preceding the date of prepayment
through the date of prepayment, then any alternate source for determining such
rates which the holder hereof may reasonably designate shall be used. The
resulting percentage rate is hereinafter referred to as the "Spread Rate". The
prepayment premium payable hereunder shall be equal to the net present value
(based upon a discount rate equal to the Treasury Note Rate) of the total amount
of interest which would be earned if the principal amount to be prepaid were
invested at the Spread Rate until the Maturity Date. In no event shall this Note
be prepayable unless the indebtedness evidenced by the "B" Note is also paid in
full at or before the prepayment hereof. If the Treasury Note Rate is equal to
or exceeds the Permanent Interest Rate, the prepayment premium shall be zero.
Upon any Event of Default hereunder, and following any
acceleration by Payee of the obligation to pay the entire outstanding principal
balance hereof and all accrued and unpaid interest hereon, a tender (the
"Tender") of payment of the principal and interest remaining due and unpaid
hereunder, made by Maker or anyone on behalf of Maker at any time at or prior to
foreclosure or mortgagee's sale, shall constitute an evasion of the payment
terms hereof and shall be deemed to be a voluntary prepayment and such payment,
to the extent permitted by law, shall include a prepayment premium in an amount
calculated as set forth in the immediately preceding paragraph. Notwithstanding
anything herein to the contrary, this Note shall be prepaid, in whole or in part
without premium or penalty, from any recoveries under title insurance policies
covering the Premises or from any undisbursed insurance proceeds and
condemnation awards required by the terms of the Mortgage to be applied on the
indebtedness evidenced by this Note.
<PAGE>
9
The parties hereto have intended in good faith to comply with all
applicable usury and interest rate disclosure laws. Notwithstanding anything to
the contrary contained in this Note or any of the other Loan Documents, Maker
shall not be obligated to pay interest at a rate which would subject Payee to
either criminal or civil liability. If, by the terms of this Note or any of the
other Loan Documents, Maker is ever obligated to pay interest on the principal
balance hereof in an amount or at a rate in excess of the applicable lawful
maximum, then the interest due to Payee shall be immediately and automatically
reduced to such maximum, the interest payable shall be computed at such maximum
rate, and all prior interest payments in excess of such lawful maximum shall be
immediately and automatically applied, and shall be deemed to have been treated
as having been applied at the time of receipt, in reduction of the principal
balance due under this Note.
No delays on the part of Payee in exercising any right hereunder
or under the Building Loan Agreement, the "B" Note, the Mortgage, the "B"
Mortgage or any of the other Loan Documents shall operate as a waiver thereof or
preclude the exercise thereof at any time during the continuance of any default
of which Payee has given written notice to Maker or during the continuance of a
subsequent default of which Payee has given written notice to Maker.
Notwithstanding any other provision of this Note or any of the
Loan Documents, neither the obligation of Maker to pay the debt evidenced by
this Note and the Mortgage nor the obligation of Maker to perform any covenant
or agreement contained in this Note, the Mortgage, or any of the other Loan
Documents shall be enforced by any action or proceeding wherein or whereby
damages or any money judgment shall be sought against Maker or any of its
partners or
<PAGE>
10
officers, shareholders, directors or partners of such partners (direct or
indirect), except a foreclosure or other action against the Premises, and any
judgment in any such foreclosure or other action shall be enforceable against
Maker only to the extent of its interest in such Premises and the income
therefrom after an Event of Default has occurred, and no deficiency or other
personal judgment shall be rendered or entered against Maker or any of its
partners or officers, directors, shareholders or partners of such partner
(direct or indirect) in such foreclosure or other action. Nothing in this
paragraph shall, however, (1) be deemed to affect the priority of the lien and
security title created by the Mortgage, (2) impair the right of Payee to
accelerate the maturity of this Note (or to avail itself of its other rights and
remedies against the Premises and Maker's interest therein) upon an Event of
Default under this Note, the Mortgage or any other Loan Documents, or (3)
relieve Maker of any of the covenants or obligations set forth in this Note, the
Mortgage or the other Loan Documents subject, however, to the limitations on
personal liability set forth above.
This Note may not be modified or terminated orally.
This Note has been delivered in Atlanta, Georgia and shall be
construed and enforced in accordance with the laws of the State of Georgia.
The property encumbered by the Mortgage is located in the City of
Atlanta, Georgia.
Any and all notices, approvals, requests and other communications
to be given hereunder shall be served and delivered in the manner set forth in
the Mortgage.
<PAGE>
11
IN WITNESS WHEREOF, Maker his executed this Note under seal as of
the lst day of February, 1988.
MAKER: ONE NINETY ONE PEACHTREE ASSOCIATES,
a Georgia general partnership, by its two general
partners
By: C-H Associates, Ltd., a Georgia limited
partnership, by its two general partners
By: Hines Peachtree Associates I
Limited Partnership, a Georgia
limited partnership, by its two general
partners
By: /s/ Gerald D. Hines (SEAL)
-----------------------
Gerald D. Hines
<PAGE>
12
By: Hines Atlanta Corporation,
a Georgia corporation
By: /s/ Gerald D. Hines
------------------------
Gerald D. Hines,
President
Attest: /s/ David McGinnis
------------------------
David McGinnis,
Assistant Secretary
[CORPORATE SEAL]
By: Cousins Real Estate Corporation, a Georgia
corporation
By: /s/ Vipin L. Patel
------------------------
Vipin L. Patel,
Executive Vice President
Attest: /s/ Robert P. Hunter, Jr.
------------------------
Robert P. Hunter, Jr.,
Secretary
[CORPORATE SEAL]
<PAGE>
13
By: DIHC Peachtree Associates, a Georgia
general partnership, by its two general
partners
By: DIHC Peachtree, Inc., a Georgia
corporation
By: /s/ Herman A. Vonhof
-------------------------
Herman A. Vonhof,
President
Attest: /s/ Charles W. Strawser, Jr.
-------------------------
Charles W. Strawser, Jr..
Vice President
[CORPORATE SEAL]
By: DIHC Atlanta, Inc., a Georgia
corporation
By: /s/ Herman A. Vonhof
-------------------------
Herman A. Vonhof,
President
Attest: /s/ Charles W. Strawser, Jr.
-------------------------
Charles W. Strawser, Jr.,
Vice President
[CORPORATE SEAL]
<PAGE>
ASSIGNMENT OF LOAN DOCUMENTS
(191 PEACHTREE)
FOR VALUE RECEIVED, DIHC FINANCE CORPORATION, a Georgia
corporation having an office at Suite 2000, 200 Galleria Parkway, Atlanta,
Georgia ("Assignor"), has this day granted, bargained, sold, assigned,
transferred and set over unto STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIKJE EN MAATSCHAPPELIKJE BELANGEN, a foundation formed according to the
laws of The Netherlands, having an office at Kroostweg Number 149, Zeist, The
Netherlands ("Assignee"), all of Assignor's right, title, and interest in, to
and under (i) that certain "A" Note (the "Note") in the principal amount of One
Hundred Forty-Five Million and No/100 Dollars ($145,000,000.00), dated February
1, 1988, made by One Ninety One Peachtree Associates, a Georgia general
partnership ("Borrower"), payable to the order of Assignor (the "Note"), (ii)
that certain First Deed to Secure Debt, Security Agreement and Assignment of
Leases and Rents, dated as of February 1, 1988 from Borrower to Assignor,
recorded in Deed Book 11305, Page 196 in the Fulton County, Georgia public
records, as the same has been heretofore amended (as amended, the "Mortgage"),
and those certain documents evidencing, securing or otherwise relating to the
loan evidenced by the Note that are described on Exhibit A attached hereto and
made a part hereof (the Note, the Mortgage and such other documents described on
Exhibit A are herein referred to collectively as the "Loan Documents").
TO HAVE AND TO HOLD the same unto Assignee, its successors and
assigns, without recourse, from and after the date hereof.
AND Assignor covenants that as of the effective date of this
instrument the outstanding balance of principal and interest under the Note was
$145,000,000.00.
IN WITNESS WHEREOF, Assignor has caused this instrument to be
executed effective as of the 1st day of March, 1993.
Signed and Sealed in DIHC FINANCE CORPORATION,
the Presence of: a Georgia corporation
/s/ By: /s/ Barrington H. Branch
- ---------------------------- ------------------------------
Witness Name: Barrington H. Branch
Title: President
/s/ Susan L. Bonds
- ----------------------------
Notary Public Attest: /s/ C. Lowell Ball
---------------------------
Name: C. Lowell Ball
My commission expires: Title: Secretary
_______________________
[NOTARY SEAL] [CORPORATE SEAL]
<PAGE>
EXHIBIT A
"A" LOAN DOCUMENTS
Closing Binder
Tab No.
"A" Note in the original principal amount of $145,000,000 22
Agreement Regarding Interest and Charges 24
First Deed to Secure Debt, Security Agreement and Assignment of Leases 25
and Rents, recorded in Deed Book 11305, Page 196, Fulton County,
Georgia records
First Amendment to First Deed to Secure Debt, Security Agreement and 26
Assignment of Leases and Rents, recorded in Deed Book 11321, Page 88,
aforesaid Records
Second Amendment to First Deed to Secure Debt, Security Agreement 27
and Assignment of Leases and Rents, recorded in Deed Book 11485,
Page 276, aforesaid Records
UCC Financing Statement File No. 690932, aforesaid Records, between 31
One Ninety One Peachtree Associates Debtor, and DIHC Finance
Corporation, Secured Party
UCC Financing Statement File No. 691564, aforesaid Records, between 32
One Ninety One Peachtree Associates, Debtor, and DIHC Finance
Corporation, Secured Party, as amended
UCC Financing Statement File No. 88-01703, DeKalb County, Georgia 34
Records, between One Ninety One Peachtree Associates, Debtor, and
DIHC Finance Corporation, Secured Party, as amended
Lawyers Title Insurance Corporation Mortgagee's Title Insurance Policy
No. 82-01-945001, as endorsed 50
<PAGE>
Exhibit 10.72
ASSIGNMENT OF COLLATERAL
(DIHC PROPERTIES I, INC.)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
Signed, sealed and
delivered in the presence of: By: /s/
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
[Signature Illegible]
Official Witness
By: /s/
Name: Anneke C. van de Puttelaar
Title: Attorney-in-fact
/s/ Patti A. Olson
Notary Public
My Commission Expires:
_________________________
2
<PAGE>
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
Signed, sealed and
delivered in the presence of: By: /s/
Name: Rodney C. Dimock
Title: Executive Vice President
[Signature Illegible]
Official Witness
Attest: /s/
Its: Thomas P. Loftus
Patti A. Olson Secretary
Notary Public
My Commission Expires:
_______________________ [CORPORATE SEAL]
[NOTARY SEAL]
Signed, sealed and
delivered in the presence of: By: /s/
Name: John S. Moody
Title: President
[Signature Illegible]
Official Witness
Attest: /s/
Its: Thomas P. Loftus
Patti A. Olson Secretary
Notary Public
My Commission Expires:
________________________ [CORPORATE SEAL]
[NOTARY SEAL]
3
<PAGE>
EXHIBIT A
1. Amended and Restated Promissory Note dated as of November 1, 1994,
executed by DIHC Properties I, Inc. ("DIHC I") in favor of Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen
("PGGM") in the principal amount of $33,310,304.78.
2. Deed to Secure Debt and Security Agreement dated as of December 31, 1988,
executed by DIHC I in favor of PGGM, recorded in Deed Book 5207 at page
306 in the Records of Cobb County, Georgia; as modified by that certain
Deed to Secure Debt Modification Agreement dated as of December 1, 1991,
executed by and between DIHC I and PGGM, recorded in Deed Book 6603 at
page 391, aforesaid records; as further modified by that certain Deed to
Secure Debt Modification Agreement dated as of November 1, 1994, executed
by and between DIHC I and PGGM, recorded in Deed Book 8785 at page 344,
aforesaid records.
3. Amended and Restated Promissory Note made as of October 1, 1997 from DIHC
I to PGGM in the principal sum of $32,585,166.10.
4
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(DIHC PROPERTIES I, INC.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/
Name: Anneke C. van de Puttelaar
Title: Attorney-in-fact
DATE: October 27, 1997
5
<PAGE>
Exhibit 10.73
AMENDED AND RESTATED PROMISSORY NOTE
THIS PROMISSORY NOTE, made as of November 1, 1994 by and between
DIHC PROPERTIES I, INC., a Georgia corporation ("Maker"), having an office at
Suite 2000, 200 Galleria Parkway, N.W., Atlanta, Georgia 30339, and STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a
foundation formed according to the laws of The Netherlands ("Payee"), having an
office at Kroostweg Number 149, Zeist, The Netherlands.
FOR VALUED RECEIVED, Maker promises to pay to the order of Payee at
its office recited above or at such other place as may be designated in writing
by the holder hereof, the principal sum of Thirty Three Million Three Hundred
Ten Thousand Three Hundred Four and 78/100 Dollars ($33,310,304.78), with
interest thereon in lawful money of the United States of America, such principal
and interest to be payable as follows:
Interest and amortization shall be payable in thirty-five (35) equal
constant monthly payments of interest and principal in the amount of Two Hundred
Sixty Eight Thousand Twenty Two and 25/100 Dollars ($268,022.25) attributable
first to interest at the rate of nine percent (9%) per annum, and then the
balance to principal, payable on the first day of each month during the term of
this Note, beginning on December 1, 1994. The entire unpaid principal balance,
together with any accrued but unpaid interest thereon, shall be due and payable
on October 1, 1997 (the "Maturity Date").
Upon any default hereunder the continuance of such default for a
period of twenty (20) days after the due date, or upon any default under the
Deed to Secure Debt and Security Agreement dated December 31, 1988, recorded in
Deed Book 5207, Page 306, Cobb County,
<PAGE>
Georgia records, as amended (the "Security Deed"), from Maker to Payee securing
this Note and the continuance of such default after the expiration of any
applicable grace period under the Security Deed, Maker promises immediately to
pay to the holder hereof the principal and interest remaining due and unpaid
hereunder, together with all costs and expenses incurred in connection with the
collection or attempted collection hereof and reasonable attorneys' fees
actually incurred, whether or not suit is instituted. Interest shall accrue on
such amounts from the date of such default at the rate of twelve percent (12%)
per annum, provided that any such interest which has accrued shall be paid at
the time of and as a condition precedent to the curing of any default.
Maker agrees to be bound to the extent provided in the Security Deed
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in the Security Deed,
waives demand, protest, notice of nonpayment, and any and all lack of diligence
or delays in the collection or enforcement hereof, and expressly consents to any
extension of time, release of any party liable for the indebtedness evidenced
hereby, release of any of the security of this Note, acceptance of other
security therefor, or any other indulgence or forbearance whatsoever by Payee,
any one or all of which may be made without notice to Maker or such released
party or any other party.
This Note may be prepaid in whole or in part at any time upon ten
(10) days' prior written notice, without fee or penalty, but with accrued
interest on the amount so prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay
2
<PAGE>
interest at a rate which would subject Payee to either criminal or civil
liability or forfeiture. If, by the terms of this Note or any other instrument
evidencing, securing or relating to this Note, Maker at any time is required or
obligated to pay interest on the principal amount of this Note in an amount or
at a rate in excess of the applicable legal maximum, the interest due to Payee
shall be immediately and automatically reduced to such maximum, the interest
payable shall be computed at such maximum rate, and all prior interest payments
in excess of such lawful maximum shall be immediately and automatically applied,
and shall be deemed to have been treated as having been applied at the time or
receipt, in reduction of the principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or may become due and payable under the terms
of the Security Deed (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Security Deed or any other agreement further evidencing or securing
this Note shall operate as a waiver thereof or preclude the exercise thereof at
any time during the continuance of any default or during the continuance of a
subsequent default.
Notwithstanding any other provisions of this Note or the Security
Deed to the contrary, neither the obligation of Maker to pay the debt evidenced
by this Note and the Security Deed nor the obligation of Maker to perform any
covenant or agreement contained in this Note or the Security Deed, shall be
enforced by any action or proceeding wherein or whereby damages or any money
judgment shall be sought against Maker or any of its partners or officers,
directors or
3
<PAGE>
partners of such partners, except a foreclosure or other action against the
property encumbered by the Security Deed, and any judgment in any such
foreclosure or other action shall be enforceable against Maker only to the
extent of its interest in such property and the income therefrom and no
deficiency or other personal judgment shall be rendered or entered against Maker
or any of its partners or officers, directors or partners of such partners in
such foreclosure or other action. Nothing in this paragraph shall, however, (1)
be deemed to affect the priority of the lien and the security title created by
the Security Deed, (2) impair the right of Payee to accelerate the maturity of
this Note (or to avail itself of its other rights and remedies against the
property encumbered by the Security Deed and Maker's interest therein,) upon a
default under this Note or the Security
4
<PAGE>
Deed, or (3) relieve Maker of any of the covenants or obligations set forth in
this note or the Security Deed subject, however, to the limitations on personal
liability set forth above.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion , without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of Georgia.
The Property encumbered by the Security Deed is located in Cobb
County, Georgia.
IN WITNESS WHEREOF, Maker has executed this Note under seal
effective as of the date first set forth above.
DIHC PROPERTIES I, INC.
a Georgia Corporation
By: /s/ Barrington H. Branch
---------------------------
Barrington H. Branch
President
Attest: /s/ C. Lowell Ball
-----------------------
C. Lowell Ball
Secretary
5
<PAGE>
Exhibit 10.74
ASSIGNMENT OF COLLATERAL
(TRANSCANAL PROPERTIES, INC.)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. van der Vlist
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/ Jan H.W.R. van der Vlist
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
------------------------------
Name: John S. Moody
Title: President
By: /s/ Rodney C. Dimock
------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
2
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by /s/ Jan M.W.R.
van der Vlist of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN this 27th day of October, 1997.
/s/ Patti A. Olson
--------------------------
Notary Public
My Commission Expires: August 31, 1999
STATE OF NEW YORK ) Patti A. Olson
) ss.: Notary Public, State of New York
COUNTY OF NEW YORK ) No. 4738281
Subscribed, sworn to and acknowledged before me by Anneke C. van de
Puttelaar of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN this ____ day of _____________, 1997.
/s/ Patti A. Olson
------------------------
Notary Public
My Commission Expires: August 31, 1999
Patti A. Olson
Notary Public, State of New York
No. 4738281
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by John S. Moody,
President of Cornerstone Properties Inc., this 27th day of October, 1997.
/s/ Patti A. Olson
-------------------------
Notary Public
My Commission Expires: August 31, 1999
STATE OF NEW YORK ) Patti A. Olson
) ss.: Notary Public, State of New York
COUNTY OF NEW YORK ) No. 4738281
Subscribed, sworn to and acknowledged before me by Rodney C. Dimock,
Executive Vice President of Cornerstone Properties Inc., this 27th day of
October, 1997.
/s/ Patti A. Olson
-------------------------
Notary Public
My Commission Expires: August 31, 1999
Patti A. Olson
Notary Public, State of New York
No. 4738281
<PAGE>
VIRGINIA:
IN THE CLERK'S OFFICE OF THE CIRCUIT COURT
This certificate was presented, and with the Certificate annexed,
admitted to record on _______________ at ______________ o'clock __.m.
Clerk's fees: $____________ have been paid.
Attest:___________________________________, Deputy Clerk
<PAGE>
EXHIBIT A
1. Amended and Restated Promissory Note dated as of December 31, 1994,
executed by TransCanal Properties, Inc. ("TCP") in favor of Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen
("PGGM") in the principal amount of $7,061,864.65.
2. Deed of Trust and Security Agreement dated as of February 3, 1988,
executed by TCP in favor of Real Title Company, Inc., as Trustee for the
benefit of DIHC Finance Corporation ("DIFCO"), recorded in Deed Book 1234
at page 322, in the Clerk's Office of the Circuit Court for the City of
Alexandria, Virginia; as assigned by DIFCO to PGGM pursuant to that
certain Assignment of Note and Deed of Trust dated as of March 1, 1988,
recorded in Deed Book 1236 at page 384, aforesaid records; as modified by
that certain Extension and Modification Agreement dated as of December 31,
1994, executed by and between TCP and PGGM, recorded in Deed Book 1526 at
page 666, aforesaid records.
3. Assignment of Lessor's Interest in Leases dated as of February 3, 1988,
executed by TCP in favor of DIFCO, recorded in Deed Book 1234 at page 359,
aforesaid records; as assigned by DIFCO to PGGM pursuant to that certain
Assignment of Assignment of Lessor's Interest in Leases dated as of March
1, 1988, recorded in Deed Book 1236 at page 387, aforesaid records.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(TRANSCANAL PROPERTIES, INC.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. van der Vlist
------------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/ Anneke C. van de Puttelaar
------------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in-fact
DATE: October 27, 1997
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE
THIS AMENDED AND RESTATED PROMISSORY NOTE, made as of December 31,
1994 by and between TRANSCANAL PROPERTIES, INC., a Georgia corporation
("Maker"), having an office at Suite 2000, 200 Galleria Parkway, N.W., Atlanta,
Georgia 30339, and STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MATTSCHAPPELIJKE BELANGEN, a foundation formed according to the laws of The
Netherlands ("Payee"), having an office at Kroostweg Number 149, Zeist, The
Netherlands.
FOR VALUED RECEIVED, Maker promises to pay to the order of Payee at
its office recited above or at such other place as may be designated in writing
by the holder hereof, the principal sum of Seven Million Sixty One Thousand
Eight Hundred Sixty Four and 65/100 Dollars ($7,061,864.65), with interest
thereon in lawful money of the United States of America, such principal and
interest to be payable as follows:
Interest and amortization shall be payable in equal constant monthly
payments of interest and principal in the amount of Fifty Nine Thousand Three
Hundred Seventy Nine and 99/100 Dollars ($59,379.99) attributable first to
interest at the rate of nine and one-half percent (9.5%) per annum, and then the
balance to principal, payable on the first day of each month during the term of
this Note, beginning on February 1, 1995. The entire unpaid principal balance,
together with any accrued but unpaid interest thereon, shall be due and payable
on December 31, 1999 (the "Maturity Date").
This Note is secured, inter alia, by (i) that certain Deed of Trust
and Security Agreement dated February 3, 1988 from Maker to Real Title Company,
Inc., as trustee for the
<PAGE>
benefit of DIHC Finance Corporation ("DIFCO"), recorded in Book 1234, Page 322
in the Clerk's office of the Circuit Court-City of Alexandria, Virginia, as
assigned by DIFCO to Beneficiary by Assignment of Note and Deed of Trust dated
as of March 1, 1988 recorded as Instrument No. 13504, aforesaid records (the
"Assignment"), and as modified by Extension and Modification Agreement of even
date herewith (as thus amended, the "Deed of Trust") and (ii) that certain
Assignment of Lessor's Interest in Leases dated as of February 3, 1988 from
Maker to DIFCO, recorded in Book 1234, Page 359, aforesaid records, as assigned
to Payee by Assignment dated as of March 1, 1988 recorded as Instrument No.
13505 aforesaid records (as assigned the "Collateral Assignment") (the Deed of
Trust and the Collateral Assignment are herein referred to individually and
collectively as the "Security Documents"). Upon any default hereunder and the
continuance of such default for a period of twenty (20) days after the due date,
or upon any default under the Security Documents and the continuance of such
default after the expiration of any applicable grace or cure period thereunder,
at Payee's election, Maker shall immediately pay to the holder hereof the
principal and interest remaining due and unpaid hereunder, together with all
costs and expenses incurred in connection with the collection or attempted
collection hereof and reasonable attorneys' fees actually incurred, whether or
not suit is instituted. Interest shall accrue on such amounts from the date of
such default at the rate of two percent (2%) per annum in excess of the rate
charged from time to time by Trust Company Bank, Atlanta, Georgia, on short term
(90) day unsecured loans to its preferred customers; provided that any such
interest which has accrued shall be paid at the time of and as a condition
precedent to the curing of any default.
2
<PAGE>
Maker agrees to be bound to the extent provided in the Security
Documents and waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof except as set forth in the Security
Documents, waives demand, protest, notice of nonpayment, and any and all lack of
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security of this Note,
acceptance of other security therefor, or any other indulgence or forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
This Note may be prepaid in whole or in part at any time upon ten
(10) days' prior written notice, without fee or penalty, but with accrued
interest on the amount so prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or forfeiture. If, by
the terms of this Note or any other instrument evidencing, securing or relating
to this Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall be immediately and
automatically reduced to such maximum, the interest payable shall be computed at
such maximum rate, and all prior interest payments in excess of such lawful
maximum shall be immediately and automatically applied, and shall be deemed to
have been
3
<PAGE>
treated as having been applied at the time or receipt, in reduction of the
principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or may become due and payable under the terms
of the Security Documents (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Security Documents or any other agreement further evidencing or
securing this Note shall operate as a waiver thereof or preclude the exercise
thereof at any time during the continuance of any default or during the
continuance of a subsequent default.
Notwithstanding any other provisions of this Note or the Security
Documents to the contrary, neither the obligation of Maker to pay the debt
evidenced by this Note and the Security Documents nor the obligation of Maker to
perform any covenant or agreement contained in this Note or the Security
Documents, shall be enforced by any action or proceeding wherein or whereby
damages or any money judgment shall be sought against Maker or any of its
partners or officers, directors or partners of such partners, except a
foreclosure or other action against the property encumbered by the Security
Documents, and any judgment in any such foreclosure or other action shall be
enforceable against Maker only to the extent of its interest in such property
and the income therefrom and no deficiency or other personal judgment shall be
rendered or entered against Maker or any of its partners or officers, directors
or partners of such partners in such foreclosure or other action. Nothing in
this paragraph shall, however, (1) be deemed to affect the priority of the lien
and the security title created by the Security Documents, (2) impair
4
<PAGE>
the right of Payee to accelerate the maturity of this Note (or to avail itself
of its other rights and remedies against the property encumbered by the Security
Documents and Maker's interest therein,) upon a default under this Note or the
Security Documents, or (3) relieve Maker of any of the covenants or obligations
set forth in this note or the Security Documents subject, however, to the
limitations on personal liability set forth above.
This Amended and Restated Note constitutes an amendment and
restatement of that certain Note from Maker to DIFCO dated as of February 3,
1988, as assigned to Beneficiary, and does not constitute a novation.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of the
Commonwealth of Virginia.
The Property encumbered by the Security Documents is located in the
City of Alexandria, Arlington County, Virginia.
5
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note under seal
effective as of the date first set forth above.
TRANSCANAL PROPERTIES, INC.
a Georgia Corporation
By: /s/ Barrington H. Branch
--------------------------------
Barrington H. Branch
President
Attest: /s/ C. Lowell Ball
----------------------------
C. Lowell Ball
Secretary
6
<PAGE>
Exhibit 10.76
ASSIGNMENT OF COLLATERAL
(CANAL CENTER PROPERTIES, INC.)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. van der Vlist
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/ Anneke C. van de Puttelaar
Name: Anneke C. van de Puttelaar
Title: Attorney-in-fact
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
Name: John S. Moody
Title: President
By: /s/ Rodney C. Dimock
Name: Rodney C. Dimock
Title: Executive Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by Jan M.W.R. van
der Vlist of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN this 27th day of October, 1997.
/s/ Patti A. Olson
Notary Public
My Commission Expires:_________________ Patti A. Olson
Notary Public, State of New York
No. 4738281
Commission Expires August 31, 1999
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by Anneke C. van de
Puttelaar of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN this 27th day of October, 1997.
/s/ Patti A. Olson
Notary Public
My Commission Expires:_________________ Patti A. Olson
Notary Public, State of New York
No. 4738281
Commission Expires August 31, 1999
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by John S. Moody,
President of Cornerstone Properties Inc., this 27th day of October, 1997.
/s/ Patti A. Olson
Notary Public
My Commission Expires:_________________ Patti A. Olson
Notary Public, State of New York
No. 4738281
Commission Expires August 31, 1999
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by Rodney C. Dimock,
Executive Vice President of Cornerstone Properties Inc., this 27th day of
October, 1997.
/s/ Patti A. Olson
Notary Public
My Commission Expires:_________________ Patti A. Olson
Notary Public, State of New York
No. 4738281
Commission Expires August 31, 1999
<PAGE>
VIRGINIA:
IN THE CLERK'S OFFICE OF THE CIRCUIT COURT
This certificate was presented, and with the Certificate annexed,
admitted to record on _______________ at ______________ o'clock __.m.
Clerk's fees: $____________ have been paid.
Attest:___________________________________, Deputy Clerk
<PAGE>
EXHIBIT A
1. Second Amended and Restated Promissory Note dated as of December 31, 1994,
executed by Canal Center Properties, Inc. ("CCP") in favor of Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen
("PGGM") in the principal amount of $17,963,440.81.
2. Construction Deed of Trust and Security Agreement dated as of September
15, 1985, executed by CCP in favor of Real Title Company, Inc., as Trustee
for DIHC Finance Corporation ("DIFCO"); as assigned by DIFCO to PGGM
pursuant to that certain Assignment of Construction Note and Construction
Deed of Trust dated as of December 11, 1989; and as further amended by
Extension and Modification Agreement dated as of December 31, 1994,
executed by and between CCP and PGGM, recorded in Deed Book 1526 at page
672, in the Clerk's Office of the Circuit Court of the City of Alexandria,
Virginia.
3. Assignment of Lessor's Interest in Leases dated as of September 15, 1985,
executed by CCP in favor of DIFCO; as assigned by DIFCO to PGGM pursuant
to that certain Assignment of Assignment of Lessor's Interest in Leases
dated as of December 11, 1989.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(CANAL CENTER PROPERTIES, INC.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee")
without recourse or warranty except as provided for and set forth in that
certain Loan Purchase Agreement dated as of August 18, 1997 executed by and
between Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen and Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. van der Vlist
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/ Anneke C. van de Puttelaar
Name: Anneke C. van de Puttelaar
Title: Attorney-in-fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.77
SECOND AMENDED AND RESTATED PROMISSORY NOTE
THIS SECOND AMENDED AND RESTATED PROMISSORY NOTE, made as of
December 31, 1994 by and between CANAL CENTER PROPERTIES, INC., a Georgia
corporation ("Maker"), having an office at Suite 2000, 200 Galleria Parkway,
N.W., Atlanta, Georgia 30339, and STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a foundation formed according to the
laws of The Netherlands ("Payee"), having an office at Kroostweg Number 149,
Zeist, The Netherlands.
FOR VALUED RECEIVED, Maker promises to pay to the order of Payee at
its office recited above or at such other place as may be designated in writing
by the holder hereof, the principal sum of Seventeen Million Nine Hundred Sixty
Three Thousand Four Hundred Forty and 81/100 Dollars ($17,963,440.81), with
interest thereon in lawful money of the United States of America, such principal
and interest to be payable as follows:
Interest and amortization shall be payable in equal constant monthly
payments of interest and principal in the amount of One Hundred Fifty One
Thousand Forty Six and 35/100 Dollars ($151,046.35) attributable first to
interest at the rate of nine and one-half percent (9.5%) per annum, and then the
balance to principal, payable on the first day of each month during the term of
this Note, beginning on February 1, 1995. The entire unpaid principal balance,
together with any accrued but unpaid interest thereon, shall be due and payable
on December 31, 1999 (the "Maturity Date").
This Note is secured, inter alia, by that certain Construction Deed
of Trust and Security Agreement dated as of September 15, 1985 from Maker to
Real Title Company, Inc., as
<PAGE>
trustee for the benefit of DIHC Finance Corporation ("DIFCO"), as assigned by
DIFCO to Payee by Assignment of Construction Note and Construction Deed of Trust
dated December 11, 1989, and as amended by Extension and Modification Agreement
of even date herewith (as thus amended, the "Deed of Trust") and (ii) that
certain Assignment of Lessor's Interest in Leases dated as of September 15, 1985
from Maker to DIFCO, recorded in Book ___, Page___, aforesaid records, as
assigned to Payee by Assignment dated as of December 11, 1989 (as assigned, the
"Collateral Assignment") (the Deed of Trust and the Collateral Assignment are
herein referred to individually and collectively as the "Security Documents").
Upon any default hereunder and the continuance of such default for a period of
twenty (20) days after the due date, or upon any default under the Security
Documents and the continuance of such default after the expiration of any
applicable grace or cure period thereunder, at Payee's election, Maker shall
immediately pay to the holder hereof the principal and interest remaining due
and unpaid hereunder, together with all costs and expenses incurred in
connection with the collection or attempted collection hereof and reasonable
attorneys' fees actually incurred, whether or not suit is instituted. Interest
shall accrue on such amounts from the date of such default at the rate of two
percent (2%) per annum in excess of the rate charged from time to time by Trust
Company Bank, Atlanta, Georgia, on short term (90) day unsecured loans to its
preferred customers; provided that any such interest which has accrued shall be
paid at the time of and as a condition precedent to the curing of any default.
Maker agrees to be bound to the extent provided in the Security
Documents and waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof
2
<PAGE>
except as set forth in the Security Documents, waives demand, protest, notice of
nonpayment, and any and all lack of diligence or delays in the collection or
enforcement hereof, and expressly consents to any extension of time, release of
any party liable for the indebtedness evidenced hereby, release of any of the
security of this Note, acceptance of other security therefor, or any other
indulgence or forbearance whatsoever by Payee, any one or all of which may be
made without notice to Maker or such released party or any other party.
This Note may be prepaid in whole or in part at any time upon ten
(10) days' prior written notice, without fee or penalty, but with accrued
interest on the amount so prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or forfeiture. If, by
the terms of this Note or any other instrument evidencing, securing or relating
to this Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall be immediately and
automatically reduced to such maximum, the interest payable shall be computed at
such maximum rate, and all prior interest payments in excess of such lawful
maximum shall be immediately and automatically applied, and shall be deemed to
have been treated as having been applied at the time or receipt, in reduction of
the principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or
3
<PAGE>
may become due and payable under the terms of the Security Documents (subject to
any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Security Documents or any other agreement further evidencing or
securing this Note shall operate as a waiver thereof or preclude the exercise
thereof at any time during the continuance of any default or during the
continuance of a subsequent default.
Notwithstanding any other provisions of this Note or the Security
Documents to the contrary, neither the obligation of Maker to pay the debt
evidenced by this Note and the Security Documents nor the obligation of Maker to
perform any covenant or agreement contained in this Note or the Security
Documents, shall be enforced by any action or proceeding wherein or whereby
damages or any money judgment shall be sought against Maker or any of its
partners or officers, directors or partners of such partners, except a
foreclosure or other action against the property encumbered by the Security
Documents, and any judgment in any such foreclosure or other action shall be
enforceable against Maker only to the extent of its interest in such property
and the income therefrom and no deficiency or other personal judgment shall be
rendered or entered against Maker or any of its partners or officers, directors
or partners of such partners in such foreclosure or other action. Nothing in
this paragraph shall, however, (1) be deemed to affect the priority of the lien
and the security title created by the Security Documents, (2) impair the right
of Payee to accelerate the maturity of this Note (or to avail itself of its
other rights and remedies against the property encumbered by the Security
Documents and Maker's interest therein,) upon a default under this Note or the
Security Documents, or (3) relieve Maker of any of
4
<PAGE>
the covenants or obligations set forth in this note or the Security Documents
subject, however, to the limitations on personal liability set forth above.
This Second Amended and Restated Note constitutes an amendment and
restatement of that certain Amended and Restated Note from Maker to Payee dated
as of December 11, 1989 and does not constitute a novation.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion , without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of the
Commonwealth of Virginia.
The Property encumbered by the Security Documents is located in the
City of Alexandria, Arlington County, Virginia.
5
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note under seal
effective as of the date first set forth above.
CANAL CENTER PROPERTIES, INC.
a Georgia Corporation
By: /s/ Barrington H. Branch
---------------------------------
Barrington H. Branch
President
Attest: /s/ C. Lowell Ball
-----------------------------
C. Lowell Ball
Secretary
6
SECOND AMENDED AND RESTATED PROMISSORY NOTE
THIS SECOND AMENDED AND RESTATED PROMISSORY NOTE, made as of
December 31, 1994 by and between CANAL CENTER PROPERTIES, INC., a Georgia
corporation ("Maker"), having an office at Suite 2000, 200 Galleria Parkway,
N.W., Atlanta, Georgia 30339, and STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a foundation formed according to the
laws of The Netherlands ("Payee"), having an office at Kroostweg Number 149,
Zeist, The Netherlands.
FOR VALUED RECEIVED, Maker promises to pay to the order of Payee at
its office recited above or at such other place as may be designated in writing
by the holder hereof, the principal sum of Seventeen Million Nine Hundred Sixty
Three Thousand Four Hundred Forty and 81/100 Dollars ($17,963,440.81), with
interest thereon in lawful money of the United States of America, such principal
and interest to be payable as follows:
Interest and amortization shall be payable in equal constant monthly
payments of interest and principal in the amount of One Hundred Fifty One
Thousand Forty Six and 35/100 Dollars ($151,046.35) attributable first to
interest at the rate of nine and one-half percent (9.5%) per annum, and then the
balance to principal, payable on the first day of each month during the term of
this Note, beginning on February 1, 1995. The entire unpaid principal balance,
together with any accrued but unpaid interest thereon, shall be due and payable
on December 31, 1999 (the "Maturity Date").
This Note is secured, inter alia, by that certain Construction Deed
of Trust and Security Agreement dated as of September 15, 1985 from Maker to
Real Title Company, Inc., as
<PAGE>
trustee for the benefit of DIHC Finance Corporation ("DIFCO"), as assigned by
DIFCO to Payee by Assignment of Construction Note and Construction Deed of Trust
dated December 11, 1989, and as amended by Extension and Modification Agreement
of even date herewith (as thus amended, the "Deed of Trust") and (ii) that
certain Assignment of Lessor's Interest in Leases dated as of September 15, 1985
from Maker to DIFCO, recorded in Book ___, Page___, aforesaid records, as
assigned to Payee by Assignment dated as of December 11, 1989 (as assigned, the
"Collateral Assignment") (the Deed of Trust and the Collateral Assignment are
herein referred to individually and collectively as the "Security Documents").
Upon any default hereunder and the continuance of such default for a period of
twenty (20) days after the due date, or upon any default under the Security
Documents and the continuance of such default after the expiration of any
applicable grace or cure period thereunder, at Payee's election, Maker shall
immediately pay to the holder hereof the principal and interest remaining due
and unpaid hereunder, together with all costs and expenses incurred in
connection with the collection or attempted collection hereof and reasonable
attorneys' fees actually incurred, whether or not suit is instituted. Interest
shall accrue on such amounts from the date of such default at the rate of two
percent (2%) per annum in excess of the rate charged from time to time by Trust
Company Bank, Atlanta, Georgia, on short term (90) day unsecured loans to its
preferred customers; provided that any such interest which has accrued shall be
paid at the time of and as a condition precedent to the curing of any default.
Maker agrees to be bound to the extent provided in the Security
Documents and waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof
2
<PAGE>
except as set forth in the Security Documents, waives demand, protest, notice of
nonpayment, and any and all lack of diligence or delays in the collection or
enforcement hereof, and expressly consents to any extension of time, release of
any party liable for the indebtedness evidenced hereby, release of any of the
security of this Note, acceptance of other security therefor, or any other
indulgence or forbearance whatsoever by Payee, any one or all of which may be
made without notice to Maker or such released party or any other party.
This Note may be prepaid in whole or in part at any time upon ten
(10) days' prior written notice, without fee or penalty, but with accrued
interest on the amount so prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or forfeiture. If, by
the terms of this Note or any other instrument evidencing, securing or relating
to this Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall be immediately and
automatically reduced to such maximum, the interest payable shall be computed at
such maximum rate, and all prior interest payments in excess of such lawful
maximum shall be immediately and automatically applied, and shall be deemed to
have been treated as having been applied at the time or receipt, in reduction of
the principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or
3
<PAGE>
may become due and payable under the terms of the Security Documents (subject to
any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Security Documents or any other agreement further evidencing or
securing this Note shall operate as a waiver thereof or preclude the exercise
thereof at any time during the continuance of any default or during the
continuance of a subsequent default.
Notwithstanding any other provisions of this Note or the Security
Documents to the contrary, neither the obligation of Maker to pay the debt
evidenced by this Note and the Security Documents nor the obligation of Maker to
perform any covenant or agreement contained in this Note or the Security
Documents, shall be enforced by any action or proceeding wherein or whereby
damages or any money judgment shall be sought against Maker or any of its
partners or officers, directors or partners of such partners, except a
foreclosure or other action against the property encumbered by the Security
Documents, and any judgment in any such foreclosure or other action shall be
enforceable against Maker only to the extent of its interest in such property
and the income therefrom and no deficiency or other personal judgment shall be
rendered or entered against Maker or any of its partners or officers, directors
or partners of such partners in such foreclosure or other action. Nothing in
this paragraph shall, however, (1) be deemed to affect the priority of the lien
and the security title created by the Security Documents, (2) impair the right
of Payee to accelerate the maturity of this Note (or to avail itself of its
other rights and remedies against the property encumbered by the Security
Documents and Maker's interest therein,) upon a default under this Note or the
Security Documents, or (3) relieve Maker of any of
4
<PAGE>
the covenants or obligations set forth in this note or the Security Documents
subject, however, to the limitations on personal liability set forth above.
This Second Amended and Restated Note constitutes an amendment and
restatement of that certain Amended and Restated Note from Maker to Payee dated
as of December 11, 1989 and does not constitute a novation.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion , without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of the
Commonwealth of Virginia.
The Property encumbered by the Security Documents is located in the
City of Alexandria, Arlington County, Virginia.
5
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note under seal
effective as of the date first set forth above.
CANAL CENTER PROPERTIES, INC.
a Georgia Corporation
By: /s/ Barrington H. Branch
---------------------------------
Barrington H. Branch
President
Attest: /s/ C. Lowell Ball
-----------------------------
C. Lowell Ball
Secretary
6
<PAGE>
Exhibit 10.78
ASSIGNMENT OF COLLATERAL
(BRYCE MOUNTAIN, INC.)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
-------------------------------
Name: Jan H. W. R. van der Vlist
Title: Attorney-in Fact
By: /s/
-------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in Fact
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/
-------------------------------
Name: John Moody
Title: President
By: /s/
-------------------------------
Name: Rodney C. Mimock
Title: Executive Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by Jan M. W. R. van
der Vlist, _________ of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE
EN MAATSCHAPPELIJKE BELANGEN this 27th day of October, 1997.
/s/
-------------------------
Notary Public
Commission Expires August 31, 1999
Patti A. Olson
Notary Public, State of New York
No. 4738281
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by Anneke C. van der
Puttelaar, _________ of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE
EN MAATSCHAPPELIJKE BELANGEN this 27th day of October, 1997.
/s/
-------------------------
Notary Public
Commission Expires August 31, 1999
Patti A. Olson
Notary Public, State of New York
No. 4738281
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by John S. Moody,
President of Cornerstone Properties Inc., this 27th day of October, 1997.
/s/
-------------------------
Notary Public
Commission Expires August 31, 1999
Patti A. Olson
Notary Public, State of New York
No. 4738281
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Subscribed, sworn to and acknowledged before me by Rodney C. Dimock,
Executive Vice President of Cornerstone Properties Inc., this 27th day of
August, 1997.
/s/
-------------------------
Notary Public
Commission Expires August 31, 1999
Patti A. Olson
Notary Public, State of New York
No. 4738281
<PAGE>
VIRGINIA:
IN THE CLERK'S OFFICE OF THE CIRCUIT COURT
This certificate was presented, and with the Certificate annexed,
admitted to record on _______________ at ______________ o'clock __.m.
Clerk's fees: $____________ have been paid.
Attest:___________________________________, Deputy Clerk
<PAGE>
EXHIBIT A
1. Modified and Restated Note dated as of February 13, 1996, executed by
Bryce Mountain, Inc. ("Bryce") in favor of Stichting Pensioenfonds voor de
Gezondheid, Geestelijke en Maatschappelijke Belangen ("PGGM") in the
principal amount of $42,000,000; as modified by that certain Second
Modified and Restated Note dated as of December 1, 1987, as modified by
that certain Third Amended and Restated Promissory Note dated as of
December 31, 1994, in the principal amount of $9,001,126.41.
2. Construction Deed of Trust and Security Agreement dated as of May 1, 1981,
executed by Bryce in favor of Carolyn Musselman and Robert M. Musselman,
Trustees for the benefit of Dutch Institutional Finance Corporation, Inc.
("DIFCO"), recorded in Deed Book 1026 at page 511, in the Clerk's Office
among the land records of the City of Alexandria, Virginia; as modified by
that certain Deed of Appointment of Substitute Trustee dated as of January
27, 1983, executed by DIFCO naming Real Title Company, Inc. ("Real Title")
as Substitute Trustee, recorded in Deed Book 1087 at page 622, aforesaid
records; as further amended by that certain Extension and Modification
Agreement dated as of February 13, 1986, executed by and between Bryce and
Real Title; as assigned by DIHC Finance Corporation (formerly DIFCO) to
PGGM pursuant to that certain Assignment of Note and Deed of Trust dated
as of December 1, 1987, recorded in Deed Book 1353 at page 1203, aforesaid
records; as further amended by Second Extension and Modification Agreement
dated as of December 1, 1987, recorded in Deed Book 1353 at page 1193,
aforesaid records; and as further amended by that certain Third Extension
and Modification Agreement dated as of December 31, 1994, recorded in Deed
Book 1526 at page 659, aforesaid records.
3. Collateral Assignment of Leases and Rents dated as of May 1, 1981,
executed by Bryce in favor of DIFCO, recorded in Deed Book 1026 at page
551, aforesaid records; as assigned by DIHC Finance Corporation (formerly
DIFCO) to PGGM by that certain Assignment of Collateral Assignment of
Leases and Rents dated as of December 1, 1987, recorded in Deed Book 1353
at page 1207, aforesaid records.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(BRYCE MOUNTAIN, INC.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
--------------------------------
Name: Jan H. W. R. van der Vlist
Title: Attorney-in Fact
By: /s/
--------------------------------
Name: Anneke C. can de Puttear
Title: Attorney-in Law
DATE: October 27th, 1997
<PAGE>
Exhibit 10.79
MODIFIED AND RESTATED NOTE
Modified and Restated Note, made as of the 13th day of February,
1986 by and between BRYCE MOUNTAIN, INC., a Georgia corporation ("Maker"),
having an office at Suite 2000, 200 Galleria Parkway, Atlanta, Georgia 30339,
and DIHC FINANCE CORPORATION, a Georgia corporation ("Payee") formerly known as
Dutch Institutional Finance Corporation, Inc. having an office at Suite 2000,
200 Galleria Parkway, Atlanta, Georgia 30339.
Whereas, Maker has executed and delivered to Payee a certain
Construction Note in the principal amount of up to $42,000,000 due on February
13, 1986 and dated May 1, 1981 (the "Original Note"), which Original Note is
secured by that certain Construction Deed of Trust and Security Agreement,
covering certain real property located in Alexandria, Alexandria County,
Virginia, granted by Maker to Carolyn Musselman and Robert M. Musselman, as
Trustee for the benefit of Payee (such deed of trust as modified by Deed of
Appointment of Substitute Trustee dated January 27, 1983 and by Extension and
Modification Agreement of even date is hereinafter referred to as the "Deed of
Trust"); and
Whereas, Maker and Payee have determined to extend the maturity
date, outstanding and modify the terms of payment and certain other provisions
of the original Note.
NOW THEREFORE, the Original Note is hereby modified effective as of
the date hereof and restated in its entirety as follows:
FOR VALUE RECEIVED, Maker promises to pay to Payee at its offices
recited above, or order, or at such other place as may be designated in writing
by the holder hereof, the
<PAGE>
principal sum of FORTY TWO MILLION and NO/100 DOLLARS ($42,000,000), in lawful
money of the United States of America, with interest thereon from the date
hereof at an annual rate of one-half of one percent (.5%) in excess of the
"prime" rate announced by Morgan Guaranty Trust Company of New York and in
effect as of the first day of each calendar month for that particular month,
such principal and interest to be payable as follows:
Interest only on the outstanding principal balance of FORTY TWO
MILLION and NO/100 DOLLARS ($42,000,000), shall be due and payable monthly on
the first of each month during the term of this Note, beginning with the first
day of the month next following the date hereof, computed on the basis of a 360
day fiscal year.
The entire unpaid principal balance, together with any accrued
interest thereon, shall be due and payable on February 13, 1987 (the "Maturity
Date"); provided, however, that the Maturity Date may be extended by Maker for
up to one year by Maker delivering to Payee written notice thereof at least
fifteen (15) days prior to the Maturity Date. In the event the Maturity Date is
so extended, interest shall continue to accrue and be payable monthly in
accordance with the terms set forth above and the entire unpaid balance
(together with any accrued interest thereon) shall be due and payable on the
Maturity Date, as extended.
Upon any default hereunder and the continuance of such default for a
period of twenty (20) days after the due date or upon any default under the Deed
of Trust and the continuance of such default after the expiration of any
applicable grace period under the Deed of Trust, Maker promises immediately to
pay the principal and interest remaining due and unpaid hereunder, together with
all costs and expenses incurred in connection with the collection or attempted
collection hereof and the reasonable attorney's fees, whether or not suit is
instituted.
-2-
<PAGE>
Interest shall accrue on such amounts from the date of such default at the
"Involuntary Rate" (as hereinafter defined) compounded monthly until the date
such amounts are paid. The "Involuntary Rate" shall be an annual rate equal to
two percent (2%) in excess of the rate charged from time to time by Morgan
Guaranty Trust Company of New York on short term ninety (90) day unsecured loans
to its preferred customers but in no event in excess of the then maximum legal
rate in Virginia for purposes of determining usury.
Maker agrees to be bound to the extent provided in the Deed of Trust
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in the Deed of Trust,
waives demand, protest, notice of nonpayment, and any and all lack of diligence
or delays in the collection or enforcement hereof, and expressly consents to any
extension of time, release of any party liable for the indebtedness evidenced
hereby, release of any of the security of this Note, acceptance of other
security therefor, or any other indulgence or forbearance whatsoever by Payee,
any one or all of which may be made without notice to Maker or such released
party or any other party.
This Note may be prepaid in whole or in part at any time upon ten
(10) days prior written notice, without fee or penalty, but with accrued
interest on the amount so prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability. If, by the terms of
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker at any time
-3-
<PAGE>
is required or obligated to pay interest on the principal amount of this Note in
an amount or at a rate in excess of the applicable legal maximum, the interest
due to Payee shall be immediately and automatically reduced to such maximum, the
interest payable shall be computed at such maximum rate, and all prior interest
payments in excess of such lawful maximum shall be immediately and automatically
applied, and shall be deemed to have been treated as having been applied at the
time of receipt, in reduction of the principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or may become due and payable under the terms
of the Deed of Trust (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Deed of Trust or any other agreement further evidencing or securing
this Note shall operate as a waiver thereof or preclude the exercise thereof at
any time during the continuance of any default or during the continuance of a
subsequent default.
Notwithstanding any other provisions of this Note or the Deed of
Trust to the contrary, neither the obligation of Maker to pay the debt evidenced
by this Note and the Deed of Trust nor the obligation of Maker to perform any
covenant or agreement contained in this Note or the Deed of Trust, shall be
enforced by any action or proceeding wherein or whereby damages or any money
judgment shall be sought against Maker or any of its partners or officers,
directors or partners of such partners, except a foreclosure or other action
against the property encumbered by the Deed of Trust, and any judgment in any
such foreclosure or other action shall be enforceable against Maker only to the
extent of its interest in such property and the income
-4-
<PAGE>
therefrom and no deficiency or other personal judgment shall be rendered or
entered against Maker or any of its partners or officers, directors or partners
of such partners in such foreclosure of other action. Nothing in this paragraph
shall, however (1) be deemed to affect the priority of the lien of the Deed of
Trust, (2) impair the right of Payee to accelerate the maturity of this Note (or
to avail itself of its other rights and remedies against the property encumbered
by the Deed of Trust and Maker's interest therein) upon a default under this
Note or the Deed of Trust, or (3) relieve Maker of any of the covenants or
obligations set forth in this Note or the Deed of Trust subject, however, to the
limitations on personal liability set forth above.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of Virginia.
The property encumbered by the Deed of Trust is located in
Alexandria County, Virginia.
IN WITNESS WHEREOF, Maker has executed this Note as of the 13th day
of February, 1986.
BRYCE MOUNTAIN, INC.
By /s/ Herman A. Vonhof
-----------------------------------
Herman A. Vonhof, President
ATTEST:
/s/ Melissa W. Carter
- ---------------------------------
-5-
<PAGE>
STATE OF GEORGIA )
: ss.:
COUNTY OF COBB )
I, Laura F. Kramer, a Notary Public in and for the aforesaid State
and County, certify that Herman A. Vonhof, whose name, as President of Bryce
Mountain, Inc. is signed to the written instrument, personally appeared before
me in said County and State and upon oath duly administered acknowledged that he
is the President of Bryce Mountain, Inc., and as such is duly authorized and
empowered to execute on behalf of said Corporation and acknowledged execution of
the foregoing on behalf of said Corporation.
Given under my hand and seal this 31st day of December, 1986.
/s/ Laura F. Kramer
-------------------------------------
Notary Public
Notary Public Georgia
State of at Large
My commission expires
May 24th, 1988
-6-
<PAGE>
SECOND MODIFIED AND RESTATED NOTE
THIS SECOND MODIFIED AND RESTATED NOTE, made as of the 1st day of
December, 1987 by and between BRYCE MOUNTAIN, INC., a Georgia corporation
("Maker"), having an office at Suite 2000, 200 Galleria Parkway, Atlanta,
Georgia 30339, and STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN, a foundation formed according to the laws of The
Netherlands ("Payee"), having an office at Kroostweg Number 149, Zeist, The
Netherlands.
WHEREAS, by virtue of Assignment dated of even date herewith from
DIHC Finance Corporation ("DIFCO") to Payee, Payee is the holder of that certain
Construction Note dated as of May 1, 1981 from Maker to DIFCO in the principal
amount of $42,000,000 (the "First Original Note"), as modified by that certain
Modified and Restated Note dated as of February 13, 1986 by and between the
Maker and DIFCO in the principal amount of $42,000,000 (the "Amended Original
Note", together with the First Original Note, the "Original Note") on which
there was due and owing, as of December 1, 1987, a sum of $17,000,000;
WHEREAS, the Original Note is secured by that certain Construction
Deed of Trust and Security Agreement, covering certain property in Alexandria,
Virginia, granted by Maker to Carolyn Musselman and Robert M. Musselman, as
Trustee for the benefit of DIFCO (such deed of trust as modified by Deed of
Appointment of Substitute Trustee dated January 27, 1983, by Extension and
Modification Agreement dated as of February 13, 1986, and by Second Extension
and Modification Agreement dated of even date herewith being referred to as the
"Deed of Trust"); and
<PAGE>
WHEREAS, Maker and Payee have determined to extend the maturity
date, fix the principal amount outstanding and modify the terms of payment and
certain other provisions of the Original Note.
NOW, THEREFORE, the Original Note is hereby modified effective as of
this date and is restated in its entirety as follows:
FOR VALUE RECEIVED, Maker promises to pay to Payee at its office
recited above, or order, or at such other place as may be designated in writing
by the holder hereof, the principal sum of SEVENTEEN MILLION AND NO/100 DOLLARS
($17,000,000), with interest thereon in lawful money of the United States of
America, such principal and interest to be payable as follows:
Interest and amortization shall be payable in eighty-four (84) equal
constant monthly payments of interest and principal in the amount of $152,337.22
attributable first to interest at the rate of 10.25% per annum (computed on the
basis of a 360 day fiscal year), and then the balance to principal, payable on
the first day of each month during the term of this Note, beginning with the
first day of the month next following the date hereof. The entire unpaid
principal balance, together with any accrued interest thereon, shall be due and
payable on January 1, 1995 (the "Maturity Date").
Upon any default hereunder and the continuance of such default for a
period of twenty (20) days after the due date or upon any default under the Deed
of Trust and the continuance of such default after the expiration of any
applicable grace period under the Deed of Trust, Maker promises immediately to
pay the principal and interest remaining due and unpaid hereunder, together with
all costs and expenses incurred in connection with the collection or
-2-
<PAGE>
attempted collection hereof and the reasonable attorney's fees, whether or not
suit is instituted. Interest shall accrue on such amounts from the date of such
default at the "Involuntary Rate" (as hereinafter defined) compounded monthly
until the date such amounts are paid. The "Involun tary Rate" shall be an annual
rate equal to two percent (2%) in excess of the rate charged from time to time
by Morgan Guaranty Trust Company of New York on short term ninety (90) day
unsecured loans to its preferred customers but in no event in excess of the then
maximum legal rate in Virginia for purposes of determining usury.
Maker agrees to be bound to the extent provided in the Deed of Trust
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in the Deed of Trust,
waives demand, protest, notice of nonpayment, and any and all lack of diligence
or delays in the collection or enforcement hereof, and expressly consents to any
extension of time, release of any party liable for the indebtedness evidenced
hereby, release of any of the security of this Note, acceptance of other
security therefor, or any other indulgence or forbearance whatsoever by Payee,
any one or all of which may be made without notice to Maker or such released
party or any other party.
This Note may be prepaid in whole or in part at any time upon ten
(10) days' prior written notice, without fee or penalty, but with accrued
interest on the amount so prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability. If, by the terms of
-3-
<PAGE>
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall be immediately and
automatically reduced to such maximum, the interest payable shall be computed at
such maximum rate, and all prior interest payments in excess of such lawful
maximum shall be immediately and automatically applied, and shall be deemed to
have been treated as having been applied at the time of receipt, in reduction of
the principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or may become due and payable under the terms
of the Deed of Trust (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Deed of Trust or any other agreement further evidencing or securing
this Note shall operate as a waiver thereof or preclude the exercise thereof at
any time during the continuance of any default or during the continuance of a
subsequent default.
Notwithstanding any other provisions of this Note or the Deed of
Trust to the contrary, neither the obligation of Maker to pay the debt evidenced
by this Note and the Deed of Trust nor the obligation of Maker to perform any
covenant or agreement contained in this Note or the Deed of Trust, shall be
enforced by any action or proceeding wherein or whereby damages or any money
judgment shall be sought against Maker or any of its partners or officers,
directors or partners of such partners, except a foreclosure or other action
against the property encumbered by the Deed of Trust, and any judgment in any
such foreclosure or other action shall be enforceable
-4-
<PAGE>
against Maker only to the extent of its interest in such property and the income
therefrom and no deficiency or other personal judgment shall be rendered or
entered against Maker or any of its partners or officers, directors or partners
of such partners in such foreclosure or other action. Nothing in this paragraph
shall, however, (1) be deemed to affect the priority of the lien of the Deed of
Trust, (2) impair the right of Payee to accelerate the maturity of this Note (or
to avail itself of its other rights and remedies against the property encumbered
by the Deed of trust and Maker's interest therein) upon a default under this
Note or the Deed of Trust, or (3) relieve Maker of any of the covenants or
obligations set forth in this Note or the Deed of Trust subject, however, to the
limitations on personal liability set forth above.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of Virginia.
The property encumbered by the Deed of Trust is located in
Alexandria County, Virginia.
IN WITNESS WHEREOF, Maker has executed this Note as of the 1st day
of December, 1987.
WITNESS: BRYCE MOUNTAIN, INC.
By: /s/ Herman A. Vonhof
- --------------------------------- ---------------------------------
Title: President
---------------------------
/s/ Julie A. Pitts
- --------------------------------
-5-
<PAGE>
THIRD AMENDED AND RESTATED PROMISSORY NOTE
THIS PROMISSORY NOTE, made as of December 31, 1994 by and between
BRYCE MOUNTAIN, INC., a Georgia corporation ("Maker"), having an office at Suite
2000, 200 Galleria Parkway, N.W., Atlanta, Georgia 30339, and STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a
foundation formed according to the laws of The Netherlands ("Payee"), having an
office at Kroostweg Number 149, Zeist, The Netherlands.
FOR VALUED RECEIVED, Maker promises to pay to the order of Payee at
its office recited above or at such other place as may be designated in writing
by the holder hereof, the principal sum of Nine Million One Thousand One Hundred
Twenty Six and 41/100 Dollars ($9,001,126.41), with interest thereon in lawful
money of the United States of America, such principal and interest to be payable
as follows:
Interest and amortization shall be payable in equal constant monthly
payments of interest and principal in the amount of Seventy Five Thousand Six
Hundred Eighty Six and 35/100 Dollars ($75,686.35) attributable first to
interest at the rate of nine and one-half percent (9.5%) per annum, and then the
balance to principal, payable on the first day of each month during the term of
this Note, beginning on February 1, 1995. The entire unpaid principal balance,
together with any accrued but unpaid interest thereon, shall be due and payable
on December 31, 1999 (the "Maturity Date").
This Note is secured, inter alia, by that certain Construction Deed
of Trust and Security Agreement dated May 1, 1981 from Maker to Carolyn
Musselman and Robert M. Musselman, trustees for the benefit of Dutch
Institutional Finance Corporation, Inc. a.k.a. DIHC Finance Corporation
("DIFCO"), recorded in Book 1026, Page 511 in the Clerk's office of the Circuit
Court--City of Alexandria, Virginia, as modified by Deed of Appointment of
Substitute Trustee dated January 27, 1983, by Extension and Modification
Agreement dated as of February 13, 1986, by Second Extension and Modification
Agreement dated December 1, 1987, recorded in Book 1353, Page 1194, aforesaid
records, and by Third Extension and
-1-
<PAGE>
Modification Agreement of even date herewith (as thus amended, the "Deed of
Trust") and (ii) that certain Collateral Assignment of Leases and Rents dated
May 1, 1981 from Maker to DIFCO, recorded in Book 1026, Page 551, aforesaid
records, as assigned to Payee by Assignment recorded in Book 1353, Page 1207,
aforesaid records (as amended, the "Collateral Assignment") (the Deed of Trust
and the Collateral Assignment are herein referred to individually and
collectively as the "Security Documents"). Upon any default hereunder and the
continuance of such default for a period of twenty (20) days after the due date,
or upon any default under the Security Documents and the continuance of such
default after the expiration of any applicable grace or cure period thereunder,
at Payee's election, Maker shall immediately pay to the holder hereof the
principal and interest remaining due and unpaid hereunder, together with all
costs and expenses incurred in connection with the collection or attempted
collection hereof and reasonable attorneys' fees actually incurred, whether or
not suit is instituted. Interest shall accrue on such amounts from the date of
such default at the rate of two percent (2%) per annum in excess of the rate
charged from time to time by Trust Company Bank, Atlanta, Georgia, on short term
(90) day unsecured loans to its preferred customers, provided that any such
interest which has accrued shall be paid at the time of and as a condition
precedent to the curing of any default.
Maker agrees to be bound to the extent provided in the Security
Documents and waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof except as set forth in the Security
Documents, waives demand, protest, notice of nonpayment, and any and all lack of
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security of this Note,
acceptance of other security therefor, or any other indulgence or forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
This Note may be prepaid in whole or in part at any time upon ten
(10) days' prior written notice, without fee or penalty, but with accrued
interest on the amount so prepaid.
-2-
<PAGE>
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or forfeiture. If, by
the terms of this Note or any other instrument evidencing, securing or relating
to this Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall be immediately and
automatically reduced to such maximum, the interest payable shall be computed at
such maximum rate, and all prior interest payments in excess of such lawful
maximum shall be immediately and automatically applied, and shall be deemed to
have been treated as having been applied at the time or receipt, in reduction of
the principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or may become due and payable under the terms
of the Security Documents (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Security Documents or any other agreement further evidencing or
securing this Note shall operate as a waiver thereof or preclude the exercise
thereof at any time during the continuance of any default or during the
continuance of a subsequent default.
Notwithstanding any other provisions of this Note or the Security
Documents to the contrary, neither the obligation of Maker to pay the debt
evidenced by this Note and the Security Documents nor the obligation of Maker to
perform any covenant or agreement contained in this Note or the Security
Documents, shall be enforced by any action or proceeding wherein or whereby
damages or any money judgment shall be sought against Maker or any of its
partners or officers, directors or partners of such partners, except a
foreclosure or other action against the property encumbered by the Security
Documents, and any judgment in any such foreclosure or other action shall be
enforceable against Maker only to the extent of its interest in such
-3-
<PAGE>
property and the income therefrom and no deficiency or other personal judgment
shall be rendered or entered against Maker or any of its partners or officers,
directors or partners of such partners in such foreclosure or other action.
Nothing in this paragraph shall, however, (1) be deemed to affect the priority
of the lien and the security title created by the Security Documents, (2) impair
the right of Payee to accelerate the maturity of this Note (or to avail itself
of its other rights and remedies against the property encumbered by the Security
Documents and Maker's interest therein,) upon a default under this Note or the
Security Documents, or (3) relieve Maker of any of the covenants or obligations
set forth in this note or the Security Documents subject, however, to the
limitations on personal liability set forth above.
This Third Amended and Restated Note constitutes an amendment and
restatement of that certain Second Modified and Restated Note from Maker to
Payee dated as of December 1, 1987 and does not constitute a novation.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion , without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of the
Commonwealth of Virginia.
The Property encumbered by the Security Documents is located in the
City of Alexandria, Arlington County, Virginia.
-4-
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note under seal
effective as of the date first set forth above.
BRYCE MOUNTAIN, INC.
a Georgia Corporation
By: /s/ Barrington H. Branch
- ------------------------ ----------------------------------
Barrington H. Branch
President
Attest: /s/ C. Lowell Ball
- ------------------------ ------------------------------
C. Lowell Ball
Secretary
-5-
<PAGE>
Exhibit 10.80
ASSIGNMENT OF COLLATERAL
(DIHC BOYLSTON CORPORATION)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Massachusetts.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. van der Vlist
----------------------------------
Name: Jan H.W.R. van der Vlist
---------------------------------
Title: Attorney-in Fact
--------------------------------
By: /s/ Anneke C van de Puttelaar
----------------------------------
Name: Anneke C. van de Puttelaar
---------------------------------
Title: Attorney-in Facty
--------------------------------
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
----------------------------------
Name: John S. Moody
---------------------------------
Title: President
--------------------------------
By: /s/ Rodney C. Dimock
----------------------------------
Name: Rodney C. Dimock
---------------------------------
Title: Executive Vice President
--------------------------------
<PAGE>
EXHIBIT A
1. Amended and Restated Promissory Note dated as of July 1, 1994, executed by
DIHC Boylston Corporation ("Boylston") in favor of Stichting Pensioenfonds
voor de Gezondheid, Geestelijke en Maatschappelijke Belangen ("PGGM") in
the principal amount of $18,461,283.03.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(DIHC BOYLSTON CORP.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H. W. R. van der Vlist
-----------------------------------
Name: /s/ Jan H. W. R. van der Vlist
---------------------------------
Title: Attorney-in Fact
-------------------------------
By: /s/ Anneke C. van de Puttelaar
-----------------------------------
Name: Anneke C. van de Puttelaar
---------------------------------
Title: Attorney-in Fact
-------------------------------
DATE: October 27, 1997
<PAGE>
Exhibit 10.81
AMENDED AND RESTATED PROMISSORY NOTE
THIS AMENDED AND RESTATED PROMISSORY NOTE, made as of July 1, 1994 (this
"Note") by and between DIHC BOYLSTON CORP., a Georgia corporation ("Maker"),
having an office at 200 Galleria Parkway, N.W., Suite 2000, Atlanta, Georgia
30339, and STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN, a foundation formed according to the laws of The
Netherlands ("Payee"), having an office at Kroostweg Number 149, Zeist, The
Netherlands.
W I T N E S S E T H
WHEREAS, Payee is holder of that certain Promissory Note dated as of July
1, 1989 from Maker to Payee in the original principal amount of up to NINE
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($9,500,000.00) (the "Boylston
Note") together with that certain Promissory Note dated as of July 1, 1989 from
DIHC St. James Corp. to Payee in the original principal amount of up to NINE
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($9,500,000.00) (the "St. James
Note"), which was effectively assigned to Maker pursuant to the Articles of
Merger of DIHC St. James Corp. with and into DIHC Boylston Corp., dated as of
March 30, 1990, and the Plan and Agreement of Merger by which DIHC St. James
Corp. merges with and into DIHC Boylston Corp., dated as of March 30, 1990
(collectively the Boylston Note and the St. James Note shall hereinafter be
referred to as the "Original Note"), on which there is due and owing, as of July
1, 1994, the aggregate sum of EIGHTEEN MILLION FOUR HUNDRED SIXTY ONE THOUSAND
TWO HUNDRED EIGHTY THREE AND .03/100 ($18,461,283.03).
WHEREAS, Maker and Payee have agreed to amend and restate the Original
Note in its entirety in order to (i) amend the amount outstanding thereunder,
(ii) amend the terms of payment and certain other provisions thereof, and (iii)
amend and extend the maturity date.
-1-
<PAGE>
NOW, THEREFORE, Maker and Payee hereby amend and restate the Original Note
in its entirety as set forth below, effective as of this date.
FOR VALUE RECEIVED, Maker promises to pay to the order of Payee at its
office recited above or at such other place as may be designated in writing by
the holder hereof, the principal sum of EIGHTEEN MILLION FOUR HUNDRED SIXTY ONE
THOUSAND TWO HUNDRED EIGHTY THREE AND .03/100 DOLLARS ($18,461,283.03), with
interest thereon from the date hereof at the rate of 9.25% per annum but in no
event in excess of the then maximum legal rate in Massachusetts for purposes of
determining usury.
Equal monthly payments in the amount of One Hundred Fifty Eight Thousand
Ninety Nine and .08/100 Dollars ($158,099.08) shall be due and payable on August
1, 1994, and on the first day of each month thereafter and shall be applied
first to the payment of interest as aforesaid and the balance in reduction of
principal. The entire unpaid principal balance, together with accrued interest
thereon, shall be due and payable on June 30, 1999 (the "Maturity Date").
Upon the request of Payee, Maker shall deliver to Payee a pledge of
Maker's partnership interest in DIHC Boylston Associates, to be secured by a
pledge, collateral assignment, UCC-I financing statement, security agreement
and any other security documents (collectively the "Security Agreement")
requested by Payee.
Upon any default hereunder and the continuance of such default for a
period of ten (10) days after the due date or any default under the Security
Agreement, if any, and the continuance of such default after the expiration date
of any applicable grace period under any Security Agreement, Maker promises
immediately to pay the principal and interest remaining due and unpaid
hereunder, together with all costs and expenses incurred in connection with the
collection or attempted collection hereof and the protection of the security
hereof or thereof, including, without limitation, attorneys' fees, whether or
not suit is instituted. Interest shall accrue on such amounts from the date of
such default at the
-2-
<PAGE>
"Involuntary Rate" (as hereinafter defined) compounded monthly until the date
such amounts are paid. The "Involuntary Rate" shall be an annual rate equal to
five percent (5%) in excess of the rate charged from time to time by Morgan
Guaranty Trust Company of New York on short term (90 day) unsecured loans to its
preferred customers but in no event in excess of the then maximum legal rate in
Massachusetts for purposes of determining usury.
Maker agrees to be bound to the extent provided in any Security Agreement
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in any Security
Agreement, waives demand, protest, notice of nonpayment, and any and all lack of
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security of this Note,
acceptance of other security thereof, or any other indulgence or forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
This Note may be prepaid in whole or in part without fee or penalty (but
with accrued interest on the amount so prepaid) upon any date for the payment of
interest, upon not less than ten (10) days' prior written notice by Maker to
Payee.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability. If, by the terms of
this Note, or any other instrument evidencing, securing, or relating to this
Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall immediately and
automatically be reduced to such maximum rate, the interest payable shall be
computed at such maximum rate, and all prior interest
-3-
<PAGE>
payments in excess of such lawful maximum shall be immediately and automatically
applied, and shall be deemed to have been treated as having been applied at the
time of receipt, in reduction of the principal balance due under this Note.
The principal amount, plus accrued interest, shall become immediately due
and payable at the option of Payee upon the happening of any event by which said
balance shall or may become due and payable under the terms of any Security
Agreement (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or under
any Security Agreement or any other agreement further evidencing or securing
this Note shall operate as a waiver thereof or preclude the exercise thereof at
any time during the continuance of any default or during the continuance of a
subsequent default.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of
Massachusetts.
IN WITNESS WHEREOF, Maker has executed this Note as of the 1st day of
July, 1994.
ATTEST: DIHC BOYLSTON CORP.
[signature illegible] By: /s/ Robert T. Sorrentino
- ---------------------------- ----------------------------
Robert T. Sorrentino
Vice President
-4-
<PAGE>
COUNTY OF COBB )
: ss.:
STATE OF GEORGIA )
BEFORE ME the undersigned authority personally appeared on this day Robert
T. Sorrentino, to me personally known, who being by me duly sworn did depose and
say that he is Vice President of DIHC Boylston Corp., the corporation described
in and which executed the foregoing instrument; that he acknowledged execution
of said instrument to be the voluntary act and deed of said corporation by order
of the Board of Directors of said corporation.
WITNESS my hand and official seal this 14th day of October, 1998
/s/ Brenda S. Leach
------------------------
Notary Public
My Commission Expires:
Notary Public, DeKalb County, Georgia
My Commission Expires July 2, 2000
-1-
<PAGE>
Exhibit 10.82
ASSIGNMENT OF COLLATERAL
(DIHC BOYLSTON BACK BAY CORPORATION)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Massachusetts.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H. W. R. van der Vlist
-----------------------------------
Name: /s/ Jan H. W. R. van der Vlist
Title: Attorney-in Fact
By: /s/ Anneke C. van de Puttelaar
-----------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in Fact
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
-----------------------------------
Name: John S. Moody
Title: President
By: /s/ Rodney C. Dimock
-----------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
<PAGE>
EXHIBIT A
1. Promissory Note dated as of August 15, 1997, executed by DIHC Boylston
Back Bay Corporation in favor of DIHC Finance Corporation ("DIFCO") in the
original principal amount of $27,327,000; as assigned by DIFCO to
Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen pursuant to that certain Assignment of Loan
Documents dated as of November 1, 1997.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(DIHC BOYLSTON BACK BAY CORP.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H. W. R. van der Vlist
-----------------------------------
Name: Jan H. W. R. van der Vlist
Title: Attorney-in Fact
By: /s/ Anneke C. von de Puttelaar
-----------------------------------
Name: Anneke C. von de Puttelaar
Title: Attorney-in Fact
DATE: October __, 1997
<PAGE>
Exhibit 10.83
PROMISSORY NOTE
Principal Sum: $27,327,000 Date: as of August 15, 1997
Interest Rate: 7.77% Maturity Date: September 1, 2000
FOR VALUE RECEIVED, DIHC BOYLSTON BACK BAY CORP. ("Maker"), a
Georgia corporation, promises to pay DIHC FINANCE CORPORATION ("Payee"), a
Georgia corporation having an office at 200 Galleria Parkway N.W., Suite 2000,
Atlanta, Georgia 30339, or order, or at such other place as may be designated in
writing by the holder hereof, the principal sum of TWENTY SEVEN MILLION THREE
HUNDRED TWENTY-SEVEN THOUSAND AND NO/100 DOLLARS ($27,327,000), in lawful money
of the United States of America, with interest thereon from the date hereof at
the rate of seven and seventy-seven one-hundredths percent (7.77%) per annum but
in no event in excess of the then maximum legal rate in Georgia for purposes of
determining usury.
Installments of interest only shall be due and payable monthly in
arrears commencing on the first day of the first after the first full calendar
month following the date hereof and continuing on the first day of each and
every calendar month thereafter ensuing until the entire principal sum hereof,
all accrued interest and all other sums due and payable hereunder shall be fully
paid. The entire unpaid principal balance, together with all accrued and unpaid
interest and all other sums due and payable hereunder, shall be due and payable
on September 1, 2000 (the "Maturity Date").
Upon the request of Payee, Maker shall deliver to Payee a pledge of
Maker's partnership interest in DIHC Boylston Associates, to be secured by a
pledge, collateral
<PAGE>
assignment, UCC-1 financing statement, security agreement and any other security
documents (collectively, the "Security Agreement") reasonably requested by
Payee.
Upon any default hereunder and the continuance of such default for a
period of ten (10) days after the due date or any default under the Security
Agreement, if any, and the continuance of such default after the expiration date
of any applicable grace period under any Security Agreement, Payee shall have
the right, at its option, to require Maker to immediately pay the entire
principal and interest remaining due and unpaid hereunder, together with all
costs and expenses incurred in connection with the collection or attempted
collection hereof and the protection of the security hereof or thereof,
including, without limitation, attorneys' fees and disbursements, whether or not
suit is instituted. Interest shall accrue on such amounts from the date of such
default at the Involuntary Rate (as hereinafter defined) compounded monthly
until the date such amounts are paid. The "Involuntary Rate" shall be an annual
rate equal to five percent (5%) in excess of the rate charged from time to time
by Morgan Guaranty Trust Company of New York on short term (90 day) unsecured
loans to its preferred customers but in no event in excess of the then maximum
legal rate in Georgia for purposes of determining usury.
Maker agrees to be bound to the extent provided in any Security
Agreement and waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof except as set forth in any Security
Agreement, waives demand, protest, notice of nonpayment, and any and all lack of
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security of this Note,
acceptance of other security thereof, or any
2
<PAGE>
other indulgence or forbearance whatsoever by Payee, any one or all of which may
be made without notice to Maker or such released party or any other party.
This Note may be prepaid in whole or in part without fee or penalty
(but with accrued interest on the amount so prepaid) upon any date for the
payment of interest, upon not less than ten (10) days prior written notice by
Maker to Payee.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability. If, by the terms of
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall immediately and
automatically reduced to such maximum rate, the interest payable shall be
computed at such maximum rate, and all prior interest payments in excess of such
lawful maximum shall be immediately and automatically applied, and shall be
deemed to have been treated as having been applied at the time of receipt, in
reduction of the principal balance due under this Note.
The entire unpaid principal balance, together with all accrued and
unpaid interest and all other sums due and payable hereunder, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which this Note shall or may become due and payable under the terms of
any Security Agreement, subject to any applicable notice, grace and/or cure
period(s) thereunder.
3
<PAGE>
No delays on the part of Payee in exercising any right hereunder or
under any security Agreement or any other agreement further evidencing or
securing this Note shall operate as a waiver thereof or preclude the exercise
thereof at any time during the continuance of any default or during the
continuance of a subsequent default.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of Georgia.
IN WITNESS WHEREOF, Maker has executed this Note as of the 15th of
August, 1997.
DIHC BOYLSTON BACK BAY CORP.
By: /s/ Robert T. Sorrentino
-------------------------------
Robert T. Sorrentino
Vice President
4
<PAGE>
COUNTY OF NEW YORK )
: ss.:
STATE OF NEW YORK )
BEFORE ME the undersigned authority personally appeared on this day
Robert T. Sorrentino, to me personally known, who being by me duly sworn did
depose and say that he is the Vice President of DIHC Boylston Back Bay Corp.,
the corporation described in and which executed the foregoing instrument; that
he acknowledged execution of said instrument to be the voluntary act and deed of
said corporation by order of the Board of Directors of said corporation.
WITNESS my hand and official seal this 15th day of August, 1997.
/s/ Russell Wohl
Notary Public
RUSSELL WOHL
Notary Public State of New York
No. 41-4977236
Qualified in Queens County
Commission Expires Jan. 28, 1999
<PAGE>
Exhibit 10.84
ASSIGNMENT OF COLLATERAL
(FIVE HUNDRED BOYLSTON WEST VENTURE)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27 day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of DIHC Boylston Associates
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated here (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Cornerstone Properties Inc., Assignor has
agreed to transfer all of its right, title and interest in and to the Collateral
to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfer assigns, grants, bargains, sells,
conveys, aliens, remises, releases, warrants, set over and confirms unto
Assignee for its benefit and the benefit of its successors and assigns, all of
its right, title and interest in and to the Collateral without recourse or
warranty except as provided for and set forth in that certain Loan Purchase
Agreement dated as of August 18, 1997, executed by and between Assignor and
Cornerstone Properties Inc.
II. Upon the request of Assignee, Assignor shall execute and deliver to Assignee
such further instruments as Assignee may deem reasonably necessary to effectuate
this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor and
Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person other
than Assignee its successors and assigns any legal or equitable right, remedy or
claim under this Assignment, and this Assignment shall be held for the sole and
exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in accordance
with the laws of the State of Massachusetts.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
Property Address: ASSIGNOR:
500 Boylston Street
Boston, Massachusetts 02116 STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
--------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/
--------------------------------
Name: Anneke C. van der Puttelaar
Title: Attorney-in-fact
ASSIGNEE:
DIHC BOYLSTON ASSOCIATES
By: DIHC Boylston Corp., a general partner
By: /s/
----------------------------
Name: John S. Moody
Title: Chief Executive Officer
By: /s/
----------------------------
Name: Rodney C. Dimock
Title: Executive Vice President &
Chief Operating Officer
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27 day of October 1997 before me personally came Jan M.W.R Van der
Vlist to me known who, being by me duly sworn, did depose and say that he
resides at The Netherlands; that he is the ___________ of STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, the
foundation described in and which executed the foregoing instrument; and that he
executed the foregoing instrument by order of the Board of Directors of said
corporation, as and for the act and deed of said corporation.
/s/
--------------------------------------
Notary Public
Patti A. Olson
Notary Public, State of New York
No. 4738281
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27 day of October, 1997 before me personally came Anneke C. Van de
Puttelaar, to me known who, being by me duly sworn, did depose and say that he
resides at The Netherlands; that he is the ___________ of STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, the
foundation described in and which executed the foregoing instrument; and that he
executed the foregoing instrument by order of the Board of Directors of said
corporation, as and for the act and deed of said corporation.
/s/
--------------------------------------
Notary Public
Patti A. Olson
Notary Public, State of New York
No. 4738281
Commission Expires August 31, 1999
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27 day of October 1997 before me personally came John S. Moody, to
me known who, being by me duly sworn, did depose and say that he resides at New
York; that he is the President of CORNERSTONE PROPERTIES INC., the corporation
described in and which executed the foregoing instrument; and that he executed
the foregoing instrument by order of the Board of Directors of said corporation,
as and for the act and deed of said corporation.
/s/
--------------------------------------
Notary Public
Patti A. Olson
Notary Public, State of New York
No. 4738281
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27 day of October 1997 before me personally came Rodney C. Dimock,
to me known who, being by me duly sworn, did depose and say that he resides at
New York; that he is the Executive Vice President of CORNERSTONE PROPERTIES
INC., the corporation described in and which executed the foregoing instrument;
and that he executed the foregoing instrument by order of the Board of Directors
of said corporation, as and for the act and deed of said corporation.
/s/
--------------------------------------
Notary Public
Patti A. Olson
Notary Public, State of New York
No. 4738281
Commission Expires August 31, 1999
<PAGE>
EXHIBIT A
VI. "A" Note dated as of May 29, 1986, executed by Five Hundred Boylston West
Venture ("500") in favor of DIHC Finance Corporation ("DIFCO") in the
original principal amount of $153,650,000; as assigned from DIFCO to
Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen ("PGGM") pursuant to that certain Assignment of
"A" Note and First Mortgage and Security Agreement dated as of February
10, 1989, recorded in the Suffolk County Registry of Deeds Office, Boston,
Massachusetts, in Book 15439 at page 37, and filed with the Suffolk
Registry District of the Land Court as Document Number 449660.
VII. First Mortgage and Security Agreement dated as of May 29, 1986, executed
by 500 in favor of DIFCO, recorded in Deed Book 12524 at page 319, and
filed as Document Number 405540, aforesaid records; as assigned from DIFCO
to PGGM pursuant to that certain Assignment of "A" Note and First Mortgage
and Security Agreement dated as of February 10, 1989, recorded in Deed
Book 15439 at page 37, and filed as Document Number 449660, aforesaid
records.
3. First Collateral Assignment of Leases and Rents dated as of May 29, 1986,
executed by 500 in favor of DIFCO, recorded in Deed Book 12525 at page
001, and filed as Document Number 405541, aforesaid records; as assigned
from DIFCO to PGGM pursuant to that certain Assignment of First Collateral
Assignment of Leases and Rents dated as of February 10, 1989, recorded in
Deed Book 15439 at page 40, and filed as Document Number 449661, aforesaid
records.
4. Building Loan Agreement dated as of May 29, 1986, executed by 500 in favor
of DIFCO; as assigned by DIFCO to PGGM pursuant to that certain Assignment
of Loan Documents dated as of October __, 1997.
5. Guaranty dated as of May 29, 1986, executed by Dutch Institutional Holding
Company, Inc. in favor of 500; as assigned by DIFCO to PGGM pursuant to
that certain Assignment of Loan Documents dated as of October __, 1997.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(FIVE HUNDRED BOYLSTON WEST VENTURE)
Pay to the order of DIHC BOYLSTON ASSOCIATES (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Cornerstone Properties Inc.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
-----------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/
-----------------------------------
Name: Anneke C. Van de Putterlaar
Title: Attorney-in-fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.85
Restated Pursuant to
Amended and Restated "A" Note
Dated as of February 10, 1989
"A" NOTE
FOR VALUE RECEIVED, FIVE HUNDRED BOYLSTON WEST VENTURE ("Maker"), a
joint venture formed pursuant to the partnership laws of the Commonwealth of
Massachusetts, consisting of (1) BOYLSTON WEST 1986 ASSOCIATES LIMITED
PARTNERSHIP, a Texas limited partnership, (2) NEW ENGLAND MUTUAL LIFE INSURANCE
COMPANY, a mutual life insurance company, and (3) DIHC BOYLSTON ASSOCIATES, a
Georgia partnership, and having an address at 462 Boylston Street, Suite 3200,
Boston, Massachusetts 02116, promises to pay to DIHC FINANCE CORPORATION, its
successors is interest or assigns ("Payee"), at its office at 200 Galleria
Parkway, Suite 2000, Atlanta, Georgia 30339, or order, or at such other place as
may be designated in writing by the holder hereof, the principal sum of ONE
HUNDRED FIFTY THREE MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS ($153,650,000),
or so much thereof as shall be advanced in accordance with the provisions of
that certain Building Loan Agreement (the "Building Loan Agreement") of even
date herewith between Maker and Payee, in lawful money of the United States of
America, on the thirty-fifth (35) anniversary of the date of this Note (the
"Maturity Date"), and to pay interest on the unpaid principal balance hereof
from the date hereof at the times and at the applicable rates of interest set
forth below.
Until the Permanent Funding Date (as such term is defined in the
Building Loan Agreement), interest shall be computed on the outstanding
principal sum of One Hundred and Fifty Three Million Six Hundred Fifty Thousand
Dollars ($153,650,000), or so much thereof as
<PAGE>
2
shall have been advanced hereunder, at the rate of ten percent (10%) per annum.
Until the Permanent Funding Date, interest shall compound annually, provided,
however, that for any period in which the prime rate of interest as announced by
The Chase Manhattan Bank, N.A. shall be 10% or greater, interest on this Note
for such period shall compound monthly. Maker shall pay all accrued and unpaid
interest (i) or the tenth of each month, to the extent of 70% of Maker's Net
Cash Flow (as such term is hereinafter defined) for the immediately preceding
calendar month, and (ii) any interest not paid out of 70% of Maker's Net Cash
Flow as set forth in (i) above shall be paid annually on each anniversary of the
date of this Note occurring prior to the Permanent Funding Date and on the
Permanent Funding Date, as the case may be, from draws made under the Building
Loan Agreement for Interim Financing Costs (as such term is defined in the
Building Loan Agreement).
After the Permanent Funding Date, interest shall be paid on the
tenth day of each month following the calendar month which includes the
Permanent Funding Date, in an amount in each case equal to all accrued and
unpaid interest on this Note. Such monthly dates for the payment of interest
after the Permanent Funding Date shall be referred to hereinafter as "Monthly
Payment Dates". The 28, 29, 30 or 31 day period, as the case may be, from the
Permanent Funding Date to the first Monthly Payment Date and from a Monthly
Payment Date to the next Monthly Payment Date shall be referred to as a "Monthly
Period". After the Permanent Funding Date, this Note shall bear interest as
follows (each of the interest rates set forth in the following four numbered
paragraphs being referred to hereinafter as the "Full Interest Rate" then in
effect under this Note after the Permanent Funding Date):
<PAGE>
3
(1) at the rate of 8.00% per annum from and after the Permanent
Funding Date through and including the date immediately preceding the fifth
anniversary of the Permanent Funding Date;
(2) at the rate of 8.50% per annum from and after the fifth
anniversary of the Permanent Funding Date through and including the date
immediately preceding the tenth anniversary of the Permanent Funding Date;
(3) at the rate of 9.00% per annum from and after the tenth
anniversary of the Permanent Funding Date through and including the date
immediately preceding the fifteenth anniversary of the Permanent Funding Date;
and
(4) at the rate of 10.00% per annum from and after the fifteenth
anniversary of the Permanent Funding Date through and including the Maturity
Date.
On the Maturity Date, the outstanding principal balance of this
Note, together with all accrued and unpaid interest thereon shall be due and
payable.
Commencing with the first month in which the Venture receives any
Gross Receipts (as such term is hereinafter defined) and for each calendar month
thereafter prior to the Permanent Funding Date, Maker shall cause a statement of
income and expense setting forth the elements and the calculation of
Pre-Debt-Service Net Cash Flow (as such term is hereinafter defined) for such
month to be prepared and furnished to Payee on or before the tenth day of the
month following the calendar month to which such statement applies. Each such
monthly statement shall be certified by an authorized representative of Maker.
<PAGE>
4
Each payment received by Payee on account of this Note shall be
applied in the following order of priority: first, to the curing of any default
(including late charges) hereunder, under the Building Loan Agreement during the
term thereof or under that certain First Mortgage and Security Agreement (the
"Mortgage") of even date herewith, made by Maker to Payee to secure the payment
of this Note or under any other document executed by Maker pursuant to the terms
of this Note or the other agreements specified above (all such documents and
agreements referred to collectively hereinafter as the "Loan Documents");
second, to interest accruing at the applicable Full Interest Rate on the
outstanding principal balance hereof since the immediately preceding Monthly
Payment Date; and third, to the outstanding principal balance hereof.
If any portion of the indebtedness evidenced hereby is not paid on
the date on which it is due, Maker shall pay to Payee, in addition to all
amounts otherwise due and payable under this Note, an amount equal to two
percent (2%) of such unpaid portion of the indebtedness evidenced hereby as a
late payment charge, and such amount shall be secured by the Mortgage.
Upon (i) Payee notifying Maker of any monetary default hereunder, or
under that certain "B" Construction Note (the ""B" Note") of even date herewith
executed by Maker in favor of Payee, or under any of the Loan Documents, and the
continuance of such monetary default for a period of twenty (20) days after the
delivery of such written notice of default by Payee to Maker (the "Event of
Default") or (ii) Payee notifying Maker of any non-monetary default hereunder,
under the "B" Note or under any of the Loan Documents, and the continuance of
such default for a period of sixty (60) days after delivery of such written
notice of default by Payee, (or, if such non-monetary default is of the type
that cannot be cured in such period of time, then such
<PAGE>
5
additional period of time as is necessary to cure same, provided Maker promptly
commences to cure same and thereafter diligently and continually prosecutes to
completion the cure of same) (the "Event of Default"), Maker, at the option of
Payee, shall pay the principal and interest remaining due and unpaid hereunder
in accordance with the terms hereof and of the Mortgage, together with all costs
and expenses incurred in connection with the collection or attempted collection
hereof and the protection of the security hereof or thereof, including
reasonable attorneys' fees, whether or not suit is instituted. Interest shall
accrue on such past due amounts from the date of such Event of Default at the
"Involuntary Rate" (as hereinafter defined) compounded monthly until the date
such past due amounts together with such interest at the Involuntary Rate are
paid. The "Involuntary Rate" shall be:
(A) for any advances, disbursements or moneys advanced by Payee in
accordance with the terms of this Note, the Mortgage, the Building Loan
Agreement or the other Loan Documents in furtherance of protecting the
security hereof or thereof or for any monetary defaults set forth in
clause (i) of this paragraph but prior to any acceleration by Payee of the
debt evidenced by this Note, an annual rate equal to five percent (5%) in
excess of the rate announced from time to time by The Chase Manhattan
Bank, N.A. as its prime rate, on the past due amount or the amount so
advanced, as the case may be, but in no event in excess of the then
applicable maximum lawful rate.
(B) in the event the principal amount of this Note and all interest due
hereunder is accelerated by Payee in accordance with terms of this Note or
the Mortgage, an annual rate computed from the date of such acceleration
equal to the greater of (i) fifteen percent
<PAGE>
6
(15%) or (ii) five percent (5%) in excess of the rate announced from time
to time by The Chase Manhattan Bank, N.A. as its prime rate, on the
principal and all interest and the amounts then due and payable, but in no
event in excess of the then applicable maximum lawful rate.
Maker (i) waives and renounces any and all exemption rights and the
benefit of all valuation and appraisal privileges as against the indebtedness
evidenced hereby or any renewal or extension thereof except as set forth in the
Mortgage, (ii) waives demand, protest, notice of nonpayment, and any and all
lack of diligence or delays in the collection or enforcement hereof, and (iii)
expressly consents to any extension of time, release of any of the security of
this Note, acceptance of other security therefor, or any other indulgence or
forbearance whatsoever by Payee, any one or all of which may be made without
notice to Maker or any other party.
On or after the Permanent Funding Date Maker and Payee shall execute
and deliver an estoppel letter confirming the principal amount of this Note as
of such Date and, at the request of Payee, Maker shall execute and deliver a
note in replacement of this Note (upon surrender by Payee to Maker of this Note)
setting forth the then holder of this Note and the principal amount of this Note
then outstanding in the form and substance of this Note except that the terms
hereof relating to the period prior the Permanent Funding Date which are no
longer applicable shall be deleted. Any failure of Maker to execute such
replacement note complying with the above within thirty (30) days after delivery
by Payee of a request therefor, accompanied by such replacement note, shall be a
default under this Note but shall in no event affect the validity of this Note.
<PAGE>
7
As used in this Note:
(a) The term "Property" shall mean the property and improvements
encumbered by the Mortgage.
(b) The term "Gross Receipts" shall mean the gross cash receipts
(computed in accordance with accepted cash basis accounting principles,
consistently applied) received by Maker, any of Maker's partners or agents on
behalf of Maker or any other person on behalf of Maker in cash or cash
equivalents (other than capital contributions made by Maker's partners, the
amounts borrowed hereunder or under the "B" Note or any other loan proceeds
received by Maker and proceeds of any sale, refinancing, condemnation, or
insurance recovery due to any casualty relating to the Property) from all
sources whatsoever as a direct or indirect result of the ownership or operation
of the Property or the operations of Maker including, without limitation, the
gross amounts received as rent, prepaid rent, additional rent, the proceeds of
rent insurance, fees, charges or otherwise (excluding security deposits unless
such security deposits are applied as payment of rent or forfeited upon default
under a lease), sundry income, concession income, interest on deposits
(including deposits in escrow pursuant to the Building Loan Agreement) provided
that such interest is not the property of tenants by lease or local law, the net
amount of any refund of impositions of tax applicable to any period through and
including the Maturity Date (to the extent that Maker is not required to remit
such refund to tenants) and the proceeds of any sale of personal property or
fixtures now or hereafter located on the Property.
(c) The term "Operating Expenses" shall mean the operating expenses
actually paid by Maker, computed in accordance with accepted cash basis
accounting principles,
<PAGE>
8
consistently applied, for costs of: the maintenance, management, administration,
operation, repair and replacement of any portion of the Property except to the
extent financed by borrowings of Maker, amounts paid by Maker (including
reimbursements) to any property manager (but not construction manager),
administrator (but specifically excluding the "loan administration fee" payable
to DIHC Management Corporation for administering the loan advanced under the
Building Loan Agreement prior to the Permanent Funding Date), accountants,
attorneys or other agents for services rendered in connection with the operation
(as opposed to the initial construction) of the Property, and all other costs
specifically designated by and in accordance with the provisions hereof to be
Operating Expenses. Operating Expenses shall include the cost of or charges for
the following by way of illustration but not limitation: interest and other
periodic amortization, if any, on any indebtedness of Maker (excluding all
interest paid under this Note and the "B" Note" prior to the Permanent Funding
Date), whether or not secured by a lien on the Property, together with all other
costs incurred in connection with any such indebtedness or lien; advertising and
promotional costs; leasing commissions; real estate taxes and assessments; all
taxes upon the gross or net rental income of Maker derived from the Property;
water-and sewer charges; linkage payments (or alternatives thereto) to City or
the BRA under the Amended and Restated Sale and Construction Agreement dated as
of April 15, 1986; insurance premiums; licenses, permits and inspections (except
building permits and inspections relating to the initial construction of the
Improvements); heat, light and power; janitorial services; building staff;
garbage services; costs of providing air-conditioning; costs of supplies,
materials, equipment and tools for operating the Property; and the cost to Maker
of contesting by appropriate proceedings
<PAGE>
9
the applicability to the Property, or the validity, of any statute, ordinance,
rule or regulation affecting the Property which might increase Operating
Expenses, provided, however, that Operating Expenses shall not include
depreciation, amortization of any previously capitalized expenditure or any
other expense not involving a cash expenditure by Maker.
(d) The term "Net Cash Flow" for any period shall mean an amount
equal to Gross Receipts of such period less the sum of Operating Expenses for
such period and a reasonable reserve for contingencies and for general working
capital requirements of Maker.
(e) The term "Pre-Debt-Service Net Cash Flow" for any period shall
mean an amount equal to the Net Cash Flow for such period computed without
regard to any deduction, as an Operating Expense, for interest paid on this
Note.
This Note may not be prepaid in whole or in part prior to the
Permanent Funding Date except to the extent that 70% of the Pre-Debt Service Net
Cash Flow of Maker exceeds interest (and any other charges) payable hereunder.
After the Permanent Funding Date, this Note may not be prepaid in whole or in
part prior to the eighth (8th) anniversary of the Permanent Funding Date, except
at the times and to the extent set forth in that certain Escrow Agreement to be
executed by Maker, Payee and DIHC Boylston Associates pursuant to the Building
Loan Agreement (at which time such amount shall be due and payable hereunder
without premium or penalty), and may be prepaid in whole (but not in part) at
any time following the eighth (8th) anniversary of the Permanent Funding Date
upon thirty (30) days prior written notice to Payee and upon payment of the
following prepayment premium (based on the principal amounts so
<PAGE>
10
prepaid) computed with respect to the year after the Permanent Funding Date
during which such prepayment is made:
Year after Permanent
Funding Date Premium
------------ -------
9th 6%
10th 5%
11th 4%
12th 3%
13th - 20th 2%
At any time following the twentieth (20th) anniversary of the Permanent Funding
Date, this Note may be prepaid in whole or in part without premium or penalty
upon thirty (30) days' prior written notice to Payee. Upon any Event of Default
hereunder, and following any acceleration by Payee (except for an acceleration
resulting from an event described in Paragraphs 4(a) or 4(b) of the Mortgage)
prior to the eighth anniversary of the Permanent Funding Date of the obligation
to pay the entire outstanding principal balance hereof and all accrued and
unpaid interest hereon, a tender (the "Tender") of payment of the principal and
interest remaining due and unpaid hereunder, made by Maker or anyone on behalf
of Maker at any time at or prior to foreclosure or mortgagee's sale, shall
constitute an evasion of the payment terms hereof and shall be deemed to be a
voluntary prepayment and such payment, to the extent permitted by law, shall
include a prepayment premium in an amount equal to 12% of the principal amount
so Tendered (or, for the period beginning from the eighth anniversary of the
Permanent Funding Date until the twentieth anniversary of such date, a
prepayment premium in accordance with the schedule set forth above).
<PAGE>
11
Notwithstanding anything herein to the contrary, this Note shall be prepaid, in
whole or in part without premium or penalty, from any recoveries under title
insurance policies covering the Property or from any undisbursed insurance
proceeds and condemnation awards required by the terms of the Mortgage to be
applied on the indebtedness evidenced by this Note.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any of the other Loan Documents, Maker shall not be obligated to
pay interest at a rate which would subject Payee to either criminal or civil
liability. If, by the terms of this Note or any of the other Loan Documents,
Maker is ever obligated to pay interest on the principal balance hereof in an
amount or at a rate in excess of the applicable lawful maximum, then the
interest due to Payee shall be immediately and automatically reduced to such
maximum, the interest payable shall be computed at such maximum rate, and all
prior interest payments in excess of such lawful maximum shall be immediately
and automatically applied, and shall be deemed to have been treated as having
been applied at the time of receipt, in reduction of the principal balance due
under this Note.
No delays on the part of Payee in exercising any right hereunder or
under the Building Loan Agreement, the "B" Note, the Mortgage or any of the
other Loan Documents shall operate as a waiver thereof or preclude the exercise
thereof at any time during the continuance of any default of which Payee has
given written notice to Maker or during the continuance of a subsequent default
of which Payee has given written notice to Maker.
Notwithstanding any other provision of this Note or any of the Loan
Documents, neither the obligation of Maker to pay the debt evidenced by this
Note and the Mortgage nor the
<PAGE>
12
obligation of Maker to perform any covenant or agreement contained in this Note,
the Mortgage, or any of the other Loan Documents shall be enforced by any action
or proceeding wherein or whereby damages or any money judgment shall be sought
against Maker or any of its partners or officers, directors or partners of such
partners, except a foreclosure or other action against the Property encumbered
by the Mortgage, and any judgment in any such foreclosure or other action shall
be enforceable against Maker only to the extent of its interest in such Property
and the income therefrom and no deficiency or other personal judgment shall be
rendered or entered against Maker or any of its partners or officers, directors
or partners of such partner in such foreclosure or other action; provided,
however, that Maker (and Maker's partners) shall be personally liable, following
the receipt of a notice of default hereunder or under any of the Loan Documents,
to apply, prior to the Permanent Funding Date, 70% of the Pre-Debt-Service Net
Cash Flow of the Venture, and, after the Permanent Funding Date, all Pre-Debt
Service Net Cash Flow of the Venture received after the notice of default to
cure such default, before applying such receipts in any other manner. Nothing in
this paragraph shall, however, (1) be deemed to affect the priority of the lien
of the Mortgage, (2) impair the right of Payee to accelerate the maturity of
this Note (or to avail itself of its other rights and remedies against the
Property and Maker's interest therein) upon an Event of Default under this Note,
the Mortgage or any other Loan Documents, or (3) relieve Maker of any of the
covenants or obligations set forth in this Note, the Mortgage or the other Loan
Documents subject, however, to the limitations on personal liability set forth
above.
This Note may not be modified or terminated orally.
<PAGE>
13
This Note has been delivered in Boston, Massachusetts and shall be
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
The property encumbered by the Mortgage is located in the City of
Boston, Massachusetts.
Any and all notices, approvals, requests and other communications to
be given hereunder shall be served and delivered in the manner set forth in the
Mortgage.
IN WITNESS WHEREOF, Maker has executed this Note under seal as of
the 29th day of May, 1986.
FIVE HUNDRED BOYLSTON WEST
VENTURE, a joint venture
By: BOYLSTON WEST 1986 ASSOCIATES
LIMITED PARTNERSHIP, a joint venturer
WITNESS: By: Gerald D. Hines Interests, Ltd.,
doing business in Massachusetts as
Gerald D. Hines Interests, Limited
Partnership, its general partner
/s/ (signature illegible) By: /s/ Gerald D. Hines
- ------------------------- -------------------
Gerald D. Hines,
General Partner ESO
By: NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY, a joint venturer
By: COPLEY REAL ESTATE
WITNESS: ADVISORS, INC., its agent and duly
authorized asset manager
/s/ (signature illegible) By: /s/ William J. Salisbury
- ------------------------- ------------------------
William J. Salisbury,
Principal
<PAGE>
14
By: DIHC BOYLSTON ASSOCIATES, a joint
venturer
WITNESS: By: DIHC BOYLSTON CORP., a
partner
/s/ (signature illegible) By: /s/ Herman A. Vonhof
- ------------------------- --------------------
Herman A. Vonhof
President
WITNESS: By: DIHC ST. JAMES CORP., a partner
/s/ (signature illegible) By: /s/ Herman A. Vonhof
- ------------------------- --------------------
Herman A. Vonhof,
President
<PAGE>
ASSIGNMENT OF "A" NOTE AND
FIRST MORTGAGE AND SECURITY AGREEMENT
FOR VALUE RECEIVED, DIHC FINANCE CORPORATION (formerly known as
Dutch Institutional Finance Corporation, Inc.), a Georgia corporation having an
office at Suite 2000, 200 Galleria Parkway, Atlanta, Georgia ("Assignor"), has
this day granted, bargained, sold, assigned, transferred and set over unto
STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE
BELANGEN, a foundation formed according to the laws of The Netherlands, having
an office at Kroostweg Number 149, Zeist, The Netherlands ("Assignee"), all of
Assignor's right, title and interest in and to that certain First Mortgage and
Security Agreement and to that certain "A" Note in the original principal amount
of up to ONE HUNDRED FIFTY-THREE MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS
($153,650,000) dated as of May 29, 1986 granted by FIVE HUNDRED BOYLSTON WEST
VENTURE, a joint venture formed pursuant to the partnership laws of the
Commonwealth of Massachusetts, consisting of (1) BOYLSTON WEST 1986 ASSOCIATES
LIMITED PARTNERSHIP, a Texas Limited partnership, (2) NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY, a mutual life insurance company, and (3) DIHC BOYLSTON
ASSOCIATES, a Georgia partnership, and having an address at 500 Boylston Street,
Suite 1800, Boston, Massachusetts 02116, to Assignor, and recorded in the
Suffolk County Registry of Deeds Office, Boston, Massachusetts, in Book 12524 at
Page 319, and filed with the Suffolk Registry District of the Land Court as
Document Number 405540, together with moneys due and to become due thereon.
<PAGE>
TO HAVE AND TO HOLD the same unto Assignee, its successors and
assigns from and after the date hereof.
AND Assignor covenants that as of this date there was due and owing
on the said note principal and interest under said note in the aggregate amount
of $118,230,463.78.
IN WITNESS WHEREOF, Assignor has caused its corporate seal to be
hereto affixed and these presents to be signed in its name and behalf by Charles
W. Strawser, Jr., its Senior Vice-President, as of the 10th day of February,
1989.
Signed and Sealed in DIHC FINANCE CORPORATION
Presence of
/s/ Susan M. Harris By: /s/ Charles W. Strawser, Jr.
- ------------------------------ ----------------------------------
Name: Charles W. Strawser, Jr.
/s/ Melissa W. Carter Title: Senior Vice President
- ------------------------------
2
<PAGE>
ACKNOWLEDGMENT
STATE OF GEORGIA )
: ss.
COUNTY OF COBB )
On this 17th day of February, 1989, before me appeared CHARLES W.
STRAWSER, JR., Senior Vice-President of DIHC Finance Corporation, who made oath
that the foregoing statement is true.
/s/ Susan M. Talbott
--------------------------------
Notary Public
3
<PAGE>
Exhibit 10.86
ASSIGNMENT OF COLLATERAL
(DIHC BERKELEY CORPORATION)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27 day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Massachusetts.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
------------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/
------------------------------------
Name: Anneke C. van der Puttelaar
Title: Attorney-in-fact
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/
------------------------------------
Name: John S. Moody
Title: President
By: /s/
------------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
<PAGE>
EXHIBIT A
1. Promissory Note dated as of December 31, 1994, executed by DIHC Berkeley
Corporation ("Berkeley") in favor of Stichting Pensioenfonds voor de
Gezondheid, Geestelijke en Maatschappelijke Belangen ("PGGM") in the
original principal amount of $44,000,000.
2. Pledge and Security Agreement dated as of December 31, 1994, executed by
Berkeley in favor of PGGM.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(DIHC BERKELEY CORP.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
------------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/
------------------------------------
Name: Anneke C. van der Puttelaar
Title: attorney-in-fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.87
PROMISSORY NOTE
THIS PROMISSORY NOTE, made as of December 31, 1994 by and between DIHC
BERKELEY CORP., a Georgia corporation ("Maker"), having an office at Suite 2000,
200 Galleria Parkway, N.W., Atlanta, Georgia 30339, to and for the benefit of
STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE
BELANGEN, a foundation formed according to the laws of The Netherlands
("Payee"), having an office at Kroostweg Number 149, Zeist, The Netherlands.
FOR VALUED RECEIVED, Maker promises to pay to the order of Payee at its
office recited above or at such other place as may be designated in writing by
the holder hereof, the principal sum of Forty-Four Million and No/100 Dollars
($44,000,000.00), with interest thereon, compounded monthly, at the rate of nine
percent (9%) per annum from the date hereof through December 31, 1999 and at the
"Market Rate" (as defined below) beginning January 1, 2000 through the Maturity
Date (as defined below), in lawful money of the United States of America, such
principal and interest to be payable as follows:
An initial payment in the amount of Seven Hundred Ten Thousand Seven
Hundred Twenty Three and 15/100 Dollars ($710,723.15) shall be due and payable
on March 1, 1995. Thereafter, equal constant monthly payments in the amount of
Three Hundred Fifty Four Thousand Thirty Three and 95/100 Dollars ($354,033.95)
shall be due and payable on the first day of each month during the term of this
Note, beginning on April 1, 1995 through and including December 1, 1999.
Effective January 1, 2000, the interest rate charged on the outstanding balance
of this Note shall be adjusted to the "Market Rate" (as defined below). Upon
determination of such Market Rate, the amount of the equal monthly payments due
hereunder for the period beginning January 1, 2000 through the Maturity Date
shall be calculated to reflect the Market Rate and an amortization of the then
outstanding principal balance of this Note over a 25 year amortization period.
As used herein, the "Market Rate" of interest which will be charged during
-1-
<PAGE>
the period from January 1, 2000 through the Maturity Date means an annual rate
which is 1.5 percentage points (150 basis points) higher than the average yield
on U.S. Treasury securities having a 5 year maturity, as quoted in The Wall
Street Journal on December 1, 1999. The entire unpaid principal balance,
together with any accrued but unpaid interest thereon, shall be due and payable
on December 31, 2004 (the "Maturity Date").
Upon any default hereunder and the continuance of such default for a
period of twenty (20) days after the due date, or upon any default under the
Pledge and Security Agreement (the "Security Agreement") of even date herewith,
from Maker to Payee securing this Note and the continuance of such default after
the expiration of any applicable grace period under the Security Agreement, then
at Payee's election, Maker shall pay to the holder hereof the principal and
interest remaining due and unpaid hereunder, together with all costs and
expenses incurred in connection with the collection or attempted collection
hereof and reasonable attorneys' fees actually incurred, whether or not suit is
instituted. Interest shall accrue on such amounts from the date of such default
at the rate of two percent (2%) per annum in excess of the rate charged from
time to time by Trust Company Bank, Atlanta, Georgia, on short term (90) day
unsecured loans to its preferred customers, provided that any such interest
which has accrued shall be paid at the time of and as a condition precedent to
the curing of any default.
Maker agrees to be bound to the extent provided in the Security Agreement
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in the Security
Agreement, waives demand, protest, notice of nonpayment, and any and all lack of
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security of this Note,
acceptance of other security therefor, or any other indulgence or forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
-2-
<PAGE>
This Note may be prepaid in whole or in part at any time upon ten (10)
days' prior written notice, without fee or penalty, but with accrued interest on
the amount so prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or forfeiture. If, by
the terms of this Note or any other instrument evidencing, securing or relating
to this Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall be immediately and
automatically reduced to such maximum, the interest payable shall be computed at
such maximum rate, and all prior interest payments in excess of such lawful
maximum shall be immediately and automatically applied, and shall be deemed to
have been treated as having been applied at the time or receipt, in reduction of
the principal balance due under this Note.
The principal amount, plus accrued interest, shall become immediately due
and payable at the option of Payee upon the happening of any event by which said
balance shall or may become due and payable under the terms of the Security
Agreement (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or under
the Security Agreement or any other agreement further evidencing or securing
this Note shall operate as a waiver thereof or preclude the exercise thereof at
any time during the continuance of any default or during the continuance of a
subsequent default.
Notwithstanding any other provisions of this Note or the Security
Agreement to the contrary, neither the obligation of Maker to pay the debt
evidenced by this Note and the Security Agreement nor the obligation of Maker to
perform any covenant or agreement contained in this Note or the Security
Agreement, shall be enforced by any action or proceeding wherein or whereby
damages or any money
-3-
<PAGE>
judgment shall be sought against Maker or any of its partners or officers,
directors or partners of such partners, except a foreclosure or other action
against the property encumbered by the Security Agreement, and any judgment in
any such foreclosure or other action shall be enforceable against Maker only to
the extent of its interest in such property and the income therefrom and no
deficiency or other personal judgment shall be rendered or entered against Maker
or any of its partners or officers, directors or partners of such partners in
such foreclosure or other action. Nothing in this paragraph shall, however, (1)
be deemed to affect the priority of the lien and the security interest created
by the Security Agreement, (2) impair the right of Payee to accelerate the
maturity of this Note (or to avail itself of its other rights and remedies
against the property encumbered by the Security Agreement and Maker's interest
therein,) upon a default under this Note or the Security Agreement, or (3)
relieve Maker of any of the covenants or obligations set forth in this note or
the Security Agreement subject, however, to the limitations on personal
liability set forth above.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of Georgia.
-4-
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note under seal effective as
of the date first set forth above.
DIHC BERKELEY CORP.
a Georgia Corporation
By: /s/ Barrington H. Branch
-----------------------------
Barrington H. Branch
President
Attest: /s/ C. Lowell Ball
-------------------------
C. Lowell Ball
Secretary
-5-
<PAGE>
Exhibit 10.88
ASSIGNMENT OF COLLATERAL
(DIHC BERKELEY BACK BAY CORPORATION)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27 day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of Massachusetts.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
---------------------------------
Name: John H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/
---------------------------------
Name: Anneke C. van de Puttar
Title: Attorney-in Law
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/
---------------------------------
Name: John S. Moody
Title: President
By: /s/
---------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
<PAGE>
EXHIBIT A
1. Promissory Note dated as of August 15, 1997, executed by DIHC Berkeley
Back Bay Corporation in favor of DIHC Finance Corporation ("DIFCO") in the
original principal amount of $45,080,000; as assigned by DIFCO to
Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen by that certain Assignment of Loan Documents
dated as of November 1, 1997.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(DIHC BOYLSTON BACK BAY CORP.)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
---------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-Fact
By: /s/
---------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in-Fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.89
PROMISSORY NOTE
Principal Sum: $45,080,000 Date: as of August 15, 1997
Interest Rate: 7.77% Maturity Date: September 1, 2000
FOR VALUE RECEIVED, DIHC BERKELEY BACK BAY CORP. ("Maker"), a
Georgia corporation, promises to pay DIHC FINANCE CORPORATION ("Payee"), a
Georgia corporation having an office at 200 Galleria Parkway N.W., Suite 2000,
Atlanta, Georgia 30339, or order, or at such other place as may be designated in
writing by the holder hereof, the principal sum of FORTY FIVE MILLION EIGHTY
THOUSAND AND NO/100 DOLLARS ($45,080,000), in lawful money of the United States
of America, with interest thereon from the date hereof at the rate of seven and
seventy-seven one-hundredths percent (7.77 %) per annum but in no event in
excess of the then maximum legal rate in Georgia for purposes of determining
usury.
Installments of interest only shall be due and payable monthly in
arrears commencing on the first day after the first full calendar month
following the date hereof and continuing on the first day of each and every
calendar month thereafter ensuing until the entire principal sum hereof, all
accrued interest and all other sums due and payable hereunder shall be fully
paid. The entire unpaid principal balance, together with all accrued and unpaid
interest and
<PAGE>
all other sums due and payable hereunder, shall be due and payable on September
1, 2000 (the "Maturity Date").
Upon the request of Payee, Maker shall deliver to Payee a pledge of
Maker's partnership interest in DIHC Berkeley Associates, to be secured by a
pledge, collateral assignment, UCC-1 financing statement, security agreement and
any other security documents (collectively, the "Security Agreement") reasonably
requested by Payee.
Upon any default hereunder and the continuance of such default for a
period of ten (10) days after the due date or any default under the Security
Agreement, if any, and the continuance of such default after the expiration date
of any applicable grace period under any Security Agreement, Payee shall have
the right, at its option, to require Maker to immediately pay the entire
principal and interest remaining due and unpaid hereunder, together with all
costs and expenses incurred in connection with the collection or attempted
collection hereof and the protection of the security hereof or thereof,
including, without limitation, attorneys' fees and disbursements, whether or not
suit is instituted. Interest shall accrue on such amounts from the date of such
default at the Involuntary Rate (as hereinafter defined) compounded monthly
until the date such amounts are paid. The "Involuntary Rate" shall be an annual
rate equal to five percent (5 %) in excess of the rate charged from time to time
by Morgan Guaranty Trust Company of New York on short term (90 day) unsecured
loans to its preferred customers but in no event in excess of the then maximum
legal rate in Georgia for purposes of determining usury.
Maker agrees to be bound to the extent provided in any Security
Agreement and waives and renounces any and all exemption rights and the benefit
of all valuation and appraisal privileges as against the indebtedness evidenced
hereby or any renewal or extension thereof
-2-
<PAGE>
except as set forth in any Security Agreement, waives demand, protest, notice of
nonpayment, and any and all lack of diligence or delays in the collection or
enforcement hereof, and expressly consents to any extension of time, release of
any party liable for the indebtedness evidenced hereby, release of any of the
security of this Note, acceptance of other security thereof, or any other
indulgence or forbearance whatsoever by Payee, any one or all of which may be
made without notice to Maker or such released party or any other party.
This Note may be prepaid in whole or in part without fee or penalty
(but with accrued interest on the amount so prepaid) upon any date for the
payment of interest, upon not less than ten (10) days prior written notice by
Maker to Payee.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability. If, by the terms of
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker at any time is required or obligated to pay interest on the
principal amount of this Note in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall immediately and
automatically reduced to such maximum rate, the interest payable shall be
computed at such maximum rate, and all prior interest payments in excess of such
lawful maximum shall be immediately and automatically applied, and shall be
deemed to have been treated as having been applied at the time of receipt, in
reduction of the principal balance due under this Note.
The entire unpaid principal balance, together with all accrued and
unpaid interest and all other sums due and payable hereunder, shall become
immediately due and payable at the
-3-
<PAGE>
option of Payee upon the happening of any event by which this Note shall or may
become due and payable under the terms of any Security Agreement, subject to any
applicable notice, grace and/or cure period(s) thereunder.
No delays on the part of Payee in exercising any right hereunder or
under any security Agreement or any other agreement further evidencing or
securing this Note shall operate as a waiver thereof or preclude the exercise
thereof at any time during the continuance of any default or during the
continuance of a subsequent default.
This Note may not be modified or terminated orally. This Note may be
assigned by Payee, in its sole discretion, without the consent of Maker. This
Note shall be construed and enforced in accordance with the law of Georgia.
IN WITNESS WHEREOF, Maker has executed this Note as of the 15th of
August, 1997.
DIHC BERKELEY BACK BAY CORP.
By: /s/ Robert T. Sorrentino
---------------------------------
Robert T. Sorrentino
Vice President
-4-
<PAGE>
COUNTY OF NEW YORK )
: ss.:
STATE OF NEW YORK )
BEFORE ME the undersigned authority personally appeared on this day
Robert T. Sorrentino, to me personally known, who being by me duly sworn did
depose and say that he is the Vice President of DIHC Berkeley Back Bay Corp.,
the corporation described in and which executed the foregoing instrument; that
he acknowledged execution of said instrument to be the voluntary act and deed of
said corporation by order of the Board of Directors of said corporation.
WITNESS my hand and official seal this 15th day of August, 1997.
/s/ Russell Wohl
---------------------------------
Notary Public
Russell Wohl
Notary Public State of New York
No. 41-4977236
Qualified in Queens County
Commission Expires Jan 28, 1999
<PAGE>
Exhibit 10.90
ASSIGNMENT OF COLLATERAL
(CHARLOTTE OFFICE TOWER ASSOCIATES "A")
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of North Carolina.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R vander Vlist
---------------------------------
Name: Jan H.W.R. vander Vlist
ATTEST: Title: Attorney-in-fact
By:
----------------------
Name:
--------------------
Title:
-------------------
[CORPORATE SEAL]
By: /s/ Anneke C. vande Puttelaar
---------------------------------
Name: Anneke C. vande Puttelaar
ATTEST: Title: Attorney-in-fact
By:
----------------------
Name:
--------------------
Title:
-------------------
[CORPORATE SEAL]
<PAGE>
3
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
---------------------------------
Name: John S. Moody
Title: President
ATTEST:
By: /s/ Thomas P. Loftus
--------------------------
Name: Thomas P. Loftus
Title:Secretary
[CORPORATE SEAL]
By: /s/ Rodney C. Dimock
---------------------------------
Name: Rodney C. Dimock
ATTEST: Title: Executive Vice President
By: /s/ Thomas P. Loftus
--------------------------
Name: Thomas P. Loftus
Title: Secretary
[CORPORATE SEAL]
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/, a Notary Public of said County and State, certify that /s/ Jan
H.W.R. Vander Vlist personally came before me this day and acknowledged that
he/she is the attorney-in-fact of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a Foundation formed according to the
laws of the Netherlands, and that by authority duly given on and behalf of the
Foundation, the foregoing instrument was signed in its name by its
attorney-in-fact, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
---------------------------------
Notary Public
My Commission Expires:
February 21, 1999
[NOTARY SEAL] Michael L. Perry
Notary Public, State of New York
No. 01PE5039358
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/, a Notary Public of said County and State, certify that /s/ Anneke
C. Vande Puttelaar, personally came before me this day and acknowledged that
he/she is the attorney-in-fact of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a Foundation formed according to the
laws of the Netherlands, and that by authority duly given on and behalf of the
Foundation, the foregoing instrument was signed in its name by its
attorney-in-fact, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
---------------------------------
Notary Public
My Commission Expires:
February 21, 1999 Michael L. Perry
Notary Public, State of New York
No. 0PE5039358
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/ a Notary Public of said County and State, certify that /s/ Rodney
C. Dimock, personally came before me this day and acknowledged that he/she is
___________ of Cornerstone Properties Inc., a Nevada corporation, and that by
authority duly given on and behalf of the Corporation, the foregoing instrument
was signed in its name by its _____________, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
---------------------------------
Notary Public
My Commission Expires:
February 21, 1999
[NOTARY SEAL] Michael L. Perry
Notary Public, State of New York
No. 01PE5039358
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/, a Notary Public of said County and State, certify that /s/ John S.
Moody, personally came before me this day and acknowledged that he/she is
President of Cornerstone Properties Inc., a Nevada corporation, and that by
authority duly given on and behalf of the Corporation, the foregoing instrument
was signed in its name by its _______________, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
---------------------------------
Notary Public
My Commission Expires:
February 21, 1999 Michael L. Perry
Notary Public, State of New York
No. 01PE5039358
<PAGE>
EXHIBIT A
1. Modified and Restated "A" Note dated as of December 21, 1982, executed by
Charlotte Office Tower Associates ("Charlotte") in favor of Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen
("PGGM") in the principal amount of $33,000,000, recorded in Deed Book
4609 at page 841, in the Mecklenburg County, North Carolina Register of
Deeds.
2. "A" Construction Deed of Trust and Security Agreement dated as of October
22, 1980, executed by Charlotte in favor of Robert W. Bradshaw, Jr. and
Russell M. Robinson II, as Trustees for Dutch Institutional Finance
Corporation ("DIFCO"), recorded in Deed Book 4358 at page 808, aforesaid
records; as modified by that certain "A" Extension, Modification and
Spreader Agreement dated as of December 21, 1982, executed by and between
Charlotte and Robert W. Bradshaw, Jr. and Russell M. Robinson II, as
Trustees for DIFCO, recorded in Deed Book 4609 at page 854, aforesaid
records; as assigned by DIFCO to PGGM pursuant to that certain Assignment
of "A" Note, dated December 21, 1982, and recorded December 30, 1982, in
Deed Book 4609 at page 834, aforesaid records; as further amended and
modified by that certain Spreader and Release Agreement dated as of July
18, 1989, recorded in Deed Book 6069 at page 460, aforesaid records.
3. "A" Collateral Assignment of Leases and Rents dated as of October 22,
1980, executed by Charlotte in favor of DIFCO, recorded in Deed Book 4358
at page 755, aforesaid records; as assigned by DIFCO to PGGM pursuant to
that certain Assignment recorded on December 30, 1982, in Deed Book 4609
at page 873, aforesaid records.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(CHARLOTTE OFFICE TOWER ASSOCIATES "A")
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. vander Vlist
----------------------------------
Name: Jan H.W.R vander Vlist
Title: Attorney-in-fact
By: /s/ Anneke C. van de Puttelaar
----------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in-fact
DATE: October 27, 1997
<PAGE>
Exhibit 10.91
MODIFIED AND RESTATED "A" NOTE
Modified and Restated "A" Note, made as of the 21st day of December,
1982 by and between CHARLOTTE OFFICE TOWER ASSOCIATES, a joint venture formed
pursuant to the partnership laws of the State of North Carolina ("Maker"),
having an office at 1400 Charlotte Plaza, Charlotte, North Carolina 28244, and
STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE
BELANGEN, a foundation formed according to the laws of the Netherlands
("Payee"), having an office at Kroostweg Number 149, Zeist, the Netherlands.
Whereas, by virtue of Assignment dated as of the date hereof from
Dutch Institutional Finance Corporation, Inc. to Payee, Payee is the holder of
that certain "A" Construction Note dated October 22, 1980 from Maker to Dutch
Institutional Finance Corporation, Inc. in the principal amount of $33,000,000
(the "Original Note") on which is presently due and owing the sum of
$33,000,000, and
Whereas, Maker and Payee have determined to extend the maturity date
and modify the terms of payment and certain other provisions of the Original
Note.
NOW THEREFORE, the Original Note is hereby modified effective as of
the date hereof and restated in its entirety as follows:
FOR VALUE RECEIVED, Maker promises to pay to Payee at its office
recited above, or order, or at such other place as may be designated in writing
by the holder hereof, the principal sum of THIRTY-THREE MILLION AND NO/100
DOLLARS ($33,000,000.00), in
<PAGE>
lawful money of the United States of America, with interest thereon from the
date hereof, at the rate of twelve percent (12%) per annum, such principal and
interest to be payable as follows:
Interest only on the outstanding principal sum of THIRTY-THREE
MILLION AND NO/100 DOLLARS ($33,000,000.00), is due and payable monthly on the
first day of each month during the "Initial Term" (as hereinafter defined) of
this Note, beginning with the first day of the first month next following the
date hereof.
The "Initial Term" shall be the period commencing on the date hereof
and expiring on the earlier to occur of the following dates (the "Conversion
Date"): (1) the first day of the month next following the month in which the
property encumbered by the "A" Deed of Trust and Security Agreement made by
Maker dated October 22, 1980, recorded in the Office of the Register of Deeds of
Mecklenburg County, North Carolina in Book 4358 at page 0808, as modified by "A"
Extension, Modification and Spreader Agreement of even date herewith
(collectively, the "Deed of Trust") shall achieve a "Positive Cash Flow" (as
hereinafter defined) or (2) December 31, 1987.
The entire unpaid principal balance, together with any accrued
interest thereon, shall be due and payable on the thirty-fifth (35th)
anniversary of the Conversion Date (the "Maturity Date").
Commencing with the first day of the month following the Conversion
Date, interest and amortization shall be payable in four hundred twenty (420)
equal constant monthly installments of principal and interest computed to fully
amortize the principal balance, with interest thereon to be computed at the rate
of twelve percent (12%) per annum from the
2
<PAGE>
Conversion Date, so that the last payment shall be due on the thirty-fifth
(35th) anniversary of the Conversion Date.
Notwithstanding the foregoing, in the event either Balsam Mountain,
Inc. or Crow-Charlotte Office Tower Associates or any "Affiliate" (as such term
is hereinafter defined) of either of them shall transfer its respective interest
as a joint venturer of Maker in accordance with the provisions of Joint Venture
Agreement of Maker, this Note shall, at the option of Payee, upon notice to
Maker (the "Acceleration Notice") given within sixty (60) days after the date
Payee is notified of such event, become due and payable in its entirety,
together with all accrued interest thereon, on the later to occur of (a) the
fifth (5th) anniversary of the giving of the Acceleration Notice or (b) October
30, 1995. Installments of interest and amortization shall continue to be made in
the same amounts as theretofore, except that the entire then unpaid principal
balance with accrued interest shall be paid on the later of such dates following
the giving of the Acceleration Notice.
Upon any default hereunder and the continuance of such default for a
period of ten (10) days after the due date or any non-monetary default under the
Deed of Trust and the continuance of such default for a period of twenty (20)
days after delivery of written notice of default by Payee, Maker promises to pay
the principal and interest remaining due and unpaid hereunder in accordance with
the terms of the Deed of Trust, together with all costs and expenses incurred in
connection with the collection or attempted collection hereof and the protection
of the security hereof or thereof, including reasonable attorney's fees, whether
or not suit is instituted. Interest shall accrue on such amounts from the date
of such default at the "Involuntary Rate" (as hereinafter defined) compounded
quarterly until the date such amounts are paid. The
3
<PAGE>
"Involuntary Rate" shall be an annual rate equal to the greater of (i) 12% or
(ii) two percent (2%) in excess of the rate charged from time to time by The
Chase Manhattan Bank, N. A. on short term (90 day) unsecured loans to its
preferred customers but in no event in excess of the then maximum legal rate.
Maker agrees to be bound to the extent provided in the Deed of Trust
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in the Deed of Trust,
waives demand, protest, notice of nonpayment, and any and all lack of diligence
or delays in the collection or enforcement hereof, and expressly consents to any
extension of time, release of any party liable for the indebtedness evidenced
hereby, release of any of the security of this Note, acceptance of other
security therefor, or any other indulgence or forbearance whatsoever by Payee,
any one or all of which may be made without notice to Maker or such released
party or any other party.
Prior to the Conversion Date, this Note may not be prepaid. From and
after the Conversion Date, Maker shall have the right to prepay the entire
principal and interest due hereunder, upon ninety (90) days prior written notice
to Payee, (a) after the fifteenth (15th) anniversary of the Conversion Date
hereof without penalty or (b) prior to the fifteenth (15th) anniversary of the
Conversion Date hereof concurrently with payment of an amount equal to the
"Prepayment Percentage" (as hereinafter defined) multiplied by the then unpaid
principal balance of this Note. Notwithstanding the foregoing, no prepayment of
this Note is permitted at any time unless the principal of the "B Note" (as such
term is defined in the Deed of Trust), together with all interest thereon, has
been or concurrently therewith is paid in full.
4
<PAGE>
As used in this Note:
(a) The term "Positive Cash Flow" shall mean the amount by which the
actual gross rental income (including fixed rent and one-twelfth (1/12th)
of any annual additional rent relating to taxes, utilities, and/or
operating expenses and one-twelfth (1/12th) of any applicable annual
percentage rent payments) for any calendar month exceeds one-twelfth
(1/12th) of the "Approved Budget" (as such term is defined in the Deed of
Trust) for the then current year.
(b) The term "Affiliate" shall mean a wholly owned subsidiary of a
party, the person or entity which controls such party, or any other
entity, the controlling interest in which is held by such party or which
is controlled by the same person or entity which controls such party.
(c) The term "Prepayment Percentage" shall mean, with respect to the
portion of a loan procured by maker to prepay this Note, the amount by
which twelve percent (12%) exceeds the interest rate payable on the loan
procured by Maker to prepay this Note, but in no event less than one
percent (1%) nor more than six percent (6%), and with respect to any other
sums used to prepay this Note six percent (6%).
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability. If, by the terms of
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker at any time is required or obligated to pay interest on the
principal made available to Maker in an
5
<PAGE>
amount or at a rate in excess of the applicable legal maximum, the interest due
to Payee shall be immediately and automatically reduced to such maximum, the
interest payable shall be computed at such maximum rate, and all prior interest
payments in excess of such lawful maximum shall be immediately and automatically
applied, and shall be deemed to have been treated as having been applied at the
time of receipt, in reduction of the principal balance due under this Note.
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or may become due and payable under the terms
of the Deed of Trust (subject to any applicable grace period).
No delays on the part of Payee in exercising any right hereunder or
under the Deed of Trust or any other agreement further evidencing or securing
this Note shall operate as a waiver thereof or preclude the exercise thereof at
any time during the continuance of any default or during the continuance of a
subsequent default.
Notwithstanding any other provision of this Note to the contrary,
neither the obligation of Maker to pay the debt evidenced by this Note and the
Deed of Trust nor the obligation of Maker to perform any covenant or agreement
contained in this Note, the Deed of Trust or any other instrument evidencing or
securing the payment of this Note shall be enforced by any action or proceeding
wherein or whereby damages or any money judgment shall be sought against Maker,
except a foreclosure or other action against the property encumbered by the Deed
of Trust; any judgment in any such foreclosure or other action shall be
enforceable against Maker only to the extent of its interest in such property
and the income therefrom and no
6
<PAGE>
deficiency or other personal judgment shall be rendered or entered against Maker
in such foreclosure or other action.
This Note may not be modified or terminated orally.
This Note shall be construed and enforced in accordance with the law
of North Carolina.
The property encumbered by the Deed of Trust is located in
Mecklenburg County, North Carolina.
This Modified and Restated "A" Note may be signed in counterparts.
The signatures of the parties hereto on the several counterparts shall have the
same effect as if they had all signed the same counterpart.
IN WITNESS WHEREOF, Maker has executed this Modified and Restated
"A" Note as of the 21st day of December, 1982, and Payee, by its
countersignature hereto acknowledges that the Original Note is superceded in its
entirety by the provisions hereof.
CHARLOTTE OFFICE TOWER ASSOCIATES,
a joint venture, Maker
WITNESS: By: CROW-CHARLOTTE OFFICE TOWER
ASSOCIATES, a joint venturer
By /s/ Fred W. Klein (SEAL)
- ----------------------------- ----------------------------------
General Partner
ATTEST: By: BALSAM MOUNTAIN, INC.,
a joint venturer
By /s/ Herman A. Vonhof
- ----------------------------- ----------------------------------
President
7
<PAGE>
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
WITNESS: MAATSCHAPPELIJKE BELANGEN, Payee
(SEAL)
By /s/ Anton F.L. Fiolet
- ----------------------------- ----------------------------------
8
<PAGE>
STATE OF GEORGIA )
: ss.:
COUNTY OF FULTON )
On this 22nd day of December, 1982, personally came before me, Ann
W. Kilby, a Notary Public in and for the State of GEORGIA, Herman A. Vonhof,
who, being by me duly sworn, says that he is the President of BALSAM MOUNTAIN,
INC., a Georgia corporation, which executed the foregoing instrument as a
partner of CHARLOTTE OFFICE TOWER ASSOCIATES, a North Carolina joint venture,
that the seal affixed to the foregoing instrument in writing is the corporate
seal of the corporation, and that said writing was signed and sealed by him on
behalf of said joint venture.
And the said Herman A. Vonhof acknowledged the said writing to be
the act and deed of said corporation.
WITNESS my hand and notarial seal this 22nd day of December, 1982.
/s/ Ann W. Kilby
----------------------------------
Notary Public
My Commission expires
Nov. 6. 1986
- ---------------------------
<PAGE>
STATE OF TEXAS )
: ss.:
COUNTY OF DALLAS )
I, Christine McCorkle, a Notary Public in and for the State of
Texas, do hereby certify that Fred N. Klein, a general partner of CROW-CHARLOTTE
OFFICE TOWER ASSOCIATES, a Texas limited partnership, personally appeared before
me this day and acknowledged the due execution of the foregoing instrument on
behalf of said CROW-CHARLOTTE OFFICE TOWER ASSOCIATES as a general partner of
CHARLOTTE OFFICE TOWER ASSOCIATES, a North Carolina joint venture, on behalf of
said joint venture.
WITNESS my hand and notarial seal this 9th day of December, 1982.
/s/ Christine McCorkle
----------------------------------
Notary Public
My Commission expires
5-21-86
- -------------------------
<PAGE>
COUNTRY OF THE NETHERLANDS )
: ss.:
CITY OF AMSTERDAM )
I hereby certify that on this day before me, a civil law notary,
officiating in Amsterdam, The Netherlands, duly authorized and qualified in the
Country and City aforesaid to take acknowledgments, personally appeared Anton
F.L. Fiolet, well known to me to be the authorized signature of STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a
foundation formed according to the laws of The Netherlands, who executed the
foregoing instrument on behalf of said foundation in the presence of a
subscribing witness, freely and voluntarily, under authority duly vested in him
by said foundation, and that said foundation has no seal.
WITNESS my hand, in the Country and City aforesaid, this 2nd day of
December, 1982.
/s/ J.A.E. Koning
----------------------------------
My Commission expires
- -----------------------------
<PAGE>
Exhibit 10.92
ASSIGNMENT OF COLLATERAL
(CHARLOTTE OFFICE TOWER ASSOCIATES "B")
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27th day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the State of North Carolina.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. van der Vlist
----------------------------------
Name: Jan H.W.R van der Vlist
ATTEST: Title: Attorney-in-fact
By:
----------------------
Name:
--------------------
Title:
-------------------
[CORPORATE SEAL]
By: /s/ Anneke C. van de Puttelaar
----------------------------------
Name: Anneke C. van de Puttelaar
ATTEST: Title: Attoney-in-fact
By:
----------------------
Name:
--------------------
Title:
-------------------
[CORPORATE SEAL]
<PAGE>
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
----------------------------------
Name: John S. Moody
Title: President
ATTEST:
By: /s/ Thomas P. Loftus
-------------------------
Name: Thomas P. Lotus
Title:Secretary
[CORPORATE SEAL]
By: /s/ Rodney C. Dimock
----------------------------------
Name: Rodney C. Dimock
ATTEST: Title: Executive Vice President
By: /s/ Thomas P. Loftus
-------------------------
Name: Thomas P. Loftus
Title:Secretary
[CORPORATE SEAL]
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/, a Notary Public of said County and State, certify that /s/ Jan
H.W.R. Van Der Vlist, personally came before me this day and acknowledged that
he/she is the attorney-in-fact of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a Foundation formed according to the
laws of the Netherlands, and that by authority duly given on and behalf of the
Foundation, the foregoing instrument was signed in its name by its
attorney-in-fact, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
----------------------------------
Notary Public
My Commission Expires:
February 21, 1999
- ----------------------
[NOTARY SEAL] Michael L. Perry
Notary Public, State of New York
No.O1PE503358
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/ a Notary Public of said County and State, certify that /s/ Anneke
C. Van de Puttelaar, personally came before me this day and acknowledged that
he/she is the attorney-in-fact of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a Foundation formed according to the
laws of the Netherlands, and that by authority duly given on and behalf of the
Foundation, the foregoing instrument was signed in its name by its
attorney-in-fact, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
----------------------------------
Notary Public
My Commission Expires:
February 21, 1999 Michael L. Perry
- ----------------------- Notary Public, State of New York
No.O1PE503358
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/, a Notary Public of said County and State, certify that /s/ Rodney
C. Dimock, personally came before me this day and acknowledged that he/she is
Secretary of Cornerstone Properties Inc., a Nevada corporation, and that by
authority duly given on and behalf of the Corporation, the foregoing instrument
was signed in its name by its _____________, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
----------------------------------
Notary Public
My Commission Expires:
February 21, 1999
[NOTARY SEAL] Michael L. Perry
Notary Public, State of New York
No.O1PE503358
STATE OF NEW YORK
COUNTY OF NEW YORK
I, /s/, a Notary Public of said County and State, certify that /s/ John S.
Moody, personally came before me this day and acknowledged that he/she is
President of Cornerstone Properties Inc., a Nevada corporation, and that by
authority duly given on and behalf of the Corporation, the foregoing instrument
was signed in its name by its _______________, and attested by him/her.
Witness my hand and office stamp or seal this 27th day of October, 1997.
/s/
----------------------------------
Notary Public
My Commission Expires:
February 21, 1999
- ----------------------
Michael L. Perry
Notary Public, State of New York
No.O1PE503358
<PAGE>
EXHIBIT A
1. Modified and Restated "B" Note dated as of December 21, 1982, executed by
Charolotte Office Tower Associates ("Charlotte") in favor of Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen
("PGGM") in the principal amount of $8,196,549.27, recorded in Deed Book
4609 at page 876 in the Mecklenburg County, North Carolina Register of
Deeds.
2. "B" Construction Deed of Trust and Security Agreement dated as of October
22, 1980, executed by Charlotte in favor of Robert W. Bradshaw, Jr. and
Russell M. Robinson II, as Trustees for Dutch Institutional Finance
Corporation ("DIFCO"), recorded in Deed Book 4358 at page 763, aforesaid
records; as modified by that certain "B" Extension, Modification and
Spreader Agreement dated as of December 21, 1982, executed by and between
Charlotte and Robert W. Bradshaw, Jr. and Russell M. Robinson II, as
Trustees for DIFCO, recorded in Deed Book 4609 at page 815, aforesaid
records; as assigned by DIFCO to PGGM pursuant to that certain Assignment
of "B" Note, recorded December 30, 1982, in Deed Book 4609 at page 839,
aforesaid records; as further amended and modified by that certain
Spreader and Release Agreement dated as of July 18, 1989, recorded in Deed
Book 6069 at page 460, aforesaid records.
3. "B" Collateral Assignment of Leases and Rents dated as of October 22,
1980, executed by Charlotte in favor of DIFCO, recorded in Deed Book 4358
at page 747, aforesaid records; as assigned by DIFCO to PGGM pursuant to
that certain Assignment recorded on December 30, 1982, in Deed Book 4609
at page 836, aforesaid records.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(CHARLOTTE OFFICE TOWER ASSOCIATES "B")
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/ Jan H.W.R. van der Vlist
----------------------------------
Notary Public
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-fact
By: /s/ Anneke C. Van de Puttelaar
----------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in-fact
DATE: October 27th, 1997
<PAGE>
Exhibit 10.93
MODIFIED AND RESTATED "B" NOTE
Modified and Restated "B" Note, made as of the 21st day of December,
1982 by and between CHARLOTTE OFFICE TOWER ASSOCIATES, a joint venture formed
pursuant to the partnership laws of the State of North Carolina, ("Maker"),
having an office at 1400 Charlotte Plaza, Charlotte, North Carolina 28244, and
STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE
BELANGEN, a foundation formed according to the laws of the Netherlands,
("Payee"), having an office at Kroostweg Number 149, Zeist, the Netherlands.
Whereas, by virtue of Assignment dated as of the date hereof from
Dutch Institutional Finance Corporation, Inc. to Payee, Payee is the holder of
that certain "B" Construction Note dated October 22, 1980 from Maker to Dutch
Institutional Finance Corporation, Inc. in the principal amount of $7,500,000
(the "Original Note") on which is presently due and owing the sum of $7,140,000,
together with accrued interest in the amount of $1,056,549.27, aggregating
$8,196,549.27, and
Whereas, Maker and Payee have determined to extend the maturity date
and modify the terms of payment and certain other provisions of the Original
Note.
NOW THEREFORE, the Original Note is hereby modified effective as of
the date hereof and restated in its entirety as follows:
FOR VALUE RECEIVED, Maker promises to pay to Payee at its office
recited above, or order, or at such other place as may be designated in writing
by the holder hereof, the principal sum of EIGHT MILLION ONE HUNDRED NINETY-SIX
THOUSAND FIVE HUNDRED FORTY-NINE AND 27/100 DOLLARS ($8,196,549.27), in lawful
money of the
<PAGE>
United States of America, with interest thereon from the date hereof as set
forth below, such principal and interest to be payable as follows:
Subject to the following provisions of this Notes, interest shall
accrue on the outstanding principal sum of EIGHT MILLION ONE HUNDRED NINETY-SIX
THOUSAND FIVE HUNDRED FORTY-NINE AND 27/100 DOLLARS ($8,196,549.27), and shall
be compounded quarterly, beginning with the date hereof at the rate of ten
percent (10%) per annum until December 31, 1992, and thereafter at the rate of
twelve percent (12%) per annum until the "Maturity Date" (as hereafter defined).
The entire unpaid principal balance, together with any accrued
interest thereon, shall be due and payable on December 31, 1997 (the "Maturity
Date").
Maker shall make quarterly payments (which shall be adjusted, to the
extent necessary, on a calendar year basis) on account of interest and principal
under this Note in an amount equal to, and only to the extent of, the "Available
Cash Flow", as such term is defined in the "B" Deed of Trust and Security
Agreement dated October 22, 1980 and recorded in the Office of the Register of
Deeds, Mecklenburg County, North Carolina in Book 4358 at Page 0763, as modified
by "B" Extension, Modification and Spreader Agreement dated concurrently
herewith (collectively, the "Deed of Trust") securing this Note.
Maker shall deliver to Payee, within thirty (30) days after the end
of each calendar quarter and within ninety (90) days after the end of each
calendar year, a detailed statement of the Net Cash Flow and the Available Cash
Flow (as such terms are defined in the Deed of Trust) for that calendar quarter
or calendar year, as the case may be, and the Available Cash Flow shown on that
statement shall then be immediately due and payable to Payee and shall be
applied first on
2
<PAGE>
account of accrued interest and any balance to reduction of principal under this
Note. In the event that Maker shall have made quarterly payments in excess of
the Available Cash Flow, as adjusted for any calendar year, Payee shall
reimburse Maker any such excess promptly upon receipt of the annual statement
together with request for such repayment. Each such statement shall be certified
by Maker (or a partner or officer of Maker) or by the then managing agent of the
property secured by the Deed of Trust. Such statements shall be deemed binding
and conclusive on Payee unless Payee gives Maker notice of any dispute or
disagreement regarding such statement within ninety (90) days after Payee's
receipt of any such statement. Failure to make any payment required above and
the continuance of such default for a period of ten (10) days after the due date
is an event of default which shall entitle Payee to declare the entire unpaid
balance of this Note immediately due and payable.
Any dispute between the parties concerning the computation of the
Net Cash Flow or the Available Cash Flow hereunder shall be determined by
arbitration in Charlotte, North Carolina by the American Arbitration Association
or any successor organization, in accordance with its rules then obtaining, and
the decision rendered in such arbitration shall be binding upon the parties and
may be entered in any court having jurisdiction. If the American Arbitration
Association is not then in existence or has no successor, any arbitration
hereunder shall be conducted in Charlotte, North Carolina before one arbitrator
appointed, on application of either party, by the Senior Resident Superior Court
Judge in Mecklenburg County.
If Crow-Charlotte Office Tower Associates (or any of its Affiliates)
exercises its option under the Joint Venture Agreement of Maker dated as of
October 22, 1980 to purchase
3
<PAGE>
the interest of Balsam Mountain, Inc. (or any of its Affiliates) in Maker, then
this Note, at the option of Payee, upon notice to Maker (the "Acceleration
Notice") given within sixty (60) days after the date Payee is notified of such
event, shall become due and payable in its entirety, together with all accrued
interest thereon, on the date which is ninety (90) days after the giving of the
Acceleration Notice.
Upon any default hereunder and the continuance of such default for a
period of ten (10) days after the due date or any non-monetary default under the
Deed of Trust and the continuance of such default for a period of twenty (20)
days after delivery of written notice of default by Payee, Maker promises to pay
the principal and interest remaining due and unpaid hereunder in accordance with
the terms of the Deed of Trust, together with all costs and expenses incurred in
connection with the collection or attempted collection hereof and the protection
of the security hereof or thereof, including reasonable attorney's fees, whether
or not suit is instituted. Interest shall accrue on such amounts from the date
of such default at the "Involuntary Rate" (as hereinafter defined) compounded
quarterly until the date such amounts are paid. The "Involuntary Rate" shall be
an annual rate equal to the greater of (i) 12% or (ii) two percent (2%) in
excess of the rate charged from time to time by The Chase Manhattan Bank, N. A.
on short term (90 day) unsecured loans to its preferred customers but in no
event in excess of the then maximum legal rate.
Maker agrees to be bound to the extent provided in the Deed of Trust
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in the Deed of Trust,
waives demand, protest, notice of nonpayment, and any and all lack of
4
<PAGE>
diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security of this Note,
acceptance of other security therefor, or any other indulgence or forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
This Note may be prepaid in whole or in part, at any time and from
time to time, without penalty on ninety (90) days prior written notice.
As used in this Note the term "Affiliate" shall mean a wholly owned
subsidiary of a party, the person or entity which controls such party, or any
other entity, the controlling interest in which is held by such party or which
is controlled by the same person or entity which controls such party.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability. If, by the terms of
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker at any time is required or obligated to pay interest on the
principal made available to Maker in an amount or at a rate in excess of the
applicable legal maximum, the interest due to Payee shall be immediately and
automatically reduced to such maximum, the interest payable shall be computed at
such maximum rate, and all prior interest payments in excess of such lawful
maximum shall be immediately and automatically applied, and shall be deemed to
have been treated as having been applied at the time of receipt, in reduction of
the principal balance due under this Note.
5
<PAGE>
The principal amount, plus accrued interest, shall become
immediately due and payable at the option of Payee upon the happening of any
event by which said balance shall or may become due and payable under the terms
of the Deed of Trust subject to any applicable grace period.
No delays on the part of Payee in exercising any right hereunder or
under the Deed of Trust or any other agreement further evidencing or securing
this Note shall operate as a waiver thereof or preclude the exercise thereof at
any time during the continuance of any default or during the continuance of a
subsequent default.
Maker shall pay the debt evidenced by this Note in full when due and
payable provided however that Payee shall not be entitled to enforce any
judgment against Maker or the mortgaged property or to retain any proceeds from
a foreclosure sale of the mortgaged property except to the extent of the then
"Percentage Interest of Developer in the Venture" (as such terms are used and
defined in the Joint Venture Agreement of Maker dated as of October 22, 1980).
This Note may not be modified or terminated orally.
This Note shall be construed and enforced in accordance with the law
of North Carolina.
The property encumbered by the Deed of Trust is located in
Mecklenburg County, North Carolina.
This Modified and Restated "B" Note may be signed in counterparts.
The signatures of the parties hereto on the several counterparts shall have the
same effect as if they had all signed the same counterpart.
6
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Modified and Restated
"B" Note as of the 21st day of December, 1982, and Payee, by its
countersignature hereto acknowledges that the Original Note is superceded in its
entirety by the provisions hereof.
CHARLOTTE OFFICE TOWER ASSOCIATES,
a joint venture, Maker
WITNESS: By: CROW-CHARLOTTE OFFICE TOWER
ASSOCIATES, a joint venturer
/s/ (signature illegible) By /s/ Fred W. Klein (SEAL)
- ------------------------- --------------------------
General Partner
ATTEST: By: BALSAM MOUNTAIN, INC.,
a joint venturer
/s/ (signature illegible) By /s/ Herman A. Vonhof
- ------------------------- --------------------------
President
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
WITNESS: MAATSCHAPPELIJKE BELANGEN, Payee
(SEAL)
/s/ (signature illegible) By /s/ Anton F.L. Fiolet
- ------------------------- --------------------------
Attorney-in-Fact
7
<PAGE>
STATE OF GEORGIA )
: ss.:
COUNTY OF FULTON )
On this 22nd day of December, 1982, personally came before me, Ann
W. Kilby, a Notary Public in and for the State of GEORGIA, Herman A. Vonhof,
who, being by me duly sworn, says that he is the President of BALSAM MOUNTAIN,
INC., a Georgia corporation, which executed the foregoing instrument as a
partner of CHARLOTTE OFFICE TOWER ASSOCIATES, a North Carolina joint venture,
that the seal affixed to the foregoing instrument in writing is the corporate
seal of the corporation, and that said writing was signed and sealed by him on
behalf of said joint venture.
And the said Herman A. Vonhof acknowledged the said writing to be
the act and deed of said corporation.
WITNESS my hand and notarial seal this 22nd day of December, 1982.
/s/ Ann W. Kilby
----------------
Notary Public
My Commission expires
November 6, 1986
----------------
<PAGE>
STATE OF TEXAS )
: ss.:
COUNTY OF DALLAS )
I, Christine E. McCorkle, a Notary Public in and for the State of
Texas do hereby certify that Fred W. Klein, a general partner of CROW-CHARLOTTE
OFFICE TOWER ASSOCIATES, a Texas limited partnership, personally appeared before
me this day and acknowledged the due execution of the foregoing instrument on
behalf of said CROW-CHARLOTTE OFFICE TOWER ASSOCIATES as a general partner of
CHARLOTTE OFFICE TOWER ASSOCIATES, a North Carolina joint venture, on behalf of
said joint venture.
WITNESS my hand and notarial seal this 9th day of December, 1982.
/s/ Christine E. McCorkle
-------------------------
Notary Public
My Commission expires
May 21, 1986
------------
<PAGE>
COUNTRY OF THE NETHERLANDS )
: ss.:
CITY OF AMSTERDAM )
I hereby certify that on this day before me, a civil law notary,
officiating in Amsterdam, The Netherlands, duly authorized and qualified in the
Country and City aforesaid to take acknowledgments, personally appeared Anton
F.L. Fiolet, well known to me to be the authorized signature of STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a
foundation formed according to the laws of The Netherlands, who executed the
foregoing instrument on behalf of said foundation in the presence of a
subscribing witness, freely and voluntarily, under authority duly vested in him
by said foundation, and that said foundation has no seal.
WITNESS my hand, in the Country and City aforesaid, this 21st day of
December, 1982.
/s/ J.A.E. Koning
-----------------
My Commission expires
______________________
<PAGE>
Exhibit 10.94
1
ASSIGNMENT OF COLLATERAL
(AVENUE ASSOCIATES LIMITED PARTNERSHIP)
THIS ASSIGNMENT OF COLLATERAL (hereinafter referred to as the
"Assignment") is made as of the 27 day of October, 1997, by STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN
(hereinafter referred to as "Assignor") in favor of Cornerstone Properties Inc.
(hereinafter referred to as "Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the recipient and owner of the promissory note and
collateral security documents described on Exhibit A attached hereto and by this
reference incorporated herein (the "Collateral"); and
WHEREAS, pursuant to that certain Loan Purchase Agreement dated as of
August 18, 1997, between Assignor and Assignee, Assignor has agreed to transfer
all of its right, title and interest in and to the Collateral to Assignee.
NOW, THEREFORE, for and in consideration of the exchange of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto covenant and agree as
follows:
I. Assignor hereby irrevocably transfers, assigns, grants, bargains,
sells, conveys, remises, releases, warrants, set over and confirms unto Assignee
for its benefit and the benefit of its successors and assigns, all of its right,
title and interest in and to the Collateral without recourse or warranty except
as provided for and set forth in that certain Loan Purchase Agreement dated as
of August 18, 1997, executed by and between Assignee and Assignor.
II. Upon the request of Assignee, Assignor shall execute and deliver to
Assignee such further instruments as Assignee may deem reasonably necessary to
effectuate this Assignment.
III. This Assignment shall bind and inure to the benefit of the Assignor
and Assignee and their respective heirs, successors and assigns.
IV. Nothing in this Assignment shall be construed to give to any person
other than Assignee its successors and assigns any legal or equitable right,
remedy or claim under this Assignment, and this Assignment shall be held for the
sole and exclusive benefit of Assignee and its successors and assigns.
V. This Assignment shall be governed by, construed and enforced in
accordance with the laws of the District of Columbia.
<PAGE>
2
IN WITNESS WHEREOF, Assignor and Assignee have executed or caused to be
executed this Assignment under seal, as of the date and year first above
written.
ASSIGNOR:
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
---------------------------
Name: Jan H.W.R. van der Vlist
-------------------------
Title: Attorney-in-fact
------------------------
By: /s/
---------------------------
Name: Anneke C. van de Puttelaar
-------------------------
Title:
------------------------
ASSIGNEE:
CORNERSTONE PROPERTIES INC.
By: /s/
---------------------------
Name: John S. Moody
-------------------------
Title: President
------------------------
By: /s/
---------------------------
Name: Rodney S. Dimock
-------------------------
Title: Executive Vice President
------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
Subscribed, sworn to and acknowledged before me by Anneke C. Van de
Puttelaar, _________ of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE
EN MAATSCHAPPELIJKE BELANGEN this 27 day of October, 1997.
/s/
----------------
Notary Public
My Commission Expires: February 21, 1999 Michael L. Perry
------------------ Notary Public, State of New York
No. O1PE50393S8
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
Subscribed, sworn to and acknowledged before me by Jan M.W.R. Van
der Vlist, __________ of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE
EN MAATSCHAPPELIJKE BELANGEN this 27 day of October, 1997.
/s/
----------------
Notary Public
My Commission Expires: February 21, 1999 Michael L. Perry
------------------ Notary Public, State of New York
No. O1PE50393S8
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
Subscribed, sworn to and acknowledged before me by John S. Moody,
President of Cornerstone Properties Inc., this 27 day of October, 1997.
/s/
----------------
Notary Public
My Commission Expires: February 21, 1999 Michael L. Perry
------------------ Notary Public, State of New York
No. O1PE50393S8
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
Subscribed, sworn to and acknowledged before me by Rodney C. Dimock,
Executive Vice President of Cornerstone Properties Inc., this 27 day of
_____________, 1997.
/s/
----------------
Notary Public
My Commission Expires: February 21, 1999 Michael L. Perry
------------------ Notary Public, State of New York
No. O1PE50393S8
<PAGE>
VIRGINIA:
IN THE CLERK'S OFFICE OF THE CIRCUIT COURT
This certificate was presented, and with the Certificate annexed,
admitted to record on _______________ at ______________ o'clock __.m.
Clerk's fees: $____________ have been paid.
Attest:___________________________________, Deputy Clerk
<PAGE>
EXHIBIT A
1. Promissory Note dated as of July 15, 1987, executed by Avenue Associates
Limited Partnership ("AALP") in favor of DIHC Finance Corporation
("DIFCO") in the original principal amount of $188,491,750; as assigned by
DIFCO to Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen ("PGGM") pursuant to that certain Assignment of
Loan Documents dated as of November 15, 1992.
2. Deed of Trust and Security Agreement dated as of July 15, 1987, executed
by AALP in favor of Michael J. Shea, as Trustee for DIFCO, recorded June
17, 1987 as Instrument No. 38127, among the Land Records of the District
of Columbia; as amended by that certain Spreader Amendment to Deed of
Trust and Security Agreement and Assignment of Lessor's Interest in Leases
dated as of June 13, 1988, executed by and between AALP, DIFCO and Michael
J. Shea, recorded June 24, 1988, as Instrument No. 34236, aforesaid
records; as further amended by that certain First Amendment to Deed of
Trust dated as of July 15, 1987, executed by and between AALP, Michael J.
Shea and DIFCO, recorded October 18, 1988, as Instrument No. 57570,
aforesaid records; as further amended by that certain Second Amendment to
Deed of Trust dated as of July 15, 1987, executed by and between AALP,
Michael J. Shea and DIFCO, recorded May 23, 1989, as Instrument No. 28528,
aforesaid records; as further amended by that certain Third Amendment to
Deed of Trust dated as of July 15, 1987, executed between AALP, Michael J.
Shea and DIFCO, recorded November 29, 1989, as Instrument No. 66305,
aforesaid records; and as assigned by DIFCO to PGGM pursuant to that
certain Assignment of Loan Documents dated as of November 15, 1992.
3. Assignment of Lessor's Interest in Leases dated as of July 15, 1987,
executed by AALP in favor of DIFCO, recorded July 17, 1987, as Instrument
No. 38128, aforesaid records; as assigned by DIFCO to PGGM pursuant to
that certain Assignment of Loan Documents dated as of November 15, 1992.
4. Assignment of Borrower's Interest in Construction Contract Documents dated
as of July 15, 1987, executed by AALP in favor of DIFCO; as assigned by
DIFCO to PGGM pursuant to that certain Assignment of Loan Documents dated
as of November 15, 1992.
5. Building Loan Agreement dated as of July 15, 1987, executed by and between
AALP and DIFCO; as amended by that certain First Amendment to Building
Loan Agreement dated as of January 27, 1989; as further amended by that
certain Second Amendment to Building Loan Agreement dated as of April 17,
1991; and as assigned by DIFCO to PGGM pursuant to that certain Assignment
of Loan Documents dated as of November 15, 1992.
<PAGE>
6. Subordination Agreement executed by and between PADC, Robert Acker,
Charles Duke and DIFCO; as assigned by DIFCO to PGGM pursuant to that
certain Assignment of Loan Documents dated as of November 15, 1992.
7. Agreement to Subordinate executed by and between PADC and DIFCO; as
assigned by DIFCO to PGGM pursuant to that certain Assignment of Loan
Documents dated as of November 15, 1992.
8. Sixteen consecutively numbered Amendments to Deed of Trust executed by
Avenue Associates in favor of Michael Shea, as trustee for DIFCO; as
assigned by DIFCO to PGGM pursuant to that certain Assignment of Loan
Documents dated as of November 15, 1992.
9. Escrow Agreement executed by and between AALP, DIFCO, and Commercial
Settlements concerning the sixteen consecutively numbered Amendments to
the Deed of Trust; as assigned by DIFCO to PGGM pursuant to that certain
Assignment of Loan Documents dated as of November 15, 1992.
10. Borrower's Affidavit executed by T. Christopher Roth in favor of DIFCO,
Chicago Title Insurance Company, Commonwealth Land Title Insurance Company
and Ticor Title Insurance Company; as assigned by DIFCO to PGGM pursuant
to that certain Assignment of Loan Documents dated as of November 15,
1992.
11. Letter from Western Associates to Market Square Associates approving the
loan by DIFCO to Market Square Associates; as assigned by DIFCO to PGGM
pursuant to that certain Assignment of Loan Documents dated as of November
15, 1992.
12. Opinion Letter from Jones, Day, Reavis & Pogue to DIHC Market Square and
DIFCO concerning loans; as assigned by DIFCO to PGGM pursuant to that
certain Assignment of Loan Documents dated as of November 15, 1992.
<PAGE>
ALLONGE
ENDORSEMENT OF NOTE
(AVENUE ASSOCIATES LIMITED PARTNERSHIP)
Pay to the order of CORNERSTONE PROPERTIES INC. (the "Assignee") without
recourse or warranty except as provided for and set forth in that certain Loan
Purchase Agreement dated as of August 18, 1997 executed by and between Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen and
Assignee.
STICHTING PENSIOENFONDS VOOR
DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN
By: /s/
----------------------------
Name: Jan H.W.R. van der Vlist
--------------------------
Title: Attorney-in-Fact
-------------------------
By: /s/
----------------------------
Name: Anneke C. van de Puttelaar
--------------------------
Title: Attorney-in-fact
-------------------------
DATE: October __, 1997
<PAGE>
Exhibit 10.95
$188,491,750 Washington, D.C.
PROMISSORY NOTE
FOR VALUE RECEIVED, AVENUE ASSOCIATES LIMITED PARTNERSHIP, a limited
partnership formed pursuant to the laws of the District of Columbia ("Maker"),
having an office at Suite 500, 1001 30th Street, N.W., Washington, D.C. 20007,
promises to pay to DIHC FINANCE CORPORATION, a Georgia corporation ("Payee"), at
its office at 200 Galleria Parkway, N.W., Suite 2000, Atlanta, Georgia 30339 or
order, or at such other place as may be designated in writing by the holder
hereof, the principal sum of ONE HUNDRED EIGHTY-EIGHT MILLION FOUR HUNDRED
NINETY-ONE THOUSAND SEVEN HUNDRED FIFTY AND NO/100 DOLLARS ($188,491,750), or so
much thereof as shall have been advanced, in lawful money of the United States
of America, with interest thereon from the date hereof, at the rate of eight and
three-fourths percent (8.75%) per annum to the "Conversion Date", as hereinafter
defined, and at the rate of nine and three-fourths percent (9.75%) per annum
from and after the Conversion Date. All computations of interest shall be made
on the basis of a year consisting of twelve (12) months of thirty (30) days each
and interest for any partial month shall be calculated based on the actual
number of days elapsed in the period for which such interest accrues. As used in
this Note, the "Conversion Date" shall mean the date which is fifty-two (52)
months after the date of this Note; provided that if Maker shall have exercised
its right to extend the Conversion Date as provided in paragraph 1 of Exhibit
"C" to the Building Loan Agreement of even date herewith between Maker and Payee
(the "Building Loan Agreement"), and shall have paid the extension fee described
in the Building Loan
<PAGE>
2
Agreement, and all other conditions and requirements set forth in the Building
Loan Agreement for exercise of such extension right shall have been satisfied,
then the Conversion Date shall be the date sixty-four (64) months after the date
of this Note.
Principal and interest hereunder shall be payable as follows:
Interest only on the outstanding principal sum shall be due and payable monthly
in arrears on the first day of each month during the term of this Note through
and including the Conversion Date, beginning with the first day of the first
month next following the first advance hereunder made in accordance with the
terms and conditions of the Building Loan Agreement.
Commencing on the first day of the first month following the
Conversion Date and continuing on the first day of each month thereafter through
and including the "Maturity Date", as hereinafter defined, installments of
principal and accrued interest shall be due and payable in equal monthly
installments in an amount sufficient to amortize the entire indebtedness
outstanding hereunder as of the Conversion Date, at an interest rate of nine and
three fourths percent (9.75%) per annum, over a period of three hundred sixty
(360) months.
The entire unpaid principal balance, together with any accrued but
unpaid interest thereon, shall be due and payable on the date one hundred eighty
(180) months after the Conversion Date (the "Maturity Date").
Maker shall make all payments required under this Note to the
registered holder of this Note as reflected on the books and records of Maker.
Maker shall be required to recognize a new owner of this Note as the new
registered holder of this Note only if the transfer of the ownership interest in
the Note has been disclosed to Maker. In such case, Maker shall either
<PAGE>
3
make an entry on its books and records identifying the new owner of such
interest or, if a new holder surrenders this Note to Maker, Maker shall either
reissue this Note to the new holder or issue a new instrument to the new holder
containing terms and conditions identical to this Note.
If Maker fails to make any payment when due hereunder and such
failure continues for a period of seven (7) days after delivery by Payee of
written notice of default (provided, that in the event that during any twelve
month period commencing on the date hereof or on any anniversary date hereof,
two or more payments are not received by Payee on or before the date the same
become due and payable hereunder, then commencing on the third such late
payment, and thereafter throughout the succeeding twelve (12) month period, no
such notice shall be required and any subsequent late payment during such twelve
(12) month period shall immediately entitle Lender to exercise any and all of
its remedies hereunder including acceleration of the indebtedness evidenced
hereby), or upon the occurrence of an Event of Default under the Building Loan
Agreement of even date herewith between Maker and Payee (the "Building Loan
Agreement") or the Deed of Trust and Security Agreement made by Maker to Michael
J. Shea, as trustee(s) for Payee of even date herewith (the "Deed of Trust")
then, at Payee's option, the entire outstanding principal balance hereof,
together with accrued but unpaid interest thereon, all costs and expenses
incurred in connection with the collection or attempted collection hereof and
the protection of the security hereof or thereof, including reasonable
attorney's fees, whether or not suit is instituted, shall immediately become due
and payable in full. Interest shall accrue on any amounts not paid when due from
the date of such default at the "Involuntary Rate" (as hereinafter defined)
compounded quarterly until the date such amounts are paid. The "Involuntary
Rate"
<PAGE>
4
shall be an annual rate equal to the greater of (i) 12% or (ii) four and
one-fourth (4.25) percentage points in excess of the rate announced and
published from time to time by The Chase Manhattan Bank, N.A., New York, New
York, as its "prime interest rate" or "base lending rate" but in no event in
excess of the then maximum legal rate.
Maker agrees to be bound to the extent provided in the Deed of Trust
and waives and renounces any and all exemption rights and the benefit of all
valuation and appraisal privileges as against the indebtedness evidenced hereby
or any renewal or extension thereof except as set forth in the Deed of Trust,
waives presentment, demand, protest, notice of nonpayment, and any and all lack
of diligence or delays in the collection or enforcement hereof, and expressly
consents to any extension of time, release of any party liable for the
indebtedness evidenced hereby, release of any of the security for this Note,
acceptance of other security therefor, or any other indulgence or forbearance
whatsoever by Payee, any one or all of which may be made without notice to Maker
or such released party or any other party.
Except as provided upon the application by Payee of insurance or
condemnation proceeds as required by the Deed of Trust or as otherwise provided
in the Deed of Trust, this Note may not be prepaid.
The parties hereto have intended in good faith to comply with all
applicable usury laws. Notwithstanding anything to the contrary contained in
this Note or any other instrument evidencing, securing, or relating to this
Note, Maker shall not be obligated or required to pay interest at a rate which
would subject Payee to either criminal or civil liability or a forfeiture of
interest or principal hereunder. If, by the terms of this Note or any other
instrument evidencing,
<PAGE>
5
securing or relating to this Note, Maker at any time is required or obligated to
pay interest on the principal made available to Maker in an amount or at a rate
in excess of the applicable legal maximum, the interest due to Payee shall be
immediately and automatically reduced to such maximum, the interest payable
shall be computed at such maximum rate, and all prior interest payments in
excess of such lawful maximum shall be immediately and automatically applied,
and shall be deemed to have been treated as having been applied at the time of
receipt, in reduction of the principal balance due under this Note with no
prepayment premium.
No delays on the part of Payee in exercising any right hereunder or
under the Building Loan Agreement, the Deed of Trust or any other agreement
further evidencing or securing this Note shall operate as a waiver thereof or
preclude the exercise thereof at any time during the continuance of any default
or during the continuance of a subsequent default.
Notwithstanding any other provisions of this Note to the contrary,
neither the obligation of Maker to pay the debt evidenced by this Note and the
Deed of Trust nor the obligation of Maker to perform any covenant or agreement
contained in this Note, the Deed of Trust, the Building Loan Agreement or any
other instrument evidencing or securing the payment of this Note shall be
enforced by any action or proceeding wherein or whereby damages or any money
judgment shall be sought against Maker or its partners (or their partners)
except a foreclosure or other action against or involving the property
encumbered by the Deed of Trust; any judgment in any such foreclosure or other
action shall be enforceable against Maker only to the extent of its interest in
such property and the income therefrom and no deficiency or other personal
judgment shall be rendered or entered against Maker or its partners (or their
partners) in
<PAGE>
6
such foreclosure or other action. Notwithstanding the foregoing, nothing
contained herein shall be deemed to reduce, impair or release any obligations of
the "Guarantor" under that certain Guaranty (the "Guaranty"), of even date
herewith from Crow-Pennsylvania Avenue Limited Partnership, Harlan R. Crow,
Wolfram Vedder, T. Christopher Roth, Thomas D. Simmons, Jr., J. McDonald
Williams, Joel C. Peterson, Robert E. Kresko, Gary D. Shafer, and The Crow
Foundation, a Texas general partnership, in favor of Payee guaranteeing certain
obligations contained in the Building Loan Agreement, it being acknowledged that
such Guaranty shall remain in effect as provided therein and the liability of
Guarantor shall not be limited except as expressly set forth therein.
This Note may not be modified, extended or terminated orally. Any
modifications, extensions or prepayments (except prepayments specifically
permitted or required hereinabove) shall require the prior written consent of
Payee, which consent may be arbitrarily withheld. Maker acknowledges that DIHC
Market Square, Inc., a partner in the general partner of Maker is an affiliate
of Payee, but acknowledges and agrees that decisions with respect to the loan
evidenced hereby may be made by Payee acting in its own interest and without
regard to the interests of Maker or the partners of Maker (or their partners).
This Note shall be construed and enforced in accordance with the law
of the District of Columbia. The property encumbered by the Deed of Trust is
located in the District of Columbia.
<PAGE>
7
IN WITNESS WHEREOF, Maker has executed this Note as of the
15th day of July, 1987.
AVENUE ASSOCIATES LIMITED PARTNERSHIP, a
District of Columbia limited
partnership, by its sole general partner
By: MARKET SQUARE ASSOCIATES, a
District of Columbia joint venture,
by all of its joint venturers
By: DIHC Market Square, Inc., a
Georgia corporation, a
joint venturer
By: /s/ Herman A. Vonhof
--------------------
- ------------------ Herman A. Vonhof
Witness President
Attest: /s/ Charles W. Stawser, Jr.
---------------------------
Asst. Secretary
[CORPORATE SEAL]
By: Crow-Pennsylvania Avenue
Limited Partnership, by its
duly authorized general partner
By: Crow-Washington CBD
Development Corporation, a
Texas corporation
By: /s/ T. Christopher Roth
-----------------------
Christopher Roth
Vice President
Attest: /s/ Robert Chogres
------------------
Asst. Secretary
[CORPORATE SEAL]
<PAGE>
ASSIGNMENT OF-COLLATERAL
ASSIGNMENT OF LEASES AND RENTS
FOR VALUE RECEIVED,/DIHC FINANCE CORPORATION (formerly known as
Dutch Institutional Finance Corporation, Inc.), a Georgia corporation having an
office at Suite 2000, 200 Galleria Parkway, Atlanta, Georgia ("Assignor"), has
this day granted, bargained, sold, assigned, transferred and set over
unto/STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE
BELANGEN, a foundation formed according to the laws of The Netherlands, having
an office at Kroostweg Number 149, Zeist, The Netherlands ("Assignee"), all of
Assignor's right, title and interest in and to that certain Collateral
Assignment of Leases and Rents made by Bryce Mountain, Inc. to Assignor, dated
as of May 1, 1981 and recorded on July 10, 1981 in Book 1026 at page 551 of the
Alexandria, Virginia public records.
TO HAVE AND TO HOLD the same unto Assignee, its successors and
assigns from and after the date hereof.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment as of
December 1, 1987.
WITNESS: DIHC FINANCE CORPORATION
- --------------------- --------------------
- --------------------- --------------------
[signature illegible] /s/ Herman A. Vonhof
- --------------------- --------------------
- --------------------- Name: Herman A. Vonhof
Title: President
<PAGE>
Exhibit 10.96
NOTE AND COLLATERAL AGENCY AGREEMENT
dated as of October 27, 1997, among
CORNERSTONE PROPERTIES INC.,
certain of its SUBSIDIARIES party hereto,
the LENDERS party hereto,
and
STICHTING PENSIOENFONDS VOOR DE GEZONDHEID,
GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN ("PGGM"),
as Administrative Agent
The parties hereto agree as follows:
ARTICLE I.
Definitions
SECTION 1.1 Defined Terms. As used in this Note and Collateral
Agency Agreement as amended, supplemented or modified hereafter (the
"Agreement"), the following terms have the meanings specified below:
"Administrative Agent" means Stichting Pensioenfonds voor de
Gezondheid, Geestelijke en Maatschappelijke Belangen, in its capacity as
administrative agent for the Lenders hereunder.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified. With
respect to natural persons, all individuals related by blood, marriage or
adoption shall be deemed to be an Affiliate of such natural person. For purposes
of this Agreement, the Administrative Agent and the Lenders shall not be
Affiliates of the Borrower or any of Borrower's Subsidiaries.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 8.5), and accepted by the Administrative Agent.
"Board of Directors" means the board of directors of Borrower or any
committee of that board duly authorized to act hereunder.
<PAGE>
2
"Borrower" means Cornerstone Properties Inc., a Nevada corporation.
"Bryce Security Documents" shall mean that certain Deed of Trust and
Security Agreement dated as of the date hereof executed by Bryce Mountain, Inc.
in favor of Administrative Agent, that certain Assignment of Lessor's Interest
in Leases dated as of the date hereof executed by Bryce Mountain, Inc. in favor
of Administrative Agent, that certain Environmental Indemnification Agreement
dated as of the date hereof executed by Bryce Mountain, Inc. in favor of
Administrative Agent, that certain Stock Pledge Agreement (Bryce Mountain, Inc.)
dated as of the date hereof executed by Borrower in favor of Administrative
Agent and any other document, instrument or agreement securing or otherwise
evidencing the obligations in respect of the Guaranty including UCC financing
statements.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Charlotte Office Security Documents" shall mean that certain Deed
of Trust and Security Agreement dated as of the date hereof executed by
Charlotte Office Tower Associates in favor of Administrative Agent, that certain
Assignment of Lessor's Interest in Leases dated as of the date hereof executed
by Charlotte Office Tower Associates in favor of Administrative Agent, that
certain Environmental Indemnification Agreement dated as of the date hereof
executed by Charlotte Office Tower Associates in favor of Administrative Agent,
that certain Stock Pledge Agreement (Charlotte Plaza Properties, Inc.) dated as
of the date hereof executed by Borrower in favor of Administrative Agent, that
certain Stock Pledge Agreement (Balsam Mountain, Inc.) dated as of the date
hereof executed by Borrower in favor of Administrative Agent, that certain
Assignment and Security Agreement (Charlotte Office Tower Associates) dated as
of the date hereof executed by Charlotte Plaza Properties, Inc. in favor of
Administrative Agent, and that certain Assignment and Security Agreement
(Charlotte Office Tower Associates) dated as of the date hereof executed by
Balsam Mountain, Inc. in favor of Administrative Agent and any other document,
instrument or agreement securing or otherwise evidencing the obligations in
respect of the Guaranty including UCC financing statements.
"Collateral" means all property and assets, now existing or
hereafter acquired, and all cash and non-cash proceeds thereof, in respect of
which any Lien in favor of Lenders is granted or created under the terms of any
of the Collateral Agreements.
<PAGE>
3
"Collateral Agreements" means, collectively, the Note A Collateral
Agreements, the Note B Collateral Agreements, the Note C Collateral Agreements,
the Note D Collateral Agreements and the Note E Collateral Agreements.
"Collateral Note Documents" shall mean that certain Collateral
Assignment of Mortgage and Other Documents (Market Square) dated as of the date
hereof executed by Borrower in favor of Administrative Agent and that certain
Collateral Assignment of Note dated as of the date hereof executed by Borrower
in favor of Administrative Agent.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Dearborn Security Documents" shall mean that certain Mortgage and
Security Agreement dated as of the date hereof executed by Dearborn Interests in
favor of Administrative Agent, that certain Assignment of Lessor's Interest in
Leases dated as of the date hereof executed by Dearborn Interests in favor of
Administrative Agent, that certain Environmental Indemnification Agreement dated
as of the date hereof executed by Dearborn Interests in favor of Administrative
Agent; that certain Stock Pledge Agreement (DIHC Marble Place Properties, Inc.)
dated as of the date hereof executed by Borrower in favor of Administrative
Agent; that certain Stock Pledge Agreement (DIHC Dearborn Properties, Inc.)
dated as of the date hereof executed by Borrower in favor of Administrative
Agent; that certain Assignment and Security Agreement (DIHC Dearborn Venture)
dated as of the date hereof executed by DIHC Marble Place Properties, Inc, in
favor of Administrative Agent; that certain Assignment and Security Agreement
(DIHC Dearborn Venture) dated as of the date hereof executed by DIHC Dearborn
Properties, Inc. in favor of Administrative Agent; that certain Assignment of
Security Agreement (Dearborn Interests) dated as of the date hereof executed by
DIHC Dearborn Properties, Inc. in favor of Administrative Agent; that certain
Assignment and Security Agreement (Dearborn Interests) dated as of the date
hereof executed by DIHC Dearborn Venture in favor of Administrative Agent;
instrument or agreement securing or otherwise evidencing the obligations in
respect of the Guaranty, including UCC financing statements.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Default Rate" shall have the meaning set forth in Section 2.2(c) of
this Agreement.
<PAGE>
4
"Dollars" or "$" refers to lawful money of the United States of
America.
"Environmental Laws" shall mean (1) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. Section 9601 ("CERCLA"),
(2) the Resource Conservation and Recovery Act, as amended by the Hazardous and
Solid Waste Amendment of 1984, 42 U.S.C.A. Section 6901, (3) the Clean Air Act,
42 U.S.C.A. Section 7401, (4) the Federal Water Pollution Control Act of 1977,
33 U.S.C.A. Section 1251, (5) the Toxic Substances Control Act, 15 U.S.C.A.
2601, (6) all other laws, rules, regulations and ordinances relating to air
pollution, water pollution, and/or the handling, discharge, existence, disposal
or recovery of on-site or off-site hazardous, toxic waste, substances or
materials, as each of the foregoing may be amended from time to time, and (7)
the rules, regulations, and ordinances, court or administrative order of decree
or private agreement or interpretation relating to the use, manufacture,
distribution, labeling, handling, collection, storage, treatment or disposal of
any Hazardous Materials of (A) the city, county and state in which Borrower has
disposed of Hazardous Materials, (B) the Environmental Protection Agency and (C)
all other applicable federal, state, regional and local agencies and bureaus,
whether now or hereafter in existence.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute, and the
regulations promulgated and the rulings issued thereunder.
"Event of Default" has the meaning assigned to it in Article VI of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Taxes" means, with respect to the Administrative Agent,
any Lender or any other recipient of any payment to be made by or on account of
any obligation of the Borrower or any Guarantor hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower or any Guarantor is located and
(c) in the case of a Foreign Lender, any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes a
party to this Agreement or is attributable to such Foreign Lender's failure or
inability to comply with Section 2.6(e), except to the extent that such Foreign
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower or any Guarantor with respect to such
withholding tax pursuant to Section 2.6(a).
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
<PAGE>
5
"Financial Statements" has the meaning ascribed to it in Section 4.1
of this Agreement.
"Foreign Lender" means any Lender that is organized under the laws
of the jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied, that are in effect from time to
time.
"Governmental Authority" means the government of the United States
of America, any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to the government of the
United States of America or any political subdivision thereof.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary borrower") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner or such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement,
condition or liquidity of the primary borrower so as to enable the primary
borrower to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guaranty" means, collectively and, as amended, supplemented or
modified from time to time, (i) that certain Guaranty dated as of the date
hereof executed by certain of the Guarantors in favor of Administrative Agent
for the benefit of the Lenders (the "Recourse Guaranty"), (ii) that certain
Non-Recourse Guaranty dated as of the date hereof executed by certain of the
Guarantors in favor of Administrative Agent for the benefit of the Lenders and
(iii) that certain Guaranty dated as of the date hereof executed by Cornerstone
Properties Inc. in favor of the Administrative Agent for the benefit of the
Lenders (the "Cornerstone Guaranty").
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"Guarantor" means, collectively, the Note A Guarantors, the Note B
Guarantors, the Note C Guarantors, the Note D Guarantors and the Note E
Guarantors. The term Guarantor shall also include Madison Avenue in its capacity
as the issuer of Note D.
"Hazardous Materials" means any hazardous substance, toxic substance
or hazardous waste, the generation, handling, storage, treatment or disposal of
which is regulated by any local or state Governmental Authority in any
jurisdiction in which Borrower has owned, leased or operated real estate or
disposed of hazardous materials, or by the United States Government, including
any material or substance which is (1) defined as a "hazardous waste,"
"hazardous substance," "extremely hazardous waste," or "restricted hazardous
waste" or other similar term or phrase under any such law, (2) petroleum,
radioactive materials, asbestos, radon and lead contaminated materials, (3)
designated as a "hazardous substance" pursuant to Section 311 of the Federal
Water Pollution Control Act, 33 U.S.C.A. 1251 (33 U.S.C.A. 1321), (4) designated
as a toxic substance pursuant to the Toxic Substances Control Act, 15 U.S.C.A.
2601, (5) listed pursuant to Section 307 of the Federal Water Pollution Control
Act (33 U.S.C.A. 1317), (6) de fined as a "hazardous waste" pursuant to Section
1004 of the Resource Conservation and Recovery Act, 42 U.S.C.A. 6901 (42
U.S.C.A. 6903), or (7) defined as a "hazardous substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C.A. 9601 (42 U.S.C.A. 9601).
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
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"Lenders" means the holders of the Notes listed on Schedule 1.1 and
any other Person that shall have become a party hereto pursuant to an Assignment
and Acceptance, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Acceptance.
"Lien" means any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
charge, pledge, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes. The term "Lien" shall include, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements affecting property. For the purposes of this Agreement,
Borrower or a Guarantor shall be deemed to be the owner of any property which it
has acquired or holds subject to a conditional sale agreement, capitalized lease
or other arrangement pursuant to which title to the property has been retained
by or vested in some other Person for security purposes and such retention or
vesting shall constitute a Lien.
"Loan" means the loan made by the Lenders to the Borrower and
CStone-527 Madison, Inc. pursuant to this Agreement in the aggregate principal
amount of $250,000,000.
"Loan Documents" means this Agreement, the Notes, the Guaranty and
the Collateral Agreements.
"Madison Avenue" means CStone-527 Madison, Inc., a Delaware
corporation.
"Madison Security Documents" shall mean that certain Amended and
Restated Mortgage and Security Agreement dated as of the date hereof executed by
Madison Avenue in favor of Administrative Agent, that certain Assignment of
Lessor's Interest in Leases dated as of the date hereof executed by Madison
Avenue in favor of Administrative Agent, that certain Environmental
Indemnification Agreement dated as of the date hereof executed by Madison Avenue
in favor of Administrative Agent, that certain Stock Pledge Agreement
(CStone-527 Madison Inc.) dated as of the date hereof (the "Additional New York
Mortgage") executed by Borrower in favor of Administrative Agent, that certain
Mortgage and Security Agreement dated as of the date hereof executed by Madison
Avenue in favor of Administrative Agent and any other document, instrument or
agreement securing or otherwise evidencing the obligations in respect of Note D
including UCC financing statements.
"Maturity Date" shall mean (a) October __, 2000 with respect to Note
A and Note B; (b) October __, 2004 with respect to Note C and Note D, and (c)
October __, 2007 with respect to Note E.
"Note A" means that certain Deferred Purchase Price Note (Note A)
dated as of the date hereof and executed by the Borrower in the original
principal amount of $55,000,000 and
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8
any replacements or substitutions therefor, each as amended, supplemented or
modified from time to time.
"Note B" means that certain Deferred Purchase Price Note (Note B)
dated as of the date hereof and executed by the Borrower in the original
principal amount of $10,000,000 and any replacements or substitutions therefor,
each as amended, supplemented or modified from time to time.
"Note C" means that certain Deferred Purchase Price Note (Note C)
dated as of the date hereof and executed by the Borrower in the original
principal amount of $30,000,000 and any replacements or substitutions therefor,
each as amended, supplemented or modified from time to time.
"Note D" means that certain Deferred Purchase Price Note (Note D)
dated as of the date hereof and executed by Madison Avenue in the original
principal amount of $35,000,000 and any replacements or substitutions therefor,
each as amended, supplemented or modified from time to time.
"Note E" means that certain Deferred Purchase Price Note (Note E)
dated as of the date hereof and executed by the Borrower in the original
principal amount of $120,000,000 and any replacements or substitutions therefor,
each as amended, supplemented or modified from time to time.
"Note A Collateral Agreements" means the Bryce Security Documents
and the Charlotte Office Security Documents.
"Note B Collateral Agreements" means the Dearborn Security
Documents.
"Note C Collateral Agreements" means the Oakbrook Security
Documents.
"Note D Collateral Agreements" means the Madison Security Documents.
"Note E Collateral Agreements" means the Properties Security
Documents and the Collateral Note Documents.
"Note A Guarantors" means, collectively, Charlotte Office Tower
Associates, Charlotte Plaza Properties, Inc., Balsam Mountain, Inc. and Bryce
Mountain, Inc.
"Note B Guarantors" means, collectively, Dearborn Interests, DIHC
Dearborn Venture, DIHC Marble Place Properties, Inc. and DIHC Dearborn
Properties, Inc.
"Note C Guarantor" means, CStone-Oakbrook, Inc.
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9
"Note D Guarantors" means CStone-527 Madison, Inc.
"Note E Guarantors" means, collectively, DIHC of Georgia, Inc. and
DIHC Properties I, Inc.
"Notes" means, collectively, Note A, Note B, Note C, Note D and Note
E.
"Oakbrook Security Documents" shall mean that certain Deed of Trust
and Security Agreement dated as of the date hereof executed by CStone-Oakbrook,
Inc. in favor of Administrative Agent, that certain Assignment of Lessor's
Interest in Leases dated as of the date hereof executed by CStone-Oakbrook, Inc.
in favor of Administrative Agent, that certain Environmental Indemnification
Agreement dated as of the date hereof executed by CStone-Oakbrook, Inc. in favor
of Administrative Agent and that certain Stock Pledge Agreement
(CStone-Oakbrook, Inc.) dated as of the dated hereof executed by Borrower in
favor of Administrative Agent and any other document, instrument or agreement
securing or otherwise evidencing the obligations in respect of the Guaranty,
including UCC financing statements.
"Other Taxes" means any and all present or future stamp or
documentary Taxes or any other excise or property Taxes arising from any payment
made hereunder or from the execution, delivery, or enforcement of, or otherwise
with respect to, this Agreement.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Properties Security Documents" shall mean that certain Deed to
Secure Debt and Security Agreement dated as of the date hereof executed by DIHC
Properties I, Inc. in favor of Administrative Agent, that certain Assignment of
Lessor's Interest in Leases dated as of the date hereof executed by DIHC
Properties I, Inc. in favor of Administrative Agent, that certain Environmental
Indemnification Agreement dated as of the date hereof executed by DIHC
Properties I, Inc. in favor of Administrative Agent and that certain Stock
Pledge Agreement (DIHC Properties I, Inc.) dated as of the dated hereof executed
by DIHC of Georgia, Inc. in favor of Administrative Agent and any other
document, instrument or agreement securing or otherwise evidencing the
obligations in respect of the Guaranty, including UCC financing statements.
"Register" has the meaning set forth in Section 8.5.
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10
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Required Filing Date" has the meaning ascribed to it in Section 4.1
of this Agreement.
"Required Lenders" shall mean Lenders holding a majority in
outstanding principal amount of Note A, plus Lenders holding a majority in
outstanding principal amount of Note B, plus a Lenders holding a majority in
principal amount of Note C, plus Lenders holding a majority in principal amount
of Note D, plus Lenders holding a majority in outstanding principal amount of
Note E. For purposes of calculating Required Lenders, the principal amount of
any portion of the Notes held by Borrower or any Affiliate of Borrower shall be
excluded in determining whether Lenders holding a majority of the outstanding
principal amount of that Note consent to an action; provided, however, in the
event that Borrower or an Affiliate of Borrower owns 100% of a Note (for
example, where Borrower is the holder of the full principal amount of Note A),
the foregoing provision shall be inapplicable with respect to a determination as
to whether the holders of that Note consent to an action.
"Securities" has the meaning set forth in Section 2(1) of the
Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transactions" means the execution, delivery and performance by the
Borrower and the Guarantors of this Agreement and the other Loan Documents, the
borrowing of Loans, and the use of the proceeds thereof.
SECTION 1.2 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require,
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11
any pronoun shall include the corresponding masculine, feminine and neuter
forms. The words "include", "includes" and including" shall be deemed to be
followed by the phrase "without limitation." The word "will" shall be construed
to have the same meaning and effect as the word "shall." Unless the context
requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.3 Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II.
The Loan
SECTION 2.1 Loan. Upon the terms and subject to the conditions
hereof and the other Loan Documents, Lenders agree to make the Loan to Borrower
and Madison Avenue in accordance with this Agreement.
SECTION 2.2 The Notes. The borrowings hereunder shall be evidenced
by the Notes in the form attached hereto as Schedule 2.2.
(a) Repayment of Notes. The Borrower and Madison Avenue hereby
unconditionally promise to pay to each Lender directly, in federal funds or
other funds
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12
immediately available, the then unpaid principal amount of each Note issued by
it and held by such Lender on the Maturity Date of such Note to pay all other
sums as when such amounts become due under the terms of such Notes.
(b) Limitation on Interest. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Note, together with
all fees, charges and other amounts which are treated as interest on such Note
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by the Lender holding such Note in accordance with
applicable law, the rate of interest payable in respect of such Note hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Note but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Notes or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
(c) Late Charges; Default Rate. In the event any payment due under
the Notes is not paid within five (5) business days following the due date for
such payment, Borrower, or Madison Avenue in the case of Note D, shall pay to
the holder of such Note a late charge for the month during which such payment is
not made when due, and for each month or fraction thereof that such sum remains
unpaid, equal to five percent (5%) of such payment. In addition, in the event
Borrower, or Madison Avenue in the case of Note D, fails to pay any installment
of principal and interest on the date due, the unpaid amount shall accrue
interest at the Default Rate until paid. "Default Rate" shall be the higher of
(a) 3% above the nondefault interest rate set forth in each Note or (b) 3% above
the Prime Rate.
(d) Prepayment. The indebtedness evidenced by any Note (or any
portion of a Note) may not be prepaid, either in whole or in part, without the
express written consent of the Lender holding that Note; provided, however, the
Borrower or Madison Avenue in the case of Note D may prepay the indebtedness
evidenced by any Note without penalty on or after the date which is sixty (60)
days prior to the Maturity Date of such Note.
SECTION 2.3 The Guaranty. The indebtedness evidenced by the Notes
shall be guaranteed by each Guarantor pursuant to the terms of the Guaranty in
the forms attached hereto as Schedule 2.3. In addition, Borrower shall guarantee
the indebtedness evidenced by Note D pursuant to the terms of the Cornerstone
Guaranty in the form attached hereto as Schedule 2.3A. Borrower shall, and shall
cause each Guarantor to, execute and deliver the Guaranty to the Administrative
Agent and to abide by and to fully perform the obligations contained therein.
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13
SECTION 2.4 The Collateral Agreements. (a) The indebtedness and
obligations evidenced by the Guaranty and the Notes shall be secured by the
Collateral Agreements. Borrower shall cause Charlotte Office Tower Associates,
Balsam Mountain, Inc. and Charlotte Plaza Properties, Inc. to execute and
deliver the Charlotte Office Security Documents and to abide by and to perform
fully the obligations contained therein. Borrower shall cause Bryce Mountain to
execute and deliver the Bryce Security Documents and to abide by and to perform
fully the obligations contained therein. Borrower shall cause DIHC Properties I,
Inc. and DIHC of Georgia, Inc. to execute and deliver the Properties Security
Documents and to abide by and to perform fully the obligations contained
therein. Borrower shall cause DIHC Dearborn Venture, Dearborn Interests, DIHC
Marble Place Properties, Inc. and DIHC Dearborn Properties, Inc. to execute and
deliver the Dearborn Security Documents and to abide by and perform fully the
obligations contained therein. Borrower shall cause CStone-Oakbrook, Inc. to
execute and deliver the Oakbrook Security Documents and to abide by and to
perform fully the obligations contained therein. Borrower shall cause CStone-527
Madison, Inc. to execute and deliver the Madison Security Documents and to abide
by and to perform fully the obligations contained therein. Borrower shall
execute and deliver the Collateral Note Documents and shall abide by and perform
fully the obligations contained therein.
(b) The Borrower and Madison Avenue acknowledge that Administrative
Agent is holding an original, fully executed and acknowledged counterpart of the
Additional New York Mortgage, which Additional New York Mortgage is not intended
to be recorded at the time of the closing of the Transactions. The Borrower and
Madison Avenue acknowledge and agree that Administrative Agent has the right, in
its sole and absolute discretion, at any time from and after the date hereof to
record and file the Additional New York Mortgage. The Lenders shall, ratably in
accordance with the aggregate outstanding principal amount of their respective
Notes, pay (or shall reimburse the Administrative Agent for) all costs and
expenses (including payment of all applicable mortgage recording taxes, filing
and recording charges and title charges and premiums relating thereto (the
"Additional New York Mortgage Charges")) and neither Borrower nor Madison Avenue
nor any other Guarantor shall be obligated or liable under any provision of the
Loan Documents for the payment of the New York Mortgage Charges; provided,
however, Madison Avenue agrees that it will be solely responsible for the
payment of, and shall pay or reimburse the Administrative Agent and the Lenders
for the payment of, any and all Additional New York Mortgage Charges incurred
after the continuance of an Event of Default.
SECTION 2.5 Termination of Guaranty and Collateral Agreements.
Notwithstanding anything to the contrary contained herein, any and all liability
or obligation of the Note A Guarantors under the Guaranty as well as the Note A
Collateral Agreements shall terminate and be discharged in full upon payment and
performance, in full, of Note A, provided, however, no Default or Event of
Default shall have occurred and be continuing at the time of such termination
and discharge, unless such Event of Default will be cured, or cease to exist, as
a result of such termination or discharge; any and all liability or obligation
of Note B Guarantors under the Guaranty as well as the Note B Collateral
Agreements shall terminate and be discharged in full
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14
upon payment and performance, in full, of Note B, provided, however, no Default
or Event of Default shall have occurred and be continuing at the time of such
termination and discharge, unless such Event of Default will be cured, or cease
to exist, as a result of such termination or discharge; and any and all
liability or obligation of the Note C Guarantors under the Guaranty as well as
the Note C Collateral Agreements shall terminate and be discharged in full upon
payment and performance, in full, of Note C, provided, however, no Default or
Event of Default shall have occurred and be continuing at the time of such
termination and discharge, unless such Event of Default will be cured, or cease
to exist, as a result of such termination or discharge; any and all liability or
obligation of the Note D Guarantors or Borrower under the Guaranty as well as
the Note D Collateral Agreements shall terminate and be discharged in full upon
payment and performance, in full, of Note D, provided, however, no Default or
Event of Default shall have occurred and be continuing at the time of such
termination and discharge, unless such Event of Default will be cured, or cease
to exist, as a result of such termination or discharge; and any and all
liability or obligation of the Note E Guarantors under the Guaranty as well as
the Note E Collateral Agreements shall terminate and be discharged in full upon
payment and performance, in full, of Note E, provided, however, no Default or
Event of Default shall have occurred and be continuing at the time of such
termination and discharge, unless such Event of Default will be cured or cease
to exist, as a result of such termination or discharge.
SECTION 2.6 Taxes.
(a) Any and all payments by or on account of any obligation of the
Borrower, Madison Avenue or any Guarantor under any Loan Document shall be made
free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower or any Guarantor
shall make such deductions and (iii) the Borrower or any Guarantor shall pay the
full amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower or any Guarantor shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower or any Guarantor shall indemnify each Lender within
10 days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) paid by such
Lender and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
<PAGE>
15
Authority. A certificate as to the amount of such payment or liability delivered
to the Borrower or any Guarantor by a Lender shall be conclusive absent manifest
error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower or any Guarantor to a Governmental Authority, the
Borrower or any Guarantor shall deliver to the Lender the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Lender.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower or any Guarantor is located, or any treaty to which such jurisdiction
is a party, with respect to payments under this Agreement shall deliver to the
Borrower, at the time or times prescribed by applicable law or reasonably
requested by the Borrower or any Guarantor, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate.
(f) Each Lender and the Administrative Agent shall reasonably
cooperate with Borrower or any Guarantor (at the cost and expense of the
Borrower) in challenging or contesting the imposition of any Tax which Borrower
or Guarantor reasonably believes is not due.
SECTION 2.7 Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.
(a) The Borrower and Madison Avenue shall make each payment required
to be made by it hereunder or any Note (whether of principal, interest, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off, deduction or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Lender, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall be made
directly to each Lender at its address specified in Schedule 1.1 hereto or at
such other address as may be designated by such Lender from time to time by
written notice at least five (5) Business Days prior to any payment date. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in Dollars.
(b) (i) If any Lender or the Administrative Agent obtains any
proceeds of the Collateral which is the subject of the Note A Collateral
Agreements and which either the Administrative Agent or any Lender is entitled
to apply to the Indebtedness evidenced by the
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Notes, then such proceeds shall be applied first, to pay any costs or fees of
the Administrative Agent in obtaining or realizing such proceeds, second, to
reduce any costs or fees then due under Note A, applied ratably among the
holders of Note A in accordance with the amounts of costs and fees then due to
such holders, third, to pay accrued and unpaid interest due under Note A,
applied ratably among the holders of Note A in accordance with the amounts of
interest then due to such holders, and fourth, to pay principal then due under
Note A, applied ratably among the holders of Note A in accordance with the
amounts of principal then due to such holders.
(ii) If any Lender or the Administrative Agent obtains any proceeds
of the Collateral which is the subject of the Note B Collateral Agreements and
which either the Administrative Agent or any Lender is entitled to apply to the
indebtedness evidenced by the Notes, then such proceeds shall be applied first,
to pay any costs or fees of the Administrative Agent in obtaining and realizing
on any such proceeds, second, to reduce any costs or fees then due under Note B,
applied ratably among the holders of Note B in accordance with the amounts of
costs and fees then due to such holders, third, to pay accrued and unpaid
interest due under Note B, applied ratably among the holders of Note B in
accordance with the amounts of interest then due to such holders, and fourth, to
pay principal then due under Note B, applied ratably among the holders of Note B
in accordance with the amounts of principal then due to such holders.
(iii) If any Lender or the Administrative Agent obtains any proceeds
of the Collateral which is the subject of the Note C Collateral Agreements and
which either the Administrative Agent or any Lender is entitled to apply to the
indebtedness evidenced by the Notes, then such proceeds shall be applied first,
to pay any costs or fees of the Administrative Agent in obtaining and realizing
on any such proceeds, second, to reduce any costs or fees then due under Note C,
applied ratably among the holders of Note C in accordance with the amounts of
costs and fees then due to such holders, third, to pay accrued and unpaid
interest due under Note A, applied ratably among the holders of Note C in
accordance with the amounts of interest then due to such holders, and fourth, to
pay principal then due under Note C, applied ratably among the holders of Note C
in accordance with the amounts of principal then due to such holders.
(iv) If any Lender or the Administrative Agent obtains any proceeds
of the Collateral which is the subject of the Note D Collateral Agreements and
which either the Administrative Agent or any Lender is entitled to apply to the
indebtedness evidenced by the Notes, then such proceeds shall be applied first,
to pay any costs or fees of the Administrative Agent in obtaining and realizing
on any such proceeds, second, to reduce any costs or fees then due under Note D,
applied ratably among the holders of Note D in accordance with the amounts of
costs and fees then due to such holders, third, to pay accrued and unpaid
interest due under Note D, applied ratably among the holders of Note D in
accordance with the amounts of interest then due to such holders, and fourth, to
pay principal then due under Note D, applied ratably
<PAGE>
17
among the holders of Note D in accordance with the amounts of principal then due
to such holders.
(v) If any Lender or the Administrative Agent obtains any proceeds
of the Collateral which is the subject of the Note E Collateral Agreements and
which either the Administrative Agent or any Lender is entitled to apply to the
indebtedness evidenced by the Notes, then such proceeds shall be applied first,
to pay any costs or fees of the Administrative Agent in obtaining and realizing
on any such proceeds, second, to reduce any costs or fees then due under Note E,
applied ratably among the holders of Note E in accordance with the amounts of
costs and fees then due to such holders, third, to pay accrued and unpaid
interest due under Note E, applied ratably among the holders of Note E in
accordance with the amounts of interest then due to such holders, and fourth, to
pay principal then due under Note E, applied ratably among the holders of Note E
in accordance with the amounts of principal then due to such holders.
(vi) After application in accordance with the preceding paragraphs
of this Section 2.7(b), to the extent any proceeds remain, then such proceeds
shall be applied first to the Administrative Agent to pay any costs or fees then
due, second to reduce any costs or fees then due under the Notes, applied
ratably among the holders of the Notes in accordance with the amount of costs
and fees then due to such holders, third to pay accrued and unpaid interest due
under the Notes, applied ratably among the holders of the Notes in accordance
with the amount of interest then due to such holders and fourth, to pay
principal then due under the Notes, applied ratably among the holders of the
Notes in accordance with the amount of principal then due to such holders.
(vii) After application in accordance with the preceding paragraphs
of this Section 2.7(b), to the extent any proceeds remain, then such proceeds
shall be delivered as the owner of such property shall direct (including to any
creditor or such owner as directed under any agreement by such owner).
(c) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, interest and
fees then due under the Notes, such funds shall be applied (i) first, to pay
interest and fees then due under the Notes, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, to pay principal then due under the Notes, ratably
among the parties entitled thereto in accordance with the amounts of principal
under the Notes then due to such parties.
(d) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of the Notes resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of the Notes held by such Lender and
accrued interest thereon than the proportion received by any other
<PAGE>
18
Lender, then the Lender receiving such greater proportion shall purchase (for
cash at face value) participation in the Notes of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Notes; provided that (i) if any such
participation is purchased and all or any portion of the payment giving rise
thereto is recovered, such participation shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower or any Guarantor pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Notes to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). The Borrower
and each Guarantor consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangement may exercise against the
Borrower or any Guarantor rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower or any Guarantor in the amount of such participation.
ARTICLE III.
Representations and Warranties
The Borrower and each Guarantor represent and warrant to the
Administrative Agent and the Lenders that:
SECTION 3.1 Organization; Powers. Each of the Borrower and the
Guarantors is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION 3.2 Authorization; Enforceability. The Transactions are
within the Borrower's and each Guarantor's corporate powers and have been duly
authorized by all necessary action (including those by partners and
shareholders). This Agreement has been duly executed and delivered by the
Borrower and constitutes a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
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19
SECTION 3.3 Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of the Guarantors or any order of any
Governmental Authority, and (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon the Borrower or any of
the Guarantors or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of the Guarantors.
SECTION 3.4 Litigation. There are no actions, suits or proceedings
pending or, to the best of Borrower's and each Guarantor's knowledge, threatened
against Borrower or any Guarantor, or involving the Collateral, at law or in
equity, or before any governmental or administrative agency, except actions,
suits and proceedings which are fully covered by insurance or which, if
adversely determined, would not impair the ability of Borrower or any Guarantor
to perform its obligations under and by virtue of the Loan Documents.
SECTION 3.5 Default. Except as set forth on Schedule 3.5, neither
the Borrower nor any Guarantor is in default under or with respect to any
obligation in any respect which default or defaults would be reasonably expected
in the aggregate to impair the ability of Borrower or any Guarantor to perform
its obligations under and by virtue of the Loan Documents.
ARTICLE IV.
Affirmative Covenants
Until the principal of and interest on each of the Notes and all
amounts under the Loan Documents shall have been paid in full, the Borrower and
each Guarantor covenant and agree with the Administrative Agent and the Lenders
that:
SECTION 4.1 Provision of Financial Information. Whether or not
Borrower is subject to Section 13 or 15(d) of the Exchange Act, Borrower will,
to the extent permitted under the Exchange Act, file with the Commission the
annual reports, quarterly reports and other documents which Borrower would have
been required to file with the Commission pursuant to such Section 13 or 15(d)
(the "Financial Statements") if Borrower were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which Borrower would have been required so to file such
documents if Borrower were so subject.
<PAGE>
20
Borrower will also in any event (x) within 15 days of each Required
Filing Date (i) transmit by mail to Lenders without cost to Lenders, copies of
the annual reports and quarterly reports which Borrower would have been required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
if Borrower were subject to such Sections, and (y) if filing such documents by
Borrower with the Commission is not required under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to Lenders.
SECTION 4.2 Statement as to Compliance. Borrower shall deliver to
Lenders within 120 days after the end of each fiscal year, a written statement
signed a Financial Officer of Borrower, stating that:
(a) a review of the activities of Borrower and each Guarantor during
such year and of its performance under the Loan Documents has been made
under his or her supervision, and
(b) to the best of his or her knowledge, based on such review, (i)
Borrower and each Guarantor has complied with all the conditions and
covenants imposed on it under the Loan Documents throughout such year, or,
if there has been a default in the fulfillment of any such condition or
covenant, specifying each such default known to him or her and the nature
and status thereof, and (ii) no Default or Event of Default has occurred
and is continuing, or if such a Default or Event of Default has occurred
and is continuing, specifying each such event known to him and the nature
and status thereof.
SECTION 4.3 Existence. Borrower and each Guarantor will do or cause
to be done all things necessary to preserve and keep in full force and effect
the existence, rights and franchises of the Borrower and each Guarantor;
provided, however, that Borrower and the Guarantors shall not be required to
preserve any right or franchise if the Board of Directors shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Borrower and the Guarantors and that the loss thereof is not
disadvantageous in any material respect to the Administrative Agent or the
Lenders. The foregoing shall not prohibit any merger, consolidation, liquidation
or dissolution permitted under Section 5.2.
SECTION 4.4 Payment of Taxes and Other Claims. Borrower and each
Guarantor will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any Guarantor or upon the income, profits
or property of Borrower or any Guarantor, and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of Borrower or any Guarantor; provided, however, that Borrower and each
Guarantor shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
<PAGE>
21
SECTION 4.5 Books and Records; Inspection Rights. The Borrower will,
and will cause each of the Guarantors to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of the Guarantors, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonably prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and
independent accountants, all at such reasonable times and as often as reasonably
required.
SECTION 4.6 Compliance with Laws. Borrower will promptly comply and
will cause each Guarantor to comply promptly with all laws, ordinances or
governmental rules and regulations to which it is subject, including, without
limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA,
the Americans with Disabilities Act of 1990, as amended, and all Environmental
Laws, the violations of which could reasonably be expected to materially and
adversely affect the properties, business, cash flow or financial condition of
Borrower and its Subsidiaries taken as a whole.
ARTICLE V.
Negative Covenants
Until the principal of and interest on each of the Notes and all
amounts under the Loan Documents shall have been paid in full, the Borrower and
each Guarantor covenants and agrees with the Administrative Agent and the
Lenders that:
SECTION 5.1 Indebtedness. The Borrower will not permit any Guarantor
under the Recourse Guaranty to create, incur, assume or permit to exist any
Indebtedness, except: (a) Indebtedness under the Loan Documents, (b) unsecured
Indebtedness to the Borrower or any Subsidiary of the Borrower subordinated to
the obligations under the Loan Documents, (c) Indebtedness existing on the date
hereof and extensions, renewals and replacements or any such Indebtedness that
do not increase the outstanding principal amount thereof and (d) unsecured
Indebtedness incurred to finance improvements to or operate the Collateral
(including but not limited to tenant improvements, leasing commissions or leases
with respect to the Collateral).
SECTION 5.2 Restriction on Fundamental Changes. Borrower will not,
and will not permit any Guarantor to, enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of the Collateral unless no
Default or Event of Default shall be continuing at the time thereof or would
result therefrom and either (1) Borrower or one of the Guarantors is the
surviving or continuing entity resulting from such merger or transfer, or (2)
the surviving or continuing entity of such merger or
<PAGE>
22
transfer agrees in writing to assume the obligations and indebtedness evidenced
by the Notes, the Guaranties and the Collateral Agreements subject to the
provisions of Section 8.11 hereof.
SECTION 5.3 Transactions with Affiliates. The Borrower shall
conduct, and cause each of the Guarantors to conduct, all transactions with any
Affiliate of Borrower or the Guarantors only on terms that are in writing, fair
and reasonable and no less favorable to Borrower or such Guarantor than it would
obtain in a comparative arm's-length transaction with an independent third
Person; provided however, that nothing herein shall restrict or prohibit any
transaction between or among the Borrower and its Subsidiaries not involving any
other Affiliate.
SECTION 5.4 Single-Purpose Guarantors. Each Guarantor, other than
DIHC of Georgia, Inc., shall engage in no activity or have any business other
than ownership of the Collateral and activities and businesses reasonably
incidental thereto.
SECTION 5.5 Guarantors. Until the obligations under the Loan
Documents of any Guarantor is fully terminated and discharged pursuant to
Section 2.5, such Guarantor (other than the Borrower and DIHC of Georgia, Inc.)
shall not be a "Guarantor" under that certain Revolving Credit and Guaranty
Agreement among the Borrower, certain subsidiaries of the Borrower, the lenders
signatory thereto, Bankers Trust Company, as Administrative Agent and Chase
Securities, Inc., as Syndication Agent.
SECTION 5.6 Changes. The Borrower and each Guarantor will not change
(a) the location of its chief executive office or office where it keeps its
books and records or (b) its name, identity or corporate structure, in each
case, unless (x) it shall have given prior written notice thereof to the
Administrative Agent and (y) it shall have taken all necessary action to
maintain the validity, perfection and priority of the Administrative Agent's
Lien with respect to the Collateral.
ARTICLE VI.
Events of Default
The occurrence of any one of the following events shall constitute
an Event of Default hereunder:
SECTION 6.1 Borrower or Madison Avenue in the case of Note D fails
to pay any installment of principal or interest, or any part thereof, payable
hereunder or under any of the Notes, when and as the same shall become due and
payable, and with respect to payments of interest, such failure is not cured
within five (5) days;
<PAGE>
23
SECTION 6.2 Borrower or any Guarantor fails to pay any other sums
covenanted to be paid by Borrower or any Guarantor hereunder or under any of the
Notes or any Loan Document or any other instrument or document now or hereafter
evidencing or securing the Notes, when and as the same shall become due and
payable, and such failure is not cured within ten (10) days after written notice
thereof from Lenders to Borrower;
SECTION 6.3 An involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower or any Guarantor or its debts, or of a
substantial part of its assets, under any federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Guarantor or for a substantial part of
its assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered.
SECTION 6.4 The Borrower or any Guarantor shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 6.3 of this Agreement, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any Guarantor
or for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing.
SECTION 6.5 The Borrower or any Guarantor shall become unable, admit
in writing or fail generally to pay its debts as they become due.
SECTION 6.6 Any warranty, covenant, representation or statement of
Borrower or Guarantor, or which is or has been made on behalf of Borrower or
Guarantor, in this Agreement, the Notes, the Guaranty or the Collateral
Agreements or in any loan commitment, affidavit, certificate or other instrument
or document now or hereafter evidencing, securing or otherwise relating to the
Indebtedness evidenced by the Notes, or any part thereof, proves untrue or
misleading in any material respect; or Borrower or any Guarantor fails to keep,
observe, perform, carry out and execute in every particular any other covenant,
agreement, obligation or condition contained herein, in any of the Notes, the
Guaranty, the Collateral Agreements or any other instrument or document now or
hereafter evidencing or securing the Indebtedness evidenced by the Notes or any
part thereof, and such untruth, misleading matter, failure or default is not
cured within thirty (30) days after the earlier of the Borrower's or any
Guarantor's knowledge thereof or written notice thereof from the Administrative
Agent or any Lender to Borrower or any Guarantor.
<PAGE>
24
SECTION 6.7 The Collateral Agreements shall for any reason (other
than pursuant to the terms thereof (except due solely to the act or omission of
the Administrative Agent or the Lenders)) cease to create a valid and perfected
Lien on the Collateral. The Guaranty shall for any reason become invalid or
unenforceable or the Borrower or any Guarantor shall so assert in writing.
SECTION 6.8 Any "Event of Default" shall occur under any of the
Notes, the Guaranty or the Collateral Agreements.
SECTION 6.9 Acceleration of Maturity; Recession and Annulment. In
the event of an occurrence and continuation of an Event of Default hereunder,
then, and in every such event (other than an event with respect to the Borrower
or Madison Avenue described in Sections 6.3 and 6.4) and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Lenders holding a majority in outstanding principal amount of any
Note shall, by notice to the Borrower or, in the case of Note D, Madison Avenue,
take either or both of the following actions, at the same or different times:
(i) declare any such Note then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Notes so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower or Madison Avenue
accrued hereunder with respect to such Note, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any Event of
Default with respect to the Borrower described in Sections 6.3 and 6.4, the
principal of the Notes then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower; and in
the case of any Event of Default with respect to Madison Avenue described in
Sections 6.3 and 6.4, the principal amount of Note D then outstanding, together
with accrued interest thereon and all fees and other obligations of Madison
Avenue accrued hereunder with respect to such Note, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Madison Avenue, and (ii) may exercise
any other rights or remedies available under the other Loan Documents including
but not limited to the Collateral Agreements, at law or in equity.
SECTION 6.10 Waiver of Past Defaults. The Required Lenders, by
notice to the Administrative Agent, may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of principal or of
interest on any Note. Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
<PAGE>
25
SECTION 6.11 Control by Required Holders. Subject to Article VII,
the Required Lenders may direct the time, method and place of conducting any
proceeding for any remedy available to the Administrative Agent or exercising
any trust or power conferred on the Administrative Agent.
SECTION 6.12 Limitations on Suits and Actions. A Lender may not
pursue any remedy with respect to this Agreement or the Notes unless:
(i) the Lender gives to the Administrative Agent written notice of a
continuing Event of Default;
(ii) the Required Lenders request to the Administrative Agent to
pursue the remedy;
(iii) such Lenders offer to the Administrative Agent reasonable
indemnity against any costs, liability or expense to be incurred in
compliance with such request;
(iv) the Administrative Agent does not comply with the request
within 60 days after receipt of the request and the offer of indemnity;
and
(v) during such 60-day period, the Required Lenders do not give the
Administrative Agent a direction that is inconsistent with the request.
ARTICLE VII.
The Administrative Agent
Each of the Lenders hereby irrevocably appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof, together with such actions and powers as are
reasonably incidental thereto.
The Person serving as the Administrative Agent hereunder shall have
the same rights and powers in its capacity as a Lender as any other Lender and
may exercise the same as though it were not the Administrative Agent, and such
Person and its Affiliates may hold equity in, accept deposits from, lend money
to and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if it were not the Administrative Agent
hereunder.
Each Lender hereby authorizes the Administrative Agent, in its sole
discretion, to consent or withhold consent with respect to Sections 8, 9, 13 and
18 of the Security Deeds,
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26
Deeds of Trust or Mortgages executed by Guarantors without seeking any direction
or input from any Lender.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing by the Required Lenders,
and (c) except as expressly set forth herein, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the Person serving as Administrative Agent or any
of its Affiliates in any capacity. The Administrative Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Required Lenders or in the absence of its own gross negligence or wilful
misconduct. The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth herein, other than to confirm receipt of
items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon. The Administrative Agent may consult with legal
counsel (who may be counsel for the Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not
taken by it in accordance with the advice of any such counsel, accountants or
experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities provided for herein.
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27
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agency may, on behalf of the Lenders, appoint a
successor Administrative Agent. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.
ARTICLE VIII.
Miscellaneous
SECTION 8.1 Notices. Any and all notices, elections or demands
permitted or required to be made under this Agreement shall be in writing and
shall be delivered personally, or sent by registered or certified mail, to the
other party at the address set forth below, or at such other address as may be
supplied in writing in accordance with the terms of this paragraph. The date of
personal delivery or the second business day following the date of mailing, as
the case may be, shall be the date of such notice, election or demand. For the
purposes of this Agreement:
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28
The address of Borrower is:
Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Telecopier: (404) 572-5148
Attention: William B. Fryer, Esq.
The address of Administrative Agent is:
Pensioenfonds PGGM
Kroostweg-Noord 149
Zeist, The Netherlands
Telecopier: 011-31-30-696-3388
Attention: Mr. Jan van der Vlist
Ms. Anneke C. van de Puttelaar
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Telecopier: (212) 750-9022
Attention: Robert M. Safron, Esq.
or such other address as any party hereto may give the other pursuant to the
provisions hereof.
SECTION 8.2 Waivers; Amendments.
(a) No failure or delay by the Administrative Agent or any Lender in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent and the
Lenders hereunder
<PAGE>
29
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) reduce the principal amount of any Note or reduce the
rate of interest thereon, or reduce any fees payable hereunder, without the
written consent of each Lender affected thereby, (ii) postpone the scheduled
date of payment of the principal amount of any Note, or any interest thereon, or
any fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, without the written consent of each Lender affected thereby, (iii)
amend or alter the prepayment provision of any Note without the written consent
of each Lender affected thereby, (iv) change Section 2.7 in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (v) change any of the provisions of this Section or the
definition of "Required Lenders" or any other provision hereof specifying the
number or percentage of Lenders required to waive, amend or modify any rights
hereunder or make any determination or grant any consent hereunder, without the
written consent of each Lender; (vi) release all or substantially all of the
Collateral which is the subject of the Note A Collateral Agreements or release
or discharge Note A Guarantors from any liability or indebtedness incurred under
the Loan Documents without the written consent of each holder of Note A, (vii)
release all or substantially all of the Collateral which is the subject of the
Note B Collateral Agreements or release or discharge any Note B Guarantors from
any liability or indebtedness incurred under the Loan Documents without the
written consent of each holder of Note B, (viii) release all or substantially
all of the Collateral which is the subject of the Note C Collateral Agreements
or release or discharge Note C Guarantors from any liability or indebtedness
incurred under the Loan Documents without the written consent of each holder of
Note C, or (ix) release all or substantially all of the Collateral which is the
subject of the Note D Collateral Agreements or release or discharge Note D
Guarantors from any liability or indebtedness incurred under the Loan Documents
without the written consent of each holder of Note D, provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent hereunder without the prior written consent of the
Administrative Agent.
SECTION 8.3 Expenses.
(a) The Borrower and each Guarantor shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent, including the
reasonable actually incurred fees, charges and disbursements, reasonably
actually incurred, of counsel for the Administrative Agent, in connection with
the enforcement or protection of its rights in connection with the Loan
<PAGE>
30
Documents, including its rights under this Section 8.3, or in connection with
the Loans made hereunder.
(b) Borrower and Madison Avenue shall indemnify and hold the
Administrative Agent and each Lender (each, an "Indemnified Party") harmless
from and against all obligations, liabilities, losses, costs, expenses, fines,
penalties or damages (including reasonable attorneys' fees and disbursements)
which the Administrative Agent or any Lender may actually incur by reason of
being the Administrative Agent or a Lender under any Loan Document or with
regard to the Collateral other than loss, obligations, liabilities, costs,
expenses, fines, penalties or damages caused by such Indemnified Party's willful
misconduct or gross negligence. Borrower and Madison Avenue shall defend each
Indemnified Party against any claim or litigation involving such Indemnified
Party for the same, and should such Indemnified Party incur such obligation,
liability, loss, cost, expense, fine, penalty or damage, then Borrower and
Madison Avenue shall reimburse such Indemnified Party upon demand.
(c) To the extent permitted by applicable law, neither the Borrower
nor Madison Avenue shall assert, and each hereby waives, any claim against any
Indemnified Party, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, any Loan Document, the
Transactions, any Loan or the use of the proceeds thereof.
SECTION 8.4 Replacement of Notes; Exchange of Notes. Upon receipt of
evidence reasonably satisfactory to Borrower of the loss, theft, destruction or
mutilation of any of the Notes, and in the case of any such loss, theft or
destruction, upon delivery of an indemnity agreement reasonably satisfactory to
Borrower or, in the case of any such mutilation, upon surrender and cancellation
of the Note, Borrower at Lender's expense will issue, in lieu thereof, a new
Note of like tenor, with appropriate recitations with respect to its replacement
of another note. The Borrower and Madison Avenue shall, from time to time at the
expense of the Lender requesting the same, issue one or more new Notes in
exchange for any Note. Such new Notes shall be Notes under the Loan Documents,
shall have an aggregate principal amount not exceeding the principal amount of
the Note for which such new Notes are exchanged and shall otherwise have the
same terms and conditions as the Note for which such new Notes; provided such
new Notes may be dated as of the date of such exchange.
SECTION 8.5 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by the Borrower without
such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their
<PAGE>
31
respective successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) and legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement and any Loan Document
(including all or a portion of the Notes at the time owing to it); provided that
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender,
the Administrative Agent must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld), (ii) except in
the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the indebtedness owed to the
assigning Lender, the amount of the indebtedness owed to the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Borrower and the
Administrative Agent otherwise consent, (iii) each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender's
rights and obligations under this Agreement and any Loan Document, (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance. Upon acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement and any Loan Document, and the assigning Lender thereunder
shall, to the extent of the interest assigned by such Assignment and Acceptance,
be released from its obligations under this Agreement and any Loan Document
(and, in the case of an Assignment and Acceptance covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.6 and 8.3). Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this paragraph 8.5 shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders, and principal amount of the Notes owing to, each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, and any written consent to such
assignment required by
<PAGE>
32
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower or the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and obligations
under this Agreement (including all or a portion of the Notes owing to it);
provided that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 8.5(b) that affects such Participant.
Subject to paragraph (f) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.6 and 8.3 to the
same extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (b) of this Section.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.6 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrower's prior
written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.6 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.6 as though it
were a Lender.
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement and the Loan Documents
to secure obligations of such Lender, including any such pledge or assignment to
a Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such assignee for such Lender as a party hereto.
SECTION 8.6 Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the Loan Documents and
the making of any Notes regardless of any investigation made by any such other
<PAGE>
33
party or on its behalf and notwithstanding that the Administrative Agent or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Note or any fee or any other amount payable under this
Agreement is outstanding and unpaid. The provisions of Sections 2.6 and 8.3 and
shall survive and remain in full force and effect regardless of the consummation
of the transactions contemplated hereby, the repayment of the Notes or the
termination of this Agreement or any provision hereof.
SECTION 8.7 Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 8.8 CHOICE OF LAW. THE TERMS OF THIS AGREEMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK (EXCLUSIVE OF ANY RULES AS TO CONFLICT OF LAWS) AND THE
LAWS OF THE UNITED STATES APPLICABLE THEREIN. SERVICE OF PROCESS ON THE BORROWER
OR MADISON AVENUE IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTION SHALL BE EFFECTIVE IF MAILED TO THE PARTY IN ACCORDANCE WITH
SECTION 8.1 HEREOF. NOTHING HEREIN SHALL PRECLUDE THE ADMINISTRATIVE AGENT OR
ANY LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION.
SECTION 8.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
<PAGE>
34
SECTION 8.10 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the constitution of, or be taken into
consideration in interpreting, this Agreement.
SECTION 8.11 Non-Recourse. Except as specifically provided for in
this Section 8.11, none of the Borrower, DIHC of Georgia, Inc., Charlotte Plaza
Properties, Inc., Balsam Mountain, Inc., DIHC Marble Place Properties, DIHC
Dearborn Properties, Inc., DIHC Dearborn Venture nor any of their respective
officers, directors, shareholders, agents, employees or representatives
(collectively, the "Exculpated Parties") shall be personally liable for the
payment of any sums due hereunder or the performance of any obligations of the
Borrower or any Guarantor hereunder, or under the other Loan Documents. No
judgment for the repayment of the Notes or interest thereon or any other amount
payable pursuant to any of the Loan Documents will be enforced against any of
the Exculpated Parties personally, or any property of any of the Exculpated
Parties other than the Collateral and any other security now or hereafter
expressly granted under the Loan Documents in any action to enforce this Loan
Agreement or otherwise realize upon any security now or hereafter expressly
granted under the Loan Documents or to collect any amount payable hereunder or
under the other Loan Documents. Notwithstanding the foregoing:
1. Nothing herein contained shall be construed as prohibiting the
Administrative Agent or any Lender from exercising any and all remedies
which the Loan Documents permit, including the right to bring actions or
proceedings against the Borrower, DIHC of Georgia, Inc., Charlotte Plaza
Properties, Inc., Balsam Mountain, Inc., DIHC Marble Place Properties,
DIHC Dearborn Properties, Inc., DIHC Dearborn Venture and other Exculpated
Parties and to enter a judgment against any Borrower, DIHC of Georgia,
Inc., Charlotte Plaza Properties, Inc., Balsam Mountain, Inc., DIHC Marble
Place Properties, DIHC Dearborn Properties, Inc., DIHC Dearborn Venture
and other Exculpated Parties, so long as the exercise of any remedy does
not extend to execution against or recovery out of any property of the
Borrower, DIHC of Georgia, Inc., Charlotte Plaza Properties, Inc., Balsam
Mountain, Inc., DIHC Marble Place Properties, DIHC Dearborn Properties,
Inc., DIHC Dearborn Venture or any other Exculpated Party other than the
Collateral expressly granted under the Loan Documents;
2. Each of the Borrower, DIHC of Georgia, Inc., Charlotte Plaza
Properties, Inc., Balsam Mountain, Inc., DIHC Marble Place Properties,
DIHC Dearborn Properties, Inc., and DIHC Dearborn Venture shall be fully
and personally liable for, and the other Exculpated Parties (to the extent
the other Exculpated Parties would be liable outside of the provisions of
this paragraph), shall be fully and personally liable for (i) misapplying
any condemnation awards or insurance awards attributable to the
Collateral, to the full extent of such awards so misapplied, (ii)
misapplying any security deposits attributable to the Collateral, to the
full extent of such deposits so misapplied, (iii) collecting any rents
more than forty (40) days in advance in violation of any covenant
contained in the Loan
<PAGE>
35
Documents, to the full extent of such rents so collected in advance, (iv)
committing fraud or intentional misrepresentation in connection with the
operation of the Collateral or the making of the Loans, to the full extent
of any loss, damage, expense or costs (including reasonable attorneys'
fees) actually incurred by the Administrative Agent or any Lender
resulting from such fraud or misrepresentation, (v) failing to pay in
order of priority: real estate taxes or assessments, (or escrow accounts
established therefor), operating and maintenance expenses relating to the
Collateral, other sums required by the Loan Documents, deposits into a
required reserve account, capital expenditures, management fees, leasing
fees and expenses, marketing and advertising costs and debt service or
other amounts due on the Indebtedness, but only to the extent of any gross
revenues from the Collateral that were available to pay such expenses but
were not so used during the period beginning six (6) months prior to
either (A) any Exculpated Party's receipt of notice of default under any
of the Loan Documents or (B) the occurrence of a Default and continuing
through the date the Administrative Agent or any Lender takes title to the
Collateral; (vi) the seizure or forfeiture of the Collateral due to the
criminal activity by the Borrower or any Guarantor, any constituent
partner of the Borrower or any Guarantor, or any of their respective
shareholders, partners, officers, employees or agents, in the full amount
of the loss incurred by the Administrative Agent or any Lender as a result
of such seizure or forfeiture.
This Section shall impose no limitation on any other Exculpated
Party's personal liability under and the exercise of any of the Administrative
Agent's rights under any indemnity from any Exculpated Party to the
Administrative Agent including but not limited to, the Environmental
Indemnification Agreement of even date herewith from any Guarantor and the
Borrower to the Administrative Agent with regard to the Collateral except as may
be expressly set forth therein.
This Section shall impose no limitation on or prejudice to the
rights of the Administrative Agent or the Lender to proceed against any entity
or person whatsoever, including the Exculpated Parties, with respect to the
enforcement of any sums due hereunder or under any of the other Loan Documents
or any part thereof, any master leases, or any similar rights of payment that
may be entered into after the date hereof, except as may be expressly set forth
therein.
SECTION 8.12 Confidentiality. Each of the Administrative Agent and
the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates, directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise
<PAGE>
36
of any remedies hereunder or any suit, action or proceeding relating to this
Agreement or the enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or Participant in,
any of its rights or obligations under this Agreement, (g) with the consent of
the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent or any Lender on a nonconfidential basis
from a source other than the Borrower. For the purposes of this Section,
"Information" means all information received from the Borrower relating to the
Borrower or its business, other than any such Information that is available to
the Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by the Borrower; provided that, in the case of Information received
from the Borrower after the date hereof, such Information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 8.13 Intercompany Indebtedness. The Borrower and each
Guarantor agrees and shall cause each of their respective subsidiaries to agree
that all obligations and liabilities owing to them ("Junior Claims") from any
Guarantor party to the Recourse Guarantor (a "Recourse Guarantor") shall be
subordinate and junior in right of payment to such Recourse Guarantor's
obligations under the Recourse Guaranty. So long as any amounts owing by the
Recourse Guarantor under the Recourse Guaranty are due and remain unpaid, no
direct or indirect payment, whether in cash or otherwise, shall be made by such
Recourse Guarantor on account of any Junior Claim. Any payment or distribution
in contravention of the foregoing shall be deemed received in trust by the
Borrower or any Guarantor or any subsidiary thereof and shall be immediately
turned over to the Administrative Agent for application to the amounts owing by
such Recourse Guarantor under the Recourse Guaranty.
<PAGE>
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
By: /s/ R. Dimock
-----------------------
Name: R. Dimock
Title:
CHARLOTTE PLAZA PROPERTIES, INC.
a Georgia corporation
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[CORPORATE SEAL]
BALSAM MOUNTAIN, INC.,
a Georgia corporation
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[CORPORATE SEAL]
<PAGE>
38
DIHC OF GEORGIA, INC.,
a Georgia corporation
By: /s/ J. S. Moody
-----------------------
Name: J. S. Moody
Title: President
[CORPORATE SEAL]
DIHC MARBLE PLACE PROPERTIES, INC.,
a Georgia corporation
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[CORPORATE SEAL]
DIHC DEARBORN PROPERTIES, INC.,
a Georgia corporation
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[CORPORATE SEAL]
<PAGE>
39
DIHC DEARBORN VENTURE
By: DIHC Marble Place Properties, Inc.
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[SEAL]
By: DIHC Dearborn Properties, Inc.
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[SEAL]
CHARLOTTE OFFICE TOWER
ASSOCIATES,
a North Carolina partnership
By: Balsam Mountain, Inc.,
a general partner
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[SEAL]
By: Charlotte Plaza Properties, Inc.,
a general partner
By: /s/ John S. Moody
-----------------------
Name: John S. Moody
Title: President
[SEAL]
<PAGE>
40
BRYCE MOUNTAIN, INC.,
a Georgia corporation
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
[CORPORATE SEAL]
DIHC PROPERTIES I, INC.,
a Georgia corporation
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
[CORPORATE SEAL]
DEARBORN INTERESTS,
a Georgia general partnership
By: DIHC Dearborn Properties, Inc.,
a general partner
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
[SEAL]
<PAGE>
41
By: DIHC Dearborn Venture
a Georgia general partnership
By: DIHC Dearborn Properties, Inc.,
a general partner
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
[SEAL]
By: DIHC Marble Place
Properties, Inc.,
a general partner
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
[SEAL]
CSTONE-OAKBROOK, INC.,
a Delaware corporation
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
[CORPORATE SEAL]
<PAGE>
42
CSTONE-527 MADISON, INC.,
a Delaware corporation
By: /s/ John S. Moody
------------------------
Name: John S. Moody
Title: President
By: /s/ Rodney C. Dimock
------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
[CORPORATE SEAL]
STICHTING PENSIOENFONDS VOOR DE
GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN,
individually and as Administrative Agent
By: /s/ Jan H.W.R. van der Vlist
------------------------------
Name: Jan H.W.R. van der Vlist
Title: Attorney-in-Fact
By: /s/ Anneke C. van de Puttelaar
--------------------------------
Name: Anneke C. van de Puttelaar
Title: Attorney-in-Fact
DUTCH INSTITUTIONAL HOLDING
COMPANY, INC.
By: /s/ Robert T. Sorrentino
------------------------
Name: Robert T. Sorrentino
Title: Vice President
<PAGE>
SCHEDULE 1.1
LENDERS
Stichting Pensioenfonds Voor de Gezondheid,
Geestelijke en Maatschappelijke Belangen
Kroostweg-Noord 149
Zeist, The Netherlands
Dutch Institutional Holding Company, Inc.
c/o DIHC Management Corporation
200 Galleria Parkway, N.W., Suite 200
Atlanta, Georgia 30339
<PAGE>
SCHEDULE 2.2
FORM OF NOTES
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND ALL APPLICABLE STATE SECURITIES LAWS (THE "STATE
LAWS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO PERMIT SALE OR TRANSFER
OF THIS SECURITY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) WITHOUT REGISTRATION. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE OBLIGOR THAT (A) THIS SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION, ONLY (1) TO
THE OBLIGOR, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT IN ACCORDANCE WITH REGULATION S, RULE
144 OR RULE 145 UNDER THE SECURITIES ACT OR (4) PURSUANT TO ANOTHER APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND STATE
LAWS (IF AVAILABLE) TO THE EXTENT IT DELIVERS TO THE OBLIGOR AND THE OBLIGEE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE OBLIGOR THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT AND STATE LAWS, AND THAT (B) THE HOLDER
WILL, AND WILL REQUIRE AS A CONDITION OF TRANSFER EACH SUBSEQUENT HOLDER TO
AGREE IN WRITING TO, NOTIFY ANY PURCHASER OF ANY SECURITY FROM IT OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
DEFERRED PURCHASE PRICE NOTE
(Note A)
$55,000,000 Dated: October __, 1997
FOR VALUE RECEIVED, the undersigned CORNERSTONE PROPERTIES INC., a Nevada
corporation (the "Obligor"), HEREBY PROMISES TO PAY to the order of DUTCH
INSTITUTIONAL HOLDING COMPANY, INC., a Delaware corporation, and its successors
and assigns (the "Obligee") having an address at 200 Galleria Parkway, N.W.,
Suite 2000, Atlanta, Georgia 30339, or at such other place as the holder of this
Note may designate from time to time in writing, the sum of FIFTY-FIVE MILLION
AND NO/100 DOLLARS ($55,000,000), together with all accrued and unpaid interest
thereon.
<PAGE>
Interest shall accrue from the date hereof to and including the date on
which all principal and interest hereunder is paid in full, shall be computed on
the basis of actual days elapsed in a 365-day year, and shall be calculated on
the outstanding principal balance hereunder at an annual rate of interest equal
to seven and 28/100 percent (7.28%) per annum. Principal shall be due and
payable in full on October _, 2000 (the "Maturity Date"). Accrued interest shall
be due and payable quarterly in arrears on January 1, April 1, July 1 and
October 1 of each calendar year until the Maturity Date, at which time all
accrued and unpaid interest shall be due and payable in full. Both principal and
interest are payable in lawful money of the United States of America in same day
funds.
In the event any payment is not paid by Obligor within five (5) Business
Days following the due date for such payment, Obligor shall pay to Obligee a
late charge for the month during which such payment is not made when due, and
for each month or fraction thereof that such sum remains unpaid, equal to five
percent (5%) of such payment. In addition, in the event Obligor fails to pay any
installment of principal and interest on the date due, the unpaid amount shall
accrue interest at the Default Rate until paid. "Default Rate" shall be the
higher of (a) 10.28% or (b) 3% above the "prime rate" as announced by The Chase
Manhattan Bank from time to time.
The indebtedness evidenced by this Note may not be prepaid, either in
whole or in part, without the express written consent of the Obligee; provided,
however, the Obligor may prepay the indebtedness evidenced by this Note without
any penalty on or after the date which is sixty (60) days prior to the Maturity
Date.
This Deferred Purchase Price Note is issued and delivered pursuant to that
certain Note and Collateral Agency Agreement dated as of the date hereof
executed by and between Obligor, certain of its subsidiaries, Obligee and
Stichting Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke
Belangen, on its own behalf and as administrative agent, as amended,
supplemented or modified (the "Loan Agreement") and shall be governed by the
provisions of the Loan Agreement. Upon and after the occurrence of an Event of
Default under the Loan Agreement (as such term is defined therein), this Note
may, and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable. This Note is guarantied and secured by
the Guaranty and the Collateral Agreements referred to in the Loan Agreement and
is entitled to the benefits thereof.
Except as provided for herein, Obligee's right, title and interest in and
to this Note are freely assignable without the consent of Obligor by Obligee, in
whole or in part, and any such assignment hereof by Obligee shall operate to
vest in such assignee all rights, titles, interests and powers herein conferred
upon Obligee. Without limiting the generality of the foregoing, Obligor
acknowledges that Obligee may, at any time and from time to time, sell this Note
or any interest herein, pledge or assign this Note or any interest herein as
security in connection with any financing arrangement and enter into any
participation or similar cooperative arrangements with respect hereto.
2
<PAGE>
The liability of the Obligor hereunder is subject to the non-recourse
limitations set forth in Section 8.11 of the Loan Agreement.
If at any time the interest rate applicable to this Note, together with
all fees, charges and other amounts which are treated as interest on this Note
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by Obligee in accordance with applicable law, the rate of
interest payable in respect of this Note, together with all Charges payable in
respect hereof, shall be limited to the Maximum Rate and, to the extent lawful,
the interest and Charges that would have been payable in respect of this Note
but were not payable as a result of the operation of this provision shall be
cumulated and the interest and Charges payable to the Obligor in respect of
other Notes or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received
by Obligor.
Time is of the essence hereunder.
To the extent permitted by applicable law, Obligor and, by its acceptance
hereof the holder hereof, irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim arising out of or relating to this Note,
The terms of this Note shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of New York (exclusive of any
rules as to conflict of laws) and the laws of the United States applicable
therein. Service of process on the Obligor in any action arising out of or
relating to this Note shall be effective if mailed to the Obligor in accordance
with Section 8.1 of the Loan Agreement. Nothing herein shall preclude the
Obligee from bringing suit or taking other legal action in any other
jurisdiction.
Capitalized terms used and not defined herein shall have the meaning
ascribed to them in the Loan Agreement.
This Note has been executed, delivered and accepted at New York, New York.
CORNERSTONE PROPERTIES INC.,
a Nevada corporation
By:__________________________
Its:_________________________
By:__________________________
Its:_________________________
[CORPORATE SEAL]
3
<PAGE>
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND ALL APPLICABLE STATE SECURITIES LAWS (THE "STATE
LAWS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO PERMIT SALE OR TRANSFER
OF THIS SECURITY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) WITHOUT REGISTRATION. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE OBLIGOR THAT (A) THIS SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION, ONLY (1) TO
THE OBLIGOR, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT IN ACCORDANCE WITH REGULATION S, RULE
144 OR RULE 145 UNDER THE SECURITIES ACT OR (4) PURSUANT TO ANOTHER APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND STATE
LAWS (IF AVAILABLE) TO THE EXTENT IT DELIVERS TO THE OBLIGOR AND THE OBLIGEE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE OBLIGOR THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT AND STATE LAWS, AND THAT (B) THE HOLDER
WILL, AND WILL REQUIRE AS A CONDITION OF TRANSFER EACH SUBSEQUENT HOLDER TO
AGREE IN WRITING TO, NOTIFY ANY PURCHASER OF ANY SECURITY FROM IT OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
DEFERRED PURCHASE PRICE NOTE
(Note B)
$10,000,000 Dated: October __, 1997
FOR VALUE RECEIVED, the undersigned CORNERSTONE PROPERTIES INC., a Nevada
corporation (the "Obligor"), HEREBY PROMISES TO PAY to the order of DUTCH
INSTITUTIONAL HOLDING COMPANY, INC., a Delaware corporation, and its successors
and assigns (the "Obligee") having an address at 200 Galleria Parkway, N.W.,
Suite 2000, Atlanta, Georgia 30339, or at such other place as the holder of this
Note may designate from time to time in writing, the sum of TEN MILLION AND
NO/100 DOLLARS ($ 10,000,000), together with all accrued and unpaid interest
thereon.
Interest shall accrue from the date hereof to and including the date on
which all principal and interest hereunder is paid in full, shall be computed on
the basis of actual days elapsed in a 365-day year, and shall be calculated on
the outstanding principal balance hereunder at an annual rate of interest equal
to seven and 28/100 percent (7.28%) per annum; provided, however, that during
the
1
<PAGE>
period from the date hereof up to and including the date which is earlier of (1)
the date upon which the Obligor sells, transfers and conveys its interest in the
parcel of undeveloped real property which is the subject of the Dearborn
Security Documents or (2) October __, 2000, no interest shall accrue on the
indebtedness evidenced by this Note. Principal shall be due and payable in full
on October __, 2000 (the "Maturity Date"). Accrued interest shall be due and
payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each
calendar year until the Maturity Date, at which time all accrued and unpaid
interest shall be due and payable in full.
In the event any payment is not paid by Obligor within five (5) Business
Days following the due date for such payment, Obligor shall pay to Obligee a
late charge for the month during which such payment is not made when due, and
for each month or fraction thereof that such sum remains unpaid, equal to five
percent (5%) of such payment. In addition, in the event Obligor fails to pay any
installment of principal and interest on. the date due, the unpaid amount shall
accrue interest at the Default Rate until paid. "Default Rate" shall be the
higher of (a) 10.28% or (b) 3% above the "prime rate" as announced by The Chase
Manhattan Bank from time to time.
The indebtedness evidenced by this Note may not be prepaid, either in
whole or in part, without the express written consent of the Obligee; provided,
however, the Obligor may prepay the indebtedness evidenced by this Note without
any penalty on or after the date which is sixty (60) days prior to the Maturity
Date.
This Deferred Purchase Price Note is issued and delivered pursuant to that
certain Note and Collateral Agency Agreement dated as of the date hereof
executed by and between Obligor, certain of its subsidiaries, Obligee and
Stichting Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke
Belangen, on its own behalf and as administrative agent, as amended,
supplemented or modified (the "Loan Agreement") and shall be governed by the
provisions of the Loan Agreement. Upon and after the occurrence of an Event of
Default under the Loan Agreement (as such term is defined therein), this Note
may, and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable. This Note is guarantied and secured by
the Guaranty and the Collateral Agreements referred to in the Loan Agreement and
is entitled to the benefits thereof.
Except as provided for herein, Obligee's right, title and interest in and
to this Note are freely assignable without the consent of Obligor by Obligee, in
whole or in part, and any such assignment hereof by Obligee shall operate to
vest in such assignee all rights, titles, interests and powers herein conferred
upon Obligee. Without limiting the generality of the foregoing, Obligor
acknowledges that Obligee may, at any time and from time to time, sell this Note
or any interest herein, pledge or assign this Note or any interest herein as
security in connection with any financing arrangement and enter into any
participation or similar cooperative arrangements with respect hereto.
The liability of the Obligor hereunder is subject to the non-recourse
limitations set forth in Section 8.11 of the Loan Agreement.
2
<PAGE>
If at any time the interest rate applicable to this Note, together with
all fees, charges and other amounts which are treated as interest on this Note
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by Obligee in accordance with applicable law, the rate of
interest payable in respect of this Note, together with all Charges payable in
respect hereof, shall be limited to the Maximum Rate and, to the extent lawful,
the interest and Charges that would have been payable in respect of this Note
but were not payable as a result of the operation of this provision shall be
cumulated and the interest and Charges payable to the Obligor in respect of
other Notes or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received
by Obligor.
Time is of the essence hereunder.
To the extent permitted by applicable law, Obligor and, by its acceptance
hereof the holder hereof, hereby irrevocably waive all right to trial by jury in
any action, proceeding or counterclaim arising out of or relating to this Note.
The terms of this Note shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of New York (exclusive of any
rules as to conflict of laws) and the laws of the United States applicable
therein. Service of process on the Obligor in any action arising out of or
relating to this Note shall be effective if mailed to the Obligor in accordance
with Section 8.1 of the Loan Agreement. Nothing herein shall preclude the
Obligee from bringing suit or taking other legal action in any other
jurisdiction.
Capitalized terms used and not defined herein shall have the meaning
ascribed to them in the Loan Agreement.
This Note has been executed, delivered and accepted at New York, New York.
CORNERSTONE PROPERTIES INC.,
a Nevada corporation
By:__________________________
Its:_________________________
By:__________________________
Its:_________________________
[CORPORATE SEAL]
3
<PAGE>
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND ALL APPLICABLE STATE SECURITIES LAWS (THE "STATE
LAWS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO PERMIT SALE OR TRANSFER
OF THIS SECURITY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) WITHOUT REGISTRATION. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE OBLIGOR THAT (A) THIS SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION, ONLY (1) TO
THE OBLIGOR, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE, OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT IN ACCORDANCE WITH REGULATION S, RULE
144 OR RULE 145 UNDER THE SECURITIES ACT OR (4) PURSUANT TO ANOTHER APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND STATE
LAWS (IF AVAILABLE) TO THE EXTENT IT DELIVERS TO THE OBLIGOR AND THE OBLIGEE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE OBLIGOR THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT AND STATE LAWS, AND THAT (B) THE HOLDER
WILL, AND WILL REQUIRE AS A CONDITION OF TRANSFER EACH SUBSEQUENT HOLDER TO
AGREE IN WRITING TO, NOTIFY ANY PURCHASER OF ANY SECURITY FROM IT OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
DEFERRED PURCHASE PRICE NOTE
(Note C)
$30,000,000 Dated: October __,1997
FOR VALUE RECEIVED, the undersigned CORNERSTONE PROPERTIES INC., a Nevada
corporation (the "Obligor"), HEREBY PROMISES TO PAY to the order of DUTCH
INSTITUTIONAL HOLDING COMPANY, INC., a Delaware corporation, and its successors
and assigns (the "Obligee") having an address at 200 Galleria Parkway, N. W.,
Suite 2000, Atlanta, Georgia 30339, or at such other place as the holder of this
Note may designate from time to time in writing, the sum of THIRTY MILLION AND
NO/100 DOLLARS ($30,000,000), together with all accrued and unpaid interest
thereon.
Interest shall accrue from the date hereof to and including the date on
which all principal and interest hereunder is paid in full, shall be computed on
the basis of actual days elapsed in a 365-day year, and shall be calculated on
the outstanding principal balance hereunder at an annual rate of interest equal
to seven and 47/100 percent (7.47%) per annum. Principal shall be due and
payable
1
<PAGE>
in full on October __, 2004 (the "Maturity Date"). Accrued interest shall be due
and payable quarterly in arrears on January 1, April 1, July 1 and October 1 of
each calendar year until the Maturity Date, at which time all accrued and unpaid
interest shall be due and payable in full. Both principal and interest are
payable in lawful money of the United States of America in same day funds.
In the event any payment is not paid by Obligor I within five (5) Business
Days following the due date for such payment, Obligor shall pay to Obligee a
late charge for the month during which such payment is not made when due, and
for each month or fraction thereof that such sum remains unpaid, equal to five
percent (5%) of such payment. In addition, in the event Obligor fails to pay any
installment of principal and interest on the date due, the unpaid amount shall
accrue interest at the Default Rate until paid. "Default Rate" shall be the
higher of (a) 10.47% or (b) 3% above the "prime rate" as announced by The Chase
Manhattan Bank from time to time.
The indebtedness evidenced by this Note may not be prepaid, either in
whole or in part, without the express written consent of the Obligee; provided,
however, the Obligor may prepay the indebtedness evidenced by this Note without
any penalty on or after the date which is sixty (60) days prior to the Maturity
Date.
This Deferred Purchase Price Note is issued and delivered pursuant to that
certain Note and Collateral Agency Agreement dated as of the date hereof
executed by and between Obligor, certain of its subsidiaries, Obligee and
Stichting Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke
Belangen, on its own behalf and as administrative agent, as amended,
supplemented or modified (the "Loan Agreement") and shall be governed by the
provisions of the Loan Agreement. Upon and after the occurrence of an Event of
Default under the Loan Agreement (as such term is defined therein), this Note
may, and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable. This Note is guarantied and secured by
the Guaranty and the Collateral Agreements referred to in the Loan Agreement and
is entitled to the benefits thereof.
Except as provided for herein, Obligee's right, title and interest in and
to this Note are freely assignable without the consent of Obligor by Obligee, in
whole or in part, and any such assignment hereof by Obligee shall operate to
vest in such assignee all rights, titles, interests and powers herein conferred
upon Obligee. Without limiting the generality of the foregoing, Obligor
acknowledges that Obligee may, at any time and from time to time, sell this Note
or any interest herein, pledge or assign this Note or any interest herein as
security in connection with any financing arrangement and enter into any
participation or similar cooperative arrangements with respect hereto.
The liability of the Obligor hereunder is subject to the non-recourse
limitations set forth in Section 8.11 of the Loan Agreement.
If at any time the interest rate applicable to this Note, together with
all fees, charges and other amounts which are treated as interest on this Note
under applicable law (collectively the
2
<PAGE>
"Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged, taken, received or reserved by Obligee in accordance
with applicable law, the rate of interest payable in respect of this Note,
together with all Charges payable in respect hereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of this Note but were not payable as a result of the
operation of this provision shall be cumulated and the interest and Charges
payable to the Obligor in respect of other Notes or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by Obligor.
Time is of the essence hereunder.
To the extent permitted by applicable law, Obligor and, by its acceptance
hereof the holder hereof, hereby irrevocably waive all right to trial bv jury in
any action, proceeding or counterclaim arising out of or relating to this Note.
The terms of this Note shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of New York (exclusive of any
rules as to conflict of laws) and the laws of the United States applicable
therein. Service of process on the Obligor in any action arising out of or
relating to this Note shall be effective if mailed to the Obligor in accordance
with Section 8.1 of the Loan Agreement. Nothing herein shall preclude the
Obligee from bringing suit or taking other legal action in any other
jurisdiction.
Capitalized terms used and not defined herein shall have the meaning
ascribed to them in the Loan Agreement.
This Note has been executed, delivered and accepted at New York, New York.
CORNERSTONE PROPERTIES INC.,
a Nevada corporation
By:__________________________
Its:_________________________
By:__________________________
Its:_________________________
[CORPORATE SEAL]
3
<PAGE>
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND ALL APPLICABLE STATE SECURITIES LAWS (THE "STATE
LAWS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO PERMIT SALE OR TRANSFER
OF THIS SECURITY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) WITHOUT REGISTRATION. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE OBLIGOR THAT (A) THIS SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION, ONLY (1) TO
THE OBLIGOR, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT IN ACCORDANCE WITH REGULATION S, RULE
144 OR RULE 145 UNDER THE SECURITIES ACT OR (4) PURSUANT TO ANOTHER APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND STATE
LAWS (IF AVAILABLE) TO THE EXTENT IT DELIVERS TO THE OBLIGOR AND THE OBLIGEE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE OBLIGOR THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT AND STATE LAWS, AND THAT (B) THE HOLDER
WILL, AND WILL REQUIRE AS A CONDITION OF TRANSFER EACH SUBSEQUENT HOLDER TO
AGREE IN WRITING TO, NOTIFY ANY PURCHASER OF ANY SECURITY FROM IT OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
DEFERRED PURCHASE PRICE NOTE
(Note D)
$35,000,000 Dated: October _, 1997
FOR VALUE RECEIVED, the undersigned CSTONE-527 MADISON, INC., a Delaware
corporation (the "Obligor"), HEREBY PROMISES TO PAY to the order of DUTCH
INSTITUTIONAL HOLDING COMPANY, INC., a Delaware corporation, and its successors
and assigns (the "Obligee") having an address at 200 Galleria Parkway, N.W.,
Suite 2000, Atlanta, Georgia 30339, or at such other place as the holder of this
Note may designate from time to time in writing, the sum of THIRTY-FIVE MILLION
AND NO/100 DOLLARS ($35,000,000), together with all accrued and unpaid interest
thereon.
Interest shall accrue from the date hereof to and including the date on
which all principal and interest hereunder is paid in full, shall be computed on
the basis of actual days elapsed in a 365-day year, and shall be calculated on
the outstanding principal balance hereunder at an annual rate of interest equal
to seven and 47/100 percent (7.47%) per annum. Principal shall be due and
payable
1
<PAGE>
in full on October _, 2004 (the "Maturity Date"). Accrued interest shall be due
and payable quarterly in arrears on January 1, April 1, July 1 and October 1 of
each calendar year until the Maturity Date, at which time all accrued and unpaid
interest shall be due and payable in full. Both principal and interest are
payable in lawful money of the United States of America in same day funds.
In the event any payment is not paid by Obligor within five (5) Business
Days following the due date for such payment, Obligor shall pay to Obligee a
late charge for the month during which such payment is not made when due, and
for each month or fraction thereof that such sum remains unpaid, equal to five
percent (5%) of such payment. In addition, in the event Obligor fails to pay any
installment of principal and interest on the date due, the unpaid amount shall
accrue interest at the Default Rate until paid. "Default Rate" shall be the
higher of (a) 10.47% or (b) 3% above the "prime rate" as announced by The Chase
Manhattan Bank from time to time.
The indebtedness evidenced by this Note may not be prepaid, either in
whole or in part, without the express written consent of the Obligee; provided,
however, the Obligor may prepay the indebtedness evidenced by this Note without
any penalty on or after the date which is sixty (60) days prior to the Maturity
Date.
This Deferred Purchase Price Note is issued and delivered pursuant to that
certain Note and Collateral Agency Agreement dated as of the date hereof
executed by and between Cornerstone Properties Inc., certain of its subsidiaries
including Obligor, Obligee and Stichting Pensioenfonds voor de Gezondheid,
Geestelijke en Maatschappelijke Belangen, on its own behalf and as
administrative agent, as amended, supplemented or modified (the "Loan
Agreement") and shall be governed by the provisions of the Loan Agreement. Upon
and after the occurrence of an Event of Default under the Loan Agreement (as
such term is defined therein), this Note may, and without demand, notice or
legal process of any kind, be declared and immediately shall become due and
payable. This Note is guarantied and secured by the Guaranty and the Collateral
Agreements referred to in the Loan Agreement and is entitled to the benefits
thereof.
Except as provided for herein, Obligee's right, title and interest in and
to this Note are freely assignable without the consent of Obligor by Obligee, in
whole or in part, and any such assignment hereof by Obligee shall operate to
vest in such assignee all rights, titles, interests and powers herein conferred
upon Obligee. Without limiting the generality of the foregoing, Obligor
acknowledges that Obligee may, at any time and from time to time, sell this Note
or any interest herein, pledge or assign this Note or any interest herein as
security in connection with any financing arrangement and enter into any
participation or similar cooperative arrangements with respect hereto.
If at any time the interest rate applicable to this Note, together with
all fees, charges and other amounts which are treated as interest on this Note
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by Obligee in accordance with applicable law, the rate of
interest payable in respect of this Note, together with all Charges payable in
respect hereof, shall be limited to the Maximum Rate and, to the extent lawful,
the interest and Charges that would have
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been payable in respect of this Note but were not payable as a result of the
operation of this provision shall be cumulated and the interest and Charges
payable to the Obligor in respect of other Notes or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by Obligor.
Time is of the essence hereunder.
To the extent permitted by applicable law, Obligor and, by its acceptance
hereof the holders hereof, hereby irrevocably waive all right to trial by jury
in any action, proceeding or counterclaim arising out of or relating to this
Note.
The terms of this Note shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of New York (exclusive of any
rules as to conflict of laws) and the laws of the United States applicable
therein. Service of process on the Obligor in any action arising out of or
relating to this Note shall be effective if mailed to the Obligor in accordance
with Section 8.1 of the Loan Agreement. Nothing herein shall preclude the
Obligee from bringing suit or taking other legal action in any other
jurisdiction.
Capitalized terms used and not defined herein shall have the meaning
ascribed to them in the Loan Agreement.
This Note has been executed, delivered and accepted at New York, New York.
Pursuant to the Note Modification and Extension Agreement dated as of the
date hereof between Obligor and Obligee, this Deferred Purchase Price Note
amends and restates certain existing notes.
CSTONE-527 MADISON, INC.,
a Delaware corporation
By:__________________________
Its:_________________________
By:__________________________
Its:_________________________
[CORPORATE SEAL]
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THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND ALL APPLICABLE STATE SECURITIES LAWS (THE "STATE
LAWS") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO PERMIT SALE OR TRANSFER
OF THIS SECURITY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) WITHOUT REGISTRATION. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE OBLIGOR THAT (A) THIS SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION, ONLY (1) TO
THE OBLIGOR, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT IN ACCORDANCE WITH REGULATION S, RULE
144 OR RULE 145 UNDER THE SECURITIES ACT OR (4) PURSUANT TO ANOTHER APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND STATE
LAWS (IF AVAILABLE) TO THE EXTENT IT DELIVERS TO THE OBLIGOR AND THE OBLIGEE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE OBLIGOR THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT AND STATE LAWS, AND THAT (B) THE HOLDER
WILL, AND WILL REQUIRE AS A CONDITION OF TRANSFER EACH SUBSEQUENT HOLDER TO
AGREE IN WRITING TO, NOTIFY ANY PURCHASER OF ANY SECURITY FROM IT OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
DEFERRED PURCHASE PRICE NOTE
(Note E)
$120,000,000 Dated: October __, 1997
FOR VALUE RECEIVED, the undersigned CORNERSTONE PROPERTIES INC., a Nevada
corporation (the "Obligor"), HEREBY PROMISES TO PAY to the order of STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a
foundation formed according to the laws of The Netherlands, and its successors
and assigns (the "Obligee") having an address at Kroostweg-Noord 149, Zeist, The
Netherlands , or at such other place as the holder of this Note may designate
from time to time in writing, the sum of ONE HUNDRED TWENTY MILLION AND NO/100
DOLLARS ($120,000,000), together with all accrued and unpaid interest thereon.
Interest shall accrue from the date hereof to and including the date on
which all principal and interest hereunder is paid in full, shall be computed on
the basis of actual days elapsed in a 365-day
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year, and shall be calculated on the outstanding principal balance hereunder at
an annual rate of interest equal to seven and 54/100 percent (7.54%) per annum.
Principal shall be due and payable in full on October __, 2007 (the "Maturity
Date"). Accrued interest shall be due and payable quarterly in arrears on
January 1, April 1, July 1 and October 1 of each calendar year until the
Maturity Date, at which time all accrued and unpaid interest shall be due and
payable in full. Both principal and interest are payable in lawful money of the
United States of America in same day funds.
In the event any payment is not paid by Obligor within five (5) Business
Days following the due date for such payment, Obligor shall pay to Obligee a
late charge for the month during which such payment is not made when due, and
for each month or fraction thereof that such sum remains unpaid, equal to five
percent (5%) of such payment. In addition, in the event Obligor fails to pay any
installment of principal and interest on the date due, the unpaid amount shall
accrue interest at the Default Rate until paid. "Default Rate" shall be the
higher of (a) 10.54% or (b) 3% above the "prime rate" as announced by The Chase
Manhattan Bank from time to time.
The indebtedness evidenced by this Note may not be prepaid, either in
whole or in part, without the express written consent of the Obligee; provided,
however, the Obligor may prepay the indebtedness evidenced by this Note without
any penalty on or after the date which is sixty (60) days prior to the Maturity
Date.
This Deferred Purchase Price Note is issued and delivered pursuant to that
certain Note and Collateral Agency Agreement dated as of the date hereof
executed by and between Obligor, certain of its subsidiaries, Dutch
Institutional Holding Company, Inc. and Obligee, on its own behalf and as
administrative agent, as amended, supplemented or modified (the "Loan
Agreement") and shall be governed by the provisions of the Loan Agreement. Upon
and after the occurrence of an Event of Default under the Loan Agreement (as
such term is defined therein), this Note may, and without demand, notice or
legal process of any kind, be declared and immediately shall become due and
payable. This Note is guarantied and secured by the Guaranty and the Collateral
Agreements referred to in the Loan Agreement and is entitled to the benefits
thereof.
Except as provided for herein, Obligee's right, title and interest in and
to this Note are freely assignable without the consent of Obligor by Obligee, in
whole or in part, and any such assignment hereof by Obligee shall operate to
vest in such assignee all rights, titles, interests and powers herein conferred
upon Obligee. Without limiting the generality of the foregoing, Obligor
acknowledges that Obligee may, at any time and from time to time, sell this Note
or any interest herein, pledge or assign this Note or any interest herein as
security in connection with any financing arrangement and enter into any
participation or similar cooperative arrangements with respect hereto.
The liability of the Obligor hereunder is subject to the non-recourse
limitations set forth in Section 8.11 of the Loan Agreement.
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If at any time the interest rate applicable to this Note, together with
all fees, charges and other amounts which are treated as interest on this Note
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by Obligee in accordance with applicable law, the rate of
interest payable in respect of this Note, together with all Charges payable in
respect hereof, shall be limited to the Maximum Rate and, to the extent lawful,
the interest and Charges that would have been payable in respect of this Note
but were not payable as a result of the operation of this provision shall be
cumulated and the interest and Charges payable to the Obligor in respect of
other Notes or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received
by Obligor.
Time is of the essence hereunder.
To the extent permitted by applicable law, Obligor and, by its acceptance
hereof the holders hereof, hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim arising out of or relating to this
Note.
Capitalized terms used and not defined herein shall have the meaning
ascribed to such terms in the Loan Agreement.
The terms of this Note shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of New York (exclusive of any
rules as to conflict of laws) and the laws of the United States applicable
therein. Service of process on the Obligor in any action arising out of or
relating to this Note shall be effective if mailed to the Obligor in accordance
with Section 8.1 of the Loan Agreement. Nothing herein shall preclude the
Obligee from bringing suit or taking other legal action in anv other
jurisdiction.
This Note has been executed, delivered and accepted at New York, New York.
CORNERSTONE PROPERTIES INC.,
a Nevada corporation
By:__________________________
Its:_________________________
By:__________________________
Its:_________________________
[CORPORATE SEAL]
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SCHEDULE 2.3A
FORMS OF GUARANTY
GUARANTY
GUARANTY, dated as of October _, 1997, of the undersigned, CHARLOTTE
OFFICE TOWER ASSOCIATES, a North Carolina partnership ("Charlotte Office"),
BRYCE MOUNTAIN, INC., a Georgia corporation ("Bryce"), DIHC PROPERTIES I, INC.,
a Georgia corporation ("Properties"), DEARBORN INTERESTS, a Georgia general
partnership ("Dearborn"), CSTONE-OAKBROOK, INC., a Delaware corporation
("Oakbrook"), CSTONE- 527 MADISON, INC., a Delaware corporation ("Madison
Avenue") (collectively referred to herein as "Guarantors") in favor of STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHA-PPELIJKE BELANGEN, a
foundation formed according to the laws of The Netherlands, as administrative
agent for the holders of the Notes (as defined below) ("Agent").
W I T N E S S E T H :
WHEREAS, Cornerstone Properties Inc., a Nevada corporation (the
"Borrower"), and certain of its subsidiaries have executed and delivered to the
Agent that certain Note and Collateral Agency Agreement (the "Loan Agreement")
as amended, supplemented or modified from time to time, dated as of the date
hereof pursuant to which Borrower will execute and deliver that certain Deferred
Purchase Price Note (Note A) dated as of the date hereof in the original
principal amount of $55,000,000 ("Note A"), that certain Deferred Purchase Price
Note (Note B) dated as of the date hereof in the original principal amount of
$10,000,000 ("Note B"), that certain Deferred Purchase Price Note (Note C) dated
as of the date hereof in the original principal amount of $30,000,000 ("Note C")
and that certain Deferred Purchase Price Note (Note E) dated as of the date
hereof in the original principal amount of $120,000,000 ("Note E"), and CStone
527 Madison, Inc. ("Madison Avenue") will execute and deliver that certain
Deferred Purchase Price Note (Note D) dated as of the date hereof in the
original principal amount of $35,000,000 ("Note D") (Note A, Note B, Note C,
Note D and Note E, as amended, supplemented, replaced, exchanged or modified
from time to time, are collectively referred to herein as the "Notes").
WHEREAS, Borrower directly or indirectly owns 100% of the equity interests
of each of the Guarantors and Guarantors will derive direct and indirect
economic benefits from the execution and delivery of the Loan Agreement and the
Notes and the transactions related thereto;
WHEREAS, each of the Guarantors has secured this Guaranty by the pledge of
its rights in and to certain real property or other assets, as more fully
described in the Collateral Agreements.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce the Lenders to accept the Notes, it is
agreed as follows:
<PAGE>
1. DEFINITIONS. Capitalized terms used herein shall have the meanings
assigned to them in the Loan Agreement, unless the context otherwise requires or
unless otherwise defined herein.
References to this "Guaranty" shall mean this Guaranty, including
all amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to the Guaranty as the same may be in
effect at the time such reference becomes operative.
References to "Guaranteed Obligations" shall mean the unpaid
principal of and interest on the Notes and all other obligations and liabilities
of the Borrower, Madison Avenue and the Guarantors to the Agent and the Lenders
(including, without limitation, interest accruing at the then applicable rate
provided in the Notes after maturity of the Notes and interest accruing at the
then applicable rate provided in the Notes after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower or Madison Avenue, whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement or any other Loan Document.
References to "Loan Documents" shall mean the Notes, the Loan
Agreement, and the Collateral Agreements.
2. THE GUARANTY. The guaranty of each of the Guarantors hereunder is as
follows:
2.1 Guaranty of the Notes. Each of the Guarantors hereby
unconditionally guarantees to the Agent, and its successors, endorsees,
transferees and assigns, for its benefit and for the benefit of the holders of
the Notes, the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance when due of the Guaranteed Obligations. Each of the
Guarantors agrees that this Guaranty is a guaranty of payment and performance
and not of collection, and that its obligations under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guaranty, the Loan Agreement, any
other Loan Document or any other agreement, document or instrument to
which Borrower, Madison Avenue and/or any of the Guarantors is or are or
may become a party;
(b) the absence of any action to enforce this Guaranty, the Loan
Agreement, the Notes or any other Loan Document or the waiver or consent
by the Agent or any Lenders with respect to any of the provisions thereof,
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(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for the Guaranteed Obligations or any action,
or the absence of any action, by the Agent or Lenders in respect thereof
(including, without limitation, the release of any such security); or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor,
it being agreed by each of the Guarantors that, except as set forth in Section
2.4 hereof, its obligations under this Guaranty shall not be discharged until
the payment and performance, in full, of the Guaranteed Obligations. Each of the
Guarantors shall be regarded, and shall be in the same position, as principal
debtor with respect to the Notes.
2.2 Maximum Liability. The maximum liability of each Guarantor
hereunder as of any date shall in no event exceed the Maximum Guaranty Liability
(as hereinafter defined) of such Guarantor as of such date. It is the intention
of the parties hereto that in no event shall any of Guarantor's obligations
under this Guaranty constitute or result in a violation of any applicable
fraudulent conveyance, fraudulent transfer or similar law or any relevant
jurisdiction. Therefore, in the event that this Guaranty would, but for the
second preceding sentence, constitute or result in such violation, then the
liability of any Guarantor under this Guaranty shall be reduced to the maximum
amount permissible under the applicable fraudulent conveyance, fraudulent
transfer or similar laws.
(a) "Maximum Guaranty Liability" of any Guarantor as of any date
shall mean the greater of the following amounts: (i) the sum of the
following (without duplication) as of such date: (A) the outstanding
amount of all loans, advances, guarantees, capital contributions or other
investments made by the Borrower and Madison Avenue to or for the benefit
of such Guarantor, plus (B) the fair market value of all property
transferred by the Borrower and Madison Avenue to such Guarantor, plus (C)
the fair market value of all benefits received by such Guarantor's
business and other relationships with the Borrower and Madison Avenue,
plus (D) with respect to each transfer or benefit referred to in the
foregoing clauses (A), (B) and (C), interest on the amount transferred or
benefit received, such interest to accrue at the highest rate under the
Notes until the same are repaid to the Borrower and Madison Avenue; and
(ii) the greatest of the Fair Value Net Worth of such Guarantor as of (A)
September 30, 1997, (B) each fiscal quarter-end of such person thereafter
occurring on or prior to the date of determination of Maximum Guaranty
Liability, (C) the date on which enforcement of this Guaranty is sought,
and (D) the date on which a case under Title 11 of the United States Code
is commenced with respect to the Borrower or such Guarantor. "Fair Value
Net Worth" of a Guarantor as of any date shall mean (i) the fair value or
fair saleable value (as the case may be, determined in accordance with
applicable federal and state laws affecting creditors' rights and
governing determinations of insolvency of debtors) of such Guarantor's
assets (including such Guarantor's rights to contribution and subrogation
hereunder) as of such date, minus (ii) the
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sum of $ 1.00 and the amount of all liabilities of such person (determined
in accordance with such laws) as of such date but excluding (x) this
Guaranty and (y) any liabilities subordinated in right of payment to this
Guaranty.
(b) Each Guarantor agrees that the Guaranteed Obligations may at any
time and from time to time exceed the Maximum Guaranty Liability of such
Guarantor, and may exceed the aggregate Maximum Guaranty Liability of all
Guarantors, without impairing this Guaranty or affecting the rights and
remedies of any beneficiary hereunder.
2.3 Contribution. In the event that any Guarantor (a "Funding
Guarantor") shall make any payment or payments under this Guaranty, such Funding
Guarantor shall have contribution rights against each other Guarantor (each, a
"Contributing Guarantor") up to the amount of such Contributing Guarantor's
Maximum Guaranty Liability.
2.4 Termination of Guaranty. Notwithstanding anything to the
contrary contained herein, (a) any and all liability or obligation of Charlotte
Office and Bryce hereunder shall terminate and be discharged in full upon
payment and performance, in full, of Note A, provided, however, no Default or
Event of Default shall have occurred and be continuing at the time of such
termination or discharge; (b) any and all liability or obligation of Dearborn
hereunder shall terminate and be discharged in full upon payment and
performance, in full, of Note B, provided, however, no Default or Event of
Default shall have occurred and be continuing at the time of such termination or
discharge; (c) any and all liability or obligation of Oakbrook and Madison
Avenue hereunder shall terminate and be discharged in full upon payment and
performance, in full, of Note C and Note D, provided, however, no Default or
Event of Default shall have occurred and be continuing at the time of such
termination and discharge; and (d) any and all liability or obligation of
Properties hereunder shall terminate and be discharged in full upon payment and
performance, in full, of Note E, provided, however, no Default or Event of
Default shall have occurred and be continuing at the time of such termination or
discharge.
2.5 Enforcement of Guaranty. In no event shall the Agent or any
Lender have any obligation (although it is entitled, at its option) to proceed
against the Borrower or any other person or any real or personal property
pledged to secure the Guaranteed Obligations before proceeding against any of
the Guarantors, and the Agent or any Lender may proceed, prior or subsequent to,
or simultaneously with, the enforcement of the Agent's or any Lender's rights
hereunder, to exercise any right or remedy which it may have against any
property, real or personal, as a result of any Lien it may have as security for
all or any portion of the Guaranteed Obligations.
2.6 Waiver. In addition to the waivers contained in Section 2.1
hereof, each of the Guarantors waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshalling of assets
or redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Guarantor of
its obligations under, or the enforcement by Agent or any Lender of, this
Guaranty. Each of the
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Guarantors hereby waives diligence, presentment and demand (whether for
nonpayment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Notes, the Loan Agreement, or any other Loan Document,
acceptance of further security, release of further security, composition or
agreement arrived at as to the amount of, or the terms of, the Loan Agreement,
the Notes or any other Loan Document, notice of adverse change in Borrower's or
Madison Avenue's financial condition or any other fact which might materially
increase the risk to the Guarantor) with respect to the Guaranteed Obligations
or all other demands whatsoever and waives the benefit of all provisions of law
which are or might be in conflict with the terms of this Guaranty. Each of the
Guarantors represents, warrants and agrees that, as of the date of this
Guaranty, its obligations under this Guaranty are not subject to any offense or
defense against the Agent, any Lender, Madison Avenue or Borrower of any kind.
2.7 Benefits of Guaranty. The provisions of this Guaranty are for
the benefit of the Agent, the Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between Borrower, Madison Avenue, the Agent and the Lenders, the obligations
of Borrower or Madison Avenue under the Notes, the Loan Agreement or any other
Loan Document.
2.8 Modification of Note, etc. If the Agent or any Lender shall at
any time or from time to time, with or without the consent of, the Guarantors:
(a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Notes, the Loan Agreement or any
other Loan Document;
(b) take any action under or in respect of the Loan Agreement, the
Notes or any other Loan Document in the exercise of any remedy, power or
privilege contained therein or available to it at law, equity or
otherwise, or waive or refrain from exercising any such remedies, powers
or privileges;
(c) amend or modify, in any manner whatsoever, the Notes, the Loan
Agreement or any other Loan Document;
(d) extend or waive the time for any of the Guarantor's, Borrower's
or other person's performance of, or compliance with, any term, covenant
or agreement on its part to be performed or observed under the Notes, the
Loan Agreement or any other Loan Document, or waive such performance or
compliance or consent to a failure of, or departure from, such performance
or compliance;
(e) take and hold security or collateral for the Guaranteed
Obligations or sell, exchange, release, dispose of, or otherwise deal
with, any property pledged, mortgaged or conveyed, or in which the Agent
or any Lender has been granted a Lien, to secure any indebtedness of any
of the Guarantors, Madison Avenue or Borrower to the Agent or any Lender;
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(f) release anyone who may be liable in any manner for the payment
of any amounts owed by any of the Guarantors, Madison Avenue or Borrower
to the Agent or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of any
of the Guarantors, Madison Avenue or Borrower are subordinated to the
claims of the Agent or any Lender; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by any of the Guarantors, Madison Avenue or Borrower to the
Agent or any Lender in such manner as the Agent or any Lender shall
determine in their discretion;
then neither the Agent nor any Lender shall incur any liability to the
Guarantors pursuant hereto as a result thereof, and no such action shall impair
or release the obligations of any of the Guarantors under this Guaranty.
2.9 Reinstatement. This Guaranty shall remain in full force and
effect and continue to be effective in the event any petition be filed by or
against Borrower or any Guarantor for liquidation or reorganization, in the
event Borrower or any of the Guarantors becomes insolvent or makes an assignment
for the benefit of creditors or in the event a receiver or trustee be appointed
for all or any significant part of Borrower's or Guarantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Guaranteed Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by the Agent or any Lender, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
2.10 Election of Remedies, Etc., Any election of remedies which
results in the denial or impairment of the right of the Agent or any Lender to
seek a deficiency judgment against Borrower or Madison Avenue shall not impair
the obligation of any of the Guarantors to pay the full amount of the Guaranteed
Obligations. In the event the Agent or any Lender shall bid at any foreclosure
or trustee's sale or at any private sale permitted by law, the Agent or any
Lender may bid all or less than the amount of the Guaranteed Obligations and the
amount of such bid need not be paid by the Agent or any Lender but shall be
credited against the Guaranteed Obligations. The amount of the successful bid at
any such sale, whether the Agent, any Lender or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value of
the collateral.
2.11 Continuing Guaranty. The Guarantor agrees that this Guaranty is
a continuing guaranty and shall remain in full force and effect until the
payment in full of all Guaranteed Obligations except as set forth in Section
2.4.
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3. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors makes the
following representations and warranties to the Agent and each Lender:
3.1 Corporate Power; Authorization; Enforceability. The execution,
delivery and performance of this Guaranty by the Guarantor will not violate any
law or regulation, or any order or decree of any court or governmental
instrumentality, will not conflict with or result in the breach of, or
constitute a default under any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which the Guarantor is a party or by which
Guarantor or any of its property is bound, will not result in the creation or
imposition of any Lien upon any of the property of Guarantor and the same do not
require the consent or approval of any governmental body, agency, authority or
any other person except those already obtained. This Guaranty has been duly
executed and delivered by or on behalf of Guarantor.
3.2 Affirmation of Covenants, Representations and Warranties.
Guarantor affirms and ratifies the covenants, representations and warranties
contained in Articles III, IV and V of the Loan Agreement and agrees and
covenants that it shall comply with the terms of such covenants, representations
and warranties.
4. PERMITTED ASSIGNMENT BY AGENT. The Agent or any Lender may freely
assign its rights and delegate its duties under this Guaranty, but no such
assignment or delegation shall increase or diminish the obligations of the
Guarantors hereunder.
5. FURTHER ASSURANCES. Each of the Guarantors agrees, upon the written
request of the Agent, to execute and deliver to the Agent, from time to time,
any additional instruments or documents reasonably considered necessary by the
Agent to cause this Guaranty to be, become or remain valid and effective in
accordance with its terms.
6. MISCELLANEOUS.
6.1 Entire Agreement; Amendments. This Guaranty, together with the
other Loan Documents, constitute the entire agreement between the parties with
respect to the subject matter hereof and may not be amended or supplemented
except by a writing signed by each of the Guarantors and the Agent.
6.2 Headings. The headings in this Guaranty are for convenience of
reference only and are not part of the substance of this Guaranty.
6.3 Severability. In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.
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<PAGE>
6.4 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Guaranty, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be delivered in
person with receipt acknowledged, delivered by reputable overnight courier or
telecopied and confirmed immediately in writing by a copy mailed by registered
or certified mail, return receipt requested, postage prepaid, addressed as
hereinafter set forth, or mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Agent, at
Pensioenfonds PGGM
Kroostweg-Noord 149
Zeist, The Netherlands
Telecopier: 011-31-30-696-3388
Attention: Mr. Jan van der Vlist
Ms. Anneke C. van de Puttelaar
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Telecopier: (212) 750-9022
Attention: Robert M. Safron, Esq.
(b) If to the Guarantors:
Charlotte Office Tower Associates
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
Bryce Mountain, Inc.
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
8
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DIHC Properties I, Inc.
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
Dearborn Interests
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
CStone-Oakbrook, Inc.
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
CStone-527 Madison, Inc.
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
-- and --
Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Telecopier: (404) 572-5148
Attention: William B. Fryer, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder
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<PAGE>
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, on the date of telecopier
transmission, on the date of delivery by reputable overnight courier or three
(3) Business Days after the same shall have been deposited with the United
States mail.
6.5 Binding Effect. This Guaranty shall bind each of the Guarantors
and shall inure to the benefit of the Agent, the Lenders and their respective
successors and assigns. The Guarantors may not assign this Guaranty without the
consent of the Agent and the Required Lenders.
6.6 Non-Waiver. The failure of the Agent or any Lender to enforce
any right or remedy hereunder, or promptly to enforce any such right or remedy,
shall not constitute a waiver thereof, nor give rise to any estoppel against the
Agent or any Lender, nor excuse any of the Guarantors from its obligations
hereunder.
6.7 CHOICE OF LAW. THE TERMS OF THIS GUARANTY SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (EXCLUSIVE OF ANY RULES AS TO CONFLICT OF LAWS) AND THE LAWS OF THE
UNITED STATES APPLICABLE THEREIN. SERVICE OF PROCESS ON EACH OF THE GUARANTORS
IN ANY ACTION ARISING OUT OF OR RELATING TO THIS GUARANTY SHALL BE EFFECTIVE IF
MAILED TO THE GUARANTOR IN ACCORDANCE WITH SECTION 6.4 HEREOF. NOTHING HEREIN
SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION.
6.8 Expenses. Each of the Guarantors agrees that, with or without
notice or demand, it will reimburse the Agent and any Lender for all reasonable
expenses (including counsel fees) actually incurred by the Agent and any Lender
in connection with the enforcement of this Guaranty.
6.9 Indemnity. Each of the Guarantors agrees to indemnify the Agent
and any Lender and hold them harmless against any documentary taxes, withholding
taxes, assessments or charges made by any governmental authority by reason of
the execution, delivery and performance of this Guaranty.
6.10 Counterparts. This Guaranty may be executed in any number of
counterparts which shall individually and collectively constitute one agreement.
10
<PAGE>
IN WITNESS WHEREOF, each of the Guarantors has executed and
delivered this Guaranty as of the date first above written.
CHARLOTTE OFFICE TOWER ASSOCIATES,
a North Carolina general partnership
By: Its general partner,
Balsam Mountain, Inc.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[SEAL]
By: Its general partner,
Charlotte Plaza Properties, Inc.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[SEAL]
BRYCE MOUNTAIN, INC., a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
11
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DIHC PROPERTIES I, INC., a Georgia
corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
DEARBORN INTERESTS,
a Georgia general partnership
By: Its general partner,
DIHC Dearborn Properties, Inc.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
By: Its general partner,
DIHC Dearborn Venture,
a Georgia general partnership
By: Its general partner,
DIHC Dearborn Properties, Inc.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
12
<PAGE>
By: Its general partner,
DIHC Marble Place Properties, Inc.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
CSTONE-OAKBROOK, INC.,
a Delaware corporation
By:___________________________________
Name:______________________________
Title:_____________________________
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
CSTONE-527 MADISON, INC.,
a Delaware corporation
By:___________________________________
Name:______________________________
Title:_____________________________
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
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<PAGE>
NON-RECOURSE GUARANTY
GUARANTY, dated as of October _, 1997, of the undersigned, CHARLOTTE
PLAZA PROPERTIES, INC., a Georgia corporation ("Charlotte Plaza"), BALSAM
MOUNTAIN, INC., a Georgia corporation ("Balsam"), DIHC OF GEORGIA, INC., a
Georgia corporation ("DIHC"), DIHC MARBLE PLACE PROPERTIES, INC., a Georgia
corporation ("Marble"), DIHC DEARBORN PROPERTIES, INC., a Georgia corporation
("Dearborn"), DIHC DEARBORN VENTURE, a Georgia general partnership ("Venture")
(collectively referred to herein as "Guarantors") in favor of STICHTING
PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN MAATSCHAPPELIJKE BELANGEN, a
foundation formed according to the laws of The Netherlands, as administrative
agent for the holders of the Notes (as defined below) ("Agent").
W I T N E S S E T H:
WHEREAS, Cornerstone Properties Inc., a Nevada corporation (the
"Borrower") and certain of its subsidiaries, have executed and delivered to the
Agent that certain Note and Collateral Agency Agreement (the "Loan Agreement")
as amended, supplemented or modified from time to time, dated as of the date
hereof pursuant to which Borrower will execute and deliver that certain Deferred
Purchase Price Note (Note A) dated as of the date hereof in the original
principal amount of $55,000,000 ("Note A"), that certain Deferred Purchase Price
Note (Note B) dated as of the date hereof in the original principal amount of
$10,000,000 ("Note B"), that certain Deferred Purchase Price Note (Note C) dated
as of the date hereof in the original principal amount of $30,000,000 ("Note
C"), and that certain Deferred Purchase Price Note (Note E) dated as of the date
hereof in the original principal amount of $120,000,000 ("Note E"), and
CStone-527 Madison, Inc. ("Madison Avenue") will execute and deliver that
certain Deferred Purchase Price Note (Note D) dated as of the date hereof in the
original principal amount of $35,000,000 ("Note D") (Note A, Note B, Note C,
Note D and Note E, as amended, supplemented, replaced, exchanged or modified
from time to time, are collectively referred to herein as the "Notes").
WHEREAS, Borrower directly or indirectly owns 100% of the equity
interests of each of the Guarantors and Guarantors will derive direct and
indirect economic benefits from the execution and delivery of the Loan Agreement
and the Notes and the transactions related thereto;
WHEREAS, each of the Guarantors has secured this Guaranty by the
pledge of its rights in and to certain assets, as more fully described in the
Collateral Agreements.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce the Lenders to accept the Notes, it is
agreed as follows:
1. DEFINITIONS. Capitalized terms used herein shall have the
meanings assigned to them in the Loan Agreement, unless the context otherwise
requires or unless otherwise defined herein.
<PAGE>
References to this "Guaranty" shall mean this Guaranty, including
all amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to the Guaranty as the same may be in
effect at the time such reference becomes operative.
References to "Guaranteed Obligations" shall mean the unpaid
principal of and interest on the Notes and all other obligations and liabilities
of the Borrower, Madison Avenue and the Guarantors to the Agent and the Lenders
(including, without limitation, interest accruing at the then applicable rate
provided in the Notes after maturity of the Notes and interest accruing at the
then applicable rate provided in the Notes after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower or Madison Avenue, whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement or any other Loan Document.
References to "Loan Documents" shall mean the Notes, the Loan
Agreement, and the Collateral Agreements.
References to "Pledged Collateral" shall mean with respect to
Charlotte Plaza, the Collateral owned by Charlotte Plaza; with respect to
Balsam, the Collateral owned by Balsam, with respect to DIHC Georgia, the
Collateral owned by DIHC Georgia; with respect to Marble, the Collateral owned
by Marble; with respect to Dearborn, the Collateral owned by Dearborn and with
respect to Venture, the Collateral owned by Venture.
References to "Recourse Guaranty" shall mean that certain Recourse
Guaranty dated the date hereof from Charlotte Office Tower Associates, Bryce
Mountain, Inc., DIHC Properties I, Inc., Dearborn Interests, CStone-Oakbrook,
Inc. and CStone-527 Madison, Inc. in favor of the Agent for the benefit of the
Lenders, as amended, supplemented or modified from time to time.
2. THE GUARANTY. The guaranty of each of the Guarantors hereunder is
as follows:
2.1 Guaranty of the Notes. Each of the Guarantors hereby
unconditionally guarantees to the Agent, and its successors, endorsees,
transferees and assigns, for its benefit and for the benefit of the holders of
the Notes, the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance when due of the Guaranteed Obligations. Each of the
Guarantors agrees that this Guaranty is a guaranty of payment and performance
and not of collection, and that its obligations under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guaranty, the Loan Agreement, any
other Loan Document or any other
2
<PAGE>
agreement, document or instrument to which Borrower, Madison Avenue and/or
any of the Guarantors is or are or may become a party;
(b) the absence of any action to enforce this Guaranty, the Loan
Agreement, the Notes or any other Loan Document or the waiver or consent
by the Agent or any Lenders with respect to any of the provisions thereof,
(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for the Guaranteed Obligations or any action,
or the absence of any action, by the Agent or Lenders in respect thereof
(including, without limitation, the release of any such security); or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor,
it being agreed by each of the Guarantors that, except as set forth in Section
2.2 hereof, its obligations under this Guaranty shall not be discharged until
the payment and performance, in full, of the Guaranteed Obligations. Each of the
Guarantors shall be regarded, and shall be in the same position, as principal
debtor with respect to the Notes.
2.2 Termination of Guaranty. Notwithstanding anything to the
contrary contained herein, (a) any and all liability or obligation of Charlotte
Plaza and Balsam hereunder shall terminate and be discharged in full upon
payment and performance, in full, of Note A, provided, however, no Default or
Event of Default shall have occurred and be continuing at the time of such
termination or discharge unless such Default or Event of Default shall cease to
exist as a result of such termination or discharge; (b) any and all liability or
obligation of Dearborn, Marble and Venture hereunder shall terminate and be
discharged in full upon payment and performance, in full, of Note B, provided,
however, no Default or Event of Default shall have occurred and be continuing at
the time of such termination or discharge unless such Default or Event of
Default shall cease to exist as a result of such termination or discharge; and
(c) any and all liability or obligation of DIHC Georgia hereunder shall
terminate and be discharged in full upon payment and performance, in full, of
Note E, provided, however, no Default or Event of Default shall have occurred
and be continuing at the time of such termination or discharge unless such
Default or Event of Default shall cease to exist as a result of such termination
or discharge.
2.3 Enforcement of Guaranty. In no event shall the Agent or any
Lender have any obligation (although it is entitled, at its option) to proceed
against the Borrower or any other person or any real or personal property
pledged to secure the Guaranteed Obligations before proceeding against any of
the Guarantors, and the Agent or any Lender may proceed, prior or subsequent to,
or simultaneously with, the enforcement of the Agent's or any Lender's rights
hereunder, to exercise any right or remedy which it may have against any
property, real or personal, as a result of any Lien it may have as security for
all or any portion of the Guaranteed Obligations.
3
<PAGE>
2.4 Waiver. In addition to the waivers contained in Section 2.1
hereof, each of the Guarantors waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshalling of assets
or redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Guarantor of
its obligations under, or the enforcement by Agent or any Lender of, this
Guaranty. Each of the Guarantors hereby waives diligence, presentment and demand
(whether for nonpayment or protest or of acceptance, maturity, extension of
time, change in nature or form of the Notes, the Loan Agreement, or any other
Loan Document, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Loan Agreement, the Notes or any other Loan Document, notice of adverse change
in Borrower's or Madison Avenue's financial condition or any other fact which
might materially increase the risk to the Guarantor) with respect to the
Guaranteed Obligations or all other demands whatsoever and waives the benefit of
all provisions of law which are or might be in conflict with the terms of this
Guaranty. Each of the Guarantors represents, warrants and agrees that, as of the
date of this Guaranty, its obligations under this Guaranty are not subject to
any offense or defense against the Agent, any Lender, Madison Avenue or Borrower
of any kind.
2.5 Benefits of Guaranty. The provisions of this Guaranty are for
the benefit of the Agent, the Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between Borrower, Madison Avenue, the Agent and the Lenders, the obligations
of Borrower or Madison Avenue under the Notes, the Loan Agreement or any other
Loan Document.
2.6 Modification of Note, etc. If the Agent or any Lender shall at
any time or from time to time, with or without the consent of, the Guarantors:
(a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Notes, the Loan Agreement or any
other Loan Document;
(b) take any action under or in respect of the Loan Agreement, the
Notes or any other Loan Document in the exercise of any remedy, power or
privilege contained therein or available to it at law, equity or
otherwise, or waive or refrain from exercising any such remedies, powers
or privileges;
(c) amend or modify, in any manner whatsoever, Note D, the Loan
Agreement or any other Loan Document;
(d) extend or waive the time for any of the Guarantor's, Borrower's
or other person's performance of, or compliance with, any term, covenant
or agreement on its part to be performed or observed under Note D, the
Loan Agreement or any other Loan Document, or waive such performance or
compliance or consent to a failure of, or departure from, such performance
or compliance;
4
<PAGE>
(e) take and hold security or collateral for the Guaranteed
Obligations or sell, exchange, release, dispose of, or otherwise deal
with, any property pledged, mortgaged or conveyed, or in which the Agent
or any Lender has been granted a Lien, to secure any indebtedness of any
of the Guarantors, Madison Avenue or Borrower to the Agent or any Lender;
(f) release anyone who may be liable in any manner for the payment
of any amounts owed by any of the Guarantors, Madison Avenue or Borrower
to the Agent or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of any
of the Guarantors, Madison Avenue or Borrower are subordinated to the
claims of the Agent or any Lender; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by any of the Guarantors, Madison Avenue or Borrower to the
Agent or any Lender in such manner as the Agent or any Lender shall
determine in their discretion;
then neither the Agent nor any Lender shall incur any liability to the Guarantor
pursuant hereto as a result thereof, and no such action shall impair or release
the obligations of any of the Guarantor under this Guaranty.
2.7 Reinstatement. This Guaranty shall remain in full force and
effect and continue to be effective in the event any petition be filed by or
against Borrower, Madison Avenue or any Guarantor, for liquidation or
reorganization, in the event Borrower, Madison Avenue or any of the Guarantors
becomes insolvent or makes an assignment for the benefit of creditors or in the
event a receiver or trustee be appointed for all or any significant part of
Borrower, Madison Avenue's or Guarantor's assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Guaranteed Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by the Agent or any Lender, whether as a "voidable preference",
"fraudulent conveyance", or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Guaranteed Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
2.8 Election of Remedies, Etc. Any election of remedies which
results in the denial or impairment of the right of the Agent or any Lender to
seek a deficiency judgment against Borrower or Madison Avenue shall not impair
the obligation of any of the Guarantors to pay the full amount of the Guaranteed
Obligations. In the event the Agent or any Lender shall bid at any foreclosure
or trustee's sale or at any private sale permitted by law, the Agent or any
Lender may bid all or less than the amount of the Guaranteed Obligations and the
amount of such bid need not be paid by the Agent or any Lender but shall be
credited against the Guaranteed Obligations. The
5
<PAGE>
amount of the successful bid at any such sale, whether the Agent, any Lender or
any other party is the successful bidder, shall be conclusively deemed to be the
fair market value of the collateral.
2.9 Continuing Guaranty. The Guarantor agrees that this Guaranty is
a continuing guaranty and shall remain in full force and effect until the
payment in full of all Guaranteed Obligations except as set forth in Section
2.2.
3. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors makes the
following representations and warranties to the Agent and each Lender:
3.1 Corporate Power: Authorization; Enforceability. The execution,
delivery and performance of this Guaranty by the Guarantor will not violate any
law or regulation, or any order or decree of any court or governmental
instrumentality, will not conflict with or result in the breach of, or
constitute a default under any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which the Guarantor is a party or by which
Guarantor or any of its property is bound, will not result in the creation or
imposition of any Lien upon any of the property of Guarantor and the same do not
require the consent or approval of any governmental body, agency, authority or
any other person except those already obtained. This Guaranty has been duly
executed and delivered by or on behalf of Guarantor.
3.2 Affirmation of Covenants, Representations and Warranties.
Guarantor affirms and ratifies the covenants, representations and warranties
contained in Articles III and IV of the Loan Agreement and agrees and covenants
that it shall comply with the terms of such covenants, representations and
warranties.
4. PERMITTED ASSIGNMENT. The Agent or any Lender may freely assign
its rights and delegate its duties under this Guaranty, but no such assignment
or delegation shall increase or diminish the obligations of the Guarantors
hereunder.
5. FURTHER ASSURANCES. Each of the Guarantors agrees, upon the
written request of the Agent, to execute and deliver to the Agent, from time to
time, any additional instruments or documents reasonably considered necessary by
the Agent to cause this Guaranty to be, become or remain valid and effective in
accordance with its terms.
6. NON-RECOURSE. Except as specifically provided for in this Section
6 and in Section 8.11 of the Loan Agreement, (i) neither Guarantors nor any of
their respective officers, directors, shareholders, agents, employees or
representatives (collectively, the "Exculpated Parties") shall be personally
liable for the payment of any sums due hereunder or the performance of any
obligations of the Guarantors hereunder, or under the other Loan Documents, and
(ii) no judgment for the repayment of the Guaranteed Obligations or interest
thereon or any other amount payable pursuant to any of the Loan Documents will
be enforced against any of the Exculpated Parties personally, or any property of
any of the Exculpated Parties other than Collateral and any other security now
or hereafter expressly granted under the Loan Documents in any action to
6
<PAGE>
enforce this Guaranty or otherwise realize upon any security now or hereafter
expressly granted under the Loan Documents or to collect any amount payable
hereunder. Notwithstanding the foregoing:
Nothing herein contained shall be construed as prohibiting Agent or
any Lender from exercising any and all remedies which the Loan Documents permit,
including the right to bring actions or proceedings against any Guarantor and
other Exculpated Parties and to enter a judgment against any Guarantor and other
Exculpated Parties, so long as the exercise of any remedy does not extend to
execution against or recovery out of any property of any Guarantor or any other
Exculpated Party other than the Collateral expressly granted under the Loan
Documents.
7. MISCELLANEOUS.
7.1 Entire Agreement; Amendments. This Guaranty, together with the
other Loan Documents, constitute the entire agreement between the parties with
respect to the subject matter hereof and may not be amended or supplemented
except by a writing signed by the Guarantors and the Agent.
7.2 Headings. The headings in this Guaranty are for convenience of
reference only and are not part of the substance of this Guaranty.
7.3 Severability. In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.
7.4 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Guaranty, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be delivered in
person with receipt acknowledged, delivered by reputable overnight courier or
telecopied and confirmed immediately in writing by a copy mailed by registered
or certified mail, return receipt requested, postage prepaid, addressed as
hereinafter set forth, or mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Agent, at
Pensioenfonds PGGM
Kroostweg-Noord 149
Zeist, The Netherlands
Telecopier:011-31-30-696-3388
Attention: Mr. Jan van der Vlist
Ms. Anneke C. van de Puttelaar
7
<PAGE>
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Telecopier:(212) 750-9022
Attention: Robert M. Safron, Esq.
(b) If to Guarantors:
Charlotte Plaza Properties, Inc.
126 East 56th Street
New York, New York 10022
Telecopier:(212) 605-7199
Attention: Mr. John S. Moody
Balsam Mountain, Inc.
126 East 56th Street
New York, New York 10022
Telecopier:(212) 605-7199
Attention: Mr. John S. Moody
DIHC of Georgia, Inc.
126 East 56th Street
New York, New York 10022
Telecopier:(212) 605-7199
Attention: Mr. John S. Moody
DIHC Marble Place Properties, Inc.
126 East 56th Street
New York, New York 10022
Telecopier:(212) 605-7199
Attention: Mr. John S. Moody
DIHC Dearborn Properties, Inc.
126 East 56th Street
New York, New York 10022
Telecopier:(212) 605-7199
Attention: Mr. John S. Moody
8
<PAGE>
DIHC Dearborn Venture
126 East 56th Street
New York, New York 10022
Telecopier:(212) 605-7199
Attention: Mr. John S. Moody
-- and --
Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Telecopier:(212) 605-7199
Attention: Mr. John S. Moody
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Telecopier:(404) 572-5148
Attention: William B. Fryer, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, on the date of telecopier transmission, on the date
of delivery by reputable overnight courier or three (3) Business Days after the
same shall have been deposited with the United States mail.
7.5 Binding Effect. This Guaranty shall bind each of the Guarantors
and shall inure to the benefit of the Agent, the Lenders and their respective
successors and assigns. The Guarantors may not assign this Guaranty without the
consent of the Agent and the Required Lenders.
7.6 Non-Waiver. The failure of the Agent or any Lender to enforce
any right or remedy hereunder, or promptly to enforce any such right or remedy,
shall not constitute a waiver thereof, nor give rise to any estoppel against the
Agent or any Lender, nor excuse any Of the Guarantors from its obligations
hereunder.
7.7 CHOICE OF LAW. THE TERMS OF THIS GUARANTY SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
9
<PAGE>
WITH, THE LAWS OF THE STATE OF NEW YORK (EXCLUSIVE OF ANY RULES AS TO CONFLICT
OF LAWS) AND THE LAWS OF THE UNITED STATES APPLICABLE THEREIN. SERVICE OF
PROCESS ON EACH OF THE GUARANTORS IN ANY ACTION ARISING OUT OF OR RELATING TO
THIS GUARANTY SHALL BE EFFECTIVE IF MAILED TO THE GUARANTOR IN ACCORDANCE WITH
SECTION 7.4 HEREOF. NOTHING HEREIN SHALL PRECLUDE THE AGENT OR ANY LENDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.
7.8 Expenses. Each of the Guarantors agrees that, with or without
notice or demand, it will reimburse the Agent and any Lender for all reasonable
expenses (including counsel fees) actually incurred by the Agent and any Lender
in connection with the enforcement of this Guaranty.
7.9 Indemnity. Each of the Guarantors agrees to indemnify the Agent
and any Lender and hold them harmless against any documentary taxes, withholding
taxes, assessments or charges made by any governmental authority by reason of
the execution, delivery and performance of this Guaranty.
7.10 Counterparts. This Guaranty may be executed in any number of
counterparts which shall individually and collectively constitute one agreement.
10
<PAGE>
IN WITNESS WHEREOF, each of the Guarantors has executed and
delivered this Guaranty as of the date first above written.
CHARLOTTE PLAZA PROPERTIES, INC.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
BALSAM MOUNTAIN, INC.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
DIHC OF GEORGIA, INC.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
11
<PAGE>
DIHC MARBLE PLACE PROPERTIES, INC.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
DIHC DEARBORN PROPERTIES, INC.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
DIHC DEARBORN VENTURE
By: Its general partner,
DIHC Marble Place Properties, Inc.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
By: Its general partner,
DIHC Dearborn Properties I, Inc.,
a Georgia corporation
By:___________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL]
12
<PAGE>
NON-RECOURSE GUARANTY
(Cornerstone Properties Inc.)
GUARANTY, dated as of October -, 1997, of the undersigned,
CORNERSTONE PROPERTIES INC., a Nevada corporation ("Guarantor" or "Borrower"),
in favor of STICHTING PENSIOENFONDS VOOR DE GEZONDHEID, GEESTELIJKE EN
MAATSCHAPPELIJKE BELANGEN, a foundation formed according to the laws of The
Netherlands, as administrative agent under the Loan Agreement for the holders of
the Notes (as defined below) ("Agent").
W I T N E S S E T H :
WHEREAS, Guarantor and certain of its subsidiaries, have executed
and delivered to the Agent that certain Note and Collateral Agency Agreement
(the "Loan Agreement") as amended, supplemented or modified from time to time,
dated as of the date hereof pursuant to which Borrower will execute and deliver
that certain Deferred Purchase Price Note (Note A) dated as of the date hereof
in the original principal amount of $55,000,000 ("Note A"), that certain
Deferred Purchase Price Note (Note B) dated as of the date hereof in the
original principal amount of $10,000,000 ("Note B "), that certain Deferred
Purchase Price Note (Note C) dated as of the date hereof in the original
principal amount of $30,000,000 ("Note C"), and that certain Deferred Purchase
Price Note (Note E) dated as of the date hereof in the original principal amount
of $120,000,000 ("Note E"), and CStone-527 Madison, Inc. ("Madison Avenue") will
execute and deliver that certain Deferred Purchase Price Note (Note D) dated as
of the date hereof in the original principal amount of $35,000,000 ("Note D")
(Note A, Note B, Note C, Note D and Note E, as amended, supplemented, replaced,
exchanged or modified from time to time, are collectively referred to herein as
the "Notes").
WHEREAS, Guarantor directly or indirectly owns 100% of the equity
interests of Madison Avenue and will derive direct and indirect economic
benefits from the execution and delivery of the Loan Agreement and the
transactions related thereto;
WHEREAS, Guarantor has secured this Guaranty by the pledge of its
rights in and to the stock of Madison Avenue.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce the Lenders to accept the Notes, it is
agreed as follows:
1. DEFINITIONS. Capitalized terms used herein shall have the
meanings assigned to them in the Loan Agreement, unless the context otherwise
requires or unless otherwise defined herein.
References to this "Guaranty" shall mean this Guaranty, including
all amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to the Guaranty as the same mav be in
effect at the time such reference becomes operative.
<PAGE>
References to "Guaranteed Obligations" shall mean the unpaid
principal of and interest on Note D and all other obligations and liabilities of
Madison Avenue and the Guarantor to the Agent and the Lenders (including,
without limitation, interest accruing at the then applicable rate provided in
the Notes after maturity of the Notes and interest accruing at the then
applicable rate provided in the Notes after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to Madison Avenue, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement or any other Loan Document.
References to "Loan Documents" shall mean the Notes, the Loan
Agreement, and the Collateral Agreements.
References to "Pledged Collateral" shall mean the Collateral owned
by Guarantor.
2. THE GUARANTY. The guaranty of the Guarantor hereunder is as
follows:
2.1 Guaranty of Note D. The Guarantor hereby unconditionally
guarantees to the Agent, and its successors, endorsees, transferees and assigns,
for its benefit and for the benefit of the holders of the Notes, the prompt
payment (whether at stated maturity, by acceleration or otherwise) and
performance when due of the Guaranteed Obligations. The Guarantor agrees that
this Guaranty is a guaranty of payment and performance and not of collection,
and that its obligations under this Guaranty shall be primary, absolute and
unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guaranty, the Loan Agreement, any
other Loan Document or any other agreement, document or instrument to
which Madison Avenue and/or the Guarantor is or are or may become a party;
(b) the absence of any action to enforce this Guaranty, the Loan
Agreement, Note D or any other Loan Document or the waiver or consent by
the Agent or any Lenders with respect to any of the provisions thereof,
(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for the Guaranteed Obligations or any action,
or the absence of any action, by the Agent or Lenders in respect thereof
(including, without limitation, the release of any such security); or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor,
2
<PAGE>
it being agreed by the Guarantor that, except as set forth in Section 2.2
hereof, its obligations under this Guaranty shall not be discharged until the
payment and performance, in full, of the Guaranteed Obligations. The Guarantor
shall be regarded, and shall be in the same position, as principal debtor with
respect to Note D.
2.2 Termination of Guaranty. Notwithstanding anything to the
contrary contained herein, any and all liability or obligation of Guarantor
hereunder shall terminate and be discharged in full upon payment and
performance, in full, of Note D, provided, however, no Default or Event of
Default shall have occurred and be continuing at the time of such termination or
discharge unless such Event of Default shall cease to exist as a result of the
termination or discharge.
2.3 Enforcement of Guaranty. In no event shall the Agent or any
Lender have any obligation (although it is entitled, at its option) to proceed
against Madison Avenue or any other person or any real or personal property
pledged to secure the Guaranteed Obligations before proceeding against the
Guarantor, and the Agent or any Lender may proceed, prior or subsequent to, or
simultaneously with, the enforcement of the Agent's or any Lender's rights
hereunder, to exercise any right or remedy which it may have against any
property, real or personal, as a result of any Lien it may have as security for
all or any portion of the Guaranteed Obligations.
2.4 Waiver. In addition to the waivers contained in Section 2.1
hereof, the Guarantor waives, and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension, marshalling of assets or redemption
laws, or exemption, whether now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance by the Guarantor of its
obligations under, or the enforcement by Agent or any Lender of, this Guaranty.
The Guarantor hereby waives diligence, presentment and demand (whether for
nonpayment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Notes, the Loan Agreement, or any other Loan Document,
acceptance of further security, release of further security, composition or
agreement arrived at as to the amount of, or the terms of, the Loan Agreement,
Note D or any other Loan Document, notice of adverse change in Madison Avenue's
financial condition or any other fact which might materially increase the risk
to the Guarantor) with respect to the Guaranteed Obligations or all other
demands whatsoever and waives the benefit of all provisions of law which are or
might be in conflict with the terms of this Guaranty. The Guarantor represents,
warrants and agrees that, as of the date of this Guaranty, its obligations under
this Guaranty are not subject to any offense or defense against the Agent, any
Lender or Madison Avenue of any kind.
2.5 Benefits of Guaranty. The provisions of this Guaranty are for
the benefit of the Agent, the Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between Madison Avenue, the Agent and the Lenders, the obligations of Madison
Avenue under Note D, the Loan Agreement or any other Loan Document.
3
<PAGE>
2.6 Modification of Note, etc. If the Agent or any Lender shall at
any time or from time to time, with or without the consent of, the Guarantor:
(a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, Note D, the Loan Agreement or any
other Loan Document;
(b) take any action under or in respect of the Loan Agreement, Note
D or any other Loan Document in the exercise of any remedy, power or
privilege contained therein or available to it at law, equity or
otherwise, or waive or refrain from exercising any such remedies, powers
or privileges;
(c) amend or modify, in any manner whatsoever, Note D, the Loan
Agreement or any other Loan Document;
(d) extend or waive the time for any of the Guarantor's, Madison
Avenue or other person's performance of, or compliance with, any term,
covenant or agreement on its part to be performed or observed under Note
D, the Loan Agreement or any other Loan Document, or waive such
performance or compliance or consent to a failure of, or departure from,
such performance or compliance:
(e) take and hold security or collateral for the Guaranteed
Obligations or sell, exchange, release, dispose of, or otherwise deal
with, any property pledged, mortgaged or conveyed, or in which the Agent
or any Lender has been granted a Lien, to secure any indebtedness of any
of the Guarantor or Madison Avenue to the Agent or any Lender;
(f) release anyone who may be liable in any mariner for the payment
of any amounts owed by any of the Guarantor or Madison Avenue to the Agent
or any Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of the
Guarantor or Madison Avenue are subordinated to the claims of the Agent or
any Lender; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by the Guarantor or Madison Avenue to the Agent or any
Lender in such manner as the Agent or any Lender shall determine in their
discretion;
then neither the Agent nor any Lender shall incur any liability to the Guarantor
pursuant hereto as a result thereof, and no such action shall impair or release
the obligations of any of the Guarantor under this Guaranty.
2.7 Reinstatement. This Guaranty shall remain in full force and
effect and continue to be effective in the event any petition be filed by or
against Madison Avenue or Guarantor for liquidation or reorganization, in the
event Madison Avenue or the Guarantor
4
<PAGE>
becomes insolvent or makes an assignment for the benefit of creditors or in the
event a receiver or trustee be appointed for all or any significant part of
Madison Avenue's or Guarantor's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Guaranteed Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by the
Agent or any Lender, whether as a "voidable preference", "fraudulent
conveyance", or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Guaranteed Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
2.8 Election of Remedies, Etc. Any election of remedies which
results in the denial or impairment of the right of the Agent or any Lender to
seek a deficiency judgment against Madison Avenue shall not impair the
obligation of the Guarantor to pay the full amount of the Guaranteed
Obligations. In the event the Agent or any Lender shall bid at any foreclosure
or trustee's sale or at any private sale permitted by law, the Agent or any
Lender may bid all or less than the amount of the Guaranteed Obligations and the
amount of such bid need not be paid by the Agent or any Lender but shall be
credited against the Guaranteed Obligations. The amount of the successful bid at
any such sale, whether the Agent, any Lender or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value of
the collateral.
2.9 Continuing Guaranty. The Guarantor agrees that this Guaranty is
a continuing guaranty and shall remain in full force and effect until the
payment in full of all Guaranteed Obligations except as set forth in Section
2.2.
3. REPRESENTATIONS AND WARRANTIES. The Guarantor makes the following
representations and warranties to the Agent and each Lender:
3.1 Corporate Power; Authorization; Enforceability. The execution,
delivery and performance of this Guaranty by the Guarantor will not violate any
law or regulation, or any order or decree of any court or governmental
instrumentality, will not conflict with or result in the breach of, or
constitute a default under any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which the Guarantor is a party or by which
Guarantor or any of its property is bound, will not result in the creation or
imposition of any Lien upon any of the property of Guarantor and the same do not
require the consent or approval of any governmental body, agency, authority or
any other person except those already obtained. This Guaranty has been duly
executed and delivered by or on behalf of Guarantor.
3.2 Affirmation of Covenants, Representations and Warranties.
Guarantor affirms and ratifies the covenants, representations and warranties
contained in Articles III, IV and V of the Loan Agreement and agrees and
covenants that it shall comply with the terms of such covenants, representations
and warranties.
5
<PAGE>
4. PERMITTED ASSIGNMENT. The Agent or any Lender may freely assign
its rights and delegate its duties under this Guaranty, but no such assignment
or delegation shall increase or diminish the obligations of the Guarantor
hereunder.
5. FURTHER ASSURANCES. The Guarantor agrees, upon the written
request of the Agent, to execute and deliver to the Agent, from time to time,
any additional instruments or documents reasonably considered necessary by the
Agent to cause this Guaranty to be, become or remain valid and effective in
accordance with its terms.
6. NON-RECOURSE. Except as specifically provided for in this Section
6 and in Section 8.11 of the Loan Agreement, (i) neither Guarantor nor any of
its respective officers, directors, shareholders, agents, employees or
representatives (collectively, the "Exculpated Parties") shall be personally
liable for the payment of any sums due hereunder or the performance of any
obligations of the Guarantor hereunder, or under the other Loan Documents, and
(ii) no judgment for the repayment of the Guaranteed Obligations or interest
thereon or any other amount payable pursuant to any of the Loan Documents will
be enforced against any of the Exculpated Parties personally, or any property of
any of the Exculpated Parties other than Collateral and any other security now
or hereafter expressly granted under the Loan Documents in any action to enforce
this Guaranty Agreement or otherwise realize upon any security now or hereafter
expressly granted under the Loan Documents or to collect any amount payable
hereunder. Notwithstanding the foregoing:
Nothing herein contained shall be construed as prohibiting Agent or
any Lender from exercising any and all remedies which the Loan Documents permit,
including the right to bring actions or proceedings against Guarantor and other
Exculpated Parties and to enter a judgment against Guarantor and other
Exculpated Parties, so long as the exercise of any remedy does not extend to
execution against or recovery out of any property of Guarantor or any other
Exculpated Party other than the Collateral expressly granted under the Loan
Documents;
7. MISCELLANEOUS.
7.1 Entire Agreement; Amendments. This Guaranty, together with the
other Loan Documents, constitute the entire agreement between the parties with
respect to the subject matter hereof and may not be amended or supplemented
except by a writing signed by the Guarantor and the Agent.
7.2 Headings. The headings in this Guaranty are for convenience of
reference only and are not part of the substance of this Guaranty.
7.3 Severability. In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.
6
<PAGE>
7.4 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Guaranty, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be delivered in
person with receipt acknowledged, delivered by reputable overnight courier or
telecopied and confirmed immediately in writing by a copy mailed by registered
or certified mail, return receipt requested, postage prepaid, addressed as
hereinafter set forth, or mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Agent, at
Pensioenfonds PGGM
Kroostweg-Noord 149
Zeist, The Netherlands
Telecopier: 01 1-31-30-696-3388
Attention: Mr. Jan van der Vlist
Ms. Anneke C. van de Puttelaar
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Telecopier: (212) 750-9022
Attention: Robert M. Safron, Esq.
(b) If to the Guarantor:
Charlotte Plaza Properties, Inc.
126 East 56th Street
New York, New York 10022
Telecopier: (212) 605-7199
Attention: Mr. John S. Moody
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Telecopier: (404) 572-5148
Attention: William B. Fryer, Esq.
7
<PAGE>
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, on the date of telecopier transmission, on the date
of delivery by reputable overnight courier or three (3) Business Days after the
same shall have been deposited with the United States mail.
7.5 Binding Effect. This Guaranty shall bind the Guarantor and shall
inure to the benefit of the Agent, the Lenders and their respective successors
and assigns. The Guarantor may not assign this Guaranty without the consent of
the Agent and the Required Lenders.
7.6 Non-Waiver. The failure of the Agent or any Lender to enforce
any right or remedy hereunder, or promptly to enforce any such right or remedy,
shall not constitute a waiver thereof, nor give rise to any estoppel against the
Agent or any Lender, nor excuse the Guarantor from its obligations hereunder.
7.7 CHOICE OF LAW. THE TERMS OF THIS GUARANTY SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (EXCLUSIVE OF ANY RULES AS TO CONFLICT OF LAWS) AND THE LAWS OF THE
UNITED STATES APPLICABLE THEREIN. SERVICE OF PROCESS ON THE GUARANTOR IN ANY
ACTION ARISING OUT OF OR RELATING TO THIS GUARANTY SHALL BE EFFECTIVE IF MAILED
TO THE GUARANTOR IN ACCORDANCE WITH SECTION 7.4 HEREOF. NOTHING HEREIN SHALL
PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY OTHER JURISDICTION.
7.8 Expenses. The Guarantor agrees that, with or without notice or
demand, it will reimburse the Agent and any Lender for all reasonable expenses
(including counsel fees) actually incurred by the Agent and any Lender in
connection with the enforcement of this Guaranty.
7.9 Indemnity. Except as provided in Section __ of the Loan
Agreement, the Guarantor agrees to indemnify the Agent and any Lender and hold
them harmless against any documentary taxes, withholding taxes, assessments or
charges made by any governmental authority by reason of the execution, delivery
and performance of this Guaranty.
7.10 Counterparts. This Guaranty may be executed in any number of
counterparts which shall individually and collectively constitute one agreement.
8
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed and delivered this
Guaranty as of the date first above written.
CORNERSTONE PROPERTIES INC.,
a Nevada corporation
By:__________________________________
John S. Moody
President and Chief Executive Officer
By:__________________________________
Rodney C. Dimock
Executive Vice President and
Chief Operating Officer
[CORPORATE SEAL]
9
<PAGE>
SCHEDULE 3.5
EXISTING DEFAULTS
<PAGE>
Exhibit 10.97
ASSIGNMENT OF PROMISSORY NOTE
-----------------------------
FOR VALUE RECEIVED DIHC FINANCE CORPORATION ("Assignor"), a Georgia
corporation having an office at 200 Galleria Parkway, N.W., Suite 2000, Atlanta,
Georgia 30339, has this day granted, bargained, sold, assigned, transferred and
set over unto CORNERSTONE PROPERTIES INC., a Nevada corporation, having an
office at 125 East 56th Street, New York, New York ("Assignee"), all of
Assignor's right, title and interest in and to that certain promissory note more
particularly described on Schedule A annexed hereto and made a part hereof (such
note, as the same may have been amended or modified, are hereinafter the
"Note"), and all other recorded and unrecorded documents, instruments and
agreements, if any, delivered to Assignor in connection with the loan (the
"Loan") evidenced by the Note (such documents, instruments, agreement, together
with the Note and Security Agreement, is hereinafter the "Loan Documents").
TO HAVE AND TO HOLD the Loan Documents unto the Assignee and to the
successors, legal representatives and assigns of the Assignee forever from and
after the date hereof.
AND Assignor represents and warrants that as of the date hereof there
is due and owing in respect of the Loan the outstanding principal amount set
forth on Schedule A attached hereto.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment as of
the 27th day of October, 1997.
DIHC FINANCE CORPORATION
By: /s/ John S. Moody
-------------------------------
Name: John S. Moody
Title: President
By: /s/ Thomas P. Loftus
-------------------------------
Name: Thomas P. Loftus
Title: Secretary
<PAGE>
COUNTY OF NEW YORK )
)SS:
STATE OF NEW YORK )
BEFORE ME THE UNDERSIGNED AUTHORITY PERSONALLY APPEARED ON THIS DAY
JOHN S. MOODY AND THOMAS P. LOFTUS, TO ME PERSONALLY KNOWN, WHO BEING BY ME DULY
SWORN DID DEPOSE AND SAY THAT THEY ARE THE PRESIDENT AND SECRETARY OF DIHC
FINANCE CORPORATION, THE CORPORATION DESCRIBED INT AND WHICH EXECUTED THE
FOREGOING INSTRUMENT; THAT HE ACKNOWLEDGED EXECUTION OF SAID INSTRUMENT TO BE
THE VOLUNTARY ACT AND DEED OF SAID CORPORATION BY ORDER OF THE BOARD OF
DIRECTORS OF SAID CORPORATION.
WITNESS MY HAND AND OFFICIAL SEAL THIS 27TH DAY OF OCTOBER, 1997.
/S/ PATTI A. OLSON
-----------------------------------
NOTARY PUBLIC
PATTI A. OLSON
NOTARY PUBLIC
STATE OF NEW YORK
NO. 4738281
QUALIFIED IN DUCHESS COUNTY
<PAGE>
SCHEDULE A
(NOTES)
1.PROMISSORY NOTE DATED AS OF AUGUST 15, 1997 IN THE ORIGINAL PRINCIPAL AMOUNT
OF $38,900,000 MADE BY MARKET SQUARE DEVELOPMENT INVESTORS IN FAVOR OF DIHC
FINANCE CORPORATION.
<PAGE>
Exhibit 10.98
PROMISSORY NOTE AND LOAN AGREEMENT
Principal Sum: up to $41,900,000 Date: August 15, 1997
New York, New York
FOR VALUE RECEIVED, MARKET SQUARE DEVELOPMENT INVESTORS ("Maker"), a
District of Columbia limited partnership, promises to pay DIHC FINANCE
CORPORATION ("Payee"), a Georgia corporation having an office at 200 Galleria
Parkway N.W., Suite 2000, Atlanta, Georgia 30339, or order, or at such other
place as may be designated in writing by the holder hereof, the principal sum of
FORTY-ONE MILLION NINE HUNDRED THOUSAND AND NO/100 DOLLARS ($41,900,000) with
interest thereon, or on the amount thereof from time to time outstanding, to be
computed as hereinafter provided, until the said principal sum shall be fully
paid and to be due and payable as hereinafter provided. The said principal sum,
or the amount thereof outstanding, with accrued and unpaid interest thereon,
shall be due and payable on the Maturity Date (as hereinafter defined).
1. Interest. Interest shall accrue from the date hereof up to and
through the date on which all principal and interest hereunder is paid in full,
shall be computed on the basis of actual days elapsed in a 365-day year, and
shall be calculated on the outstanding principal balance hereunder at an annual
rate of interest equal to eleven (11%) percent per annum (the "Interest Rate").
2. Installments.
(a) No installments of interest or principal shall be payable
under this Note for the period commencing on the date hereof and ending on
August 1, 1999 (the
<PAGE>
2
"Deferral End Date"). During such period, all interest on this Note shall accrue
and, to the extent permitted by law, such accrued and unpaid interest shall bear
interest at the Interest Rate, compounded monthly.
(b) Installments of principal and interest at the Interest
Rate (the "Installment Payments"), in the amount necessary to amortize in equal
monthly payments the sum of (a) the then-outstanding principal sum hereof and
(b) the amount of all interest accrued and deferred pursuant to the preceding
sentence as of the Deferral End Date and the interest accrued thereon as of
Deferral End Date less any sums paid on account of such accrued and deferred
interest as hereinafter provided, together with interest on such sum, over a
period of twenty (20) years (the "Amortization Period"), shall be due and
payable commencing on September 1, 1999 and continuing on the first day of each
and every calendar month thereafter ensuing until September 1, 2002 (the
"Maturity Date"), at which time the entire outstanding principal sum hereof, all
accrued interest and all other sums due and payable hereunder shall be fully
paid. Payee shall calculate the amount of such installments and give notice
thereof to Maker. Payee's calculation of the amount of such installments shall
be definitive absent manifest error.
(c) Maker agrees that in the event that Maker has any net cash
flow from any source, such net cash flow shall be applied first on account of
any interest accrued and deferred hereunder, second, on account of any
Installment Payments then due hereunder, and third, on account of the
outstanding principal amount of this Note prior to being used for any other
purpose.
<PAGE>
3
(d) Payee expressly acknowledges that (i) in no event shall
the obligations of Maker under this Note or the Security Documents (as
hereinafter defined) be enforced against M.I. West Pennsylvania Limited
Partnership ("M.I. West"), M.I. West End, Inc., any interest of M.1 West in
Maker, any partner or agent of M.I. West, or any shareholder, officer, director
or agent of M.I. West End, Inc. (collectively, the "Exculpated Parties") and
(ii) Payee shall not seek any judgment against the Exculpated Parties in respect
of this Note, the Security Documents or otherwise relating to the indebtedness
evidenced hereby.
3. Advances.
(a) Immediately after the execution of this Note, Payee agrees
to lend to Maker the sum of $38,900,000 (the "Initial Advance"). Payee agrees to
disburse the proceeds of the Initial Advance to the sole partners, as of the
date hereof, of Maker, DIHC Market Square, Inc. ("DIHC-MS") and M.I. West, in
proportion to their respective interests in Maker. M.I. West's proportionate
share of the Initial Advance in the amount of $16,208,463.00 shall be paid to
M.I. West pursuant to the wire instructions attached hereto as Schedule A and
DIHC-MS's proportionate share of the Initial Advance in the amount of
$22,691,537.00 shall be wired or transferred into an account as directed by
DIHC-MS.
(b) Provided that Maker is not in default hereunder beyond any
applicable notice and/or grace period, Payee agrees, upon request of Maker from
time to time after the date hereof, but not more frequently than once per
calendar month, to lend to Maker additional sum(s) in an amount not to exceed
THREE MILLION AND NO/100
<PAGE>
4
($3,000,000) DOLLARS in the aggregate (the "Additional Loan") for the sole
purpose of funding any capital contributions or loans to Market Square
Associates ("MSA") required or permitted under the joint venture agreement for
MSA (the "Venture Agreement"), provided that at no time shall the aggregate
outstanding principal amount evidenced by this Note exceed $41,900,000. In the
event of any such additional lending after the Deferral End Date, Payee agrees
to recalculate the Installment Payment to take into account the additional
lending provided that the Amortization Period for the purposes of such
recalculation shall be deemed reduced by the number of years or fractional
portions thereof that have elapsed since the occurrence of the Deferral End
Date.
4. Default Interest Rate. In the event Maker fails to pay any
installment of principal or interest within ten (10) days after its due date,
the unpaid amount shall accrue interest at the rate (the "Default Rate") equal
to the lesser of (a) five percent (5%) in excess of the "prime rate" announced
from time to time by Morgan Guaranty Trust Company at its offices in the City of
New York or (b) the maximum interest rate permitted by law to be charged to
Maker until paid.
5. Security. Upon the request of Payee, Maker shall deliver (a) to
Payee a pledge of Maker's partnership interest in MSA under the Venture
Agreement as security for Maker's obligations under this Note pursuant to a
pledge and security agreement satisfactory to Payee and (b) such other security
documents as Payee may reasonably request to secure Maker's obligations
hereunder, including, but not limited to, UCC-1 Financing Statements
(collectively, the "Security Documents").
<PAGE>
5
6. Event of Default. The occurrence of any one of the following
events shall constitute an Event of Default hereunder:
(a) Maker fails to pay any installment of principal or
interest, or any other sum due hereunder, when and as the same shall become due
and payable, and such failure is not cured within fifteen (15) days after
written notice thereof from Payee to Maker;
(b) Maker, or any endorser makes any assignment for the
benefit of creditors; or a receiver, liquidator or trustee of Maker, or of
substantially all property of Maker or such endorser, is appointed; or any
voluntary or involuntary petition for the bankruptcy, reorganization or
arrangement of, or for the composition, extension, arrangement or adjustment of
any of the obligations of, Maker or such endorser, pursuant to the Federal
Bankruptcy Code, or any similar statute, is filed and not dismissed within 60
days; or Maker or such endorser shall have been adjudicated a bankrupt or
insolvent; or any voluntary or involuntary petition by or against Maker or such
endorser, as debtor seeking an order for relief pursuant to the Federal
Bankruptcy Code, or any similar statute, is pending or filed and not dismissed
within 60 days; or a court enters an order for relief for Maker or such
endorser, as debtor; or Maker or any such endorser, is insolvent by reason of
its inability to pay its debts as they become due; or a writ of attachment is
issued against any of the property of Maker or such endorser, and not dismissed
within 60 days; or if possession is taken to assume control of all or any
substantial part of such property or of the business of Maker or such endorser
by any government or governmental agency; and/or
(c) Any warranty, representation or statement of Maker in this
Note
<PAGE>
6
or any of the Security Documents or any other instrument or document now or
hereafter evidencing, securing or otherwise relating to the indebtedness
evidenced by this Note proves untrue or misleading in any material respect; or
Maker fails to keep, observe, and perform any other covenant, agreement,
obligation or condition contained herein, the Security Documents or in any other
instrument or document now or hereafter evidencing or securing the indebtedness
evidenced by this Note or any part thereof, and such untruth, misleading matter,
failure or default is not cured within thirty (30) days after written notice
thereof from Payee to Maker or such additional period as may be reasonably
needed as long as Payee diligently prosecutes the cure of same.
7. Rights of Payee upon Default. Upon and after the occurrence of an
Event of Default, it is expressly agreed that the principal sum of this Note
(and all accrued interest thereon and other sums payable hereunder) shall become
immediately due and payable at the option of Payee.
8. Prepayment. This Note may be prepaid in whole or in part without
fee or penalty (but with accrued interest on the amount so prepaid) upon any
date for the payment of interest, upon not less than ten (10) days prior written
notice by Maker to Payee.
9. Applicable Law. This Note has been negotiated, executed, made and
delivered in the City, County and State of New York. Maker agrees that this Note
shall be governed, construed and interpreted in accordance with the laws of the
State of New York.
10. Waiver.
(a) Maker and any endorsers, sureties and guarantors hereof or
<PAGE>
7
hereon hereby waive presentment for payment, demand, protest, notice of
non-payment or dishonor and of protest, and agree to remain bound until the
principal sum of this Note or the amount thereof outstanding and interest and
all other sums payable hereunder are paid in full notwithstanding any extensions
of time for payment which may be granted even though the period of extension be
indefinite, and notwithstanding any inaction by, or failure to assert any legal
right available to, Payee.
(b) It is further expressly agreed that any waiver by Payee
other than a waiver in writing signed by Payee, of any term or provision hereof,
of the Security Documents or of any right, remedy or option under this Note or
the Security Documents shall not be controlling, nor shall it prevent or estop
Payee from thereafter enforcing such term, provision, right, remedy or option,
and the failure or refusal of Payee to insist in any one or more instances upon
the strict performance of any of the terms or provisions of this Note, or the
Security Documents shall not be construed as a waiver or relinquishment for the
future of any such term or provision, but the same shall continue in full force
and effect, it being understood and agreed that Payee's rights, remedies and
options under this Note and the Security Documents are and shall be cumulative
and are in addition to all other rights, remedies and options of Payee in law or
in equity or under any other agreement.
(c) No modification or waiver by Payee of any right or remedy
under this Note shall be effective unless made in writing. No delay by Payee in
exercising any right or remedy hereunder, or otherwise afforded by law, shall
operate as a waiver thereof or preclude the exercise thereof upon the occurrence
of an Event of Default. No
<PAGE>
8
failure by Payee to insist upon the strict performance by Maker of each and
every covenant and agreement of Maker under this Note shall constitute a waiver
of any such covenant or agreement, and no waiver by Payee of any Event of
Default shall constitute a waiver of or consent to any subsequent Event of
Default. No failure of Payee to exercise its option to accelerate the maturity
of the indebtedness evidenced hereby, nor any forbearance by Payee before or
after the exercise of such option shall be construed as a waiver of any option,
power or right of Payee hereunder.
11. Successors. The term "Payee" shall mean the then holder of this
Note from time to time and its successors and permitted assigns.
12. Costs of Collection. Maker shall pay all costs of collection
when incurred, including, without limitation, the reasonable attorneys' fees and
disbursements of the Payee's counsel and court costs, which costs may be added
to the indebtedness evidenced hereby and must be paid promptly on demand,
together with interest thereon at the Default Rate.
13. Interest Not to Exceed Maximum Allowed by Law. If from any
circumstances whatsoever, the fulfillment of any provision of this Note or of
any other instrument evidencing or securing the indebtedness evidenced hereby,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law with regard to obligations of like character
and amount, then ipso facto, the obligation to be fulfilled shall be reduced to
the limit of such validity so that in no event shall any exaction be possible
<PAGE>
9
under this Note or under any other instrument evidencing or securing the
indebtedness evidenced hereby that is in excess of the current limit of such
validity, but such obligation shall be fulfilled to the limit of such validity.
In the event of any such reduction of said obligation, the unpaid principal
balance of this Note together with all accrued interest thereon and any other
sums advanced hereunder or under any instruments securing the indebtedness
evidenced hereby shall at the option of Payee become immediately due and
payable.
14. Assignment. Payee's right, title and interest in and to this
Note are freely assignable by Payee to Dutch Institutional Holding Company
("DIHC"), any affiliate or subsidiary of DIHC, Cornerstone Properties, Inc.
("CPP"), or any wholly-owned subsidiary of CPP without the consent or approval
of any person or entity, and any such assignment hereof by Payee shall operate
to vest in such assignee all rights, titles, interests and powers herein
conferred upon Payee. Notwithstanding the foregoing, Maker acknowledges that
Payee may, at any time and from time to time, sell this Note or any interest
herein, pledge or assign this Note or any interest herein as security in
connection with any financing arrangement and enter into any participation or
similar cooperative arrangements with respect hereto.
15. No Subordinate Financing. Notwithstanding anything to the
contrary contained in the Maker's venture agreement (the "MSDI Agreement"), in
no event shall Maker be permitted to incur any additional indebtedness under the
MSDI Agreement or otherwise on behalf of Maker.
16. Time of the Essence. Time is of the essence with respect to each
and
<PAGE>
10
every covenant, agreement and obligation of Maker under this Note.
17. Successors and Assigns. Each and every covenant, warranty and
agreement of Maker herein, if Maker be more than one, shall be jointly and
severally binding upon and enforceable against Maker, and each of them except as
otherwise provided in this Note. As used herein the terms "Maker" and "Payee"
shall include the named Maker and the named Payee and their respective heirs,
executors, administrators, legal representatives, successors, successors in
title and permitted assigns.
18. Severability. If any provision, paragraph, sentence, clause,
phrase or word of this Note, or the application thereof in any circumstance, is
held invalid or unenforceable, the validity and enforceability of the remainder
of this Note, and of the application of any such provision, paragraph, sentence,
clause, phrase or word in any other circumstance, shall not be affected thereby,
it being intended that all rights, powers and privileges of Payee hereunder
shall be enforceable to the fullest extent permitted by law.
19. Notices. Any and all notices, elections or demands permitted or
required to be made under this Note (collectively, "Notices") shall be in
writing and shall be delivered personally, or sent by registered or certified
mail, to the other party at the address set forth above, or at such other
address as may be supplied in writing in accordance with the terms of this
paragraph. For the period commencing on the date hereof and ending on the
Closing Date (as defined in that certain Redemption Agreement dated as of even
date herewith between DIHC, Maker and M.I. West), a copy of all Notices shall be
sent via telecopy with a copy by overnight courier to M.I. West, Attention: Mr.
Joop J. Hiddink,
<PAGE>
11
PVF Nederland nv, 410 Staalmeesterslaan, 1057PH Amsterdam, The Netherlands
(telecopy number: 011-31-20-607-4245) with a copy in like manner to Hale and
Dorr, LLP, 1455 Pennsylvania Avenue, N.W., Washington, D.C. 20004, Attention:
Steven S. Snider, Esq. (telecopy number: 202-942-8484). The date of personal
delivery, the third (3rd) business day following the date of mailing or the
first (1st) business day following a transmission by overnight courier, as the
case may be, shall be the date of the Notice.
20. Captions. Titles or captions of articles and paragraphs
contained in this Note are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Note or the intent of any provision hereof.
21. Number and Gender. Whenever required by the context, the
singular number shall include the plural and the gender of any pronoun shall
include the other genders.
<PAGE>
12
IN WITNESS WHEREOF, Maker has executed this Note as of the 15th day
of August, 1997.
MARKET SQUARE DEVELOPMENT
INVESTORS
By: DIHC Market Square, Inc., general
partner
By: /s/ Robert T. Sorrentino
------------------------
Robert T. Sorrentino
Vice President
By: M.I. West Pennsylvania Limited
Partnership, general partner
By: M.I. West End, Inc., its sole
general partner
By: /s/ Joop J. Hiddink
------------------------
Name: Joop J. Hiddink
Title: President
<PAGE>
Schedule A
Wiring Instructions
Bank: ABNAMRO Bank-New York
ABA number: 026 009 580
Account Number: 456-0-573922-42
Beneficiary: M.I. West Pennsylvania LP
Reference: 469.543-Loan Proceeds Distribution-MSDI
<PAGE>
STATE OF NEW YORK )
) ss.:
)
COUNTY OF NEW YORK )
On the 15th day of August 1997, before me personally came Joop J.
Hiddink, to me known who, being by me duly sworn, did depose and say that he
resides in the Town of Castricum, The Netherlands, that he is the President of
M.I. WEST END, INC., the corporation described in and which executed the
foregoing instrument, acting in its capacity as a general partner of M.I. WEST
PENNSYLVANIA LIMITED PARTNERSHIP, the limited partnership described in and which
executed the foregoing instrument and that he executed the foregoing instrument
by order of the Board of Directors of said corporation, as and for the act and
deed of said limited partnership.
/s/ Russell Wohl
----------------
Notary Public
Russell Wohl
STATE OF NEW YORK ) Notary Public State of New York
) ss.: No. 41-4977236
) Qualified in Queens Count
COUNTY OF NEW YORK ) Commission Expires Jan 28, 1999
On the 15th day of August, 1997, before me personally came Robert T.
Sorrentino, to me known who, being by me duly sworn, did depose and say that he
resides at 4312 Ivywood, Marietta, Georgia 30062; that he is Vice President of
DIHC MARKET SQUARE, INC., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of said corporation.
/s/ Russell Wohl
----------------
Notary Public
Russell Wohl
Notary Public State of New York
No. 41-4977236
Qualified in Queens Count
Commission Expires Jan 28, 1999
<PAGE>
Exhibit 10.99
PROMISSORY NOTE AND LOAN AGREEMENT
Principal Sum: $2,908,230.00 Date: as of January 30, 1998
New York, New York
FOR VALUE RECEIVED, MARKET SQUARE DEVELOPMENT INVESTORS ("Maker"), a
District of Columbia limited partnership, promises to pay to CORNERSTONE MARKET
SQUARE LLC ("Payee"), a Delaware limited liability company having an office at
126 East 56th Street, New York, New York 10022, or to order, or at such other
place as may be designated hereof, the principle sum of TWO MILLION NINE HUNDRED
EIGHT THOUSAND TWO HUNDRED THIRTY AND NO/100 DOLLARS ($2,908,230.00) with
interest thereon, or on the amount thereof from time to time outstanding, to be
computed as hereinafter provided, until the said principal sum shall be fully
paid, to be due and payable as provided. The said principal sum, or the amount
thereof outstanding, with accrued and unpaid interest thereon, shall be due and
payable on the Maturity Date (as hereinafter defined).
1. Interest. Interest shall accrue from the date hereof up to and
through the date on which all principle and interest hereunder, is paid in full,
shall be computed on the basis of actual days elapsed in a 365-day year, and
shall be calculated on the outstanding principal balance hereunder at an annual
rate of interest equal to eleven percent (11%) percent per annum (the"Interest
Rate") .
2. Installments.
a. No installments of interest or principal shall be payable
under this Note for the period commencing on the date hereof and ending on
August 1, 1999 (the "Deferral End Date"). During such period, all interest on
this Note shall accrue and, to the extent permitted by law, such accrued and
unpaid interest shall bear interest at the Interest Rate, compounded monthly.
b. Installments of principal and interest at the Interest Rate
(the "Installment Payments"), in the amount necessary to amortize in equal
monthly payments the sum of (a) the then-outstanding principal sum hereof and
(b) the amount of all interest accrued and deferred pursuant to the preceding
sentence as of the Deferral End Date, and the interest accrued thereon as of
Deferral End Date, less any sums paid on account of such accrued and deferred
interest and on account of principal as hereinafter provided, together with
interest on such sum, over a period of twenty (20) years (the "Amortization
Period"), shall be due and payable commencing on September 1, 1999 and
continuing on the first day of each and every calendar month thereafter ensuing
until September 1, 2002 (the "Maturity Date"), at which time the entire
outstanding principal sum hereof, all accrued interest and all other sums due
and payable hereunder shall be fully paid. Payee shall calculate the amount of
such installments and give notice thereof to Maker. Payee's calculation of the
amount of such installments shall be definitive absent manifest error.
<PAGE>
c. Maker agrees that in the event that Maker has any net cash
flow from any source after payment of any amounts due under that certain
Promissory Note and Loan Agreement dated August 15, 1997, from Maker, as "Maker"
therein, to DIHC Finance Corporation, as "Payee" therein, in the original
principal amount of up to $41,900,000.00, which loan has been assigned to
Cornerstone Properties Limited Partnership, such net cash flow shall be applied
first on account of any interest accrued and deferred hereunder; second, on
account of any Installment Payments then due hereunder; and third, on account of
the outstanding principal amount of this Note, prior to being used for any other
purpose.
d. Payee expressly acknowledges that (i) in no event shall the
obligations of Maker under this Note or the Security Documents (as hereinafter
defined) be enforced against DIHC Market Square Inc. ("DIHC-MS"), any interest
of DIHC-MS in Maker, or any shareholder, officer, director or agent of DIHC-MS
(collectively, the "Exculpated Parties") and (ii) payee shall not seek any
judgment against the Exculpated Parties in respect of this Note, the Security
Documents or otherwise relating to the indebtedness evidenced hereby.
3. Default Interest Rate. In the event Maker fails to pay any
installment of principal or interest within ten (10) days after its due date,
the unpaid amount shall accrue interest at the rate (the "Default Rate") equal
to the lesser of (a) five percent (5%) in excess of the "prime rate" announced
from time to time by Bankers Trust Company at its offices in the City of New
York or (b) the maximum interest rate permitted by law to be charged to Maker
until paid.
4. Security. Upon the request of Payee, Maker shall deliver (a) to
Payee a pledge of Maker's partnership interest under the joint venture agreement
for Market Square Associates, a District of Columbia general partnership
("MSA"), as security for Maker's obligations under this Note pursuant to a
pledge and security agreement satisfactory to Payee, and (b) such other security
documents as Payee may reasonably request to secure Maker's obligations
hereunder, including, but not limited to, UCC-1 Financing Statements
(collectively, the "Security Documents").
5. Event of Default. The occurrence of any one of the following
events shall constitute an "Event of Default" hereunder:
a. Maker fails to pay any installment of principal or
interest, or any other sum due hereunder, when and as the same shall become due
and payable, and such failure is not cured within fifteen (15) days after
written notice thereof from Payee to Maker;
b. Maker, or any endorser makes any assignment for the benefit
of creditors; or a receiver, liquidator or trustee of Maker, or of substantially
all property of Maker or such endorser, is appointed; or any voluntary or
involuntary petition for the bankruptcy, reorganization or arrangement of, or
for the composition, extension, arrangement or adjustment of any of the
obligations of, Maker or such endorser, pursuant to the Federal Bankruptcy Code,
or any similar statute, is filed and not dismissed within sixty (60) days; or
Maker or such endorser
2
<PAGE>
shall have been adjudicated a bankrupt or insolvent; or any voluntary or
involuntary petition by or against Maker or such endorser, as debtor seeking an
order for relief pursuant to the Federal Bankruptcy Code, or any similar
statute, is pending or filed and not dismissed within sixty (60) days; or a
court enters an order for relief for Maker or such endorser, as debtor; or Maker
or any such endorser, is insolvent by reason of its inability to pay its debts
as they become due; or a writ of attachment is issued against any of the
Property of Maker or such endorser, and not dismissed within sixty (60) days; or
if Possession is taken to assume control of all or any substantial part of such
part of such property or of the business of Maker or such endorser by any
government or governmental agency; and/or
c. Any warranty, representation or statement of Maker in this
Note or any of the Security Documents or any other instrument or document now or
hereafter evidencing, securing or otherwise relating to the indebtedness
evidenced by this Note proves untrue or misleading in any material respect; or
Maker fails to keep, observe, and perform any other covenant, agreement,
obligation or condition contained herein, the Security Documents or in any other
instrument or document now or hereafter evidencing or securing the indebtedness
evidenced by this Note or any part thereof, and such untruth, misleading matter,
failure or default is not cured within thirty (30) days after written notice
thereof from Payee to Maker or such additional period as may be reasonably
needed as long as Payee commences the cure of same within the thirty (30)-day
period and thereafter diligently prosecutes the cure to completion.
6. Rights of Payee upon Default. Upon and after the occurrence of an
Event of Default, it is expressly agreed that the principal sum of this Note
(and all accrued interest thereon and other sums payable hereunder) shall become
immediately due and payable at the option of Payee.
7. Prepayment. This Note may be prepaid in whole or in part without
fee or penalty (but with accrued interest on the amount so prepaid) at any time
upon not less am ten (10) days' prior written notice by Maker to Payee.
8. Applicable Law. This Note has been negotiated, executed, made and
delivered in the City, Country and State of New York. Maker agrees that this
Note shall be governed, construed and interpreted in accordance with the laws of
the State of New York.
9. Waiver.
a. Maker and any endorsers, sureties and guarantors hereof or
hereon hereby waive presentment for payment, demand, protest, notice of
non-payment or dishonor and of protest, and agree to remain bound until the
principal sum of this Note or the amount thereof outstanding and interest and
all other sums payable hereunder are paid in full notwithstanding any
extensions of time for payment which may be granted, even though the period of
extension may be indefinite, and notwithstanding any inaction by, or failure to
assert any legal right available to, Payee.
3
<PAGE>
b. It is further expressly agreed that any waiver by Payee,
other than a waiver in writing signed by Payee, of any term or provision hereof,
of the Security Documents or of any right, remedy or option under this Note or
the Security Documents shall not be controlling, nor shall it prevent or estop
Payee from thereafter enforcing such term, provision, right, remedy or option,
and the failure or refusal of Payee to insist in any one or more instances upon
the strict performance of any of the terms or provisions of this Note, or the
Security Documents shall not be construed as a waiver or relinquishment for the
future of any such term or provision, but the same shall continue in full force
and effect, it being understood and agreed that Payee's rights, remedies and
options under this Note and the Security Documents are and shall be cumulative
and are in addition to all other rights, remedies and options of Payee at law or
in equity or under any other agreement.
c. No modification or waiver by Payee of any right or remedy
under this Note shall be effective unless made in writing. No delay by Payee in
exercising any right or remedy hereunder, or otherwise afforded by law, shall
operate as a waiver thereof or preclude the exercise thereof upon the occurrence
of an Event of Default. No failure by Payee to insist upon the strict
performance by Maker of each and every covenant and agreement of Maker under
this Note shall constitute a waiver of any such covenant or agreement, and no
waiver by Payee of any Event of Default shall constitute a waiver of or consent
to any subsequent Event of Default. No failure of Payee to exercise its option
to accelerate the maturity of the indebtedness evidenced hereby, nor any
forbearance by Payee before or after the exercise of such option shall be
construed as a waiver of an option, power, right or remedy of Payee hereunder.
10. Successors. The term "Payee" shall mean the then holder of this
Note from time to time and its successors and permitted assigns.
11. Costs of Collection. Maker shall pay all costs of collection
when incurred, including, without limitation, the reasonable attorneys' fees and
disbursements of the Payees counsel and court costs, which costs may be added to
the indebtedness evidenced hereby and must be paid promptly on demand, together
with interest thereon at the Default Rate.
12. Interest Not to Exceed Maximum Allowed by Law. If from any
circumstances whatsoever, the fulfillment of any provision of this Note or of
any other instrument evidencing or securing the indebtedness evidenced hereby,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law with regard to obligations of like character
and amount, then ipso facto, the obligation to be fulfilled shall be reduced to
the limit of such validity so that in no event shall any exaction be possible
under this Note or under any other instrument evidencing or securing the
indebtedness evidenced hereby that is in excess of the current limit of
such validity, but such obligation shall be fulfilled to the limit of such
validity. In the event of any such reduction of said obligation, the unpaid
principal balance of this Note together with all accrued interest thereon and
any other sums advanced hereunder or under any instruments securing
4
<PAGE>
the indebtedness evidenced hereby shall at the option of Payee become
immediately due and payable.
13. Assignment. Payee's right, title and interest in and to this
Note are freely assignable by Payee to Cornerstone Properties Inc. ("CPP"), or
any affiliate or subsidiary of CPP, without the consent or approval of any
person or entity, and any such assignment hereof by Payee shall operate to vest
in such assignee all rights, titles, interests and powers herein conferred upon
Payee. Notwithstanding the foregoing, Maker acknowledges that Payee may, at any
time and from time to time, sell this Note or any interest herein, pledge or
assign this Note or any interest herein as security in connection with any
financing arrangement and enter into any participation or similar cooperative
arrangements with respect hereto.
14. Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Maker under this Note.
15. Successors and Assigns. Each and every covenant, warranty and
agreement of Maker herein, if Maker be more than one, shall be jointly and
severally binding upon and enforceable against Maker, and each of them except as
otherwise provided in this Note. As used herein the terms "Maker" and "Payee"
shall include the Maker and the named Payee and their respective heirs,
executors, administrators, legal representatives, successors, successors in
title and permitted assigns.
16. Severability. If any provision, paragraph, sentence, clause,
phrase or word of this Note, or the application thereof in any circumstance, is
held invalid or unenforceable, the validity and enforceability of the remainder
of this Note, and of the application of any such provision, paragraph, sentence,
clause, phrase or word in any other circumstance, shall not be affected thereby,
it being intended that all rights, powers and privileges of Payee hereunder
shall be enforceable to the fullest extent permitted by law.
17. Notices. Any and all notices, elections or demands permitted or
required to be made under this Note (collectively, "Notices") shall be in
writing and shall be delivered personally, or sent by registered or certified
mail, to the other party at the address set forth above, or at such other
address as may be supplied in writing in accordance with the terms of this
paragraph. The date of personal delivery, the third (3rd) business day following
the date of mailing or the first business day following a transmission by
overnight courier, as the case may be, shall be the date of the Notice.
18. Captions. Titles or captions of articles and paragraphs
contained in this Note are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Note or the intent of any provision hereof.
19. Number and Gender. Whenever required by the context, the
singular number shall include the plural and the gender of any pronoun shall
include the other genders.
5
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note as of the 30th day
of January, 1998.
"Maker":
MARKET SQUARE DEVELOPMENT
INVESTORS, a District of Columbia general
partnership
By: DIHC MARKET SQUARE, INC., a
Georgia corporation, as authorized general
partner
By: _______________________________
Name: __________________________
Title:__________________________
By: CORNERSTONE MARKET SQUARE
LLC, a Delaware limited liability company,
as authorized general partner
By: _______________________________
Name: __________________________
Title:__________________________
6
<PAGE>
Exhibit 10.100
SECOND AMENDMENT TO
ONE NINETY ONE PEACHTREE ASSOCIATES JOINT VENTURE AGREEMENT
This Second Amendment (this "Amendment") to One Ninety One Peachtree
Associates Joint Venture Agreement (the "Venture Agreement") is entered into as
of October 27, 1997, by and among C-H ASSOCIATES, LTD., a Georgia limited
partnership ("CHV") and DIHC PEACHTREE ASSOCIATES, a Georgia general partnership
("DIHC"). All capitalized terms used herein shall have the meanings given to
them in the Venture Agreement.
WHEREAS, One Ninety One Peachtree Associates (the "Venture") was
formed pursuant to the Joint Venture Agreement dated February 1, 1988 and was
amended pursuant to First Amendment, dated as of February 28, 1993 (as so
amended, the "Venture Agreement");
WHEREAS, Cornerstone Properties Inc., a Nevada corporation
("Cornerstone"), directly or indirectly, has acquired all of the beneficial
ownership of DIHC and in connection therewith has entered into certain
agreements with CHV;
WHEREAS, CHV and DIHC desire to amend the Venture Agreement as set
forth in this Amendment for certain purposes described herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. CHV consents to the acquisition by Cornerstone of all of the
beneficial ownership of DIHC and agrees that the same shall not constitute
a breach or violation of Section 6.01 or any other provisions of the
Venture Agreement so long as DIHC and Cornerstone comply with the
provisions of Section 6.01 and any other provision of the Venture
Agreement in connection with the consummation of such acquisition. DIHC
hereby represents and warrants to the Venture and CHV that the acquisition
of all of the beneficial ownership of DIHC by Cornerstone was accomplished
in compliance with all applicable state or federal securities laws. In
connection therewith, DIHC hereby agrees to indemnify and hold harmless
the Venture and CHV from and against any and all costs, damage, injury,
claims, actions and demands (including, without limitation, attorney's
fees) suffered by the Venture or CHV as a result of any violation or
alleged violation or failure to comply or alleged failure to comply with
any state or federal securities laws.
2. Section 1.01 shall be amended by replacing the existing
definitions as follows:
1
<PAGE>
DIHC Affiliate. The term "DIHC Affiliate" means (i) Cornerstone,
(ii) any Person which is wholly owned by Cornerstone, and (iii) any other
Person which, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with any of the
aforementioned DIHC Affiliates, or any of them. The term "control," as
used in the immediately preceding sentence, means, with respect to a
Person that is a corporation or partnership, the right to the exercise,
directly or indirectly of more than 25% of the voting rights attributable
to the shares of the controlled corporation or ownership of the right to
receive 25% or more of the profits of the controlled partnership, and,
with respect to a Person that is not a corporation or a partnership, the
possession, directly or indirectly, of not less than 25% of the beneficial
ownership thereof.
3. Section 3.01(c)(xvii) is hereby amended by inserting "(A)" before
the word "Approval" in the first line of Section 3.01(c)(xvii) and by
adding the following new subsections (B) and (C) to the end thereof:
"(B) Notwithstanding the foregoing, DIHC and CHV agree that at all
times prior to the earlier to occur of (i) the Lock-Out Date or (ii) the
date on which the combined Percentage Interests in the Venture of DIHC and
any DIHC Affiliate is not greater than 50% notwithstanding that CHV is the
Managing Partner of the Venture, DIHC shall have the authority to manage
and direct the leasing of space in the Property on behalf of the Venture
and to Approve all leasing matters with respect to the Property, to the
extent consistent with the Annual Budget and the Marketing Plans, without
the need of Approval from CHV. It is understood and agreed that the
Leasing Agent shall from time to time submit to DIHC for Approval on
behalf of the Venture recommendations with respect to new leases and other
leasing matters in the form of Leasing Agent Recommendations. It is
further understood and agreed that if DIHC shall desire to enter into any
new lease or implement any other leasing matter that is not the subject of
a Leasing Agent Recommendation, DIHC shall give written notice to Leasing
Agent at least ten (10) days prior to entering into such lease or
implementing such other leasing matter so as to provide Leasing Agent the
opportunity to submit to DIHC a Leasing Agent Recommendation with respect
to such proposed new lease or other leasing matter. DIHC shall have the
right to Approve or disapprove such recommendations unilaterally and
without the need for any further Approval from CHV and, once Approved,
DIHC shall oversee the implementations of the Leasing Agent
Recommendations relating to leasing matters and execute all leases and all
other documents and instruments relating to leasing matters on behalf of
the Venture. The Venture shall cause Leasing Agent, at the expense of the
Venture, to furnish or where appropriate make available to DIHC, such
documents and information as DIHC shall reasonably request in order to
enable DIHC to evaluate such Leasing Agent Recommendations relating to
leasing matters. The failure of DIHC to Approve or disapprove any Leasing
Agent Recommendation within ten (10) days after receipt by DIHC of such
Leasing Agent Recommendation together with all additional information
2
<PAGE>
reasonably requested by DIHC pertaining thereto shall be deemed the
Approval of DIHC of such Leasing Agent Recommendation and Leasing Agent
shall be entitled to implement same, provided, however, the Leasing Agent
Recommendation shall state in capitalized letters that: "THE FAILURE TO
RESPOND TO THIS LEASING AGENT RECOMMENDATION WITHIN 10 DAYS AFTER RECEIPT
OF THIS NOTICE AND ANY REASONABLY REQUESTED ADDITIONAL INFORMATION
PERTAINING HERETO SHALL BE DEEMED YOUR APPROVAL TO SUCH LEASING AGENT
RECOMMENDATION." If DIHC is unwilling or unable to Approve or disapproves
such Leasing Agent Recommendation, after consultation and discussion with
the Leasing Agent, then the resolution of such matters may be submitted by
DIHC or the Leasing Agent, to the "Venture Operations Arbitration Process"
for resolution as hereinbelow described."
"Venture Operations Arbitration Process" shall mean the process for
resolution of any dispute between DIHC and the Leasing Agent in connection
with a Leasing Agent Recommendation. Either of the Leasing Agent or DIHC
may invoke this arbitration process by the giving of written notice to the
other, which notice shall state that the invoking party believes an
impasse exists as to a Leasing Agent Recommendation.
If Leasing Agent or DIHC invokes the arbitration process, then,
within five (5) days after the non-invoking party receives notice from the
invoking party, Leasing Agent and DIHC shall each place in separate sealed
envelopes its final good faith proposal as to the Leasing Agent
Recommendation and shall open and exchange their final proposals in each
other's presence (the "Final Proposals"). If Leasing Agent and DIHC cannot
then agree on the Leasing Agent Recommendation within five (5) days
thereafter, the matter shall be determined in accordance with the rules of
the American Arbitration Association, except as modified by this
provision. If Leasing Agent or DIHC fails to prepare its Final Proposal or
to cooperate with the other party to open and exchange the Final Proposals
of the parties, and if such failure shall continue for a period of five
(5) days after the date the Final Proposals were to be opened and
exchanged, then the Final Proposal of the non-failing party shall
constitute the determination pursuant to this process.
Unless Leasing Agent and DIHC can agree upon a single arbitrator
prior to the time they are required to designate their party-arbitrators,
there shall be three arbitrators (the "Panel"), each of whom shall have
significant experience in dealing with matters similar to the matter in
dispute with respect to sizeable commercial properties in the Atlanta
metropolitan area and none of whom shall have any current or prior
connection or affiliation with either of the Venturers.
If required, the following procedure shall be used for the selection
of the Panel. Leasing Agent and DIHC shall each specify by notice to the
other on or prior to the
3
<PAGE>
fifth (5th) day after the Final Proposals were exchanged the name and
address of the person designated to act as party-arbitrator on its behalf.
The party-arbitrators so chosen shall meet within five (5) days after
their appointment and select a third arbitrator. If Leasing Agent or DIHC
fails to notify the other of the appointment of its party-arbitrator, as
aforesaid, within or by the time above specified, then the Final Proposal
of the party who timely selected a party-arbitrator shall constitute the
determination pursuant to this process.
If, within five (5) days after the party-arbitrators are appointed,
the said two party-arbitrators are unable to agree upon the appointment of
the third arbitrator, then either party, on behalf of both, may request
the American Arbitration Association in Atlanta, Georgia to appoint the
third arbitrator in accordance with its rules. In the event of the
failure, refusal or inability of any arbitrator to act, a new arbitrator
shall be appointed in his stead, which appointment shall be made in the
same manner as hereinabove provided for the appointment of such arbitrator
so failing, refusing or being unable to act.
Within five (5) days after the selection of the single arbitrator
or, if required, within one business day after the selection of the Panel,
DIHC and Leasing Agent shall submit a written statement to the arbitrator
or Panel specifying the reasons their Final Proposal as to the Leasing
Agent Recommendation should be selected. The arbitrator or Panel shall
make its decision within five (5) days after such submission. The
arbitrator or Panel shall select either the Leasing Agent's or DIHC's
Final Proposal, whichever in the arbitrator's or Panels's judgment
represents the most appropriate recommendation for preserving and
enhancing the long-term value of the Property. The Panel shall reach its
decision by majority vote. The arbitrator or the Panel shall communicate
its decision by written notice to the Leasing Agent and DIHC.
Such determination shall be final, binding and conclusive upon both
DIHC and the Leasing Agent and shall be non-appealable and enforceable in
any court having jurisdiction. All hearings and proceedings before the
arbitrator or the Panel shall be held in Atlanta, Georgia.
If a single arbitrator is selected, each party shall share such
arbitrator's fees and expenses equally. If a Panel is selected, each party
shall pay the fees and expenses of its party-arbitrator, and the fees and
expenses of the third arbitrator shall be borne equally by the parties.
Notwithstanding the foregoing, the arbitrator or the Panel may conclude
that one of the parties acted in bad faith, in which event such party
shall pay 100% of the fees and expenses of the arbitrator or the Panel, as
the case may be.
(C) In the event DIHC elects to become the Managing Partner pursuant
to Section 3.01(e), upon termination of DIHC as the Managing Partner for
any reason,
4
<PAGE>
the provisions of subsection (B) of this Section 3.01(c)(xvii) shall no
longer be deemed applicable;
4. Section 3.01 is hereby further amended by adding the following
new subsections (e), (f) and (g) following subsection (d) thereof:
"(e) DIHC may elect to be the Managing Partner instead of CHV at any
time, without cause, prior to the Lock-Out Date but only for so long as
the combined Percentage Interests in the Venture of DIHC and any DIHC
Affiliates shall exceed 50%. This right is personal to DIHC and its DIHC
Affiliates, and this right may not be assigned to or exercised by any
Person that is not DIHC or a DIHC Affiliate. To exercise such election,
DIHC must give at least ninety (90) days' prior written notice to CHV. In
the event DIHC elects to become the Managing Partner pursuant to this
Section 3.01(e), the following shall apply:
(1) In the event DIHC becomes the Managing Partner, it is
understood that the Property Manager shall from time to time submit
to DIHC for Approval on behalf of the Venture recommendations with
respect to the Annual Budget and other matters involving management,
operation, maintenance and improvement of the Property ("Property
Manager Recommendations"). It is further understood and agreed that
if DIHC shall desire to adopt an Annual Budget or take action on
other matters involving management, operation, maintenance and
improvement of the Property that is not the subject of a Property
Manager Recommendation, DIHC shall give written notice thereof to
Property Manager, together with a reasonably detailed written
explanation thereof, at least ten (10) days prior to adopting such
Annual Budget or taking such action, as the case may be, so as to
provide Property Manager the opportunity to submit to DIHC a
Property Manager Recommendation with respect to such proposed Annual
Budget and/or other action. DIHC, as the Managing Partner, shall
have the right to Approve or disapprove such recommendations
unilaterally and without the need for any further Approval from CHV
and once Approved, DIHC shall oversee the implementation of the
Property Manager Recommendations. The Property Manager shall, at the
expense of the Venture, furnish or where appropriate make available
to DIHC, such documents and information as DIHC shall reasonably
request in order to enable DIHC to evaluate such recommendation. The
failure of DIHC to Approve or disapprove any Property Manager
Recommendation within ten (10) days after receipt by DIHC of such
Property Manager Recommendation together with all additional
information reasonably requested by DIHC pertaining thereto shall be
deemed the Approval of DIHC of such Property Manager Recommendation
and Property Manager shall be entitled to implement same, provided,
however, the Property Manager Recommendation shall state in
capitalized letters that: "THE FAILURE TO
5
<PAGE>
RESPOND TO THIS PROPERTY MANAGER RECOMMENDATION WITHIN 10 DAYS AFTER
RECEIPT OF THIS NOTICE AND ANY REASONABLY REQUESTED ADDITIONAL
INFORMATION PERTAINING HERETO SHALL BE DEEMED YOUR APPROVAL TO SUCH
PROPERTY MANAGER RECOMMENDATION." If DIHC is unwilling or unable to
Approve or disapproves such Property Manager Recommendation, after
consultation and discussion with the Property Manager, then the
resolution of such matters may be submitted by DIHC or the Property
Manager to the "Venture Operations Arbitration Process" for
resolution as hereinbelow described.
"Venture Operations Arbitration Process" shall mean the
process for resolution of any dispute between DIHC and the Property
Manager in connection with a Property Manager Recommendation. Either
of the Property Manager or DIHC may invoke this arbitration process
by the giving of written notice to the other, which notice shall
state that the invoking party believes an impasse exists as to a
Property Manager Recommendation.
If Property Manager or DIHC invokes the arbitration process,
then, within five (5) days after the non-invoking party receives
notice from the invoking party, Property Manager and DIHC shall each
place in separate sealed envelopes its final good faith proposal as
to the Property Manager Recommendation and shall open and exchange
their final proposals in each other's presence (the "Final
Proposals"). If Property Manager and DIHC cannot then agree on the
Property Manager Recommendation within five (5) days thereafter, the
matter shall be determined in accordance with the rules of the
American Arbitration Association, except as modified by this
provision. If Property Manager or DIHC fails to prepare its Final
Proposal or to cooperate with the other party to open and exchange
the Final Proposals of the parties, and if such failure shall
continue for a period of five (5) days after the date the Final
Proposals were to be opened and exchanged, then the Final Proposal
of the non-failing party shall constitute the determination pursuant
to this process.
Unless Property Manager and DIHC can agree upon a single
arbitrator prior to the time they are required to designate their
party-arbitrators, there shall be three arbitrators (the "Panel"),
each of whom shall have significant experience in dealing with
matters similar to the matter in dispute with respect to sizeable
commercial properties in the Atlanta metropolitan area and none of
whom shall have any current or prior connection or affiliation with
either of the Venturers.
If required, the following procedure shall be used for the
selection of the Panel. Property Manager and DIHC shall each specify
by notice to the other on
6
<PAGE>
or prior to the fifth (5th) day after the Final Proposals were
exchanged the name and address of the person designated to act as
party-arbitrator on its behalf. The party-arbitrators so chosen
shall meet within five (5) days after their appointment and select a
third arbitrator. If Property Manager or DIHC fails to notify the
other of the appointment of its party-arbitrator, as aforesaid,
within or by the time above specified, then the Final Proposal of
the party who timely selected a party-arbitrator shall constitute
the determination pursuant to this process.
If, within five (5) days after the party-arbitrators are
appointed, the said two party-arbitrators are unable to agree upon
the appointment of the third arbitrator, then either party, on
behalf of both, may request the American Arbitration Association in
Atlanta, Georgia to appoint the third arbitrator in accordance with
its rules. In the event of the failure, refusal or inability of any
arbitrator to act, a new arbitrator shall be appointed in his stead,
which appointment shall be made in the same manner as hereinabove
provided for the appointment of such arbitrator so failing, refusing
or being unable to act.
Within five (5) days after the selection of the single
arbitrator or, if required, within one business day after the
selection of the Panel, DIHC and Property Manager shall submit a
written statement to the arbitrator or Panel specifying the reasons
their Final Proposal as to the Property Manager Recommendation
should be selected. The arbitrator or Panel shall make its decision
within five (5) days after such submission. The arbitrator or Panel
shall select either the Property Manager's or DIHC's Final Proposal,
whichever in the arbitrator's or Panels's judgment represents the
most appropriate recommendation for preserving and enhancing the
long-term value of the Property. The Panel shall reach its decision
by majority vote. The arbitrator or the Panel shall communicate its
decision by written notice to the Property Manager and DIHC.
Such determination shall be final, binding and conclusive upon
both DIHC and the Property Manager and shall be non-appealable and
enforceable in any court having jurisdiction. All hearings and
proceedings before the arbitrator or the Panel shall be held in
Atlanta, Georgia.
If a single arbitrator is selected, each party shall share
such arbitrator's fees and expenses equally. If a Panel is selected,
each party shall pay the fees and expenses of its party-arbitrator,
and the fees and expenses of the third arbitrator shall be borne
equally by the parties. Notwithstanding the foregoing, the
arbitrator or the Panel may conclude that one of the parties acted
in bad faith, in which event such party shall pay 100% of the fees
and expenses of the arbitrator or the Panel, as the case may be.
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(2) If DIHC (or a DIHC Affiliate) becomes the Managing Partner
pursuant to this Section 3.01(e) and thereafter the combined
Percentage Interests in the Venture of DIHC and any DIHC Affiliates
shall not be greater than 50%, then provided that either a Hines
Affiliate or a Cousins Affiliate is then a managing general partner
of CHV, CHV shall automatically become the Managing Partner of the
Venture instead of such non-affiliated Person, without cause
effective as of the date which is sixty (60) days after such
transfer to the non-affiliated Person.
(3) Upon the occurrence of the Lock-Out Date, provided that a
Hines Affiliate or a Cousins Affiliate is then a managing general
partner of CHV, CHV shall automatically become the Managing Partner
of the Venture instead of DIHC, without cause, effective on the day
following the occurrence of the Lock-Out Date.
(f) Upon termination of DIHC as the Managing Partner for any reason,
the provisions of paragraph (e) above shall no longer be deemed
applicable.
(g) Upon termination of any Venturer as the Managing Partner for any
reason, the terminated Managing Partner shall deliver to the new Managing
Partner the following with respect to the Property and other assets and
liabilities of the Venture:
(1) A final accounting, reflecting the balance of income and
expenses as of the date of termination to be delivered within thirty
(30) days after such termination.
(2) Control of any balance or monies of the Venture or tenant
security deposits, or both, including, without limitation, all funds
in any bank accounts held by the Managing Partner with respect to
the Venture or its properties, to be delivered immediately upon such
termination.
(3) All records, contracts, leases, receipts for deposits,
unpaid bills and other papers or documents which are in the Managing
Partner's possession or are reasonably obtainable by the Managing
Partner and which pertain to the Venture or its properties to be
delivered immediately upon such termination."
5. Section 3.04(a) is hereby amended by deleting the names "Herman
A. Vonhof or Charles W. Strawser, Jr." and substituting in lieu thereof the
names "John S. Moody or Rodney C. Dimock" and by deleting the names "Vipin L.
Patel or Charles L. Davidson, III" and substituting in lieu thereof "Daniel M.
DuPree" or "C. Kevin Shannahan".
6. Section 4.02(e)(vii) is hereby amended to read as follows:
8
<PAGE>
"(vii) For purposes of this provision, the term "liquidation" shall
have the meaning set forth in the first sentence of Treasury Regulation
Section 1.704-1(b)(2)(ii)(g), but shall not include a constructive
liquidation of the Venture caused by a termination under Section 708(b)(1)
of the Code."
7. Section 5.08 is hereby amended by deleting the first sentence in
subsection (b) and substituting the following in lieu thereof:
"In addition to all other remedies set forth herein, if the Defaulting
Venturer is the Managing Partner, the Non-Defaulting Venturer shall have
the right to remove the Defaulting Venturer as Managing Partner and
designate a new Managing Partner."
8. Section 6.01 is hereby amended by adding the following to the end
of subsection (d) thereof:
"To the extent any Venturer is now or hereafter beneficially owned or
controlled, directly or indirectly, by any Person which is
publicly-traded, the sale or transfer or other disposition of all or part
of the stock in such publicly-traded Person shall not be considered a
"Transfer" within the meaning of this Agreement."
9. Section 6.02(j) is hereby deleted in its entirety.
10. Section 6.02 shall be amended by adding a new subsection 6.02(j)
following subsection (i) as follows:
(j) In addition to all other permitted Transfers, and subject to
Section 6.02(f) above, DIHC may Transfer its entire Percentage Interest in
the Venture to an operating limited partnership in which the sole general
partner is DIHC or a DIHC Affiliate (the "Operating Partnership") or to
any Person which is, directly or indirectly, wholly-owned by the Operating
Partnership, provided that the limited partners of the Operating
Partnership have the right to convert their respective limited partner
units in the Operating Partnership ("Units") into stock of Cornerstone or
an Affiliated Entity of Cornerstone which is a publicly-traded entity on a
one-for-one basis (that is, a single Unit shall be exchangeable for a
single share of common stock of Cornerstone or an Affiliated Entity of
Cornerstone which is a publicly-traded entity on a national securities
exchange or through the NASDAQ national marketing system.)
11. Section 5.02 shall be amended by adding new subsection 5.02(k)
as follows:
(k) If, following the admission of the Operating Partnership or an
Affiliated Entity thereof to the Venture as the successor to DIHC, an
Offer is made pursuant to Section 5.02 and the Operating Partnership or an
Affiliated Entity thereof is the
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purchasing Venturer, CHV, at its option, may elect to cause the purchasing
Venturer to acquire all or part of CHV's interest in the Venture in
exchange for Units, and, in the event of such election the minimum
purchase price for CHV's interest in the Venture shall be $1,000.00. In
the event CHV elects to receive Units in consideration for the transfer of
all or any part of its interest in the Venture, CHV shall by written
notice to the Operating Partnership delivered no later than ten (10) days
prior to the Closing of the buy/sell, designate the portion of the
purchase price which it desires to receive in cash and the portion of the
purchase price (expressed in dollars) it desires to receive in Units.
Provided the Operating Partnership receives such notice in a timely
manner, at the Closing the cash portion of the purchase price paid by the
Operating Partnership shall be in the amount designated by CHV to be paid
in cash and the balance of the purchase price shall be paid in Units to
CHV (or its designee or designees) the dollar value of which, if such
Units are convertible into common shares of Cornerstone, shall be
determined based on the average of the closing price for shares of stock
of Cornerstone on The New York Stock Exchange for the five (5) consecutive
trading days ending on the trading day immediately preceding the date of
Closing, and if such Units are convertible into common shares of any
Affiliated Entity of Cornerstone which is a publicly-traded entity on a
national securities exchange or on the NASDAQ national marketing system,
shall be determined based on the average of the closing price for shares
of stock of such publicly-traded entity for the five (5) consecutive
trading days ending on the trading day immediately preceding the date of
Closing (as described above, it being acknowledged and agreed that any
holder of Units shall have the right to elect to exchange all or any
portion of such Units for shares of common stock of Cornerstone or an
Affiliated Entity thereof which is a publicly- traded entity on a
one-for-one basis.) In the event that (i) CHV elects to contribute all or
part of its interest in the Venture in exchange for Units, and (ii) the
amount of Operating Partnership liabilities that would be allocable to CHV
under section 752 of the Code immediately following the contribution would
be less than CHV's pre-contribution share of Venture liabilities
(including as a result of the extinguishment or contribution to capital of
any Venture liabilities held by Cornerstone or its affiliates) and thereby
cause CHV and its partners to recognize gain for federal income tax
purposes, DIHC shall, and shall cause Cornerstone, the Operating
Partnership and any other DIHC Affiliate to, cooperate with CHV in good
faith in implementing one or more alternative measures to have the
Operating Partnership's liabilities allocable to CHV under section 752 of
the Code equal or exceed CHV's precontribution share of Venture
liabilities so that CHV does not recognize taxable gain as a result of the
contribution, including guaranties by CHV of the "bottom-side" portion of
one or more Operating Partnership nonrecourse liabilities and/or the
assumption by CHV of partial or full deficit capital account liability,
provided that neither DIHC, Cornerstone nor the Operating Partnership
shall be required to approve any such measures to the extent that they
would adversely affect the tax position of any other limited partner of
the Operating Partnership. The foregoing shall not in any way preclude
DIHC, Cornerstone or the Operating Partnership from taking any action that
would result in the extinguishment of
10
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Venture liabilities held by Cornerstone or its Affiliates in connection
with such contribution.
12. Section 8.01 is hereby amended by deleting the names and
addresses in subsection (b) thereof and substituting the following in lieu
thereof:
Hines Interests Limited Partnership
70 West Madison
Suite 440
Chicago, Illinois 60602
Attn: C. Kevin Shannahan
With a copy to:
Cousins Real Estate Corporation
2500 Windy Ridge Parkway
Suite 1600
Atlanta, Georgia 30339
Attn: Corporate Secretary
and to:
Hines Interests Limited Partnership
2800 Post Oak Boulevard
Houston, Texas 77056
Attn: Jeffrey C. Hines
13. Section 8.01 is hereby amended by deleting the names and
addresses in subsection (c) thereof and substituting the following in lieu
thereof:
Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Attention: John S. Moody
Rodney C. Dimock
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: William B. Fryer, Esq.
14. Section 8.12(b) is hereby deleted in its entirety.
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15. For so long as the Permanent Loan remains outstanding, DIHC
agrees that no person or entity that is a partner of the Venture or who would be
treated as a partner of such partnership for federal income tax purposes shall
be the owner of such debt for federal income tax purposes, unless CHV otherwise
consents in writing.
16. The parties hereto acknowledge and agree that the Lock-Out Date
is February 28, 2002.
17. Capitalized terms used but not defined herein shall have the
same respective meanings given such terms in the Venture Agreement.
18. The Venture Agreement, as amended by this Amendment, is hereby
ratified and confirmed and remains in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have executed the Amendment
under seal as of the date first written above.
CHV:
C-H ASSOCIATES, LTD., a Georgia limited partnership,
by its only two general partners
By: Cousins Real Estate Corporation, a Georgia
corporation
By: /s/
------------------------
Name: Peter A. Tortohoff
---------------------
Title: Senior V.P
---------------------
Attest: /s/
--------------------
Name: Tom G. Charlesworth
--------------------
Title: Sec.
--------------------
[CORPORATE SEAL]
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<PAGE>
By: Hines Peachtree Associates I Limited Partnership,
a Texas limited partnership, by its only two
general partners
By: /s/ (Seal)
--------------------
Gerald D. Hines
By: Hines Atlanta Corporation, a Georgia
corporation
By: /s/
------------------------
Name: Gerald D. Hines
---------------------
Title: President
---------------------
Attest: /s/
--------------------
Name: Jeanne E. Hutchens
Title: Assistant Secretary
[CORPORATE SEAL]
14
<PAGE>
DIHC
DIHC PEACHTREE ASSOCIATES, a Georgia general
partnership, by its only two general partners
By: DIHC Atlanta, Inc., a Georgia corporation
By: /s/
-------------------------
Name: Kevin Mahoney
---------------------
Title:
---------------------
Attest: /s/
---------------------
Name: Thomas Laftus
---------------------
Title: Secretary
---------------------
[CORPORATE SEAL]
By: DIHC Peachtree, Inc., a Georgia corporation
By: /s/
-------------------------
Name: Kevin Mahoney
---------------------
Title:
---------------------
Attest: /s/
---------------------
Name: Thomas Laftus
---------------------
Title: Secretary
---------------------
[CORPORATE SEAL]
15
<PAGE>
Consented and Agreed to:
LEASING AGENT
C-H LEASING ASSOCIATES, a Georgia general
partnership, by its two general partners
By: Cousins Real Estate Corporation, a Georgia
corporation
By: /s/
--------------------------
Name: Peter A. Toutchaff
------------------------
Title: S.V.P.
-----------------------
By: Hines Atlanta Realty, Inc., a Georgia
corporation
By: /s/
--------------------------
Name: C. Kevin Shannahan
-------------------------
Title: Executive Vice President
------------------------
PROPERTY MANAGER
C-H MANAGEMENT ASSOCIATES, a Georgia general
partnership, by its two general partners
By: Cousins Real Estate Corporation, a Georgia
corporation
By: ______________________________
Name: ____________________________
Title: _____________________________
By: /s/ Gerald D. Hines
-----------------------------------
Gerald D. Hines, President of Hines
Properties, Inc., a general partner of C-H
Management Associates.
16
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Exhibit 10.101
FIVE HUNDRED BOYLSTON WEST VENTURE
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
By and Between
BOYLSTON WEST 1986 ASSOCIATES
LIMITED PARTNERSHIP
and
DIHC BOYLSTON ASSOCIATES
dated
October 27, 1997
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TABLE OF CONTENTS
Section Page
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ARTICLE I
DEFINED TERMS
SECTION 1.01. Definitions...................................................1
SECTION 1.02. Terminology...................................................9
ARTICLE II
THE VENTURE
SECTION 2.01. Reallocation Date; Consent to Transfer; Continuation;
Governing Law..............................................9
SECTION 2.02. Purposes and Scope of the Venture............................10
SECTION 2.03. Assumed Name Certificate.....................................10
SECTION 2.04. Scope of Venturer's Authority................................10
SECTION 2.05. Principal Place of Business..................................11
ARTICLE III
MANAGEMENT
SECTION 3.01. Management of the Venture....................................11
SECTION 3.02. Property Management and Other Authorized Payments............16
SECTION 3.03. Execution and Performance of Documents.......................16
SECTION 3.04. Decisions by the Venturers/Venturer's Authority..............17
SECTION 3.05. Budgets......................................................18
SECTION 3.06. Compensation and Expenses of Venturers and Venture...........18
SECTION 3.07. Contracts with Related Parties...............................19
SECTION 3.08. Property Financing...........................................19
ARTICLE IV
ACCOUNTING, CONTRIBUTIONS,
DISTRIBUTIONS AND ALLOCATIONS
SECTION 4.01. Percentage Interests of Venturers............................20
SECTION 4.02. Capital Contributions........................................22
SECTION 4.03. Intentionally deleted........................................23
SECTION 4.04. Tax Status and Returns.......................................23
SECTION 4.05. Distributions................................................26
SECTION 4.06. Allocations of Profits, Gains and Losses.....................28
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Section Page
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SECTION 4.07. Accounting...................................................32
SECTION 4.08. Bank Accounts................................................33
ARTICLE V
TERM AND TERMINATION
SECTION 5.01. Term.........................................................33
SECTION 5.02. Voluntary Termination-Buy/Sell...............................33
SECTION 5.03. Closing......................................................35
SECTION 5.04. Assumption of Liabilities....................................36
SECTION 5.05. Right of First Offer.........................................38
SECTION 5.06. Liquidation and Distribution Procedure.......................40
SECTION 5.07. Event of Dissolution.........................................40
SECTION 5.08. Default......................................................43
SECTION 5.09. Conversion to Limited Partnership............................44
ARTICLE VI
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION
SECTION 6.01. Prohibited Transfers.........................................44
SECTION 6.02. Permitted Transfers..........................................45
ARTICLE VII
INSURANCE
SECTION 7.01. Minimum Insurance Requirements...............................49
ARTICLE VIII
INTENTIONALLY DELETED
ARTICLE IX
INTENTIONALLY DELETED
ARTICLE X
GENERAL
SECTION 10.01. Notices.....................................................51
SECTION 10.02. Governing Laws..............................................53
SECTION 10.03. Exculpation/Indemnification.................................53
SECTION 10.04. Entire Agreement............................................54
SECTION 10.05. Waiver......................................................54
ii
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Section Page
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SECTION 10.06. Severability................................................54
SECTION 10.07. Status Reports..............................................54
SECTION 10.08. Appraisals..................................................54
SECTION 10.09. Attorneys' Fees.............................................55
SECTION 10.10. Terminology.................................................55
SECTION 10.11. Binding Agreement...........................................55
SECTION 10.12. Additional Remedies.........................................56
SECTION 10.13. Artwork.....................................................56
SECTION 10.14. Meetings....................................................56
SECTION 10.15. Partition...................................................56
SECTION 10.16. Confidentiality.............................................56
SECTION 10.17. Transfer of Property........................................56
SECTION 10.18. Administration Agreement....................................56
Schedule of Exhibits
Exhibit A-Description of Land
Exhibit B-Description of Eastern Component
iii
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AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT of Five
Hundred Boylston West Venture (this "Agreement"), made and entered into as of
this 27th day of October, 1997, by and among BOYLSTON WEST 1986 ASSOCIATES
LIMITED PARTNERSHIP, a Texas limited partnership ("Hines") and DIHC BOYLSTON
ASSOCIATES, a Georgia general partnership ("Company");
WHEREAS, Five Hundred Boylston West Venture (the "Venture") was formed
pursuant to that certain Joint Venture Agreement dated as of May 29, 1986 (the
"Original Venture Agreement");
WHEREAS, the Original Venture Agreement was amended on December 31, 1993
to reflect the transfer of New England Mutual Life Insurance Company's interest
in the Venture to Company;
WHEREAS, Cornerstone Properties Inc. ("Cornerstone"), directly or
indirectly, has acquired all of the beneficial ownership of Company;
WHEREAS, the "Permanent Loan" (as defined in the Original Venture
Agreement) has been contributed to the capital of the Venture as more
particularly herein described; and
WHEREAS, Hines and Company (the "Original Venturers") desire to amend and
restate the Original Venture Agreement in its entirety on the terms and
conditions herein set forth.
W I T N E S S E T H :
In consideration of the mutual covenants set forth herein, and for other
good and valuable consideration each party to the other in hand paid, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.01. Definitions.
As used herein, the following terms shall have the following meanings:
"Accountant" shall have the meaning set forth in Section 4.07(c).
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2
"Adjusted Capital Account Deficit" shall have the meaning set forth
in Section 4.06(a)(i).
"Administration Agreement" shall mean that certain Administration
Agreement dated as of May 29, 1986 by and between the Venture and the
Administrator for certain administration services with respect to the
Property as such agreement may be amended from time to time with the
Approval of the Venturers.
"Administrator" shall mean DIHC Management Corporation.
"Affiliate" shall mean, as to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control
with such Person; (ii) the officers, directors or partners of such Person;
(iii) if such Person is an officer, director or partner, any company for
which such Person acts in any such capacity; and (iv) any relative (by
blood, adoption or marriage) within the second degree of any such Person
or of any Person described in (i) and (ii) above. For purposes of this
definition the term "control" means the ownership of 10% or more of the
beneficial or voting interest in the Person referred to.
"Affiliated Entity" shall mean any corporation, partnership or other
entity which is more than 50% owned, directly or indirectly, through
subsidiaries or other partnerships, by the ultimate members or
shareholders of any Venturer.
"Annual Budget" shall mean the detailed business plan and annual
budget prepared by the Managing Partner in accordance with Section
3.01(b).
"Appraisal Panel" shall have the meaning set forth in Section 10.08.
"Approved by the Venturers" or "Approval by (or of) the Venturers"
shall mean approved in writing in advance by all Venturers in their sole
and absolute discretion unless otherwise noted.
"Bankrupt Party" shall have the meaning set forth in Section
5.07(b)(v)(1).
"BRA" shall mean the "Boston Redevelopment Authority" or such other
agency or authority which shall replace the Boston Redevelopment
Authority.
"Capital Account" shall mean the accounts maintained for each
Venturer as set forth in Section 4.01(b).
"change in control" shall have the meaning set forth in Section
6.02(d).
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3
"City" shall mean the City of Boston.
"Closing" shall have the meaning set forth in Section 5.03(a).
"Code" shall mean the United States Internal Revenue Code of 1986,
as amended, and any successor statute thereto.
"Company" shall mean DIHC Boylston Associates and its permitted
successors and assigns (specifically including any transferee under
Section 6.02(d) as to its interest in the Venture).
"Controlled or Control" means with respect to any Person, the
possession, directly or indirectly, of the power to direct or to cause the
direction of the management of such Person, whether through ownership of
voting securities or a general partnership interest or by contract, agency
or otherwise.
"Cornerstone" shall have the meaning set forth in Section 6.02(d).
"CPI" shall have the meaning set forth in Section 3.01(b).
"Defaulting Venturer" shall have the meaning set forth in Section
5.08.
"Deficit Election" shall have the meaning set forth in Section
4.02(f)(iv).
"DIHC Holding" shall mean Dutch Institutional Holding Company, Inc.,
a Delaware corporation.
"Eastern Component" shall mean the building commonly known as 222
Berkeley situated on the site adjacent to the Land, and more particularly
described on Exhibit B, to which the Improvements are integrated and
attached.
"election period" shall have the meaning set forth in Section
5.05(a)(iii).
"Event of Dissolution" shall have the meaning set forth in Section
5.07(b).
"Exchange Act" shall have the meaning set forth in Section 6.02(d).
"Final Appraiser" shall have the meaning set forth in Section 10.08.
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"Governmental Documents" shall mean all documents, permits,
approvals, licenses, certificates and agreements with BRA, the City or any
governmental or quasi-governmental agency which has jurisdiction over the
property or its development.
"HILP" shall mean Hines Interests Limited Partnership, a Delaware
limited partnership.
"Hines" shall mean Boylston West 1986 Associates Limited
Partnership, a Texas limited partnership and its permitted successors and
assigns.
"Hines Control Group" means (i) Gerald D. Hines, Jeffrey C. Hines
and/or the estate of either, (ii) a corporation, the stock of which is
wholly owned by Gerald D. Hines, Jeffrey C. Hines, the estate of either,
and/or any member of the Hines Family, (iii) any Person Controlled by a
majority of the then-current members of the Hines Management Group, or
(iv) any Person to which the operational assets of HILP are conveyed,
which is Controlled by any one or more of the Persons described in (i) or
(ii) above and/or a majority of the then-current members of the Hines
Management Group.
"Hines Family" means Gerald D. Hines or Jeffrey C. Hines (or any
trust established for the benefit of the spouse, issue, grandchildren,
brother, sister, or parents of either Gerald D. Hines or Jeffrey C.
Hines).
"Hines Management Group" means, from time to time, the ten (10)
senior ranking executives or officers of HILP other than Gerald D. Hines
and Jeffrey C.
Hines.
"Improvements" shall mean the mixed use development located on the
Land and consisting of approximately 710,000 square feet of office and
retail/commercial space located in a 25-story tower rising from a 6-story
low-rise base structure and a 3-level parking garage below grade
containing parking spaces for approximately 600 automobiles and any other
improvements from time to time constructed or to be constructed upon the
Land by the Venture.
"Incumbent Directors" shall have the meaning set forth in Section
6.02(d).
"Institutional Lender" shall mean any domestic or foreign insurance
company, bank, trust company, savings and loan association, savings bank,
merchant bank, investment banking or securities company or similar
financial institution among whose primary business is the making of
commercial loans.
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5
"Land" shall mean that certain parcel of real property and the
improvements presently thereon located in the City of Boston,
Massachusetts, more particularly described in Exhibit A attached hereto.
"Losses" shall have the meaning set forth in Section 4.06(a)(ii).
"MAI Appraiser" shall have the meaning set forth in Section 10.08.
"Major Decisions" shall have the meaning set forth in Section
3.01(d).
"Management and Leasing Agreement" shall mean that certain
Management and Leasing Agreement dated as of May 29, 1986, as amended and
restated by that certain Amended and Restated Management and Leasing
Agreement dated of even date herewith by and between the Venture and HILP
for the management and leasing of the Property, as such agreement may be
further amended from time to time with the Approval of the Venturers.
"Managing Partner" shall mean either Hines or Company or an
Affiliated Entity of Hines or Company (if Hines or Company, as applicable,
shall Transfer its entire interest to such Person pursuant to Section
6.02(a)).
"Marketing Plan" shall mean the leasing guidelines prepared in
accordance with Section 3.05.
"Member" shall mean the corporate officer(s) or general partner(s)
or other authorized agent(s), as the case may be, through whom a Venturer
shall act in connection with decisions relating to its interests in the
Venture.
"Net Cash Flow" shall have the meaning set forth in Section 4.05(a).
"Net Operating Income" shall mean the projected Net Cash Flow to be
generated by the Property during the term of any proposed Property
Financing (with respect to the balance of the calendar year in which such
determination is being made, the Net Cash Flow shall equal the Net Cash
Flow assumed for purposes of preparing the Annual Budget for such calendar
year, and for the balance of the term of the proposed Property Financing
Net Cash Flow shall be determined in accordance with the principles
utilized in preparing each Annual Budget for the Venture) without
deduction for interest, periodic amortization and other debt service of
any indebtedness of the Venture, plus the projected amount of capital
expenditures to be incurred during such period (which, for the calendar
year in which such determination is being made, shall be deemed to equal
the amount reserved for capital expenditures in the Annual Budget
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6
for such calendar year and, for the period, shall not include any
expenditures which would require additional capital contributions) such as
tenant finish costs, leasing commissions, capital improvement expenditures
and extraordinary capital repairs, which otherwise shall have reduced
projected Net Cash Flow for such period.
"Non-Defaulting Venturer" shall have the meaning set forth in
Section 5.08.
"Notice of Default" shall have the meaning set forth in Section
5.08.
"Offer", "Offeree" and "Offeror" shall have the meanings assigned to
such terms in Sections 5.02 and 5.05.
"Offer Price" shall have the meaning set forth in Section 5.02(a).
"Offeror's Interest" shall have the meaning set forth in Section
5.02(a).
"Operating Expenses" shall have the meaning set forth in Section
4.05(a)(ii).
"Percentage Interest" shall have the meaning set forth in Section
4.01(a).
"Permitted Venturer" shall have the meaning set forth in Section
4.06(c).
"Person" shall mean any individual, partnership, association,
corporation or other entity. "Profits" shall have the meaning set forth in
Section 4.06(a)(ii).
"Prohibited Syndication Offering" shall mean any transaction or
offering of securities constituting a direct or indirect interest in the
Venture where the transaction or offering would be required to be
registered or exempted from registration (under Regulation D or otherwise)
pursuant to the Securities Act of 1933.
"Property" shall mean the Land, Improvements and all other assets of
the Venture.
"Property Debt Service Coverage Ratio" shall mean, for any period,
the quotient derived by dividing the Net Operating Income from the
Property for such period by the debt service for such Property Financing
for such period. For purposes hereof, debt service shall mean the
scheduled, regularly recurring payments of principal (if any) and interest
(as reasonably estimated by the borrowing Venturer in the event of a
floating rate financing) during the term of such Property Financing.
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7
"Property Financing" shall have the meaning set forth in Section
3.08 hereof.
"Property Manager" shall mean the manager appointed to manage and
lease the Property under the Management and Leasing Agreement or such
replacement manager selected in accordance with this Agreement or the
Management and Leasing Agreement.
"Property Manager Recommendations" shall have the meaning set forth
in Section 3.01(c).
"Public Relations Plan" shall mean the advertising and public
relations guideline prepared in accordance with the provisions of Section
3.05.
"REA" shall mean the Construction, Operation and Reciprocal Easement
Agreement between the Venture and New England Mutual Life Insurance
Company.
"Reallocation Date" shall have the meaning set forth in Section
2.01(a).
"Regulations" shall mean the Income Tax Regulations promulgated
under the Code, as such Regulations may be amended from time to time (all
references herein to specific sections of the Regulations shall be deemed
to refer also to any corresponding provisions of succeeding Regulations).
"Regulatory Allocations" shall have the meaning set forth in Section
4.06(e).
"Restricted Venturer" shall have the meaning set forth in Section
4.06(c).
"Sale and Construction Agreement" shall mean that certain Amended
and Restated Sale and Construction Agreement dated as of April 15, 1986
among the City, BRA, New England Mutual Life Insurance Company, and Gerald
D. Hines Interests, Inc., and such further amendments as Approved by the
Venturers.
"Sales or Refinancing Proceeds" shall mean the excess of the
proceeds received by the Venture from (i) any sale or other disposition of
all or part of the Property (other than incidental sales of personal
property or fixtures now or hereafter located on the Property), (ii) any
casualty resulting in the receipt of insurance proceeds (other than under
policies commonly known as rent insurance) or damage recoveries by the
Venture, (iii) the condemnation of all or part of the Property, (iv) any
mortgaging, financing, or refinancing of the Property or other loan as
Approved by the Venturers to the extent required hereunder and/or (v) any
other transactions involving the ownership, operation or maintenance of
the Property which do not come within the
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8
items enumerated in Section 4.05(a)(i) (other than the receipt of capital
contributions from the Venturers or security deposits); over (A) any and
all interest on and principal of any debt obligations of the Venture that
become due as a result of the occurrence of any of the events described in
(i)-(v) above; (B) all costs and expenses related to such sale, insurance
claim, condemnation, mortgaging, financing, refinancing, loan or other
transaction and (C) the amounts paid or reserved to fund the cost of
restoration or the expenditures of the Venture for which such mortgaging,
financing, refinancing, or loan occurred as Approved by the Venturers to
the extent required hereunder.
"Surviving Mortgages" shall have the meaning set forth in Section
5.02(a).
"Terms of Sale" shall have the meaning set forth in Section
5.05(a)(i).
"Third Party" shall have the meaning set forth in Section
5.05(a)(i).
"TMP" shall mean the tax matters partner as defined in Section
4.04(c)(i).
"Transfer" shall have the meaning set forth in Section 6.01.
"Venture" shall mean Five Hundred Boylston West Venture, a general
partnership formed for the limited purposes and scope set forth herein.
"Venturer" shall mean Hines or Company individually and the term
"Venturers" shall mean Hines and Company collectively.
"Venturer Debt Service Coverage Ratio" shall mean the quotient
derived by dividing annualized Venturer distributions by annualized debt
service for the Venture Interest Financing. For purposes hereof,
annualized Venturer distributions shall mean actual distributions of Net
Cash Flow to the Venturer which intends to obtain the applicable Venture
Interest Financing for the calendar year ending on a date no earlier than
a day which is sixty (60) days prior to application by the Venturer for
any Venture Interest Financing and debt service shall mean the scheduled,
regularly recurring installments of principal (if any) and interest (as
reasonably estimated by the borrowing Venturer in the event of a floating
rate financing) during the first full twelve (12) month period of such
Venture Interest Financing, provided, however, if the interest rate or
principal payments to be made in any year of the term of the Venture
Interest Financing will vary from the first full twelve (12) month period,
debt service shall mean the average of the annual scheduled principal and
interest payments over the term of the Venture Interest Financing.
"Venture Interest" shall have the meaning set forth in Section
6.02(b)(iv).
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"Venture Interest Financing" shall have the meaning set forth in
Section 6.02(b)(iv) hereof.
"Venture Operations Arbitration Process" shall have the meaning
ascribed to such term in Section 4.1 of the Management and Leasing
Agreement.
"Withdrawing Venturer" shall have the meaning set forth in Section
5.07(c).
SECTION 1.02. Terminology.
All personal pronouns used in this agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of Articles and
Sections are for convenience only, and neither limit nor amplify the provisions
of the Agreement itself, and all references herein to Articles, Sections or
subdivisions thereof shall refer to the corresponding Article, Section or
subdivision of this Agreement unless specified reference is made to such
Article, Sections or subdivisions of another document or instrument.
ARTICLE II
THE VENTURE
SECTION 2.01. Reallocation Date; Consent to Transfer; Continuation;
Governing Law.
(a) The Venturers agree that the books of the Venture will be closed as of
11:59 p.m. on October 31, 1997 (the "Reallocation Date") and Net Cash Flow,
Sales or Refinancing Proceeds, Profits, Losses and other items of income, gain,
deduction and loss shall be accounted for as of such date and allocated to the
Original Venturers in accordance with the provisions of Article IV of the
Original Venture Agreement in accordance with its provisions immediately prior
to the effect of this Agreement. From and after the Reallocation Date all of the
aforesaid items shall be allocated to the Venturers in accordance with the terms
of this Agreement. The Venture shall instruct the Venturers accountants to
furnish a detailed accounting of the aforesaid financial and tax items as of the
Reallocation Date for review and approval by each of the Venturers and the
Venturers shall cooperate in good faith for the purpose of agreeing upon an
accounting for the Venture as of the Reallocation Date.
(b) Hines consents to the acquisition by Cornerstone of all of the
beneficial ownership of Company and agrees the same shall not constitute a
breach or violation of Section 6.01 or any other provision of the Original
Venture Agreement so long as Company and Cornerstone comply with the provisions
of Section 6.01 and any other provision of the Original Venture Agreement in
connection with the consummation of such acquisition. The
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10
Company hereby represents and warrants to the Venture and Hines that the
acquisition of all of the beneficial ownership of Company by Cornerstone was
accomplished in compliance with all applicable state or federal securities laws.
In connection therewith, Company hereby agrees to indemnify and hold harmless
the Venture and Hines from and against any and all costs, damage, injury,
claims, actions and demands (including without limitation, attorney's fees)
suffered by the Venture or Hines as a result of any violation or alleged
violation or failure to comply or alleged failure to comply with any state or
federal securities laws.
(c) The business and affairs of the Venture shall continue to be conducted
solely under the name "Five Hundred Boylston West Venture" and such name shall
be used at all times in connection with the Venture's business and affairs.
Except as expressly provided herein to the contrary, the rights and obligations
of the Venturers and the administration and termination of the Venture shall be
governed by the Uniform Partnership Act of the Commonwealth of Massachusetts.
SECTION 2.02. Purposes and Scope of the Venture. (a) Subject to the
provisions of this Agreement, the Venture shall be limited strictly to the
leasing, sale, operation, management, maintenance and improvement of the
Property (including construction, reconstruction, development and repair of the
Improvements) for investment and the production of income and profit and shall
not be extended by implication or otherwise unless Approved by the Venturers.
(b) Nothing in this Agreement shall be deemed to restrict in any way the
freedom of any Venturer (or any Affiliate of any Venturer) to conduct any other
business or activity whatsoever (including the acquisition, development,
leasing, sale, operation and management of real property) without any
accountability to the Venture or any other Venturer with respect to the income
or profits therefrom or the effect of such activity on the Property, even if
such business or activity competes with the business of the Venture. The
Venturers hereby acknowledge that the Venturers (or Affiliates of the Venturers)
have ownership and management interests in the Eastern Component and that this
Section 2.02(b) is specifically applicable to such interests.
SECTION 2.03. Assumed Name Certificate. The Venturers shall execute and
file in the appropriate records any assumed or fictitious name certificate or
certificates required by law to be filed in connection with the continuation of
the Venture.
SECTION 2.04. Scope of Venturer's Authority. Except as otherwise expressly
and specifically provided in this Agreement, no Venturer shall have any
authority to act for, or assume any obligations or responsibility on behalf of,
any other Venturer or the Venture.
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11
SECTION 2.05. Principal Place of Business. The principal place of business
of the Venture shall be in the Improvements, or at 222 Berkeley Street, Suite
1420, Boston, Massachusetts 02116-3751 or at such other place of business in
Boston, Massachusetts as Approved by the Venturers.
ARTICLE III
MANAGEMENT
SECTION 3.01. Management of the Venture. (a) Hines and Company are
individually and collectively hereby designated as the Managing Partner of the
Venture and each hereby accepts such designation. Except where herein expressly
provided to the contrary, all decisions with respect to the operation and
control of the Venture shall be vested in the Company and shall be implemented
by Company, it being acknowledged that (subject to the requirements of Section
3.01(c) with regard to Property Manager Recommendations) the Company shall have
the authority to take all actions to be taken by "the Managing Partner"
hereunder and, in furtherance thereof, to execute and deliver all documents on
behalf of the Venture in furtherance of its responsibilities as the Managing
Partner hereunder, subject to any other terms and conditions contained in this
Agreement, including, without limitation, Sections 3.01(c) and 3.01(d). Except
where herein contained to the contrary, Company shall be responsible for the day
to day supervision of all aspects of the business of the Venture (including,
without limitation, the leasing, operation, maintenance and improvement of the
Property) and the discharge of all obligations of the Managing Partner
hereunder; provided, however, if Company fails to execute any lease proposed by
the Property Manager which does not require the Approval of Company hereunder or
under the Management and Leasing Agreement, Hines, as Managing Partner, shall
have the right to execute such lease on behalf of the Venture. Hines and Company
agree and acknowledge that certain of the duties and obligations of the Managing
Partner hereunder have been delegated to the Property Manager pursuant to the
Management and Leasing Agreement and further acknowledge that Company shall have
no liability to Hines or the Venture under this Agreement as a result of the
failure of the Property Manager to discharge such duties and obligations so
delegated to it under the Management and Leasing Agreement and that Company
shall not be deemed to be a Defaulting Venturer under Section 5.08 hereof as a
result of any such failure by the Property Manager; provided, however, nothing
herein shall affect the Company's liability for the Venture's liability to
Persons (including the Venture's liability to the Property Manager pursuant to
Section 7.13 of the Management and Leasing Agreement) resulting from the
Company's general partner status.
(b) No later than November 1 of each calendar year, the Venture shall
cause Property Manager to prepare and submit to the Venturers, for their
approval, a detailed business plan and budget, which shall include and take into
account, without limitation, the Marketing Plan and the Public Relations Plan,
(the "Annual Budget") setting forth the course
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of business to be followed by the Venture and the estimated receipts and
expenditures (capital, operating and other) of the Venture for the following
full calendar year. The Annual Budget shall not be implemented or acted upon
unless and until it has been Approved by the Venturers, at which time the Annual
Budget shall govern the operation of the Venture for such calendar year. If no
budget is Approved by the Venturers, the Annual Budget for the prior year shall
govern the operation of the Venture until a new budget is agreed upon. Company
shall cause the Property Manager to operate and manage the Venture in all
material respects in compliance with the Annual Budget except Property Manager
shall have the right, without the prior approval of the Venturers, to make
expenditures and incur obligations not authorized by the Annual Budget to the
extent permissible under Section 2.1 of the Management and Leasing Agreement.
Company shall enforce the Management and Leasing Agreement on behalf of the
Venture in accordance with its terms and shall not consent to any modification
or deviation from the Management and Leasing Agreements, by the Property
Manager, unless such modification or deviation is Approved by the Venturers.
(c) It is understood that the Property Manager shall from time to time
submit to Company for Approval on behalf of the Venture recommendations with
respect to new leases, the Annual Budget, and all other matters involving
management, operation, maintenance and improvement of the Property ("Property
Manager Recommendations"). To the extent Company or the Venture intends to enter
into a new lease, adopt an annual budget or take action on any other matter
involving the leasing, management, operation, maintenance or improvement of the
Property that is not the subject of a Property Manager Recommendation, Company
shall give written notice to Property Manager, together with a reasonably
detailed explanation thereof, at least ten (10) days prior to entering into such
lease, adopting such Annual Budget or taking such other action, as the case may
be, to provide Property Manager the opportunity to submit a Property Manager
Recommendation with respect thereto. Company shall have the right to Approve or
disapprove such recommendations unilaterally and without the need for any
further Approval from Hines and once Approved, the Company shall oversee the
implementation of the Property Manager Recommendations. The Venture shall cause
Property Manager, at the expense of the Venture, to furnish or where appropriate
make available to Company, such documents and information as Company shall
reasonably request in order to enable Company to evaluate such recommendation.
The failure of Company to Approve or disapprove any Property Manager
Recommendation within ten (10) days after receipt by Company of such Property
Manager Recommendation together with all additional information reasonably
requested by Company pertaining thereto shall be deemed the Approval of Company
of such Property Manager Recommendation and Property Manager shall be entitled
to implement same, provided, however, the Property Manager Recommendation shall
state in capitalized letters that: "THE FAILURE TO RESPOND TO THIS PROPERTY
MANAGER RECOMMENDATION WITHIN 10 DAYS AFTER RECEIPT OF THIS NOTICE AND ANY
REASONABLY REQUESTED ADDITIONAL INFORMATION PERTAINING HERETO SHALL BE DEEMED
YOUR APPROVAL TO SUCH PROPERTY
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13
MANAGER RECOMMENDATION." If Company is unwilling or unable to Approve or
disapproves such Property Manager Recommendation, after consultation and
discussion with the Property Manager, then the resolution of such matters may be
submitted by Company or the Property Manager to the Venture Operations
Arbitration Process for resolution.
(d) Notwithstanding anything contained herein to the contrary other than
Sections 3.06(c) and 3.07, no act shall be taken, sum expended, decision made or
obligation incurred by the Venture, the Managing Partner, the Property Manager
or any Venturer with respect to any of the major decisions enumerated below
(hereinafter called "Major Decisions"), unless such act, sum, decision or
obligation has been Approved by both of the Venturers. The Major Decisions shall
include:
(1) Acquisition of any land or interest therein other than the Land;
(2) Except as provided in Section 3.08, financing of the Venture,
including, but not limited to, the permanent financing of the improvements
and operations of the Venture (including, but not limited to, the
modification, extension or prepayment of the same);
(3) Sale, or other Transfer (except permitted sales or Transfers
pursuant to Articles V or VI) or mortgaging or the placing of any
encumbrance on the Property or any parts thereof (except as provided in
Section 3.08);
(4) Selecting or varying depreciation and accounting methods,
changing the fiscal year of the Venture and making other material
decisions with respect to treatment of various transactions for accounting
or tax purposes including without limitation making elections as to the
proper maintenance of the Capital Accounts of the Venturers in accordance
with Section 4.01 and other tax elections on behalf of the Venture;
(5) Approval of all construction and architectural contracts and any
modifications or amendments to such contracts (or payment and performance
bonds); provided, however, individual contracts for construction of less
than $100,000 and up to $1,000,000 in the aggregate which are in
compliance with the Annual Budget or which provide for the performance of
tenant construction work pursuant to tenant leases entered into in
accordance with the terms of this Agreement and the Management and Leasing
Agreement shall not be deemed a Major Decision and require the Approval of
the Venturers;
(6) Approving the "standard form lease" to be used by the Venture
for leasing all the office and commercial/retail space in the Property;
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14
(7) Granting, altering or terminating any property rights or
easements (including the REA);
(8) Varying or changing any portion of the insurance program
required by Article VII;
(9) Making any distributions to the Venturers, except as set forth
in Section 4.05;
(10) The adjustment, settlement, or the compromise of any claim,
obligation, debt, demand, suit or judgment in excess of $25,000 against or
on behalf of the Venture;
(11) Except to the extent the Property Manager is entitled to do so
pursuant to the Management and Leasing Agreement, the making of
non-capital expenditures in excess of the aggregate amount authorized
under the Annual Budget for non-capital expenditures excluding all real
estate taxes, utilities serving the Property, debt service and other
borrowing entered into by the Venture and insurance premium amounts;
provided, however, that Managing Partner may freely pay all real estate
taxes and insurance premiums (for insurance Approved by the Venturers) and
may freely incur expenses to perform tenant construction pursuant to the
terms of leases entered into in accordance with this Agreement and the
Management and Leasing Agreement and to provide additional services to
tenants (e.g., tenant improvements and supervision of tenant construction
not required of the Venture under leases) if such expenses are to be
promptly, expressly and directly reimbursed by tenants;
(12) The institution or defense of any cause of action, suit,
declaratory judgment or other litigation affecting in any way the Property
and the development thereof;
(13) The filing of a petition in bankruptcy under any of the
bankruptcy laws by the Venture;
(14) Doing any act in contravention of this Agreement;
(15) Any modification or amendment to the Governmental Documents; or
(16) Any other decision or action which, by the provisions of this
Agreement, is required to be Approved by the Venturers.
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15
In addition, in the event Hines or an Affiliate of Hines ceases to manage
the Property pursuant to the Management and Leasing Agreement or other
similar property management agreement, Major Decisions shall thereafter be
deemed to include:
(i) Approval of the Annual Budget, including the Marketing Plan and
the Public Relations Plan;
(ii) Making capital expenditures not authorized, or in excess of the
amounts reserved for certain line items in, the Annual Budget, provided
however, that the Managing Partner may freely pay all real estate taxes,
utilities serving the Property, debt service and other borrowings entered
into by the Venture and insurance premiums (for insurance Approved by the
Venture) and may incur obligations to perform tenant construction pursuant
to the terms of leases entered into in accordance with this Agreement and
the Management and Leasing Agreement and may incur expenses to provide
additional services to tenants (e.g. tenant improvements and supervision
of tenant construction not required of the Venturer under leases) if such
expenses are to be promptly, expressly and directly reimbursed by tenant;
(iii) Approving any lease if it (i) is for space in excess of 10,000
rentable square feet in the case of office space or in excess of 2,500
rentable square feet in the case of retail space (for purposes of the
foregoing, multiple leases to a single tenant shall be aggregated for
purposes of determining the square footage of any particular lease with
respect to such tenant), (ii) materially deviates from the "standard form
lease" Approved by the Venturers or (iii) is for a term or at a rental
rate which deviates from the guidelines set forth in the Marketing Plan or
will require concessions or expenditures which exceed amounts specified in
such Marketing Plan.
The Managing Partner or the Property Manager, as the case may be, shall at
the expense of the Venture furnish, or where appropriate, make available
to each Venturer, or use its best efforts to obtain from third parties,
such documents and information as such Venturer may reasonably request in
order to enable such Venturer to make the Major Decisions set forth above.
The failure of any Venturer to Approve or disapprove any Major Decision
within twenty-one (21) days (or in the case of a Major Decision that is
required pursuant to a Property Manager Recommendation, ten (10) days as
set forth in Section 3.01(c) hereof) after (i) receipt by such Venturer of
a notice requesting its Approval and (ii) receipt of all additional
information reasonably requested by such Venturer pertaining thereto,
shall be deemed the Approval of such Venturer to such Major Decision;
provided, however, that except for Major Decisions required pursuant to a
Property Manager Recommendation (A) such notice shall state in capitalized
letters that: "THE FAILURE TO RESPOND TO THE PROPOSAL SET FORTH HEREIN
WITHIN 14 DAYS AFTER RECEIPT OF THIS NOTICE AND
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16
ANY REQUESTED ADDITIONAL INFORMATION PERTAINING HERETO SHALL BE DEEMED
YOUR APPROVAL TO SUCH PROPOSAL" and (B) if such Venturer shall not respond
by such 14th day, the Managing Partner (or such other Venturer) shall send
to the non-responding Venturer an additional notice by hand
delivery, telex, telecopy or telegram to advise such Venturer of its
failure to respond to the specific Major Decision, and such Venturer shall
nonetheless fail to Approve or disapprove such matter within seven (7)
days after its receipt of such additional notice.
SECTION 3.02. Property Management and Other Authorized Payments.
(a) Concurrently herewith, the Venture has entered into a separate
Management and Leasing Agreement with HILP for the management and leasing of the
Property, which provides for HILP to have primary responsibility for the
implementation of the decisions Approved by the Venturers and for conducting the
ordinary and usual day-to-day business and affairs of the Venture as more fully
set forth in, and as limited by, the provisions of the Management and Leasing
Agreement.
(b) Company may cancel any agreement between the Venturer and the Property
Manager, Hines or its Affiliate, as the case may be, in the event Hines, as
Managing Partner, shall breach any fiduciary duty to the Venture or the
Venturers or shall otherwise fail to perform any of the material obligations
hereunder as a Venturer or violate a material term of this Agreement provided
such breach is not cured within twenty (20) days after delivery of written
notice by Company to Hines, or if any non-monetary default cannot by its nature
be cured in such time period, then such reasonable additional period of time as
is necessary to cure same, provided Hines or its Affiliate promptly commences to
cure such default and thereafter diligently and continually prosecutes to
completion the cure of the same. In addition, Company may exercise on behalf of
the Venture without the prior approval of Hines, the Venture's right to
terminate the Management and Leasing Agreement with HILP for the management and
leasing of the Property in accordance with the terms of Article V of the
Management and Leasing Agreement. In the event Hines or any Affiliate thereof is
terminated under any service or other agreement (including, without limitation,
the Management and Leasing Agreement) by Company or the Venture in accordance
with the foregoing, the replacement service provider and the terms of its
engagement shall be determined by Company.
SECTION 3.03. Execution and Performance of Documents.
Documents to which the Venture is a party shall be executed and/or
performed on behalf of the Venture by all the Venturers or by the Managing
Partner or the Property Manager, as the case may be, where the Venturers give
the Managing Partner or the Property Manager, as the case may be, the right to
do so. No Person shall be required to inquire into
<PAGE>
17
said authority of the Venturers or the Managing Partner or the Property Manager
to execute and/or perform any document on behalf of the Venture where the
Venturers give the Managing Partner or the Property Manager the express and
specific right to do so. Except as otherwise expressly provided in this
Agreement, no Venturer or representative thereof shall have the authority or
right to bind or act for the Venture or any of the other Venturers.
SECTION 3.04. Decisions by the Venturers/Venturer's Authority.
(a) Hines and Company each shall act through either one of the respective
Members it has appointed to oversee and make decisions with respect to their
respective interests in the Venture. Upon notice to the other Venturer's
Members, each of Hines or Company may at any time and for any reason substitute
another person as its Member. If a particular Member should die, retire,
withdraw for any reason or become disabled, the Venturer whom such Member
represents shall designate a substitute Member within the following ten (10)
business days. If during any period of time both Members representing a Venturer
should die, retire, withdraw or for any reason become disabled the Venture shall
make no further Major Decisions until at least one Member representing such
Venturer shall have been substituted as set forth above.
Further, for any purpose a Member may be represented by a proxy appointed by a
written, executed instrument or a telegram, telecopy or telex. Hines and Company
initially designate as their respective Members:
Hines: Kenneth W. Hubbard or David G. Perry
Company: John S. Moody or Rodney C. Dimock
In the event any Venturer shall Transfer a portion of its interest in the
Venture to a third party in accordance with the provisions hereof, such third
party shall not be entitled to its own Member but the transferring Venturer
shall act for both itself and for the transferee of such interest.
(b) The Members shall meet at least annually in Boston, Massachusetts or
such other place Approved by the Venturers at a time and place acceptable to all
Members. The Members shall merely be authorized representatives of the Venturer
they represent and in such capacity shall have no liability to third parties.
The Venture shall indemnify and hold harmless each Member from and against any
claim, cost (including reasonable attorneys' fees), liability, judgment or cause
of action which he may sustain or incur as a result of acting (or of having
acted) as a Member, provided that such indemnification shall not encompass bad
faith or any grossly negligent act or omission; and provided further that such
indemnification shall extend only to a Member's capacity, as such, and
accordingly shall not affect the liability which any
<PAGE>
18
Member representing a Venturer, who may also be a general partner or officer of
such Venturer, has as such general partner or officer.
(c) Although a Venturer's organizational or internal documents or
structure may require the taking of certain action or the obtaining of certain
approvals in order for its Member to do certain acts, each Venturer represents
that it will be solely responsible for taking such action and obtaining such
approvals and that, prior to entering into any binding agreement or making any
decision, its Member will be vested with all power, right and authority to bind,
and make decisions on behalf of, such Venturer. Accordingly, the Venturers and
any third party may rely without inquiry upon its dealings with the other
Venturer's Member as being fully binding upon such other Venturer.
SECTION 3.05. Budgets. In addition to the Annual Budget required under
Section 3.01(b), the Managing Partner shall furnish each Venturer within 20 days
after the end of each month, a report prepared by Property Manager detailing the
operations for the preceding month, including a comparison against the Annual
Budget. The Managing Partner agrees to provide all such statements and reports
in a timely manner and in a form acceptable to the Venturers and shall use its
best efforts to insure that such statements and reports effectively analyze and
detail the results of the operations for the period in question. All statements,
financial reports and budgets shall be prepared in accordance with generally
accepted accounting principles, consistently applied.
On or prior to November 1 of each calendar year as a part of the Annual
Budget, the Managing Partner shall also cause the Property Manager to prepare
the following plans and guidelines for the Approval of the Venturers:
(i) a detailed marketing plan which shall specify the minimum
acceptable rentals for individual spaces, the maximum concessions for
major and minor tenants, the minimum and maximum acceptable terms
(including renewal options) for individual spaces and the estimated
"tenant fit-up" cost per square foot (the "Marketing Plan"); and
(ii) a detailed public relations plan (the "Public Relations Plan")
which shall specify the advertising and public relations activities and
actions which the Venture shall undertake.
SECTION 3.06. Compensation and Expenses of Venturers and Venture. (a)
Except as may be expressly provided for herein or in the Management and Leasing
Agreement, the Administration Agreement or hereafter Approved by the Venturers,
no payment will be made by the Venture to any Venturer for the services of such
Venturer or any member, stockholder, director or employee of any Venturer.
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19
(b) Except as expressly provided herein, no Venturer shall be entitled to
any compensation or reimbursement from the Venture or any other Venturer for
expenses incurred in connection with the formation, business or affairs of the
Venture.
(c) Notwithstanding any provision of this Agreement to the contrary,
Hines, Company and the TMP shall be entitled to reimbursement for out-of-pocket
expenses actually incurred on behalf of the Venture, provided only that (i) the
same are reasonable in amount and reasonably necessary or appropriate in the
Venture business, (ii) notice of same is given to the other Venturers within
thirty (30) days after such expense is incurred and (iii) same are consistent
with the provisions of this Agreement and are reasonably approved by the other
Venturer.
SECTION 3.07. Contracts with Related Parties. After the date hereof and
except as otherwise provided in Section 3.02, neither Property Manager nor any
Venturer may contract with or employ on behalf of the Venture any person or
entity which is an Affiliate of any Venturer in connection with the performance
of any duties or providing any goods or services to the Venture specified in
this Agreement unless Approved by the Venturers (or pursuant to an Annual Budget
Approved by the Venturers provided such Annual Budget identifies such
Affiliate).
SECTION 3.08. Property Financing. (a) Notwithstanding Section 3.01(d)(2)
and (3), Company may, unilaterally and without Approval of any other Venturer,
accept a loan on behalf of the Venture secured by the Property (a "Property
Financing") provided that such Property Financing meets or exceeds the following
conditions:
(i) The lender providing the Property Financing is an Institutional
Lender that is not a Venturer or a Person related to a Venturer within the
meaning of Section 465(b)(3)(C) of the Code or within the meaning of
section 1.752-4(b) of the Regulations;
(ii) The loan-to-value-ratio of the Property Financing does not
exceed fifty-percent (50%) where the "loan amount" is the full amount
committed by such Institutional Lender and the "value" is the appraised
value of the Property as determined by an appraisal by or obtained for
such Institutional Lender;
(iii) The Property Debt Service Coverage Ratio of the Property
Financing for each year of the term of the Property Financing is
projected, in the good faith estimation of the Company, to be at least
1.75;
(iv) The Property Financing shall be nonrecourse to the Venture and
the Venturers in all material respects, such that the sole recourse of the
Institutional Lender
<PAGE>
20
in the event of default thereunder shall be to the Property subject,
however, to exclusions to such limitations on recourse for fraud, willful
and intentional acts, and misappropriation of condemnation and insurance
proceeds and/or the rents, profits and other income generated by the
Property after a default which exclusions, if included, are subject to the
approval of each Venturer which will have recourse liability therefor
(such approval not to be unreasonably withheld or delayed);
(v) The Property Financing does not contain provisions providing for
any participation in the revenues of the Property, such as a participating
mortgage loan or a loan with an equity kicker; and
(vi) The fees and expenses of the Venture in obtaining the Property
Financing (including all commitment fees, points, finder's fees and legal
fees) do not exceed one and one-half percent (1.5%) of the loan amount.
At such time as Company desires to obtain Property Financing that
meets or exceeds the foregoing conditions, Company shall inform Hines in
writing and prior to accepting any loan commitment or otherwise binding
the Venture with respect to any such Property Financing, Company shall
consult with Hines and allow Hines at least ten (10) business days to
review and comment on any loan commitment for such Property Financing
Company is otherwise prepared to accept on behalf of the Venture;
provided, however, that Hines shall not have any right to disapprove any
such loan commitment. The Company shall have the unilateral right without
any further consent or Approval from any other Venturer to execute and
deliver all documents necessary to consummate any such Property Financing,
including, without limitation, a promissory note, mortgage, deed of trust,
UCC financing and/or other similar interest mortgaging and pledging the
Property to secure such loan, and such Property Financings shall for all
purposes of the Agreement be deemed to be a loan or debt Approved by the
Venturers. Any Property Financing not meeting or exceeding the foregoing
conditions shall require the Approval of both of the Venturers in
accordance with the terms of Section 3.01(c).
ARTICLE IV
ACCOUNTING, CONTRIBUTIONS,
DISTRIBUTIONS AND ALLOCATIONS
SECTION 4.01. Percentage Interests of Venturers. (a) Effective as of the
Reallocation Date, each Venturer's interest in the Venture ("Percentage
Interest") shall be as follows:
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21
Company 91.5%
Hines 8.5%
(b) The Venture shall determine and maintain "Capital Accounts" for each
Venturer throughout the full term of the Venture in accordance with section
1.704-1(b)(2)(iv) of the Regulations. To the extent not inconsistent with these
rules, the following provisions shall apply:
(i) The Capital Accounts of the Venturers, determined as of the date
of this Agreement after taking into account the contribution of the
Permanent Loan as set forth in Section 4.02(a), shall be:
Company $206,480,000.00
Hines $19,181,000.00
(ii) Thereafter, the Capital Accounts of the Venturers shall be
adjusted by increasing such Capital Accounts by the sum of:
(A) The cumulative amount of cash that has been contributed to
the capital of the Venture by such Venturer after the date of this
Agreement;
(B) The agreed-upon net fair market value (as of the date of
contribution) of all property (other than cash) that has been
contributed to the capital of the Venture by such Venturer after the
date of this Agreement; and
(C) The cumulative amount of "Profits" and all other items of
income and gain for all years ending after the date of this
Agreement and prior to the date of the determination that have been,
or are required to be, allocated to such Venturer under Sections
4.06(b), (d), or (e);
and decreasing such Capital Accounts by the sum of the following:
(A) The cumulative amount of cash that has been distributed to
such Venturer after the date of this Agreement;
(B) The agreed-upon net fair market value (as of the date of
distribution) of all property (other than cash) that has been
distributed by the Venture to such Venturer as of such date; and
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22
(C) The cumulative amount of "Losses" and all other items of
loss and deduction for all fiscal years ending after the date of
this Agreement and prior to the date of the determination that have
been, or are required to be, allocated to such Venturer under
Sections 4.06(c), (d), or (e).
A Venturer's Capital Account shall also be increased or decreased as of
such date to reflect any items described in Section 1.704-1(b)(2)(iv) of
the Regulations, that are required to be reflected in such Venturer's
capital account under such Regulations and which are not otherwise taken
into account in computing such Capital Account under this Section 4.01(b).
SECTION 4.02. Capital Contributions.
(a) Immediately after the acquisition of Company by Cornerstone, Company
contributed the Permanent Loan to the capital of the Venture. Thereafter, the
Permanent Loan was canceled and all rights and obligations under the Permanent
Loan ceased to exist.
(b) Intentionally deleted.
(c) Intentionally deleted.
(d) Intentionally deleted.
(e) Intentionally deleted.
(f) (i) Except as provided in the remaining provisions of this Section
4.02(f), no Venturer shall be obligated to contribute money to the Venture to
restore any deficit in its Capital Account upon the liquidation of the Venture
or of any Venturer's interest in the Venture.
(ii) Hines may elect, at the times and in the manner set forth in
Section 4.02(f)(iv) below, to agree to restore all or a portion of the
deficit in its Capital Account in accordance with the provisions of
Section 4.02(f)(vi) below.
(iii) Intentionally deleted.
(iv) Hines may annually elect to restore all or a portion of the
deficit in its Capital Account by delivering a written notice to the
Venture and to the other Venturer setting forth the dollar amount of the
deficit in its Capital Account which Hines agrees to restore pursuant to
this Section 4.02(f) (the "Deficit Election"); provided, however, that a
Deficit Election of Hines may not reduce the amount of the Capital Account
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23
deficit which Hines previously agreed to restore in a prior Deficit
Election. The Deficit Election shall be delivered to the Venture no later
than 60 days prior to the beginning of any fiscal year of the Venture.
(v) Provided Hines has delivered a Deficit Election, Company may
elect to agree to restore a portion of the deficit in its Capital Account
in accordance with the provisions of Section 4.02(f)(vi) below, by
delivering to the Venture and to the other Venturer(s) a Deficit Election
no later than 30 days prior to the beginning of any fiscal year of the
Venture if, in the view of counsel to Company, such election is necessary
to allocate to Company, Losses and deductions in accordance with the
provisions of Section 4.06(c).
(vi) Provided a Venturer has delivered a Deficit Election under this
Section 4.02(f), then if, upon the liquidation of the Venture, the
liquidation of such Venturer's interest in the Venture or the sale of such
Venturer's interest under the buy-sell procedure pursuant to Section 5.02,
a Venturer shall have a deficit in its Capital Account, after giving
effect to all adjustments to the Capital Account of such Venturer pursuant
to Section 4.01(b), such Venturer shall contribute to the Venture cash in
(X) the amount of such deficit or (Y) the amount specified in such
Venturer's most recent Deficit Election, whichever is less. Contributions
under this Section 4.02(f) shall be made by the end of the taxable year of
the Venture in which the liquidation or sale of such Venturer's interest
occurs (or, if later, within 90 days after the date of such liquidation or
sale) and shall be used first to satisfy any amounts then owing by the
Venture to its creditors to the extent such creditors have recourse to the
assets of the Venturers and any remaining contributions shall be
distributed to the Venturers having positive balances in their Capital
Accounts in proportion to such positive balances.
(vii) For purposes of this provision, the term "liquidation" shall
have the meaning set forth in the first sentence of Regulation section
1.704-1(b)(2)(ii)(g), but shall not include a constructive liquidation of
the Venture caused by a termination under section 708(b)(1) of the Code.
(g) Intentionally deleted.
(h) No Venturer shall be required to make any contributions to the Venture
except as required by the provisions of this Section 4.02.
SECTION 4.03. Intentionally deleted.
SECTION 4.04. Tax Status and Returns. (a) Notwithstanding any provisions
hereof to the contrary, each of the Venturers hereby recognizes that the Venture
will be a partnership
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for United States federal income tax purposes and that the Venture will be
subject to all provisions of Subchapter K of Chapter 1 of Subtitle A of the
Code; provided, however, that the filing of U.S. Partnership Returns of Income
shall not be construed to extend the purpose of the Venture or expand the
obligations or liabilities of the Venturers. At the request of any Venturer, the
Venture shall file an election under section 754 of the Code.
(b) Hines (as long as Hines, an Affiliated Entity of Hines or a Person
Conrtolled by a member of the Hines Control Group is the Property Manager) or
Company (in all other instances) shall prepare or cause to be prepared at the
expense of the Venture all tax returns and statements, if any, which must be
filed on behalf of the Venture regarding this transaction and the operation,
dissolution and liquidation of the Venture with any taxing authority, and shall
submit such returns and statements to all of the Venturers for their prior
approval at least 30 days before such returns and statements are due (including
extensions), and when Approved by the Venturers, make timely filing thereof. In
addition, within 120 days after the end of each fiscal year of the Venture,
Hines (as long as Hines, an Affiliated Entity of Hines or a Person Controlled by
a member of the Hines Control Group is the Property Manager) or Company (in all
other instances) shall furnish each Venturer with a report setting forth in
sufficient detail all data and information regarding the business and affairs of
the Venture as shall enable the Venture and each Venturer to prepare its
federal, state and local tax returns.
(c) (i) Company is designated tax matters partner (herein "TMP") as
defined in section 6231(a)(7) of the Code and the Venturers will take such
actions as may be necessary, appropriate, or convenient to effect the
designation of Company as TMP. In the event that Company shall no longer
be a Managing Partner, then Hines shall be the TMP for all taxable years
beginning with the year during which Company ceases to be a Managing
Partner. The TMP and the other Venturers shall use their best efforts to
comply with the responsibilities outlined in this section and in Sections
6222 through 6231 of the Code (including any Regulations promulgated
thereunder). In determining the TMP's responsibilities under Section
6223(g) of the Code, the term "each partner" shall be deemed to mean "each
Venturer".
(ii) Hines shall furnish Company with such information as Company
shall reasonably request to permit it to provide the Internal Revenue
Service with sufficient information to allow proper notice to the parties
in accordance with Section 6223 of the Code.
(iii) As TMP, the Company covenants and agrees with the other
Venturers that (i) after the receipt of a final partnership administrative
adjustment for a taxable year, the Company will not file a "petition for
readjustment of the partnership items", within the meaning of Section 6226
of the Code, in any court other than the United States Tax Court, without
the consent of the other Venturers and (ii) the Company will
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25
not agree, pursuant to Section 6229(b)(l)(B) of the Code, to extend the
period for assessing any tax imposed by subtitle A of the Code with
respect to any person which is attributable to any partnership item (or
affected items) of the Venture without the consent of all of the
Venturers. In the event any other Venturer becomes a TMP, such Venturer
shall be bound by this provision.
(iv) No Venturer shall file, pursuant to section 6227 of the Code, a
request for an administrative adjustment of partnership items for any
partnership taxable year without first notifying the other Venturers. If
the other Venturers agree with the requested adjustment, the TMP shall
file the request for administrative adjustment on behalf of the Venture.
If the Venturers do not reach agreement within thirty days or within the
period required to timely file the request for administrative adjustment,
if shorter, any Venturer may file a request for administrative adjustment
on its own behalf. If, under section 6227 of the Code, a request for
administrative adjustment which is to be made by the TMP must be filed on
behalf of the Venture, the TMP shall also file such a request on behalf of
the Venture under the circumstances set forth in the preceding sentence.
(v) If any Venturer intends to file a petition under section 6226 or
6228 of the Code with respect to any partnership item or other tax matter
involving the Venture, the Venturer so intending shall notify the other
Venturers of such intention and the nature of the contemplated proceeding.
Such notice shall be given in a reasonable time to allow the other
Venturers to participate in the choosing of the forum in which such
petition will be filed. If the Venturers do not agree on the appropriate
forum, the petition shall be filed with the United States Tax Court. If
any Venturer intends to seek review of any court decision rendered as a
result of the proceeding instituted under the preceding part of this
subsection, such party shall notify the others of such intended action.
(vi) The TMP shall not bind the other Venturers to settlement
agreement without the Approval of the Venturers. If any Venturer enters
into a settlement agreement with the Secretary of the Treasury with
respect to any partnership items, as defined by section 6231(a)(3) of the
Code, it shall notify the other Venturers of such settlement agreement and
its terms within thirty days from the date of settlement.
(vii) These provisions shall survive the termination of the Venture
or the termination of any Venturer's interest in the Venture and shall
remain binding on the Venturers for a period of time necessary to resolve
with the Internal Revenue Service or the Department of the Treasury any
and all matters regarding the Federal income taxation of the Venture and
each of the Venturers with respect to Venture matters.
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26
(d) Each Venturer (and any transferee of such Venturer) shall timely file
and shall use its best efforts to cause any of its Affiliates timely to file any
election permitted by law if, in the opinion of tax counsel for such Venturer
(or such Affiliate), the timely filing of such an election:
(i) would prevent the Venture's assets from being treated in whole
or in part as "tax-exempt use property" within the meaning of Code section
168(j) (or any successor provision thereto); and
(ii) would not create a significant risk that such Venturer or any
of its Affiliates shall, as a result of the filing of such election,
become subject to a more onerous tax burden than the burden to which they
would have been subject had such an election not been made.
Such Venturer and its Affiliates shall be reimbursed by the Venture for
any reasonable expenses, including reasonable attorneys' fees, which they incur
in the determination of whether to make such election and the preparation and
filing of any such election.
SECTION 4.05. Distributions. (a) For purposes of this Agreement, the "Net
Cash Flow" of the Venture shall be computed in accordance with accepted cash
basis accounting principles, consistently applied, by deducting the sum of the
amounts described in (ii) and (iii) below from the amounts described in (i)
below:
(i) The gross cash (or cash equivalent) receipts (other than Sales
or Refinancing Proceeds and capital contributions by the Venturers)
(computed in accordance with accepted cash basis accounting principles,
consistently applied) derived by the Venture, any of the Venturers,
Property Manager or any other person on behalf of the Venture from all
sources whatsoever as a direct or indirect result of the ownership or
operation of the Property or the operation of the Venture including, but
not limited to the gross amounts received as rent, prepaid rent,
additional rent, the proceeds of rent insurance, fees, charges or
otherwise (excluding security deposits unless such security deposits are
applied as payment of rent or forfeited upon default under a lease),
sundry receipts, concessionaire receipts, interest on deposits provided
that such interest is not the property of tenants by lease or local law,
the net amount of any refund of impositions of tax applicable to any
period of this Agreement (to the extent that the Venture is not required
to remit such refund to tenants), the proceeds of any sale of personal
property or fixtures now or hereafter located on the Property, but
specifically excluding any capital contribution by the Venturers.
(ii) The Operating Expenses of the Venture. For purposes of this
Agreement, the term "Operating Expenses" shall mean the operating expenses
actually
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27
paid by the Venture, computed in accordance with accepted cash basis
accounting principles, consistently applied, for costs of: the
maintenance, management, operation, repair and replacement of any portion
of the Property except to the extent financed by borrowings of the
Venture, amounts paid by the Venture (including reimbursements) to the
Property Manager under the Management and Leasing Agreement or to the
Administrator under the Administration Agreement, accountants, attorneys
or other agents for services rendered in connection with the operation of
the Property, and all other costs specifically designated by or in
accordance with the provisions hereof to be Operating Expenses. Operating
Expenses shall include the costs of or charges for the following by way of
illustration but not limitation: interest and other periodic amortization,
if any, on any indebtedness of the Venture Approved by the Venturers,
whether or not secured by a lien on the Property, together with all other
costs incurred in connection with any such indebtedness or lien;
promotional and advertising costs; leasing commissions; real estate taxes
and assessments; all taxes upon the gross or net rental income of the
Venture derived from the Property; water and sewer charges; linkage
payments (or the alternative thereto) to the City or the BRA under the
Sale and Construction Agreement; insurance premiums; licenses, permits and
inspections (excepting building permits and inspections relating to the
initial construction of the Improvements); heat, light and power;
janitorial services; building staff; garbage services; costs of providing
air-conditioning; costs of supplies, materials, equipment and tools; and
the cost to the Venture of contesting by appropriate proceedings the
applicability to the Property or the validity of any statute, ordinance,
rule or regulation affecting the Property which might increase Operating
Expenses; provided, however, that Operating Expenses shall not include
depreciation, amortization of previously capitalized expenditures or any
other expense not involving a cash expenditure by the Venture or any
amounts paid from funds specifically excluded from the gross cash receipts
specified in Section 4.05(a)(i).
(iii) A reasonable reserve for contingencies, accrued but unpaid
Operating Expenses, and the general working capital requirements of the
Venture as Approved by the Venturers.
(b) Within 10 days after the close of each calendar month, the Venture
shall distribute or otherwise apply the Net Cash Flow realized for the preceding
calendar month to the Company and Hines in proportion to their relative
Percentage Interests.
(c) Sales or Refinancing Proceeds shall be distributed or otherwise
applied to Company and Hines in proportion to their relative Percentage
Interests.
(d) Anything in this Agreement to the contrary notwithstanding, in the
event of a liquidation of the Venture, the proceeds of such liquidation
remaining after the payment of or
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provision for the debts and liabilities of the Venture shall be applied in
accordance with the following order of priority:
(i) First, to the payment of the expenses of liquidation;
(ii) Next, to the setting up of any reserves which the remaining
Venturers may deem necessary or appropriate for any contingent or
unforseen liabilities or obligations of the Venture (said reserves may be
transferred by the remaining Venturers to a bank or trust company
acceptable to the remaining Venturers, as escrowee, to be held by it for
distributing such reserves in payment of any of the aforementioned
liabilities or obligations) and at the expiration of such period as the
remaining Venturers shall deem advisable, if any, thereafter remaining in
the manner provided herein;
(iii) Thereafter, to the Venturers in proportion to their Percentage
Interests.
SECTION 4.06. Allocations of Profits, Gains and Losses. (a) Definitions.
For purposes of this Section 4.06, the following terms shall have the following
meanings:
(i) Adjusted Capital Account Deficit. The "Adjusted Capital Account
Deficit" of any Venturer means, as of any particular date, the deficit
balance, if any, in such Venturer's Capital Account as of such date, as
determined in the manner provided in Section 4.01 and by then adjusting
such Capital Account as so determined as follows:
(A) Such Capital Account shall be increased to reflect the
amount, if any, which such Venturer is obligated to restore to the
Venture under any provision of this Agreement or is deemed to be
obligated to restore pursuant to Sections 1.704-2(g) and
1.704-2(i)(5) of the Regulations; and
(B) Such Capital Account shall be reduced to reflect any items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the
Regulations.
(ii) Profits and Losses. The "Profits" and "Losses," as the case may
be, of the Venture for each year shall be an amount equal to the Venture's
taxable income or taxable loss under Section 703(a) of the Code and
Section 1.703-1 of the Regulations (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or
loss), but with the following adjustments:
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29
(A) Any tax-exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Venture during such year
shall be taken into account in computing such taxable income or
taxable loss as if it were taxable income.
(B) Any expenditures of the Venture described in Section
705(a)(2)(B) of the Code for such year, including any items treated
under Section 1.704-1(b)(2)(iv)(i) of the Regulations as items
described in Section 705(a)(2)(B) of the Code, shall be taken into
account in computing such taxable income or taxable loss as if they
were deductible items.
(C) Any items that are specially allocated pursuant to
Sections 4.06(e) shall not be taken into account in computing such
taxable income or taxable loss.
(b) Allocation of Profits. Profits for any year of the Venture shall be
allocated as follows:
(i) First, to the Venturers in proportion to, and to the extent of,
the negative balances, if any, in their respective Capital Accounts as of
the last day of such year; and then
(ii) To the Venturers in proportion to their respective Percentage
Interests.
(c) Allocation of Losses. Losses for any year of the Venture shall be
allocated to the Venturers in proportion to their respective Percentage
Interests. Notwithstanding the preceding sentence, to the extent any Losses
allocated to a Venturer hereunder would cause such Venturer (hereafter, a
"Restricted Venturer") to have an Adjusted Capital Account Deficit as of the end
of the year to which such Losses relate, such Losses shall not be allocated to
such Restricted Venturer and instead shall be allocated to the other Venturer
(hereafter, a "Permitted Venturer") in proportion to, and to the maximum extent
that, the amounts in which such Losses may be allocated to the Permitted
Venturer without causing it to have an Adjusted Capital Account Deficit.
(d) Special Allocations. The following special allocations shall be made
in the following order:
(i) Minimum Gain Chargeback. If there is a net decrease in
"partnership minimum gain" (as that term is defined in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations) during any year, each
Venturer shall be specially allocated items of Venture income and gain for
such year in an amount equal to that Venturer's share of the net decrease
in partnership minimum gain. Allocations pursuant to the previous
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30
sentence shall be made in accordance with Section 1.704-2(f)(6) of the
Regulations. This Section 4.06(d)(i) is intended to comply with the
minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(ii) Partner Minimum Gain Chargeback. If there is a net decrease in
"partner nonrecourse debt minimum gain" (as that term is defined in
Sections 1.704-2(i)(2) and (3) of the Regulations) during any year, each
Venturer who has a share of that partner nonrecourse debt minimum gain as
of the beginning of the year shall, to the extent required by Section
1.704-2(i)(4) of the Regulations, be specially allocated items of Venture
income and gain for such year (and, if necessary, subsequent years) equal
to that Venturer's share of the net decrease in partner nonrecourse debt
minimum gain. Allocations pursuant to the previous sentence shall be made
in accordance with Section 1.704-2(i)(4) of the Regulations. This Section
4.06(d)(ii) is intended to comply with the requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(iii) Qualified Income Offset. If any Venturer unexpectedly receives
any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Venture income and
gain shall be specially allocated to each such Venturer in an amount and
manner sufficient to eliminate, to the extent required by the Regulations,
the Adjusted Capital Account Deficit of such Venturer as quickly as
possible, provided that an allocation pursuant to this Section
4.06(d)(iii) shall be made only if and to the extent that such Venturer
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Section 4.06 have been tentatively made as if this
Section 4.06(d)(iii) were not in the Agreement.
(iv) Gross Income Allocation. If any Venturer has a deficit capital
account at the end of any year that is in excess of the sum of (i) the
amount such Venturer is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Venturer is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g) and 1.704-2(i)(5), each such Venturer shall be
specially allocated items of Venture income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to
this Section 4.06(d)(iv) shall be made only if and to the extent that such
Venturer would have a deficit capital account in excess of such sum after
all other allocations provided for in this Section 4.06 have been made as
if Sections 4.06(d)(iii) and (iv) were not in the Agreement.
(v) Nonrecourse Deductions. "Nonrecourse deductions" (as that term
is defined in Sections 1.704-2(b)(1) and (c) of the Regulations) for any
year or other
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31
period shall be specially allocated to the Venturers in proportion to
their respective Percentage Interests.
(vi) Partner Nonrecourse Deductions. "Partner nonrecourse
deductions" (as that term is defined in Section 1.704-2(i) of the
Regulations) for any year or other period shall be specially allocated to
the Venturer who bears the economic risk of loss with respect to the
"partner nonrecourse debt" (as that term is defined in Section 1.704-
2(b)(4) of the Regulations) to which such partner nonrecourse deductions
are attributable, in accordance with Regulations Section 1.704-2(i)(1).
(vii) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining capital
accounts, the amount of such adjustment to capital accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Venturer in a manner consistent
with the manner in which their capital accounts are required to be
adjusted pursuant to such Section of the Regulations.
(e) Curative Allocations. The allocations set forth in Section 4.06(d)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Venturers that, to the
extent possible, all Regulatory Allocations that are made be offset either with
other Regulatory Allocations or with special allocations pursuant to this
Section 4.06(e). Therefore, notwithstanding any other provision of this Section
4.06 (other than the Regulatory Allocations), the Company, as Managing Partner,
shall make such offsetting special allocations in whatever manner it determines
appropriate so that, after such offsetting allocations are made, each Venturer's
capital account balance is, to the extent possible, equal to the capital account
balance such Venturer would have had if the Regulatory Allocations were not part
of this Agreement and all Venture items were allocated pursuant to Sections
4.06(b) and (c). In exercising its discretion under this Section 4.06(e), the
Managing Partner shall take into account future Regulatory Allocations under
Sections 4.06(d)(i) and (ii) that, although not yet made, are likely to offset
other Regulatory Allocations previously made under Sections 4.06(d)(v) and (vi).
(f) Section 704(c) Allocation. Any item of income, gain, loss, and
deduction with respect to any property (other than cash) that has been
contributed by a Venturer to the capital of the Venture and which is required to
be allocated to the Venturers for income tax purposes under Section 704(c) of
the Code so as to take into account the variation between the tax basis of such
property and its agreed upon fair market value at the time of its contribution
shall be allocated to the Venturers for income tax purposes in the manner so
required or permitted. In
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32
addition, any deduction to which the Venture is entitled in a year with respect
to any accrued but unpaid item transferred to the Venture by a Venturer that is
required to be allocated to the Venturers under Section 704(c)(3) of the Code
shall be allocated in the manner so required.
SECTION 4.07. Accounting. (a) The fiscal year of the Venture shall be the
calendar year.
(b) The Managing Partner shall cause the Venture to maintain true and
correct books and records of the Venture in accordance with generally accepted
accounting principles, consistently applied, showing all costs, expenditures,
receipts, assets and liabilities and profits and losses and all other records
necessary, convenient or incidental to accurately record the business and
affairs of the Venture. The books of account of the Venture shall be kept and
maintained at all times at the Venture's principal place of business or such
other place or places Approved by the Venturers. The books of account shall be
maintained on an accrual basis of and such method of accounting shall be used
for federal income tax reporting purposes.
(c) The Venturers agree that the Venture's certified public accountants
shall be Coopers & Lybrand LLP or such other independent firm of certified
public accountants as Approved by the Venturers from time to time (the
"Accountant"); provided, however, that the termination of Coopers & Lybrand LLP
as the Accountant of the Venture shall be Approved by the Venturers. On or
before January 30 of each year, Hines (as long as Hines, an Affiliated Entity of
Hines or a Person Controlled by a member of the Hines Control Group is the
Property Manager) or Company (in all other instances) shall deliver to the
Accountant the information necessary to prepare an audited Balance Sheet,
Statement of Income or Loss and Statement of Change in Financial Position of the
Venture for the prior fiscal year. Thereafter, Hines (as long as Hines, an
Affiliated Entity of Hines or a Person Controlled by a member of the Hines
Control Group is the Property Manager) or Company (in all other instances) shall
respond to any additional inquiries or provide additional documentation required
by the Accountant and will use its best efforts to cause the Accountant to
prepare and furnish to each of the Venturers, within 60 days after the close of
each fiscal year, an audited balance sheet of the Venture dated as of the end of
the fiscal year, and a related audited statement of income or loss for the
Venture for such fiscal year. Hines (as long as Hines, an Affiliated Entity of
Hines or a Person Controlled by a member of the Hines Control Group is the
Property Manager) or Company (in all other instances) shall furnish to the other
Venturers such other reports on the Venture's operations and condition as may be
reasonably requested by either such Venturer.
(d) Each Venturer shall have the right at all reasonable times during
usual business hours to audit, examine and make copies of or extracts from the
books of account of the Venture. Such right may be exercised through any agent
or employee of such Venturer designated by it or by an independent firm of
certified public accountants designated by such
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Venturer. Each Venturer shall bear all expenses incurred in any examination made
for such Venturer's account unless there is an error of more than 3% in such
books of account (including the computation of Net Cash Flow of the Venture for
any fiscal year) in which event the Venture shall reimburse such Venturer for
its costs and expenses. In addition, if the Venture can qualify to forego
payment of any withholding taxes by preparing and filing the appropriate forms,
the Venture shall prepare and file such forms.
SECTION 4.08. Bank Accounts. Funds of the Venture shall be deposited in an
account or accounts of a type, in form and name Approved by the Venturers in
Mellon Bank or another bank or banks Approved by the Venturers. Withdrawals from
bank accounts shall be made only by parties Approved by the Venturers.
ARTICLE V
TERM AND TERMINATION
SECTION 5.01. Term. The Venture commenced on May 29, 1986 and shall
continue until May 29, 2061 or until sooner terminated in accordance with the
provisions of this Article V, which provisions shall not be mutually exclusive,
i.e., the exercise or use of one of the provisions of this Article shall not
preclude the exercise or use of any other provisions of this Agreement except as
in this Article V expressly provided. No Venturer shall have the right and each
Venturer hereby agrees not to dissolve, terminate or liquidate, or to petition a
court for the dissolution, termination or liquidation of, the Venture except as
provided in this Agreement.
SECTION 5.02. Voluntary Termination-Buy/Sell. (a) Either of Company or
Hines (the "Offeror") shall, subject to the conditions herein provided and only
at the time specified in Section 5.02(b), have the right to withdraw from the
Venture by giving notice of such intention to withdraw to the other Venturer
(the "Offeree") and, in addition, by delivering to the Offeree an offer in
writing (the "Offer") stating the cash price (determined as set forth below) at
which the Offeror would be willing to purchase or sell an undivided 100%
interest in the Property. The price set forth in the Offer (the "Offer Price")
shall be the positive or negative amount which, in the Offeror's sole and
absolute opinion, is equal to the difference between (x) the value of the
Property free and clear of any mortgages, deeds of trust and other liens and
encumbrances and (y) the aggregate unpaid principal balance plus accrued and
unpaid interest and charges (including, without limitation, prepayment
premiums), if any, of the mortgages, deeds of trust and other liens and
encumbrances affecting the Property as of the date of the Offer subject to which
the Property would be conveyed (the "Surviving Mortgages"). In each instance all
Surviving Mortgages shall be described in the Offer.
If the Improvements have been damaged or if there is a condemnation or
other taking for a public purpose pending, the Offer shall state whether or not
the Offer Price specified is
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contingent upon the Improvements being fully repaired and whether or not the
condemnation or other taking has been taken into account in the calculation of
the Offer Price. The Offer shall also specify as to whether the Offer is
contingent upon the Property being repaired and restored prior to the closing,
or whether the purchasing party will agree to accept the Property in an
unrepaired or unrestored condition and an assignment of the insurance proceeds
or condemnation award. The Managing Partner or the Property Manager, as the case
may be, shall furnish, or where appropriate, make available to the Offeror and
the Offeree, or use its best efforts to obtain from third parties such
certificates, documents and information as the Offeror and the Offeree may
reasonably request in order to enable the Offeror to prepare the Offer and
compute the Offer Price and the Offeree to make the decision described in
Section 5.02(c).
(b) Neither Venturer may make the Offer to buy or sell described in
Section 5.02(a) at any time prior to November 1, 2007.
(c) Upon receipt of an Offer given and delivered pursuant to Section
5.02(a), each Offeree shall be obligated to elect in accordance with the
provisions of Section 5.02(e), either to purchase the Offeror's entire interest
in the Venture or to sell to the Offeror the entire interest of such Offeree in
the Venture, in either case for a purchase price determined in the manner set
forth below in Section 5.02(d) and payable in cash at the closing described in
Section 5.03.
(d) The purchase price payable for any purchase and sale of an interest of
a Venturer shall be equal to the amount of Sales or Refinancing Proceeds, if
any, that would have been distributed to such Venturer in accordance with the
provisions of Section 4.05(c), subject to reduction as provided in 4.02(e) to
take into account, under certain circumstances, any negative Capital Account
balance, had the Property been sold for an amount equal to the Offer Price.
(e) An Offeree shall give written notice of its election to the Offeror
within 60 days after receipt of the Offer. Failure of an Offeree to give notice
that such Offeree has elected to purchase the Offeror's entire interest in the
Venture shall be conclusively deemed to be an election of such Offeree to sell
such Offeree's entire interest in the Venture to the Offeror. In the event that
an Offeree elects to sell its interests in the Venture to the Offeror, the
Offeror shall purchase the interest of the Offeree.
(f) If, by virtue of the election of the Offeror or Offeree to purchase
the selling Venturer's interest in the Venture pursuant to this Section 5.02,
the holder of any loan encumbering the Property has the right to, and notifies
the Venture of its intent to accelerate such loan, it shall be a condition to
the Closing that the purchasing Venturer repay such loan (plus any deferred and
accrued and unpaid interest thereon) at the Closing and the failure to do
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so will constitute such Venturer a Defaulting Venturer. The purchasing Venturer
who shall be a Defaulting Venturer agrees to indemnify the selling Venturer and
its Affiliates and hold each of them harmless from and against any damage, loss
or liability to any of them as a result of the indemnifying party's failure to
repay such loan at the Closing in accordance with the provisions hereof.
(g) If, following an election or a deemed election by an Offeree to
purchase or sell its interest, the purchasing Venturer fails to consummate the
purchase in accordance with Section 5.03, the purchasing Venturer shall be
deemed a Defaulting Venturer. The selling Venturer, in addition to all other
rights and remedies available at law or in equity against the Defaulting
Venturer (as set forth in Section 5.08), shall have the right (but not the
obligation) (i) to purchase the interest of the Defaulting Venturer in the
Venture as if the Defaulting Venturer had made an election to sell its interest
in the Venture pursuant to Section 5.02(c) or (ii) to sell the Property to a
bona fide third party who is not an Affiliate of any Non-Defaulting Venturer
without the consent of the Defaulting Venturer.
SECTION 5.03. Closing. (a) The closing ("Closing") of any sale pursuant to
this Article V (other than pursuant to Section 5.05) shall be held at a mutually
acceptable place, on a mutually acceptable date but not more than 90 days after
receipt by the Offeror of the Offeree's written notice of election, or the
expiration of the time during which the Offeree is entitled to elect, as
provided in Section 5.02(e). However, within 45 days after such receipt or
expiration, there shall be a preliminary closing at which the Venturers shall
negotiate the form of the instruments and documents that are reasonably
necessary and desirable to effectuate the sale and transfer to the purchasing
party(ies).
(b) At the Closing, an assignment and, if requested by the purchasing
party, a bill of sale (both with covenants against grantor's acts) from the
selling Venturer to the purchasing party of the selling Venturer's interest
therein, together with such other instruments and documents as may be reasonably
necessary or desirable to effectuate the sale and transfer to the purchasing
party, shall be deposited in escrow under an escrow agreement and with an escrow
agent which has been approved by the Venturers, which approval shall not be
unreasonably withheld. If there is any dispute between the parties, the title
company which issued a fee title policy to the Venture shall act as the escrow
agent. The instruments and documents to be deposited in escrow at the Closing
shall be legally sufficient to convey all of the selling Venturer's interest in
the Venture to the purchasing party, free and clear of all mortgages, deeds of
trust, liens and encumbrances, and, at such time, the Property shall be free and
clear of all mortgages, deeds of trusts, liens and encumbrances except the
Surviving Mortgages. The purchase price shall be paid to the selling Venturer by
federal wire transfer of "same day" funds to an account designated by the
selling Venturer. At Closing, all prepaid expenses of the Venture, including,
without limitation, lease payments, advance payments on service and maintenance
contracts and similar items, shall be calculated, and to the extent any
prepayment
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relates to a period beyond Closing, the selling Venturer's pro rata share (based
on the Percentage Interest of such Venturer) shall be credited to the purchase
price. All accrued but unpaid expenses of the Venture, including, without
limitation, interest and contract and other payments made in arrears, shall be
calculated, and to the extent any such accrued expenses relate to the period
prior to Closing, the selling Venturer's pro rata share (based on the Percentage
Interest of such Venturer) shall be debited against the purchase price at
Closing. To the extent the Venture has undistributed Net Cash Flow, the selling
Venturer's distributive share(s) thereof shall be credited to the purchase price
at Closing and any funds received by the Venture after Closing which are
attributable to periods prior to Closing and were not included in the
computation of Net Cash Flow shall be prorated between the Venturers and the
selling Venturer's share shall be paid to it upon receipt by the Venture.
(c) In the event there are any conveyance, transfer or similar taxes
payable as an incident to the conveyances at the preliminary closing or the
Closing, such taxes shall be expenses of the Venture. In the event that any
title insurance company insuring the title of the Venture to the Property shall
refuse to endorse its policy of title insurance to reinsure the Venture's title
to the Land and the Improvements effective immediately after the transfer to the
purchasing Venturer without exception other than as set forth in the original
policy of title insurance (other than exceptions for real estate taxes, rights
of tenants in possession, as tenants only, any Surviving Mortgages, any
easements created by the Venture in favor of utility suppliers providing utility
service to the Venture, and any other matter Approved by the Venturers at any
time or from time to time), then the assignment from the selling Venturer to the
purchasing Venturer shall contain general warranties of its title to its
interest in the Venture and the Land and Improvements.
(d) The purchasing Venturer shall have the right, within its sole and
absolute discretion, to cause its nominee or designee to acquire the selling
Venturer's interest in the Venture at the Closing but nothing herein shall
relieve the purchasing Venturer of its other obligations hereunder. Any such
designee shall, upon Closing, become a Venturer only if expressly approved and
consented to by the purchasing Venturer.
SECTION 5.04. Assumption of Liabilities. (a) At the Closing held pursuant
to this Article (other than pursuant to Section 5.05), the purchasing Venturer
shall, by a legally enforceable agreement, assume the payment of all obligations
of the Venture accruing after Closing, including, without limitation, any
indebtedness under any lien on the Property identified in the Offer to the
extent that the Venturers have personal liability therefor.
(b) If, at the time of the purchase of the Venture interest, the Property
is subject to any mortgage, deed of trust, lien or encumbrance, other than a
Surviving Mortgage, the purchasing Venturer shall discharge, assume, or take
subject to such mortgage, deed of trust, lien or encumbrance and reduce the
amount of the Offer by the amount of money as would be
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37
required to discharge such mortgage, deed of trust, lien or encumbrance
(including, without limitation, any and all prepayment premiums or
penalties)with an appropriate reduction in the purchase price under Section
5.02(d). In addition, if such an encumbrance shall have been placed by the
selling Venturer in contravention of the terms and provisions of this Agreement,
then the purchasing Venturer shall also have all of the rights provided in this
Article V with respect to a default by any Venturer.
(c) If the Improvements are damaged by fire or other casualty, or if any
party possessing the right of eminent domain or such similar right (including
the BRA pursuant to its remedies set forth under the Sale and Construction
Agreement) shall give notice of an intention to take or acquire a substantial
part of the Land or any part of the Improvements, and such damage occurs, or
such notice is given between the date of the Offer and the Closing, the
following shall apply:
(i) If the Improvements are damaged by an insured casualty (or an
uninsured casualty not resulting in significant damage, which for the
purposes of this subsection only shall mean damage the cost to repair of
which would not exceed $1,000,000), or if the taking or acquisition shall
not involve a substantial portion of the Land or any part of the
Improvements resulting in any other substantial reduction in income, then
the purchasing Venturer shall be required to complete the transaction and
accept an assignment of the insurance or condemnation proceeds, in which
case the purchase price shall be reduced by the amount of the uninsured
casualty, if any, and shall be further reduced by the sum of all
deductible amounts specified under the policies of insurance.
(ii) If the Improvements are damaged by an uninsured casualty
resulting in significant damage, or if the taking or acquisition shall or
may result in a substantial reduction in the income producing capacity of
the Property, then the purchasing Venturer shall have the option to either
(1) accept the Venture interest with the Property in an "as is" condition
together with any insurance proceeds, settlements and awards (in which
case the purchase price shall be reduced by the sum of all deductible
amounts specified under policies of insurance), or (2) cancel the
purchase.
In the event that the purchase is canceled by the purchasing Venturer in
accordance with this Section 5.04(c), the terms of this Agreement shall remain
in effect and continue to be binding on the parties.
SECTION 5.05. Right of First Offer. (a) (i) If Company or Hines wishes to
offer for sale all or any portion of its interest in the Venture (the "Offeror's
Interest") to a Person other than Venturer or Affiliated Entity of a Venturer
(the "Third Party") or receives an offer from a Third Party which it is willing
to accept, other than an entity which is directly or
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38
indirectly part of a Prohibited Syndication Offering (which shall be prohibited
under any circumstances), then such Venturer (the "Offeror") shall give prompt
notice in writing to the other Venturer (the "Offeree"), setting forth the
Percentage Interest being offered for sale, the name and address of the Third
Party, the price and other terms of the proposed offer of sale (the "Terms of
Sale") and such financial and other information regarding the Third Party as the
Offeree may reasonably request. The Terms of Sale shall not provide for (a) any
payment to be made which is not legal tender or (b) any security or collateral
to be given other than a lien on an interest of a Venturer.
(ii) The giving of such notice by the Offeror to the Offeree shall
constitute an offer by the Offeror to sell or transfer the Offeror's
Interest to the Offeree upon the same terms and conditions as contained in
the Terms of Sale. Within 10 business days after receipt of such notice,
the Offeree shall request any and all further information regarding such
offer as Offeree may reasonably require in order to fully evaluate the
Offer.
(iii) Within 60 days after the Offeror has supplied all requested
information to the Offeree (the "election period"), Offeree may elect (by
sending notice to the Offeror) to purchase or acquire the Offeror's
Interest upon the same terms and conditions as contained in the Terms of
Sale. If the Offeree elects to purchase the Offeror's Interest, then on
the closing date (which date shall be the date set forth in the Offeree's
notice of election to the Offeror but shall not be sooner than 15 days nor
later than 90 days after the date of the giving of such notice of
election), Offeror shall convey, transfer and assign to Offeree (by
instruments prepared by Offeror's attorneys and in form and substance
reasonably satisfactory to Offeree's attorneys) all or the appropriate
portion of Offeror's Interest upon the same terms and conditions as
contained in the Terms of Sale (subject to the condition imposed by
paragraph (v) below).
(iv) If the Offeree shall fail to exercise its right to purchase the
entire Offeror's Interest or, if for any other reason the Offeree does not
elect to purchase the entire Offeror's Interest, the Offeror may sell or
transfer the entire Offeror's Interest to the Third Party only, provided
(A) such sale or transfer is made on no more favorable terms and
conditions than those set forth in the Terms of Sale, (B) such sale or
transfer is consummated within 180 days after the expiration of the
election period, and (C) such sale or transfer is not, directly or
indirectly, part of a Prohibited Syndication Offering. In the event that
such sale to the Third Party is not consummated in accordance with this
Section 5.05 or the Offeror wishes to sell to someone other than the Third
Party listed in the Terms of Sale, the provisions of this Section 5.05
shall be applicable as if the previous Terms of Sale had never been
submitted.
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(v) If, by virtue of the election of the Offeree to purchase the
Offeror's Interest in accordance with the provisions of this Section 5.05,
the holder of any loan encumbering the Property has the right to, and
notifies the Venture of its intent to accelerate such loan, it shall be a
condition to the closing that the Offeree repay such loan (plus any
deferred and accrued and unpaid interest thereon) at the closing of the
sale of the Offeror's Interest.
(vi) The failure of Offeree to repay such loan in accordance with
Section 5.05(a)(v) above shall make such Offeree a Defaulting Venturer as
defined in Section 5.08 hereof. Furthermore, regardless of whether the
Offeror is then a Venturer, such Offeree who shall be a Defaulting
Venturer agrees to indemnify the Offeror and its Affiliates and hold each
of them harmless from and against any damage, loss or liability to any of
them as a result of the failure of the indemnifying party to repay such
loan in the amount indicated herein at the time specified herein for such
repayment.
(b) In the event of a sale to the Offeree or to a Third Party by the
Offeror permitted under Section 5.05, the Venture shall not be dissolved or
wound up but instead shall continue as before with, however, the replacement of
the Third Party or the Offeree as the successor in interest to the Offeror's
Interest or as a Venturer with an increased Percentage Interest, as the case may
be. No such sale shall relieve the Offeror from any of its obligations under
this Agreement accruing prior to such sale. Notwithstanding the foregoing, as a
condition to any sale by the Offeror to a Third Party, such Third Party must
execute this Agreement (as it may have been amended), or a separate consent
thereto, and agree to be bound by all of its terms and provisions; provided,
however, that such Third Party shall (i) neither become a Managing Partner by
virtue of its purchase of a Venturer's Percentage Interest nor (ii) have any
rights to participate in the management or decision-making of the Venture or to
vote on any Major Decisions, unless Company and Hines agree otherwise. In the
event Company transfers more than 50% of its Percentage Interest as of November
1, 1997 (91.5%) to the Offeree or to a Third Party pursuant to this Section 5.05
or otherwise, then from and after the date on which such transfer is
consummated, Company shall no longer have the right or authority granted under
the second sentence of Section 3.01(a) hereof to take all actions to be taken by
"the Managing Partner" hereunder and Hines shall thereafter have all such right
and authority, provided, however, that Company shall continue to remain a
Managing Partner of the Venture and shall have the right to participate in the
management and decision-making process of the Venture and to vote on Major
Decisions as provided herein with respect to all Venturers.
SECTION 5.06. Liquidation and Distribution Procedure. (a) Effective upon
the deposit in escrow of the documents of transfer and the purchase price
pursuant to Section 5.03, at the election of the purchasing Venturer, the
Venture shall be deemed dissolved. In such event the Venture's business and
affairs shall be wound up, its just debts and obligations paid
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40
and its remaining assets, if any, distributed to the remaining Venturers in
accordance with Section 4.05(d).
(b) In the event of a liquidation and dissolution as a result of the
occurrence of an Event of Dissolution pursuant to Section 5.07 hereof or a
default pursuant to Section 5.08 hereof, the Withdrawing Venturer or the
Defaulting Venturer, as the case may be, shall have no power or authority to
bind the Venture or the other Venturer but shall assist the remaining Venturer
in the dissolution and winding up of the Venture and the distribution of the
assets thereof. Upon such distribution and winding up, the parties hereto shall
be relieved of all obligations hereunder except for obligations, duties or
rights which have not been determined or ascertained as of the date of such
termination and for rights or remedies which a Non-Defaulting Venturer may have
against a Defaulting Venturer in law or equity. The winding up of the Venture
and the termination of the business and affairs of the Venture shall be
conducted by the remaining Venturer. During the period of such winding up, the
business and affairs of the Venture shall be conducted so as to maintain and
preserve the assets of the Venture in a manner consistent with the winding up of
the affairs thereof.
SECTION 5.07. Event of Dissolution. (a) The Venture shall not be wound up
and terminated by the occurrence of an Event of Dissolution unless all of the
remaining Venturers shall so decide.
(b) The term "Event of Dissolution" as used hereunder shall mean:
(i) the death of any natural person who is now or who shall
hereafter become a Venturer;
(ii) the dissolution or termination of any partnership or
corporation (other than (x) as a result of a transfer of interests therein
permitted by this Agreement or (y) a dissolution immediately followed by a
reconstitution of such partnership or corporation) which at the time is a
Venturer;
(iii) the declaration of any natural person who is now or who shall
hereafter become a Venturer as a lunatic in any judicial proceedings, or a
showing that such Venturer is of unsound mind;
(iv) the showing by competent medical evidence that any natural
person who is now or who shall hereafter become a Venturer is mentally or
medically unable to perform the duties required of him by the Venture;
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41
(v) the occurrence of any one of the following events:
(1) if any Venturer (hereinafter referred to as the "Bankrupt
Party") shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself
under the present or any future federal bankruptcy act or any other
present or future applicable federal, state or other statute or law
relative to bankruptcy, insolvency or other relief for debtors, or
shall seek or consent to or acquiesce in the appointment of any
trustee, receiver, conservator or liquidator of the Bankrupt Party
or of any substantial part of said party's properties or said
party's interest in the Venture (the term "acquiesce" as used in
this Article includes but is not limited to, the failure to file a
petition or motion to vacate or discharge any order, judgment or
decree within 30 days after the date of such order, judgment or
decree); or
(2) if a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against the Bankrupt
Party seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy act or any other present or
future applicable federal, state or other statute or law relating to
bankruptcy, insolvency or other relief for debtors, and such party
shall acquiesce in the entry of such order, judgment or decree or
such order, judgment or decree shall remain unvacated or unstayed
for an aggregate of 90 days (whether or not consecutive) from the
date of entry thereof, or any trustee, receiver, conservator or
liquidator of such party or of all or any substantial part of such
party's property or interest in the Venture shall be appointed
without the consent or acquiescence of such party and such
appointment shall remain unvacated or unstayed for an aggregate of
90 days (whether or not consecutive); or
(3) if any Venturer shall admit in writing its inability to
pay its debts as they mature; or
(4) if any Venturer shall give notice to any governmental body
of insolvency or pending insolvency, or suspension of operations; or
(5) if any Venturer shall make a general assignment for the
benefit of creditors or take any other similar action for the
protection or benefit of creditors.
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(c) In the event of the occurrence of an Event of Dissolution or otherwise
upon the agreement of all the Venturers:
(i) Provided that the other Venturer has elected to wind up and
terminate the Venture, the Venturer as to whom the Event of Dissolution
has occurred ("Withdrawing Venturer") shall immediately cease to have any
right to participate in the management or decision-making processes of the
Venture (provided that the Withdrawing Venturer shall nevertheless be
entitled to continue to receive distributions of Net Cash Flow and Sales
or Refinancing Proceeds and liquidation proceeds and allocations of gain,
loss and credit as fully as if such Venturer were not a Withdrawing
Venturer) and the remaining Venturer may send notices of the dissolution
to such persons and entities as the remaining Venturer may deem
appropriate and necessary under the circumstances.
(ii) The remaining Venturer shall settle the business of the Venture
as expeditiously as its nature will permit and account for the interests
of the Venturers. Such settlement procedure may include, but shall not be
limited to, a purchase by the remaining Venturer of the interest of the
Withdrawing Venturer at a price determined in accordance with the
appraisal procedures set forth in Section 10.08 hereof but otherwise in
accordance with the principles set forth in Section 5.02(d), a public sale
of all or any part of the assets of the Venture, a winding up of the
Venture, or a petition to a court of appropriate jurisdiction requesting
that such court supervise and approve a partitioning of the Property. If
by virtue of an Event of Dissolution, the holder of any loan encumbering
the Property has the right to, and notifies the Venture of its intent to
accelerate such loan, any settlement shall require the Venture to cause
such loan to be repaid in full.
(iii) The good will of the Venture (including the name, records and
files) shall belong to and remain solely vested in the Venture.
(iv) The prior written consent of the remaining Venturer shall be
required prior to any consent to any administration of the Property by any
referee, trustee or court of bankruptcy. The remaining Venturer shall have
the right at all times to continue the business and affairs of the Venture
pursuant to the terms of this Agreement.
SECTION 5.08. Default. If any Venturer fails to perform any of its
obligations hereunder, or violates the terms of this Agreement (the "Defaulting
Venturer"), the other Venturer (the "Non-Defaulting Venturer") shall have the
right to give the Defaulting Venturer a notice of default (the "Notice of
Default") specifically setting forth the nature of the default and stating that
the Defaulting Venturer shall have a period of 20 days to cure any such
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43
default, and if the Defaulting Venturer shall fail to cure such default within
such 20-day period, or if such default is not capable of being cured within such
period, the Defaulting Venturer has not commenced in good faith the curing of
such default within such 20-day period and does not thereafter prosecute to
completion with diligence and continuity the curing thereof, the Non- Defaulting
Venturer shall (in addition to any other rights under this Agreement, by law or
in equity) have the right:
(a) to bring any proceeding in the nature of specific performance,
injunction or other equitable remedy, it being acknowledged by each of the
Venturers that damages at law may be an inadequate remedy for a default or
threatened breach of this Agreement;
(b) to bring any action at law by or on behalf of the Venture or the
Non-Defaulting Venturer as may be permitted in order to recover damages;
(c) to institute such proceedings (including but not limited to the
right to purchase the interest of the Defaulting Venturer at a price
determined by appraisal made in accordance with the appraisal procedures
set forth in Section 10.08 hereof but otherwise in accordance with the
principles set forth in Section 5.02(d)) as may be appropriate to secure
an accounting and to dissolve, wind up and terminate the Venture; or
(d) if such default is a material default, to institute the
procedure set forth in Section 5.02 hereof by giving a notice to such
effect to the Defaulting Venturer, notwithstanding the time limitations
contained in Section 5.02(b).
In addition to the remedies set forth above, the Non-Defaulting Venturer shall
have the right to remove the Defaulting Venturer as Managing Partner, and if the
Defaulting Venturer is Hines, terminate the Management and Leasing Agreement and
designate a new Property Manager under an agreement substantially similar to the
Management and Leasing Agreement in accordance with Section 3.02(b) hereof and
if the Defaulting Venturer is Company, Hines shall succeed to Company's
management rights under Section 3.01(a) and shall be entitled to terminate the
Administration Agreement in accordance with the terms thereof.
SECTION 5.09. Conversion to Limited Partnership.
(a) Upon the occurrence of an Event of Dissolution or the occurrence of a
default pursuant to Section 5.08 which is not cured within the time period
specified in Section 5.08, then in addition to, and without excluding the
availability of any other remedy hereunder, the remaining Venturer or the
Non-Defaulting Venturer, as the case may be, may elect to convert the Venture to
a limited partnership organized and existing under the laws of the State of
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44
Massachusetts and to convert the Withdrawing Venturer or Defaulting Venturer, as
the case may be, to a limited partner therein. Upon such conversion, the former
Withdrawing Venturer or Defaulting Venturer, as the case may be, shall have
absolutely no right whatsoever to participate in the management or decision
making processes of the Venture, regardless of whether the activity in question
constitutes a Major Decision. Specifically, without limiting the generality of
the foregoing, following such conversion the former Withdrawing Venturer or
Defaulting Venturer, as the case may be, will not have any right to participate
in any decisions with respect to a sale or refinancing of the Property.
(b) In the event of any such conversion, the former Withdrawing Venturer
or Defaulting Venturer, as the case may be, agrees to execute, swear to, and
deliver any and all amendments to this Agreement, together with a certificate of
limited partnership in recordable form, in such form and substance as shall be
reasonably specified by the other Venturer, all within ten (10) days after
demand and notice form the other Venturer. In order to effectuate the foregoing,
each Venturer hereby appoints the full and complete power and authority in its
name and stead to execute, swear to, deliver, and record any and all such
amendments and such certificates. This power has been given between the
Venturers upon good and adequate consideration; it is a power coupled with an
interest; it is irrevocable; and it shall survive any death, incapacity,
dissolution, or any other event concerning any such Venturer.
(c) Any and all costs and expenses, including, without limitation
attorneys fees, recording costs, and other charges and expenses incurred in
connection with the conversion of the Venture to a limited partnership as
described in this Section 5.09 shall be paid in full by the former Withdrawing
Venturer or Defaulting Venturer, as the case may be.
ARTICLE VI
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION
SECTION 6.01. Prohibited Transfers. (a) Except as provided in Articles V
and VI, no Venturer may sell, transfer, assign or otherwise dispose of or
mortgage, hypothecate, or otherwise encumber or permit or suffer any encumbrance
of all or any part of its or his interest in the Venture whether voluntarily or
involuntarily, by operation of law or otherwise (hereinafter "Transfer") unless
Approved by the Venturers, and any attempt so to Transfer any such interest
shall be void and shall constitute a default hereunder by the Venturer
attempting to do so. The foregoing prohibition on Transfer shall also apply to a
Transfer of stock or partnership interests being held in any Venturer or the
Transfer of partnership interests or shares of stock, as the case may be, in
such members or shareholders being held by its members or shareholders, as the
case may be, or the Transfer or other agreement which results in Person(s) other
than the present beneficial owners of Hines or Company directly or indirectly
having an interest in the Venture.
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(b) No Venturer, directly or indirectly, shall consolidate with or merge
into or become a member any other partnership or other entity or convey or
transfer any part of its properties or assets except as hereby expressly
permitted. No Venturer, directly or indirectly, shall admit any new partners
(general or limited) nor shall any Venturer permit any of its general partners
to resign, except as specifically permitted under Section 6.02.
SECTION 6.02. Permitted Transfers. (a) Notwithstanding any other provision
of this Agreement to the contrary but subject to the provisions of Sections
6.02(g) and 6.02(h), each Venturer shall have the right, without the consent of
any other Venturer, to Transfer all of its interest in the Venture to an
Affiliated Entity.
(b) (i) Subject to Sections 6.02(g) and 6.02(h), Hines shall have the
right, without the consent of any other Venturer, to transfer all of its
interest in the Venture to any Person Controlled by a member of the Hines
Control Group.
(ii) Subject to Sections 6.02(g) and 6.02(h), each partner of Hines
(or the partner of any partner of Hines) may, without the consent of any
Venturer, Transfer all or any part of its interest in Hines (or any
partner of Hines) to any Person as long as Hines continues to be
Controlled by a member of the Hines Control Group.
(iii) Subject to Sections 6.02(g) and 6.02(h), Company shall have
the right to Transfer all of its interest in the Venture to any limited
partnership whose sole general partner is Cornerstone or an Affiliated
Entity of Cornerstone provided that the limited partners have the right to
convert their limited partnership interests into the stock of Cornerstone
or Affiliated Entities of Cornerstone.
(iv) Notwithstanding anything contained herein to the contrary but
subject to Section 6.02(g) and Section 6.02(h), Company and Hines shall
each be permitted to pledge their respective interests in the Venture
(herein, a "Venture Interest") for any purpose (a "Venture Interest
Financing") (and any further Transfer to the initial lender providing such
Venture Interest Financing which lender satisfies the requirements under
clause (A) below pursuant to a foreclosure or execution upon such Venture
Interest in connection which such pledge shall be permitted) provided that
the Venture Interest Financing complies with the following:
(A) the lender providing such Venture Interest Financing is an
Institutional Lender approved by the non-borrowing Venturer (such
approval not to be unreasonably withheld or delayed);
(B) the loan-to-value ratio for the Venture Interest Financing
is not in excess of fifty percent (50%); where the "loan amount" is
the full amount
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46
committed by such Institutional Lender and the value is the value of
the applicable Venture Interest as determined by the Institutional
Lender and for these purposes any appraisal obtained by or for the
Institutional Lender shall be conclusive as to such appraised value;
(C) the Venture Debt Service Coverage Ratio for such Venture
Interest Financing shall be at least 1.75;
(D) the loan documents evidencing the Venture Interest
Financing shall provide for the giving of notice to the
non-borrowing Venturer of any default thereunder by the borrowing
Venturer with the same right to cure such default for the
non-borrowing Venturer as is given to the borrowing Venturer; and
(E) all fees and expenses of obtaining the Venture Interest
Financing shall be borne by the borrowing Venturer.
Notwithstanding anything contained in Section 5.02(b), the
non-borrowing Venturer may make an Offer under Section 5.02 at any time
after such non-borrowing Venturer has cured a default under any other
Venturer's Venture Interest Financing or after such Venture Interest has
been foreclosed, executed upon or otherwise transferred pursuant to such
Venture Interest Financing.
(c) Any permitted transferee of an interest in the Venture shall become a
Venturer unless the terms of the Transfer expressly provide to the contrary;
provided, however, any such permitted transferee shall be required to (i)
execute a copy of this Agreement (or a separate consent thereto), and agree to
be bound by all of the terms and provisions hereof and (ii) assume all of its
transferor's obligations hereunder, and provided, further, that, notwithstanding
anything herein, no transferee of a partial interest of any Venturer shall have
any right to participate in the management of the Venture independently of the
Venturer making such transfer unless such participation is Approved by the
Venturers.
(d) Notwithstanding anything contained herein to the contrary, the
Venturers acknowledge that the Company is beneficially owned and controlled by
Cornerstone Properties Inc. ("Cornerstone"), an entity which is publicly traded,
and that any change in the composition of the ownership of Cornerstone, even to
the extent of a change in control thereof, shall not constitute a Transfer for
any purpose hereunder and the provisions of Section 6.01(b) shall not be
applicable to Cornerstone. Notwithstanding the foregoing, in the event any
change in the composition of the ownership of Cornerstone results in a "change
in control" with respect to Cornerstone (as defined below), Company shall notify
Hines of such change in control within twenty (20) days after the occurrence
thereof and Hines shall have the right,
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which must be exercised within thirty (30) days after receiving such written
notice of a change in control together with all additional information
reasonably requested by Hines pertaining to the change in control and the new
controlling Person, to (i) approve such change in control (such approval not to
be unreasonably withheld), or (ii) give Company written notice that it may elect
to cause Cornerstone or its successor or designee to acquire its Venture
Interest on the terms and for a purchase price determined in accordance with the
provisions set forth below and that Hines desires to have the purchase price
determined in the manner described below. As used herein, a "change in control"
shall mean the occurrence of any of the following (a) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) becoming the "beneficial owner(s)"
(as defined in said Rule 13-d-3) of shares of capital stock of Cornerstone which
entitle the holder thereof to control more than fifty percent (50%) of all
voting rights with respect to all shares of capital stock of Cornerstone; (b)
approval of the stockholders of Cornerstone of a merger, reorganization,
consolidation, exchange of shares, recapitalization, restructuring or other
business combination which results in beneficial ownership of more than fifty
percent (50%) of the common stock of Cornerstone being transferred to a person
or persons (or entities) other than DIHC Holding or an Affiliate as of the date
of this Agreement; (c) sale of all or substantially all of the Cornerstone's
assets; (d) Incumbent Directors (as defined below) cease to comprise a majority
of the directors on Cornerstone's board of directors; or (e) any transaction
that results in the common stock of Cornerstone no longer being required to be
registered under Section 12 of the Exchange Act. As used herein, the term
"Incumbent Directors" shall mean (x) all of the individuals constituting the
Board of Directors of Cornerstone as of the date of this Agreement, and (y) all
individuals hereafter designated as nominees to the board of directors of
Cornerstone by holders of common stock or preferred shares of Cornerstone as of
the date of this Agreement which holders currently have the right to nominate
individuals to the board of directors.
In the event Hines gives the notice described in clause (ii) above, the
purchase price payable for the Venture Interest which shall be acquired shall be
determined by the Venture's Accountant as soon as practicable (and the Venturers
shall direct such Accountant to make such determination) and shall be equal to
the amount of Sales or Refinancing Proceeds, if any, that would have been
distributed to the transferring Venturer in accordance with the provisions of
Section 4.05(c) had the Property been sold for the value of the Property which
shall be determined in accordance with the appraisal procedure described in
Section 10.08. The Venture's Accountant shall be directed to communicate the
purchase price to the Venturers by written notice. Within fifteen (15) days
after receipt by Hines of a written determination of such purchase price
determined by the Venture's Accountant, Hines shall have the right to elect
(which election shall be irrevocable) to cause Company or its successor or
assignee to acquire its Venture Interest on the terms (including the purchase
price) determined in accordance with the terms of this Section 6.02(d), such
closing to be effected as soon as is practicable but in any event within thirty
(30) days after the making of such election by Hines.
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In the event Hines does not so elect, Hines shall be deemed to have approved the
change in control. At the closing of such transfer, the transferring Venturer
shall, at the request of the transferee, execute and deliver to the transferee
or its designee an assignment and bill of sale (with covenants against grantor's
acts) of the transferring Venturer's Venture Interest, together with such other
instruments and documents as may be reasonably necessary or desirable to
effectuate the sale and transfer to the transferee. The purchase price shall be
paid to the transferring Venturer by a cashier's or certified check from a bank
reasonably acceptable to the transferring Venturer. At the closing, any closing
adjustments which are usual and customary in the locality of the Property shall
be made between the transferee and the transferring Venturer as of the date of
closing. In the event there are any conveyance, transfer or similar taxes
payable as an incident to the conveyances at the closing, such taxes shall be
paid by the transferee. At the closing, the transferee shall, by legally
enforceable agreement, assume the payment of any indebtedness under any lien on
the Property to the extent the Venturers have personal liability therefor, and
the transferee must execute this Agreement (as it may have been amended), or a
separate consent thereto, and agree to be bound by all of its terms and
provisions.
(e) The Transfer of all or any part of the interest of any Venturer which
is permitted hereunder shall not result in a dissolution of the Venture as a
general partnership under the Massachusetts Uniform Partnership Act even though
such Transfer may result in the withdrawal of a Venturer as a general partner of
the Venture and/or the admission of a new general partner to the Venture. The
Transfer of all or any part of the interest of any Venturer which is permitted
pursuant to Section 6.02 shall not be subject to the "right of first offer"
requirements set forth in Section 5.05 hereof.
(f) Intentionally deleted.
(g) Notwithstanding the prior provisions of this Section 6.02 (but in no
event shall this provision affect Transfers pursuant to Sections 5.02 and 5.05),
a Venturer may not Transfer all or any part of its interest in the Venture nor
may a direct or indirect owner of a Venturer Transfer all or any part of its
interest in such Venturer, if, solely as a result of such Transfer, all or any
part of the Venture's assets would thereafter become "tax-exempt use property"
within the meaning of Section 168(j) (or any successor provision) of the Code.
(h) The Venture or any Venturer shall have the right, as an absolute
condition precedent to the effectiveness or validity of any Transfer, to require
the transferor to provide the Venture and the non-transferring Venturer with
assurances that the Transfer does not violate any applicable state and federal
securities laws, that the Transfer is exempt from registration (i.e., no
Transfer shall be permitted which requires such registration), and that the
Venturer making the Transfer will indemnify and hold harmless the Venture and
the other Venturer from and against any and all costs, damage, injury, claims,
actions, and demands
<PAGE>
49
(including, without limitation, attorneys fees) suffered by the Venture or the
other Venturer as a result of any violation or claimed violation or failure to
conform or claimed failure to conform to any state or federal securities laws.
The Venture and such other Venturer may further require the submission to the
Venture and the other Venturer of a legal opinion from counsel satisfactory to
the Venture and the other Venturer in such form and substance reasonably
satisfactory to the Venture and the other Venturer.
ARTICLE VII
INSURANCE
SECTION 7.01. Minimum Insurance Requirements. (a) The Venture shall carry
and maintain in force the following insurance, the premium for which shall be a
cost and expense of the Venture:
(i) Workers' Compensation Insurance (including Employer's Liability
Insurance for an amount not less than $500,000) covering all employees of
the Venture, if any, employed in, on or about the property of the Venture
to provide statutory benefits as required by the laws of the Commonwealth
of Massachusetts;
(ii) Commercial General Liability Insurance (including protective
liability insurance on operations of independent contractors, blanket
contractual liability insurance, and personal injury liability insurance)
for the benefit of the Venture and the Venturers as named insureds against
claims, including without limitation, bodily injury, death or property
damage liability with a limit of not less than $25,000,000 for any one
occurrence, such insurance which may be furnished under a "primary" policy
and an "umbrella" policy shall also include coverage against liability for
bodily injuries or property damage arising out of the use by or on behalf
of the Venture or the Venturers of any owned, non- owned or hired
automotive equipment for a limit of not less than that specified above;
(iii) All Risks Builder's Risk Insurance on any new construction,
including coverage against collapse, written on a completed value basis in
an amount not less than the total value of the Improvements under
construction (less the value of such of the Improvements as are
uninsurable under the policy, i.e., site preparation, grading, paving,
parking lots, excepting, however, foundations and other undersurface
installations subject to collapse or damage by other insured perils)
including, if applicable, the coverage available under the so-called
Installation Floater, all in form and amount as may from time to time be
required by any mortgagee of any Improvements under construction;
<PAGE>
50
(iv) Fire, Extended Coverage and Vandalism and Malicious Mischief
Insurance on the Improvements in an amount not less than the balance of
any institutional mortgages on the Property or for such other amount (at
no time, however, less than the principal balance secured by said
mortgages) as may be required to prevent the Venture and the Venturers
from becoming coinsurers under the terms of the applicable policy, but in
any event, in an amount not less than 90% of the then actual replacement
cost of the Improvements (exclusive of excavation and foundation costs and
costs of underground tanks, conduits, pilings and other similar
underground items) without deduction for physical depreciation thereof;
such insurance on the completed Improvements shall contain the
"Replacement Cost Endorsement";
(v) In the event that such equipment is installed in the
Improvements, Boiler and Machinery Equipment Insurance in the amount of
$1,000,000 or such greater amount as Approved by the Venturers covering
boilers, pressure vessels, pressure piping, all major components and of
any central air-conditioning or heating system and such additional
equipment as Approved by the Venturers at any time;
(vi) If the Improvements are situated in an area now or subsequently
designated as having special flood hazards as defined by the Flood
Disaster Protection Act of 1973, as amended from time to time, Flood
Insurance in an amount equal to the replacement cost of the Improvements
or the maximum amount of Flood Insurance available, whichever is the
lesser; and
(vii) Such other insurance or such additional coverage, including
but not limited to insurance on rental income, as may be Approved by the
Venturers or required by the holder of any mortgage covering the
Improvements or by the City or BRA under the Governmental Documents.
(b) Evidence of all such aforesaid policies of insurance shall be
delivered to each Venturer and shall name the Venture and each of the Venturers,
as named insureds, as their respective interests may appear. All such insurance
shall be effected under policies issued by insurers and be in forms and for
amounts Approved by the Venturers and in compliance with the Governmental
Documents and the requirements of any loan encumbering the Property.
(c) All of the aforementioned insurance coverage shall be contained in
insurance policies and issued by insurance companies Approved by the Venturers
and by the City or BRA and any mortgage lenders (to the extent their consent or
approval is required).
ARTICLE VIII
INTENTIONALLY DELETED.
<PAGE>
51
ARTICLE IX
INTENTIONALLY DELETED.
ARTICLE X
GENERAL
SECTION 10.01. Notices. (a) All notices, demands or requests provided for
or permitted to be given pursuant to this Agreement must be in writing.
(b) All notices, demands and requests to be sent to Hines or any permitted
assignee of the interest of Hines hereunder pursuant hereto shall be deemed to
have been properly given or served by (i) delivering the same personally
(including overnight courier), or (ii) transmitting the same by telefacsimile,
or (iii) depositing the same in the United States mail, addressed to Hines,
postpaid and registered or certified with return receipt requested at the
following address:
If to Hines:
c/o Hines Interests Limited Partnership
222 Berkeley Street
Suite 1420
Boston, MA 02116-375l
Attn: David G. Perry
Telecopier: 617-236-4588
With a copy to:
Hines Interests Limited Partnership
East Coast Regional Office
885 Third Avenue, Suite 2700
New York, New York 10022-4834
Attn: Kenneth W. Hubbard
Telecopier: 212-230-2276
<PAGE>
52
and to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attn: Hugh Tucker, Esq.
Telecopier: 713-229-1522
(c) All notices, demands or requests to be sent to Company or any
permitted assignee of the interest of Company hereunder pursuant hereto shall be
deemed to have been properly given or served by (i) delivering the same
personally or (ii) transmitting the same by telefacsimile, or (iii) by
depositing the same in the United States mail, addressed to Company, postpaid
and registered or certified with return receipt requested at the following
address:
If to Company:
Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Attn: John S. Moody
Rodney C. Dimock
Telecopier: 212-605-7199
and to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attn: Eileen P. Brumback, Esq.
Telecopier: 212-556-2222
(d) All notices, demands and requests shall be effective upon personal
delivery or upon being deposited in the United States mail. However, if the
notice, demand or request is delivered by U.S. mail, the time period in which a
response to any such notice, demand or request must be given shall commence to
run from the date of receipt on the return receipt of the notice, demand or
request by the addressee thereof. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to be receipt of the notice, demand or request sent. In the
event that registered or certified mail is not being accepted for prompt
delivery, notices may then be served by personal service upon any officer,
director or partner of any Venturer or upon any individual who is a Venturer.
<PAGE>
53
(e) By giving to the other parties at least 30 days written notice
thereof, the parties hereto and their respective successors and assigns shall
have the right from time to time and at any time during the term of this
Agreement to change their respective addresses and each shall have the right to
specify as its address any other address at which it has a place of business or
up to two (2) other addresses to which it wishes copies of any notice sent.
(f) No transferee of any interest by any Venturer shall be entitled to
receive a notice independent of the notice sent to the Venturer making such
transfer. A notice sent or made to a Venturer shall be deemed to have been sent
and made to all transferees, if any, of such Venturer.
SECTION 10.02. Governing Laws. This Agreement and the obligations of the
Venturers hereunder shall be interpreted, construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
SECTION 10.03. Exculpation/Indemnification. (a) No Venturer (or any
partner, director, officer or employee of any Venturer) shall be personally
liable or personally responsible to any other Venturer or to the Venture beyond
its interest in the assets of the Venture for damages or other liabilities
(other than for capital contributions required of such Venturer under Section
4.02) caused by any act or omission performed or omitted by it in respect of
this Agreement or the Venture or the Property or arising under any indemnity
other than the indemnity set forth in Section 10.03(b) hereof, unless such
damage or liability results from its gross negligence, fraud or willful
misconduct.
(b) Each Venturer shall defend, indemnify and hold the other Venturer and
its officers, directors, partners, shareholders, agents and employees harmless
from and against any third party claims, demands, losses, damages or liabilities
suffered or incurred by it by reason of the fraud, gross negligence or willful
misconduct of such Venturer, its officers, directors, partners, agents or
employees. The Venture shall defend, indemnify, and hold harmless each Venturer
and its officers, directors, partners, shareholders, agents and employees from
and against any third party claims, demands, losses, damages, liabilities, or
costs and expenses, including, without limitation, attorney's fees and court
costs, suffered or incurred by any of them by reason of their actions or
omissions pursuant to this agreement or by reason of their being a Venturer in
the Venture, other than those involving willful misconduct, fraud or gross
negligence of the indemnified Venturer.
SECTION 10.04. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto relative to the Venture. No variations,
modifications or changes herein or hereof shall be binding upon any party hereto
unless set forth in a document duly executed by or on behalf of such party.
<PAGE>
54
SECTION 10.05. Waiver. No consent or waiver, express or implied, by any
Venturer to or of any breach or default by the other in the performance by the
other of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by such other
party of the same or any other obligations of such Venturer hereunder.
SECTION 10.06. Severability. If any provision of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
SECTION 10.07. Status Reports. Recognizing that each party hereto may find
it necessary from time to time to establish to third parties such as
accountants, banks, mortgagees or the like, the then current status of
performance hereunder, each party agrees, upon the written request of any other,
made from time to time, to furnish promptly a written statement (in recordable
form, if requested) on the state of any matter pertaining to this Agreement to
the best of the knowledge and belief of the party making such statement.
SECTION 10.08. Appraisals. Any valuations of the Property which the
Venturers have agreed is to be determined by appraisals shall be determined in
Boston, Massachusetts as follows:
The initiating Venturer shall designate by notice to the other Venturer a
disinterested member of the American Institute of Real Estate Appraisers ("MAI
Appraiser") to serve on the Appraisal Panel (as defined below). Upon receipt of
such notice from the initiating Venturer, the other Venturer shall have fourteen
(14) days in which to designate its own disinterested MAI Appraiser to serve on
the Appraisal Panel by serving notice of such designation to the other Venturer.
In the event that any Venturer shall fail to designate an MAI Appraiser within
such fourteen-day period, only those MAI Appraiser(s) who have been properly
selected by the Venturers shall serve on the Appraisal Panel. The MAI Appraisers
so designated by the Venturers in accordance with the foregoing shall then have
ten (10) days in which to designate a final MAI Appraiser (the "Final
Appraiser"). If the MAI Appraisers designated by the Venturers are unable to
unanimously agree on such Final Appraiser, any Venturer may request the Suffolk
Superior Court Judge in Suffolk County to appoint such Final Appraiser, and the
MAI Appraisers designated by the Venturers and the Final Appraiser (the
"Appraisal Panel") shall each appraise the Property taking into account
appropriate indicators of the value of such Property. Within 30 days after the
appointment of the Final Appraiser, each MAI Appraiser designated by a Venturer
shall submit his findings in writing to the Final Appraiser. Any such findings
which are not timely submitted to the Final Appraiser shall be disregarded for
purposes of calculating the fair market value of the Property. The Final
Appraiser shall then submit his
<PAGE>
55
findings along with the findings of all of the other MAI Appraisers which have
been timely submitted to each Venturer and the average of the appraisal value of
the Final Appraiser and the appraisal value closest thereto shall be deemed the
fair market value of the Property. Each Venturer shall pay the fees and expenses
of the MAI Appraiser appointed by it, or in whose stead, as above provided, such
appraiser was appointed, and the fees and expenses of the Final Appraiser, if
any, shall be borne equally by the Venturers; provided, however, that if the
foregoing appraisal procedure is used to determine the value of the Property
pursuant to Section 6.02(d), all such fees and expenses shall be borne by the
Company. To be qualified to be selected or designated as an MAI Appraiser for
purposes of this Paragraph, such MAI Appraiser must demonstrate (1) current good
standing in the American Institute of Real Estate Appraisers as evidenced by a
certificate from such institute, and (2) past appraising experience in the
Metropolitan Boston market of at least seven (7) years for comparable commercial
properties.
SECTION 10.09. Attorneys' Fees. If the Venture or any Venturer obtains a
judgment against any Venturer by reason of its breach of this Agreement or
failure to comply with the provisions hereof, the defaulting Venturer shall pay
the reasonable attorney's fees of the Venture or the prevailing Venturer.
SECTION 10.10. Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural and vice versa. Titles of
Articles and Sections are for convenience only, and neither limit nor amplify
the provisions of the Agreement itself, and all references herein to Articles,
Sections or subdivisions thereof shall refer to the corresponding Article,
Section or subdivision of this Agreement unless specified reference is made to
such Article, Sections or subdivisions of another document or instrument.
SECTION 10.11. Binding Agreement. Subject to the restrictions on transfers
and encumbrances set forth herein, this Agreement shall inure to the benefit of
and be binding upon the undersigned Venturers and their respective successors
and assigns. Whenever in this instrument a reference to any party or Venturer is
made, such reference shall be deemed to include a reference to the heirs,
executors, legal representatives, successors and assigns of such party or
Venturer.
SECTION 10.12. Additional Remedies. Except as otherwise provided herein,
the rights and remedies of the Venturers hereunder shall not be mutually
exclusive, i.e., the exercise of one or more of the provisions hereof shall not
preclude the exercise of any other provisions hereof.
SECTION 10.13. Artwork. The Venturers agree that the size and nature of
the Property warrant the continuation of a reasonable art program. The selection
of any new artwork for the Property shall be Approved by the Venturers.
<PAGE>
56
SECTION 10.14. Meetings. Meetings of the Venturers may be called by any
Venturer for any matter on which the Venturers may act pursuant to the terms of
this Agreement, upon the giving of not less than five (5) days' advance written
notice. The Venturers will endeavor to conduct such meetings by telephone.
SECTION 10.15. Partition. Each Venturer hereby waives any right of
partition under the laws of Massachusetts.
SECTION 10.16. Confidentiality. Each Venturer hereby covenants and agrees
with the other that it will use its best efforts, acting in good faith, not to
disclose or permit the disclosure of any information concerning the Property,
the Venture or the Venturers which is included within the scope of any matter
which is identified as confidential in any Public Relations Plan Approved by the
Venturers.
SECTION 10.17. Transfer of Property. With respect to any and all real
property and interests therein owned by the Venture, any person dealing with the
Venture or the Venturers may always: (a) conclusively rely without further
inquiry on a certificate signed by all those who then appear of record at the
Suffolk County Registry of Deeds to be the Venturers in the Venture as to the
existence or nonexistence of any facts which are in any manner germane to the
affairs of the Venture, and (b) conclusively assume that this Agreement and the
Venture have not been terminated and that there has been no change in the
provisions of this Section or in the identity of the Venturers unless such
termination or change is reflected by a deed or certificate given in accordance
with clause (a) and duly recorded with said Deeds.
SECTION 10.18. Administration Agreement. Venturers hereby acknowledge and
agree that on or about the effective date of this Amendment, Cornerstone or an
Affiliate thereof will acquire, directly or indirectly, ownership of DIHC
Management Corp. and, as a result, will acquire the rights of such Affiliate
under that certain Administration Agreement dated May 29, 1986. Hines and any
other Venturer hereby acknowledge such acquisition and agree that the
Administration Agreement is not terminable or otherwise affected by such
acquisition.
<PAGE>
57
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first set forth above.
BOYLSTON WEST 1986 ASSOCIATES
LIMITED PARTNERSHIP, a Texas limited
partnership
By: GDHI Limited Partnership, a General Partner
By: Hines Consolidated Investments, Inc., a
General Partner
By: /s/ Jeffrey C. Hines
-------------------------
Jeffrey C. Hines
Senior Executive Vice President
DIHC BOYLSTON ASSOCIATES, a Georgia
General partnership
By: DIHC Boylston Corp. a General Partner
By: /s/ John S. Moody
------------------------------
John S. Moody
By: /s/ R.C. Dimock
------------------------------
Rodney C. Dimock
<PAGE>
Exhibit A
Description of Land
[To be provided by Company upon request]
<PAGE>
Exhibit B
Description of Eastern Component
[To be provided by Company upon request]
<PAGE>
Exhibit 10.102
[EXECUTION COPY]
TWO TWENTY TWO BERKELEY VENTURE
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
By and Among
HINES 222 BERKELEY LIMITED PARTNERSHIP
and
DIHC BERKELEY ASSOCIATES
Dated
October 27, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINED TERMS
SECTION A. Definitions.................................................... 1
SECTION B. Terminology.................................................... 9
ARTICLE II.
THE VENTURE
SECTION A. Reallocation Date; Consent to Transfer; Continuation;
Governing Law ................................................. 9
SECTION B. Purposes and Scope of the Venture.............................. 10
SECTION C. Assumed Name Certificate....................................... 10
SECTION D. Scope of Venturer's Authority.................................. 10
SECTION E. Principal Place of Business.................................... 11
ARTICLE III.
MANAGEMENT
SECTION A. Management of the Venture...................................... 11
SECTION B. Property Management and Other Authorized Payments.............. 16
SECTION C. Execution and Performance of Documents......................... 16
SECTION D. Decisions by the Venturers/Venturer's Authority................ 16
SECTION E. Budgets........................................................ 18
SECTION F. Compensation and Expenses of Venturers and Venture............. 18
SECTION G. Contracts with Related Parties................................. 18
SECTION H. Property Financing............................................. 19
ARTICLE IV.
ACCOUNTING, CONTRIBUTIONS, DISTRIBUTIONS
AND ALLOCATIONS
SECTION A. Percentage Interests of Venturers.............................. 20
SECTION B. Ordinary Capital Contributions................................. 21
SECTION C. Intentionally Deleted.......................................... 23
i
<PAGE>
SECTION D. Tax Status and Returns ........................................ 23
SECTION E. Distributions.................................................. 26
SECTION F. Allocations of Profits, Gains and Losses....................... 28
SECTION G. Accounting..................................................... 31
SECTION H. Bank Accounts.................................................. 32
ARTICLE V.
TERM, TERMINATION AND BUY/SELL RIGHTS
SECTION A. Term........................................................... 33
SECTION B. Voluntary Termination-Buy/Sell................................. 33
SECTION C. Closing........................................................ 35
SECTION D. Assumption of Liabilities...................................... 36
SECTION E. Right of First Offer........................................... 37
SECTION F. Liquidation and Distribution Procedure......................... 39
SECTION G. Event of Dissolution........................................... 40
SECTION H. Default........................................................ 42
SECTION I. Conversion to Limited Partnership.............................. 43
ARTICLE VI.
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION
SECTION A. Prohibited Transfers........................................... 44
SECTION B. Permitted Transfers............................................ 44
ARTICLE VII.
INSURANCE
SECTION A. Minimum Insurance Requirements................................. 48
ARTICLE VIII.
Intentionally deleted.......................... 50
ii
<PAGE>
ARTICLE IX.
GENERAL
SECTION A. Notices........................................................ 50
SECTION B. Governing Laws................................................. 52
SECTION C. Exculpation/Indemnification.................................... 52
SECTION D. Entire Agreement............................................... 53
SECTION E. Waiver......................................................... 53
SECTION F. Severability................................................... 53
SECTION G. Status Report.................................................. 53
SECTION H. Appraisals..................................................... 53
SECTION I. Attorneys' Fees................................................ 54
SECTION J. Binding Agreement.............................................. 54
SECTION K. Additional Remedies............................................ 55
SECTION L. Meetings....................................................... 55
SECTION M. Partition...................................................... 55
SECTION N. Transfer of Property........................................... 55
SECTION O. Confidentiality................................................ 55
SECTION P. Administratio Agreement........................................ 55
SECTION Q. Artwork........................................................ 56
ARTICLE I.
DEFINED TERMS
SECTION A. Definitions.................................................... 1
SECTION B. Terminology.................................................... 9
ARTICLE II.
THE VENTURE
SECTION A. Reallocation Date; Consent to Transfer; Continuation;
Governing Law ................................................. 9
SECTION B. Purposes and Scope of the Venture ............................. 10
SECTION C. Assumed Name Certificate ...................................... 10
SECTION D. Scope of Venturer's Authority ................................. 10
SECTION E. Principal Place of Business ................................... 11
iii
<PAGE>
ARTICLE III.
MANAGEMENT
SECTION A. Management of the Venture ..................................... 11
SECTION B. Property Management and Other Authorized Payments ............. 16
SECTION C. Execution and Performance of Documents ........................ 16
SECTION D. Decisions by the Venturers/Venturer's Authority ............... 16
SECTION E. Budgets ....................................................... 18
SECTION F. Compensation and Expenses of Venturers and Venture ............ 18
SECTION G. Contracts with Related Parties ................................ 18
SECTION H. Property Financing ............................................ 19
ARTICLE IV.
ACCOUNTING, CONTRIBUTIONS, DISTRIBUTIONS
AND ALLOCATIONS
SECTION A. Percentage Interests of Venturers ............................. 20
SECTION B. Ordinary Capital Contributions ................................ 21
SECTION C. Intentionally Deleted ......................................... 23
SECTION D. Tax Status and Returns ........................................ 23
SECTION E. Distributions ................................................. 25
SECTION F. Allocations of Profits , Gains and Losses .................... 27
SECTION G. Accounting .................................................... 31
SECTION H. Bank Accounts ................................................. 32
ARTICLE V.
TERM, TERMINATION AND BUY/SELL RIGHTS
SECTION A. Term........................................................... 32
SECTION B. Voluntary Termination-Buy/Sell................................. 32
SECTION C. Closing........................................................ 34
SECTION D. Assumption of Liabilities...................................... 35
SECTION E. Right of First Offer .......................................... 37
SECTION F. Liquidation and Distribution Procedure......................... 39
SECTION G. Event of Dissolution........................................... 39
SECTION H. Default........................................................ 41
SECTION I. Conversion to Limited Partnership.............................. 42
iv
<PAGE>
ARTICLE VI.
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION
SECTION A. Prohibited Transfers........................................... 43
SECTION B. Permitted Transfers............................................ 44
ARTICLE VII.
INSURANCE
SECTION A. Minimum Insurance Requirements................................. 48
ARTICLE VIII.
Intentionally deleted.
ARTICLE IX.
GENERAL
SECTION A. Notices........................................................ 49
SECTION B. Governing Laws................................................. 51
SECTION C. Exculpation/Indemnification.................................... 51
SECTION D. Entire Agreement............................................... 52
SECTION E. Waiver......................................................... 52
SECTION F. Severability................................................... 52
SECTION G. Status Report.................................................. 52
SECTION H. Appraisals..................................................... 53
SECTION I. Attorneys' Fees................................................ 53
SECTION J. Binding Agreement.............................................. 54
SECTION K. Additional Remedies............................................ 54
SECTION L. Meetings....................................................... 54
SECTION M. Partition...................................................... 54
SECTION N. Transfer of Property........................................... 54
SECTION O. Confidentiality................................................ 54
SECTION P. Administration Agreement....................................... 55
SECTION Q. Artwork........................................................ 55
v
<PAGE>
Schedule of Exhibits
Exhibit A-Description of the Land
Exhibit B-Description of Western Component
vi
<PAGE>
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT OF TWO TWENTY TWO
BERKELEY VENTURE, made and entered into as of this 27th day of October, 1997, by
and among HINES 222 BERKELEY LIMITED PARTNERSHIP, a Texas limited partnership
("Hines"), and DIHC BERKELEY ASSOCIATES, a Georgia partnership ("Company").
WHEREAS, Two Twenty Two Berkeley Venture (the "Venture") was formed
pursuant to that certain Joint Venture Agreement dated as of April 13, 1989 (the
"Original Venture Agreement");
WHEREAS, the Original Venture Agreement was amended on December 31, 1993
to reflect the transfer of New England Mutual Life Insurance Company's interest
in the Venture to Company;
WHEREAS, Cornerstone Properties Inc. ("Cornerstone"), directly or
indirectly, has acquired all of the beneficial ownership of Company;
WHEREAS, Hines and Company (the "Original Venturers") desire to amend and
restate the Original Venture Agreement in its entirety on the terms and
conditions herein set forth.
W I T N E S S E T H:
In consideration of the mutual covenants set forth herein, and for other
good and valuable consideration each party to the other in hand paid, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINED TERMS
SECTION A. Definitions.
As used herein, the following terms shall have the following meanings:
"Accountant" shall have the meaning set forth in Section 4.07(c).
"Adjusted Capital Account Deficit" shall have the meaning set forth
in Section 4.06(a)(i).
"Administration Agreement" shall mean that certain Administration
Agreement dated as of April 13, 1989 by and between the Venture and the
Administrator for certain
<PAGE>
2
administration services with respect to the Property as such agreement may
be amended from time to time with the Approval of the Venturers.
"Administrator" shall mean DIHC Management Corporation, a Georgia
corporation.
"Affiliate" shall mean, as to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control
with such Person; (ii) the officers, directors or partners of such Person;
(iii) if such Person is an officer, director or partner, any company for
which such Person acts in any such capacity; and (iv) any relative (by
blood, adoption or marriage) within the second degree of any such Person
or of any Person described in (i) and (ii) above. For purposes of this
definition the term "control" means the ownership of 10% or more of the
beneficial or voting interest in the Person referred to.
"Affiliated Entity" shall mean any corporation, partnership or other
entity which is more than 50% owned, directly or indirectly, through
subsidiaries or other partnerships, by the ultimate members or
shareholders of any Venturer.
"Annual Budget" shall mean the detailed business plan and annual
budget prepared by the Managing Partner in accordance with Section
3.01(b).
"Appraisal Panel" shall have the meaning set forth in Section 9.08.
"Approved by the Venturers" or "Approval by (or of) the Venturers"
shall mean approved in writing in advance by all Venturers in their sole
and absolute discretion unless otherwise expressly provided.
"Bankrupt Party" shall have the meaning set forth in Section
5.07(b)(v)(1).
"BRA" shall mean the "Boston Redevelopment Authority" or such other
agency or authority which shall replace the Boston Redevelopment
Authority.
"Capital Account" shall mean the accounts maintained for each
Venturer as set forth in Section 4.01(b).
"change in control" shall have the meaning set forth in Section
6.02(d).
"City" shall mean the City of Boston.
"Closing" shall have the meaning set forth in Section 5.03(a).
"Code" shall mean the United States Internal Revenue Code of 1986,
as amended, and any successor statute thereto.
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3
"Company" shall mean DIHC Berkeley Associates, a Georgia general
partnership and its permitted successors and assigns (specifically,
including any transferee under Section 6.02(d) as to its interest in the
Venture).
"Controlled or Control" means with respect to any Person, the
possession, directly or indirectly, of the power to direct or to cause the
direction of the management of such Person, whether through ownership of
voting securities or a general partnership interest or by contract, agency
or otherwise.
"Cornerstone" shall have the meaning set forth in Section 6.02(d).
"CPI" shall have the meaning set forth in Section 3.01(b).
"Defaulting Venturer" shall have the meaning set forth in Section
5.08.
"Deficit Election" shall have the meaning set forth in Section
4.02(e)(iii).
"Deficit Election Amendment" shall have the meaning set forth in
Section 4.02(e)(v).
"DIHC Holding" shall mean Dutch Institutional Holding Company, Inc.,
a Delaware corporation.
"election period" shall have the meaning set forth in Section
5.05(a)(iii).
"Event of Dissolution" shall have the meaning set forth in Section
5.07(b).
"Exchange Act" shall have the meaning set forth in Section 6.02(d).
"Final Appraiser" shall have the meaning set forth in Section 9.08.
"Governmental Authority" shall mean the United States government,
the State of Massachusetts, or any other city, town, village or other
governmental subdivision (including, without limitation, the City of
Boston) or any agency, department, commission, bureau or instrumentality
of any thereof.
"Governmental Documents" shall mean all documents, permits,
approvals, licenses, certificates and agreements with BRA, the City or any
governmental or quasi-governmental agency which has jurisdiction over the
property or its development.
"HILP" shall mean Hines Interests Limited Partnership, a Delaware
limited partnership.
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4
"Hines" shall mean Hines 222 Berkeley Limited Partnership, a Texas
limited partnership and its permitted successors and assigns.
"Hines Control Group" means (i) Gerald D. Hines, Jeffrey C. Hines
and/or the estate of either, (ii) a corporation, the stock of which is
wholly owned by Gerald D. Hines, Jeffrey C. Hines, the estate of either,
and/or any member of the Hines Family, (iii) any Person Controlled by a
majority of the then-current members of the Hines Management Group, or
(iv) any Person to which the operational assets of HILP are conveyed,
which is Controlled by any one or more of the Persons described in (i) or
(ii) above and/or a majority of the then-current members of the Hines
Management Group.
"Hines Family" means Gerald D. Hines or Jeffrey C. Hines (or any
trust established for the benefit of the spouse, issue, grandchildren,
brother, sister, or parents of either Gerald D. Hines or Jeffrey C.
Hines).
"Hines Management Group" means, from time to time, the ten (10)
senior ranking executives or officers of HILP other than Gerald D. Hines
and Jeffrey C. Hines.
"Improvements" shall mean the mixed use development located on the
Land consisting of approximately 438,050 square feet of net rentable
office space, 59,000 square feet of net rentable retail space and 400
newly constructed, below grade parking spaces located in a 22-story
building and any other improvements from time to time constructed or to be
constructed upon the Land by the Venture.
"Incumbent Directors" shall have the meaning set forth in Section
6.02(d).
"Institutional Lender" shall mean any domestic or foreign insurance
company, bank, trust company, savings and loan association, savings bank,
merchant bank, investment banking or securities company or similar
financial institution among whose primary business is the making of
commercial loans.
"Land" shall mean that certain parcel of real property and the
improvements presently thereon located in the City of Boston,
Massachusetts, more particularly described in Exhibit A attached hereto.
"Losses" shall have the meaning set forth in Section 4.06(a)(ii).
"MAI Appraiser" shall have the meaning set forth in Section 9.08.
"Major Decisions" shall have the meaning set forth in Section
3.01(d).
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5
"Management and Leasing Agreement" shall mean that certain
Management and Leasing Agreement dated as of April 13, 1989, as amended
and restated by that certain Amended and Restated Management and Leasing
Agreement dated of even date herewith by and between the Venture and HILP
for the management and leasing of the Property, as such agreement may be
further amended from time to time with the Approval of the Venturers.
"Managing Partner" shall mean either Hines or Company or an
Affiliated Entity of Hines or Company (if Hines or Company, as applicable,
shall Transfer its entire interest to such Person pursuant to Section
6.02(a)).
"Marketing Plan" shall mean the leasing guidelines prepared in
accordance with Section 3.05.
"Member" shall mean the corporate officer(s) or general partner(s)
or other authorized agent(s), as the case may be, through whom a Venturer
shall act in connection with decisions relating to its interests in the
Venture.
"Net Cash Flow" shall have the meaning set forth in Section 4.05(a).
"Net Operating Income" shall mean the projected Net Cash Flow to be
generated by the Property during the term of any proposed Property
Financing (with respect to the balance of the calendar year in which such
determination is being made, the Net Cash Flow shall equal the Net Cash
Flow assumed for purposes of preparing the Annual Budget for such calendar
year, and for the balance of the term of the proposed Property Financing
Net Cash Flow shall be determined in accordance with the principles
utilized in preparing each Annual Budget for the Venture) without
deduction for interest, periodic amortization and other debt service of
any indebtedness of the Venture, plus the projected amount of capital
expenditures to be incurred during such period (which, for the calendar
year in which such determination is being made, shall be deemed to equal
the amount reserved for capital expenditures in the Annual Budget for such
calendar year, and for the period, and shall not include any expenditures
which would require additional capital contributions) such as tenant
finish costs, leasing commissions, capital improvement expenditures and
extraordinary capital repairs, which otherwise shall have reduced
projected Net Cash Flow for such period.
"Non-Defaulting Venturer" shall have the meaning set forth in
Section 5.08.
"Notice of Default" shall have the meaning set forth in Section
5.08.
"Offer", "Offeree" and "Offeror" shall have the meanings assigned to
such terms in Section 5.02 and 5.05.
"Offer Price" shall have the meaning set forth in Section 5.02(a).
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6
"Offeror's Interest" shall have the meaning set forth in Sections
5.02(a).
"Operating Expenses" shall have the meaning set forth in Section
4.05(a)(ii).
"Percentage Interest" shall have the meaning set forth in Section
4.01(a).
"Permitted Venturer" shall have the meaning set forth in Section
4.06(c).
"Person" shall mean any individual, partnership, association,
corporation or other entity.
"Profits" shall have the meaning set forth in Section 4.06(a)(ii).
"Prohibited Syndication Offering" shall mean any transaction or
offering of securities constituting a direct or indirect interest in the
Venture where the transaction or offering would be required to be
registered or exempted from registration (under Regulation D or otherwise)
pursuant to the Securities Act of 1933.
"Property" shall mean the Land, Improvements and all other assets of
the Venture.
"Property Debt Service Coverage Ratio" shall mean, for any period,
the quotient derived by dividing the Net Operating Income from the
Property for such period by the debt service for such Property Financing
for such period. For purposes hereof, debt service shall mean the
scheduled, regularly recurring payments of principal (if any) and interest
(as reasonably estimated by the borrowing Venturer in the event of a
floating rate financing) during the term of such Property Financing.
"Property Financing" shall have the meaning set forth in Section
3.08 hereof.
"Property Manager" shall mean the manager appointed to manage and
lease the Property under the Management and Leasing Agreement or such
replacement manager selected in accordance with this Agreement or the
Management and Leasing Agreement.
"Property Manager Recommendations" shall have the meaning set forth
in Section 3.01(c).
"Public Relations Plan" shall mean the advertising and public
relations guideline prepared in accordance with the provisions of Section
3.05.
"REA" shall mean that certain Construction, Operation and Reciprocal
Easement Agreement dated May 29, 1986 by and between Five Hundred Boylston
West Venture and
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7
New England Mutual Life Insurance Company, as amended from time to time
with the Approval of the Venturers.
"Reallocation Date" shall have the meaning set forth in Section
2.01(a).
"Regulations" shall mean the Income Tax Regulations promulgated
under the Code, as such Regulations may be amended from time to time (all
references herein to specific sections of the Regulations shall be deemed
to refer also to any corresponding provisions of succeeding Regulations).
"Regulatory Allocations" shall have the meaning set forth in Section
4.06(e).
"Restricted Venturer" shall have the meaning set forth in Section
4.06(c).
"Sale and Construction Agreement" shall mean that certain Amended
and Restated Sale and Construction Agreement dated as of April 15, 1986
among the City, BRA, New England Mutual Life Insurance Company, and Gerald
D. Hines Interests, Inc., and such further amendments as Approved by the
Venturers.
"Sales or Refinancing Proceeds" shall mean the excess of the
proceeds received by the Venture from (i) any sale or other disposition of
all or part of the Property (other than incidental sales of personal
property or fixtures now or hereafter located on the Property), (ii) any
casualty resulting in the receipt of insurance proceeds (other than under
policies commonly known as rent insurance) or damage recoveries by the
Venture, (iii) the condemnation of all or part of the Property, (iv) any
mortgaging, financing, or refinancing of the Property or other loan as
Approved by the Venturers to the extent required hereunder and/or (v) any
other transactions involving the ownership, operation or maintenance of
the Property which do not come within the items enumerated in Section
4.05(a)(i) (other than the receipt of capital contributions from the
Venturers or security deposits); over (A) any and all interest on and
principal of any debt obligations of the Venture that become due as a
result of the occurrence of any of the events described in (i)-(v) above;
(B) all costs and expenses related to such sale, insurance claim,
condemnation, mortgaging, financing, refinancing, loan or other
transaction and (C) the amounts paid or reserved to fund the cost of
restoration or the expenditures of the Venture for which such mortgaging,
financing, refinancing, or loan occurred as Approved by the Venturers to
the extent required hereunder.
"Surviving Mortgages" shall have the meaning set forth in Section
5.02(a).
"Terms of Sale" shall have the meaning set forth in Section
5.05(a)(i).
"Third Party" shall have the meaning set forth in Section
5.05(a)(i).
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8
"TMP" shall have the meaning set forth in Section 4.04(c)(i).
"Transfer" shall have the meaning set forth in Section 6.01.
"Venture" shall mean Two Twenty Two Berkeley Venture, a general
partnership formed for the limited purposes and scope set forth herein.
"Venturer" shall mean Hines or Company individually and the term
"Venturers" shall mean Hines and Company collectively.
"Venturer Debt Service Coverage Ratio" shall mean the quotient
derived by dividing annualized Venturer distributions by annualized debt
service for the Venture Interest Financing. For purposes hereof,
annualized Venturer distributions shall mean actual distributions of Net
Cash Flow to the Venturer which intends to obtain the applicable Venture
Interest Financing for the calendar year ending on a date no earlier than
a day which is sixty (60) days prior to application by the Venturer for
any Venture Interest Financing and debt service shall mean the scheduled,
regularly recurring installments of principal (if any) and interest (as
reasonably estimated by the borrowing Venturer in the event of a floating
rate financing) during the first full twelve (12) month period of such
Venture Interest Financing, provided, however, if the interest rate or
principal payments to be made in any year of the term of the Venture
Interest Financing will vary from the first full twelve (12) month period,
debt service shall mean the average of the annual scheduled principal and
interest payments over the term of the Venture Interest Financing.
"Venture Interest" shall have the meaning set forth in Section
6.02(b)(iv).
"Venture Interest Financing" shall have the meaning set forth in
Section 6.02(b)(iv) hereof.
"Venture Operations Arbitration Process" shall have the meaning
ascribed to such term in Section 4.1 of the Management and Leasing
Agreement.
"Western Component" shall mean the building commonly known as 500
Boylston situated on the site adjacent to the Land, and more particularly
described on Exhibit B, to which the Improvements are integrated and
attached.
"Withdrawing Venturer" shall have the meaning set forth in Section
5.07(c).
SECTION B. Terminology.
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9
All personal pronouns used in this agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of Articles and
Sections are for convenience only, and neither limit nor amplify the provisions
of the Agreement itself, and all references herein to Articles, Sections or
subdivisions thereof shall refer to the corresponding Article, Section or
subdivision of this Agreement unless specified reference is made to such
Article, Sections or subdivisions of another document or instrument.
ARTICLE II.
THE VENTURE
SECTION A. Reallocation Date; Consent to Transfer; Continuation; Governing
Law.
1. The Venturers agree that the books of the Venture will be closed
as of 11:59 p.m. on October 31, 1997 (the "Reallocation Date") and Net
Cash Flow, Sales or Refinancing Proceeds, Profits, Losses and other items
of income, gain, deduction and loss shall be accounted for as of such date
and allocated to the Original Venturers in accordance with the provisions
of Article IV of the Original Venture Agreement in accordance with its
provisions immediately prior to the effect of this Agreement. From and
after the Reallocation Date all of the aforesaid items shall be allocated
to the Venturers in accordance with the terms of this Agreement. The
Venture shall instruct the Venturers accountants to furnish a detailed
accounting of the aforesaid financial and tax items as of the Reallocation
Date for review and approval by each of the Venturers and the Venturers
shall cooperate in good faith for the purpose of agreeing upon an
accounting for the Venture as of the Reallocation Date.
2. Hines consents to the acquisition by Cornerstone of all of the
beneficial ownership of Company and agrees the same shall not constitute a
breach or violation of Section 6.01 or any other provision of the Original
Venture Agreement so long as Company and Cornerstone comply with the
provisions of Section 6.01 and any other provision of the Original Venture
Agreement in connection with the consummation of such acquisition. The
Company hereby represents and warrants to the Venture and Hines that the
acquisition of all of the beneficial ownership of Company by Cornerstone
was accomplished in compliance with all applicable state or federal
securities laws. In connection therewith, Company hereby agrees to
indemnify and hold harmless the Venture and Hines from and against any and
all costs, damage, injury, claims, actions and demands (including without
limitation, attorney's fees) suffered by the Venture or Hines as a result
of any violation or alleged violation or failure to comply or alleged
failure to comply with any state or federal securities laws.
3. The business and affairs of the Venture shall continue to be
conducted solely under the name "Two Twenty Two Berkeley Venture" and such
name shall be used at all times in connection with the Venture's business
and affairs. Except as expressly provided
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10
herein to the contrary, the rights and obligations of the Venturers and
the administration and termination of the Venture shall be governed by the
Uniform Partnership Act of the Commonwealth of Massachusetts.
SECTION B. Purposes and Scope of the Venture.
1. Subject to the provisions of this Agreement, the Venture shall be
limited strictly to the leasing, sale, operation, management, maintenance
and improvement of the Property (including construction, reconstruction,
development and repair of the Improvements) for investment and the
production of income and profit and shall not be extended by implication
or otherwise unless Approved by the Venturers.
2. Nothing in this Agreement shall be deemed to restrict in any way
the freedom of any Venturer (or any Affiliate of any Venturer) to conduct
any other business or activity whatsoever (including the acquisition,
development, leasing, sale, operation and management of real property)
without any accountability to the Venture or any other Venturer with
respect to the income or profits therefrom or the effect of such activity
on the Property, even if such business or activity competes with the
business of the Venture. The Venturers hereby acknowledge that the
Venturers (or Affiliates of the Venturers) have ownership and management
interests in the Western Component and that this Section 2.02(b) is
specifically applicable to such interests.
SECTION C. Assumed Name Certificate.
The Venturers shall execute and file in the appropriate records any
assumed or fictitious name certificate or certificates required by law to be
filed in connection with the continuation of the Venture.
SECTION D. Scope of Venturer's Authority.
Except as otherwise expressly and specifically provided in this Agreement,
no Venturer shall have any authority to act for, or assume any obligations or
responsibility on behalf of, any other Venturer or the Venture.
SECTION E. Principal Place of Business.
The principal place of business of the Venture shall be in the
Improvements, or at 222 Berkeley Street, Suite 1420, Boston, Massachusetts
02116-3751, or at such other place of business in Boston, Massachusetts as
Approved by the Venturers.
ARTICLE III.
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11
MANAGEMENT
SECTION A. Management of the Venture. 1. Hines and Company are
individually and collectively hereby designated as the Managing Partner of the
Venture and each hereby accepts such designation. Except where herein expressly
provided to the contrary, all decisions with respect to the operation and
control of the Venture shall be vested in the Company and shall be implemented
by Company, it being acknowledged that (subject to the requirements of Section
3.01(c) with regard to Property Manager Recommendations) the Company shall have
the authority to take all actions to be taken by "the Managing Partner"
hereunder and, in furtherance thereof, to execute and deliver all documents on
behalf of the Venture in furtherance of its responsibilities as the Managing
Partner hereunder, subject to any other terms and conditions contained in this
Agreement, including, without limitation, Sections 3.01(c) and 3.01(d). Except
where herein contained to the contrary, Company shall be responsible for the day
to day supervision of all aspects of the business of the Venture (including,
without limitation, the leasing, operation, maintenance and improvement of the
Property) and the discharge of all obligations of the Managing Partner
hereunder; provided, however, if Company fails to execute any lease proposed by
the Property Manager which does not require the Approval of Company hereunder or
under the Management and Leasing Agreement, Hines, as Managing Partner, shall
have the right to execute such lease on behalf of the Venture. Hines and Company
agree and acknowledge that certain of the duties and obligations of the Managing
Partner hereunder have been delegated to the Property Manager pursuant to the
Management and Leasing Agreement and further acknowledge that Company shall have
no liability to Hines or the Venture under this Agreement as a result of the
failure of the Property Manager to discharge such duties and obligations so
delegated to it under the Management and Leasing Agreement and that Company
shall not be deemed to be a Defaulting Venturer under Section 5.08 hereof as a
result of any such failure by the Property Manager; provided, however, nothing
herein shall affect the Company's liability for the Venture's liability to
Persons (including the Venture's liability to the Property Manager pursuant to
Section 7.13 of the Management and Leasing Agreement) resulting from the
Company's general partner status.
2. No later than November 1 of each calendar year, the Venture shall cause
Property Manager to prepare and submit to the Venturers, for their approval, a
detailed business plan and budget, which shall include and take into account,
without limitation, the Marketing Plan and the Public Relations Plan, (the
"Annual Budget") setting forth the course of business to be followed by the
Venture and the estimated receipts and expenditures (capital, operating and
other) of the Venture for the following full calendar year. The Annual Budget
shall not be implemented or acted upon unless and until it has been Approved by
the Venturers, at which time the Annual Budget shall govern the operation of the
Venture for such calendar year. If no budget is Approved by the Venturers, the
Annual Budget for the prior year shall govern the operation of the Venture until
a new budget is agreed upon. Company shall cause the Property Manager to operate
and manage the Venture in all material respects in compliance with the Annual
Budget except Property Manager shall have the right, without the prior approval
of the Venturers, to make expenditures and incur obligations not authorized by
the Annual Budget to the extent permissible under Section 2.1 of the Management
and
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12
Leasing Agreement. Company shall enforce the Management and Leasing Agreement on
behalf of the Venture in accordance with its terms and shall not consent to any
modification or deviation from the Management and Leasing Agreements, by the
Property Manager, unless such modification or deviation is Approved by the
Venturers.
3. It is understood that the Property Manager shall from time to time
submit to the Company for Approval on behalf of the Venture recommendations with
respect to new leases, the Annual Budget, and all other matters involving
management, operation, maintenance and improvement of the Property ("Property
Manager Recommendations"). To the extent Company or the Venture intends to enter
into a new lease, adopt an annual budget or take action on any other matter
involving the leasing, management, operation, maintenance or improvement of the
Property that is not the subject of a Property Manager Recommendation, Company
shall give written notice to Property Manager, together with a reasonably
detailed explanation thereof, at least ten (10) days prior to entering into such
lease, adopting such Annual Budget or taking such other action, as the case may
be, to provide Property Manager the opportunity to submit a Property Manager
Recommendation with respect thereto. Company shall have the right to Approve or
disapprove such recommendations unilaterally and without the need for any
further Approval from Hines and once Approved, the Company shall oversee the
implementation of the Property Manager Recommendations. The Venture shall cause
Property Manager, at the expense of the Venture, to furnish or where appropriate
make available to Company, such documents and information as Company shall
reasonably request in order to enable Company to evaluate such recommendation.
The failure of Company to Approve or disapprove any Property Manager
Recommendation within ten (10) days after receipt by Company of such Property
Manager Recommendation together with all additional information reasonably
requested by Company pertaining thereto shall be deemed the Approval of Company
of such Property Manager Recommendation and Property Manager shall be entitled
to implement same, provided, however, the Property Manager Recommendation shall
state in capitalized letters that: "THE FAILURE TO RESPOND TO THIS PROPERTY
MANAGER RECOMMENDATION WITHIN 10 DAYS AFTER RECEIPT OF THIS NOTICE AND ANY
REASONABLY REQUESTED ADDITIONAL INFORMATION PERTAINING HERETO SHALL BE DEEMED
YOUR APPROVAL TO SUCH PROPERTY MANAGER RECOMMENDATION." If Company is unwilling
or unable to Approve or disapproves such Property Manager Recommendation, after
consultation and discussion with the Property Manager, then the resolution of
such matters may be submitted by Company or the Property Manager to the Venture
Operations Arbitration Process for resolution.
4. Notwithstanding anything contained herein to the contrary other than
Sections 3.06(c) and 3.07, no act shall be taken, sum expended, decision made or
obligation incurred by the Venture, the Managing Partner, the Property Manager
or any Venturer with respect to any of the major decisions enumerated below
(hereinafter called "Major Decisions"), unless such act, sum, decision or
obligation has been Approved by both of the Venturers. The Major Decisions shall
include:
(a) Acquisition of any land or interest therein other than the Land;
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13
(b) Except as provided in Section 3.08, financing of the Venture,
including, but not limited to, the permanent financing of the improvements
and operations of the Venture (including, but not limited to, the
modification, extension or prepayment of the same);
(c) Sale, or other Transfer (except permitted sales or Transfers
pursuant to Articles V or VI) or mortgaging or the placing of any
encumbrance on the Property or any parts thereof (except as provided in
Section 3.08);
(d) Selecting or varying depreciation and accounting methods,
changing the fiscal year of the Venture and making other material
decisions with respect to treatment of various transactions for accounting
or tax purposes including without limitation making elections as to the
proper maintenance of the Capital Accounts of the Venturers in accordance
with Section 4.01 and other tax elections on behalf of the Venture;
(e) Approval of all construction and architectural contracts and any
modifications or amendments to such contracts (or payment and performance
bonds); provided, however, individual contracts for construction of less
than $100,000 and up to $1,000,000 in the aggregate which are in
compliance with the Annual Budget or which provide for the performance of
tenant construction work pursuant to tenant leases entered into in
accordance with the terms of this Agreement and the Management and Leasing
Agreement shall not be deemed a Major Decision and require the Approval of
the Venturers;
(f) Approving the "standard form lease" to be used by the Venture
for leasing all the office and commercial/retail space in the Property;
(g) Granting, altering or terminating any property rights or
easements (including the REA);
(h) Varying or changing any portion of the insurance program
required by Article VII;
(i) Making any distributions to the Venturers, except as set forth
in Section 4.05;
(j) The adjustment, settlement, or the compromise of any claim,
obligation, debt, demand, suit or judgment in excess of $25,000 against or
on behalf of the Venture;
(k) Except to the extent the Property Manager is entitled to do so
pursuant to the Management and Leasing Agreement, the making of
non-capital expenditures in excess of the aggregate amount authorized
under the Annual Budget for non-capital expenditures excluding all real
estate taxes, utilities serving the Property, debt service and other
borrowing entered into by the Venture and insurance premium amounts;
provided, however, that Managing Partner may freely pay all real estate
taxes and insurance premiums (for insurance Approved
<PAGE>
14
by the Venturers) and may freely incur expenses to perform tenant
construction pursuant to the terms of leases entered into in accordance
with this Agreement and the Management and Leasing Agreement and to
provide additional services to tenants (e.g., tenant improvements and
supervision of tenant construction not required of the Venture under
leases) if such expenses are to be promptly, expressly and directly
reimbursed by tenants;
(l) The institution or defense of any cause of action, suit,
declaratory judgment or other litigation affecting in any way the Property
and the development thereof;
(m) The filing of a petition in bankruptcy under any of the
bankruptcy laws by the Venture;
(n) Doing any act in contravention of this Agreement;
(o) Any modification or amendment to the Governmental Documents; or
(p) Any other decision or action which, by the provisions of this
Agreement, is required to be Approved by the Venturers.
In addition, in the event Hines or an Affiliate of Hines ceases to manage the
Property pursuant to the Management and Leasing Agreement or other similar
property management agreement, Major Decisions shall thereafter be deemed to
include:
a. Approval of the Annual Budget, including the Marketing Plan and
the Public Relations Plan;
b. Making capital expenditures not authorized, or in excess of the
amounts reserved for certain line items in, the Annual Budget, provided
however, that the Managing Partner may freely pay all real estate taxes,
utilities serving the Property, debt service and other borrowings entered
into by the Venture and insurance premiums (for insurance Approved by the
Venture) and may incur obligations to perform tenant construction pursuant
to the terms of leases entered into in accordance with this Agreement and
the Management and Leasing Agreement and may incur expenses to provide
additional services to tenants (e.g. tenant improvements and supervision
of tenant construction not required of the Venturer under leases) if such
expenses are to be promptly, expressly and directly reimbursed by tenant;
c. Approving any lease if it (i) is for space in excess of 10,000
rentable square feet in the case of office space or in excess of 2,500
rentable square feet in the case of retail space (for purposes of the
foregoing, multiple leases to a single tenant shall be aggregated for
purposes of determining the square footage of any particular lease with
respect to such tenant), (ii) materially deviates from the "standard form
lease" Approved by the Venturers or (iii) is for a term or at a rental
rate which deviates from the guidelines set forth in the
<PAGE>
15
Marketing Plan or will require concessions or expenditures which exceed
amounts specified in such Marketing Plan.
The Managing Partner or the Property Manager, as the case may be, shall at
the expense of the Venture furnish, or where appropriate, make available
to each Venturer, or use its best efforts to obtain from third parties,
such documents and information as such Venturer may reasonably request in
order to enable such Venturer to make the Major Decisions set forth above.
The failure of any Venturer to Approve or disapprove any Major Decision
within twenty-one (21) days (or in the case of a Major Decision that is
required pursuant to a Property Manager Recommendation, ten (10) days as
set forth in Section 3.01(c) hereof) after (i) receipt by such Venturer of
a notice requesting its Approval and (ii) receipt of all additional
information reasonably requested by such Venturer pertaining thereto,
shall be deemed the Approval of such Venturer to such Major Decision;
provided, however, that except for Major Decisions required pursuant to a
Property Manager Recommendation (A) such notice shall state in capitalized
letters that: "THE FAILURE TO RESPOND TO THE PROPOSAL SET FORTH HEREIN
WITHIN 14 DAYS AFTER RECEIPT OF THIS NOTICE AND ANY REASONABLY REQUESTED
ADDITIONAL INFORMATION PERTAINING HERETO SHALL BE DEEMED YOUR APPROVAL TO
SUCH PROPOSAL" and (B) if such Venturer shall not respond by such 14th
day, the Managing Partner (or such other Venturer) shall send to the
non-responding Venturer an additional notice by hand delivery, telex,
telecopy or telegram to advise such Venturer of its failure to respond to
the specific Major Decision, and such Venturer shall nonetheless fail to
Approve or disapprove such matter within seven (7) days after its receipt
of such additional notice.
SECTION B. Property Management and Other Authorized Payments.
1. Concurrently herewith, the Venture has entered into a separate
Management and Leasing Agreement with HILP for the management and leasing of the
Property, which provides for HILP to have primary responsibility for the
implementation of the decisions Approved by the Venturers and for conducting the
ordinary and usual day-to-day business and affairs of the Venture as more fully
set forth in, and as limited by, the provisions of the Management and Leasing
Agreement.
2. Company may cancel any agreement between the Venturer and the Property
Manager, Hines or its Affiliate, as the case may be, in the event Hines, as
Managing Partner, shall breach any fiduciary duty to the Venture or the
Venturers or shall otherwise fail to perform any of the material obligations
hereunder as a Venturer or violate a material term of this Agreement provided
such breach is not cured within twenty (20) days after delivery of written
notice by Company to Hines, or if any non-monetary default cannot by its nature
be cured in such time period, then such reasonable additional period of time as
is necessary to cure same, provided Hines or its Affiliate promptly commences to
cure such default and thereafter diligently and continually prosecutes to
completion the cure of the same. In addition, Company may exercise on behalf of
the Venture without the prior
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16
approval of Hines, the Venture's right to terminate the Management and Leasing
Agreement with HILP for the management and leasing of the Property in accordance
with the terms of Article V of the Management and Leasing Agreement. In the
event Hines or any Affiliate thereof is terminated under any service or other
agreement (including, without limitation, the Management and Leasing Agreement)
by Company or the Venture in accordance with the foregoing, the replacement
service provider and the terms of its engagement shall be determined by Company.
SECTION C. Execution and Performance of Documents.
Documents to which the Venture is a party shall be executed and/or
performed on behalf of the Venture by all the Venturers or by the Managing
Partner or the Property Manager, as the case may be, where the Venturers give
the Managing Partner or the Property Manager, as the case may be, the right to
do so. No Person shall be required to inquire into said authority of the
Venturers or the Managing Partner or the Property Manager to execute and/or
perform any document on behalf of the Venture where the Venturers give the
Managing Partner or the Property Manager the express and specific right to do
so. Except as otherwise expressly provided in this Agreement, no Venturer or
representative thereof shall have the authority or right to bind or act for the
Venture or any of the other Venturers.
SECTION D. Decisions by the Venturers/Venturer's Authority.
1. Hines and Company each shall act through either one of the respective
Members it has appointed to oversee and make decisions with respect to their
respective interests in the Venture. Upon notice to the other Venturer's
Members, each of Hines or Company may at any time and for any reason substitute
another person as its Member. If a particular Member should die, retire,
withdraw for any reason or become disabled, the Venturer whom such Member
represents shall designate a substitute Member within the following ten (10)
business days. If during any period of time both Members representing a Venturer
should die, retire, withdraw or for any reason become disabled the Venture shall
make no further Major Decisions until at least one Member representing such
Venturer shall have been substituted as set forth above. Further, for any
purpose a Member may be represented by a proxy appointed by a written, executed
instrument or a telegram, telecopy or telex. Hines and Company initially
designate as their respective Members:
Hines: Kenneth W. Hubbard or David G. Perry
Company: John S. Moody or Rodney C. Dimock
In the event any Venturer shall Transfer a portion of its interest in the
Venture to a third party in accordance with the provisions hereof, such third
party shall not be entitled to its own Member but the transferring Venturer
shall act for both itself and for the transferee of such interest.
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17
2. The Members shall meet at least annually in Boston, Massachusetts or
such other place Approved by the Venturers at a time and place acceptable to all
Members. The Members shall merely be authorized representatives of the Venturer
they represent and in such capacity shall have no liability to third parties.
The Venture shall indemnify and hold harmless each Member from and against any
claim, cost (including reasonable attorneys' fees), liability, judgment or cause
of action which he may sustain or incur as a result of acting (or of having
acted) as a Member, provided that such indemnification shall not encompass bad
faith or any grossly negligent act or omission; and provided further that such
indemnification shall extend only to a Member's capacity, as such, and
accordingly shall not affect the liability which any Member representing a
Venturer, who may also be a general partner or officer of such Venturer, has as
such general partner or officer.
3. Although a Venturer's organizational or internal documents or structure
may require the taking of certain action or the obtaining of certain approvals
in order for its Member to do certain acts, each Venturer represents that it
will be solely responsible for taking such action and obtaining such approvals
and that, prior to entering into any binding agreement or making any decision,
its Member will be vested with all power, right and authority to bind, and make
decisions on behalf of, such Venturer. Accordingly, the Venturers and any third
party may rely without inquiry upon its dealings with the other Venturer's
Member as being fully binding upon such other Venturer.
SECTION E. Budgets. In addition to the Annual Budget required under
Section 3.01(b), the Managing Partner shall furnish each Venturer within 20 days
after the end of each month, a report prepared by Property Manager detailing the
operations for the preceding month, including a comparison against the Annual
Budget. The Managing Partner agrees to provide all such statements and reports
in a timely manner and in a form acceptable to the Venturers and shall use its
best efforts to insure that such statements and reports effectively analyze and
detail the results of the operations for the period in question. All statements,
financial reports and budgets shall be prepared in accordance with generally
accepted accounting principles, consistently applied.
On or prior to November 1 of each calendar year, as a part of the Annual
Budget, the Managing Partner shall also cause the Property Manager to prepare
the following plans and guidelines for the Approval of the Venturers:
a. a detailed marketing plan which shall specify the minimum
acceptable rentals for individual spaces, the maximum concessions for
major and minor tenants, the minimum and maximum acceptable terms
(including renewal options) for individual spaces and the estimated
"tenant fit-up" cost per square foot (the "Marketing Plan"); and
b. a detailed public relations plan (the "Public Relations Plan")
which shall specify the advertising and public relations activities and
actions which the Venture shall undertake.
SECTION F. Compensation and Expenses of Venturers and Venture.
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18
1. Except as may be expressly provided for herein or in the Management and
Leasing Agreement, the Administration Agreement or hereafter Approved by the
Venturers, no payment will be made by the Venture to any Venturer for the
services of such Venturer or any member, stockholder, director or employee of
any Venturer.
2. Except as expressly provided herein, no Venturer shall be entitled to
any compensation or reimbursement from the Venture or any other Venturer for
expenses incurred in connection with the formation, business or affairs of the
Venture.
3. Notwithstanding any provision of this Agreement to the contrary, Hines,
Company and the TMP shall be entitled to reimbursement for out-of-pocket
expenses actually incurred on behalf of the Venture, provided only that (i) the
same are reasonable in amount and reasonably necessary or appropriate in the
Venture business, (ii) notice of same is given to the other Venturers within
thirty (30) days after such expense is incurred and (iii) same are consistent
with the provisions of this Agreement and are reasonably approved by the other
Venturer.
SECTION G. Contracts with Related Parties. After the date hereof and
except as otherwise provided in Section 3.02, neither Property Manager nor any
Venturer may contract with or employ on behalf of the Venture any person or
entity which is an Affiliate of any Venturer in connection with the performance
of any duties or providing any goods or services to the Venture specified in
this Agreement unless Approved by the Venturers (or pursuant to an Annual Budget
Approved by the Venturers provided such Annual Budget identifies such
Affiliate).
SECTION H. Property Financing. 1. Notwithstanding Section 3.01(d)(2) and
(3), Company may, unilaterally and without Approval of any other Venturer,
accept a loan on behalf of the Venture secured by the Property (a "Property
Financing") provided that such Property Financing meets or exceeds the following
conditions:
a. The lender providing the Property Financing is an Institutional
Lender that is not a Venturer or a Person related to a Venturer within the
meaning of Section 465(b)(3)(C) of the Code or within the meaning of
section 1.752-4(b) of the Regulations;
b. The loan-to-value-ratio of the Property Financing does not exceed
fifty-percent (50%) where the "loan amount" is the full amount committed
by such Institutional Lender and the "value" is the appraised value of the
Property as determined by an appraisal by or obtained for such
Institutional Lender;
c. The Property Debt Service Coverage Ratio of the Property
Financing for each year of the term of the Property Financing is
projected, in the good faith estimation of the Company, to be at least
1.75;
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19
d. The Property Financing shall be nonrecourse to the Venture and
the Venturers in all material respects, such that the sole recourse of the
Institutional Lender in the event of default thereunder shall be to the
Property subject, however, to exclusions to such limitations on recourse
for fraud, willful and intentional acts, and misappropriation of
condemnation and insurance proceeds and/or the rents, profits and other
income generated by the Property after a default which exclusions, if
included, are subject to the approval of each Venturer which will have
recourse liability therefor (such approval not to be unreasonably withheld
or delayed);
e. The Property Financing does not contain provisions providing for
any participation in the revenues of the Property, such as a participating
mortgage loan or a loan with an equity kicker; and
f. The fees and expenses of the Venture in obtaining the Property
Financing (including all commitment fees, points, finder's fees and legal
fees) do not exceed one and one-half percent (1.5%) of the loan amount.
At such time as Company desires to obtain Property Financing that
meets or exceeds the foregoing conditions, Company shall inform Hines in
writing and prior to accepting any loan commitment or otherwise binding
the Venture with respect to any such Property Financing, Company shall
consult with Hines and allow Hines at least ten (10) business days to
review and comment on any loan commitment for such Property Financing
Company is otherwise prepared to accept on behalf of the Venture;
provided, however, that Hines shall not have any right to disapprove any
such loan commitment. The Company shall have the unilateral right without
any further consent or Approval from any other Venturer to execute and
deliver all documents necessary to consummate any such Property Financing,
including, without limitation, a promissory note, mortgage, deed of trust,
UCC financing and/or other similar interest mortgaging and pledging the
Property to secure such loan, and such Property Financings shall for all
purposes of the Agreement be deemed to be a loan or debt Approved by the
Venturers. Any Property Financing not meeting or exceeding the foregoing
conditions shall require the Approval of both of the Venturers in
accordance with the terms of Section 3.01(c).
ARTICLE IV.
ACCOUNTING, CONTRIBUTIONS, DISTRIBUTIONS
AND ALLOCATIONS
SECTION A. Percentage Interests of Venturers. 1. Effective as of the
Reallocation Date, each Venturer's interest in the Venture ("Percentage
Interest") shall be as follows:
Company 91.5%
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20
Hines 8.5%
2. The Venture shall determine and maintain "Capital Accounts" for each
Venturer throughout the full term of the Venture in accordance with section
1.704-1(b)(2)(iv) of the Regulations. To the extent not inconsistent with these
rules, the following provisions shall apply:
a. The Capital Accounts of the Venturers, determined as of the date
of this Agreement, shall be:
Company $133,875,000.00
Hines $ 12,436,000.00
b. Thereafter, the Capital Accounts of the Venturers shall be
adjusted by increasing such Capital Accounts by the sum of:
(1) The cumulative amount of cash that has been contributed to
the capital of the Venture by such Venturer after the date of this
Agreement;
(2) The agreed-upon net fair market value (as of the date of
contribution) of all property (other than cash) that has been
contributed to the capital of the Venture by such Venturer after the
date of this Agreement; and
(3) The cumulative amount of "Profits" and all other items of
income and gain for all years ending after the date of this
Agreement and prior to the date of the determination that have been,
or are required to be, allocated to such Venturer under Sections
4.06(b), (d), or (e);
and decreasing such Capital Accounts by the sum of the following:
(D) The cumulative amount of cash that has been distributed to
such Venturer after the date of this Agreement;
(E) The agreed-upon net fair market value (as of the date of
distribution) of all property (other than cash) that has been
distributed by the Venture to such Venturer as of such date; and
(F) The cumulative amount of "Losses" and all other items of
loss and deduction for all fiscal years ending after the date of
this Agreement and prior to the date of the determination that have
been, or are required to be, allocated to such Venturer under
Sections 4.06(c), (d), or (e).
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21
A Venturer's Capital Account shall also be increased or decreased as of
such date to reflect any items described in section 1.704-1(b)(2)(iv) of
the Regulations, that are required to be reflected in such Venturer's
capital account under such Regulations and which are not otherwise taken
into account in computing such Capital Account under this Section 4.01(b).
SECTION B. Ordinary Capital Contributions.
1. Intentionally deleted.
2. Intentionally deleted.
3. Intentionally deleted.
4. Intentionally deleted.
5. a. Except as provided in the remaining provisions of this Section
4.02(e), no Venturer shall be obligated to contribute money to the Venture to
restore any deficit in its Capital Account upon the liquidation of the Venture
or of any Venturer's interest in the Venture.
b. Hines may elect, at the times and in the manner set forth in
Section 4.02(e)(iii) below, to agree to restore all or a portion of the
deficit in its Capital Account in accordance with the provisions of
Section 4.02(e)(vi) below.
c. Hines may elect to restore all or a portion of the deficit in its
Capital Account by delivering a written notice to the Venture and to the
other Venturer setting forth the dollar amount of the deficit in its
Capital Account which Hines agrees to restore pursuant to this Section
4.02(e) (the "Deficit Election"). The Deficit Election shall be delivered
to the Venture no later than 60 days prior to the beginning of any fiscal
year of the Venture.
d. Provided Hines has delivered a Deficit Election, Company may
elect to agree to restore a portion of the deficit in its Capital Account
in accordance with the provisions of Section 4.02(e)(vi) below, by
delivering to the Venture and to the other Venturer(s) a Deficit Election
no later than 30 days after receiving notice in accordance with paragraph
(iii) above if, in the view of counsel to Company, such election is
necessary to allocate to Company Losses and deductions in accordance with
the provisions of Section 4.06(c).
e. A Deficit Election of a Venturer may be amended on an annual
basis by making a subsequent Deficit Election ("Deficit Election
Amendment") so as to reduce (or eliminate) the amount of a Capital Account
deficit which the Venturer has agreed to restore, provided that any such
Deficit Election Amendment shall be effective only if made within the time
periods and in accordance with the notice requirements set forth in
paragraphs (iii) and (iv) above, and, as of the last day of the calendar
year immediately preceding the calendar year
<PAGE>
22
for which such Deficit Election Amendment is applicable, the deficit
balance (if any) in such Venturer's Capital Account does not exceed the
sum of the amount (if any) that the Venturer is obligated to restore
(whether pursuant to this Section 4.02(e) or otherwise) and the Venturer's
share with respect to such Venturer.
f. Provided a Venturer has delivered a Deficit Election under this
Section 4.02(e), then if, upon the liquidation of the Venture, the
liquidation of such Venturer's interest in the Venture or the sale of such
Venturer's interest under the buy-sell procedure pursuant to Section 5.02,
a Venturer shall have a deficit in its Capital Account, after giving
effect to all adjustments to the Capital Account of such Venturer pursuant
to Section 4.01(b), such Venturer shall contribute to the Venture cash in
(X) the amount of such deficit or (Y) the amount specified in such
Venturer's Deficit Election (or most recent Deficit Election Amendment),
whichever is less. Contributions under this Section 4.02(e) shall be made
by the end of the taxable year of the Venture in which the liquidation or
sale of such Venturer's interest occurs (or, if later, within 90 days
after the date of such liquidation or sale) and shall be used first to
satisfy any amounts then owing by the Venture to its creditors to the
extent such creditors have recourse to the assets of the Venturers and any
remaining contributions shall be distributed to the Venturers having
positive balances in their Capital Accounts in proportion to such positive
balances.
g. For purposes of this provision, the term "liquidation" shall have
the meaning set forth in the first sentence of Regulation section
1.704-1(b)(2)(ii)(g), but shall not include a constructive liquidation of
the Venture caused by a termination under section 708(b)(1) of the Code.
6. No Venturer shall be required to make any contributions to the Venture
except as required by the provisions of this Section 4.02.
SECTION C. Intentionally Deleted.
SECTION D. Tax Status and Returns.
1. Notwithstanding any provisions hereof to the contrary, each of the
Venturers hereby recognizes that the Venture will be a partnership for United
States federal income tax purposes and that the Venture will be subject to all
provisions of Subchapter K of Chapter 1 of Subtitle A of the Code; provided,
however, that the filing of U.S. Partnership Returns of Income shall not be
construed to extend the purpose of the Venture or expand the obligations or
liabilities of the Venturers. At the request of any Venturer, the Venture shall
file an election under section 754 of the Code.
2. Hines (as long as Hines, an Affiliated Entity of Hines or a Person
Controlled by a member of the Hines Control Group is the Property Manager) or
Company (in all other instances) shall prepare or cause to be prepared at the
expense of the Venture all tax returns and statements, if
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23
any, which must be filed on behalf of the Venture regarding this transaction and
the operation, dissolution and liquidation of the Venture with any taxing
authority, and shall submit such returns and statements to all of the Venturers
for their prior approval at least 30 days before such returns and statements are
due (including extensions), and when Approved by the Venturers, make timely
filing thereof. In addition, within 120 days after the end of each fiscal year
of the Venture, Hines (as long as Hines, an Affiliated Entity of Hines or a
Person Controlled by a member of the Hines Control Group is the Property
Manager) or Company (in all other instances) shall furnish each Venturer with a
report setting forth in sufficient detail all data and information regarding the
business and affairs of the Venture as shall enable the Venture and each
Venturer to prepare its federal, state and local tax returns.
3. a. Company is designated tax matters partner (herein "TMP") as defined
in section 6231(a)(7) of the Code and the Venturers will take such actions as
may be necessary, appropriate, or convenient to effect the designation of
Company as TMP. In the event that Company shall no longer be a Managing Partner,
then Hines shall be the TMP for all taxable years beginning with the year during
which Company ceases to be a Managing Partner. The TMP and the other Venturers
shall use their best efforts to comply with the responsibilities outlined in
this section and in Sections 6222 through 6231 of the Code (including any
Regulations promulgated thereunder). In determining the TMP's responsibilities
under Section 6223(g) of the Code, the term "each partner" shall be deemed to
mean "each Venturer".
b. Hines shall furnish Company with such information as Company
shall reasonably request to permit it to provide the Internal Revenue
Service with sufficient information to allow proper notice to the parties
in accordance with Section 6223 of the Code.
c. As TMP, the Company covenants and agrees with the other Venturers
that (i) after the receipt of a final partnership administrative
adjustment for a taxable year, the Company will not file a "petition for
readjustment of the partnership items", within the meaning of Section 6226
of the Code, in any court other than the United States Tax Court, without
the consent of the other Venturers and (ii) the Company will not agree,
pursuant to Section 6229(b)(l)(B) of the Code, to extend the period for
assessing any tax imposed by subtitle A of the Code with respect to any
person which is attributable to any partnership item (or affected items)
of the Venture without the consent of all of the Venturers. In the event
any other Venturer becomes a TMP, such Venturer shall be bound by this
provision.
d. No Venturer shall file, pursuant to section 6227 of the Code, a
request for an administrative adjustment of partnership items for any
partnership taxable year without first notifying the other Venturers. If
the other Venturers agree with the requested adjustment, the TMP shall
file the request for administrative adjustment on behalf of the Venture.
If the Venturers do not reach agreement within thirty days or within the
period required to timely file the request for administrative adjustment,
if shorter, any Venturer may file a request for
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24
administrative adjustment on its own behalf. If, under section 6227 of the
Code, a request for administrative adjustment which is to be made by the
TMP must be filed on behalf of the Venture, the TMP shall also file such a
request on behalf of the Venture under the circumstances set forth in the
preceding sentence.
e. If any Venturer intends to file a petition under section 6226 or
6228 of the Code with respect to any partnership item or other tax matter
involving the Venture, the Venturer so intending shall notify the other
Venturers of such intention and the nature of the contemplated proceeding.
Such notice shall be given in a reasonable time to allow the other
Venturers to participate in the choosing of the forum in which such
petition will be filed. If the Venturers do not agree on the appropriate
forum, the petition shall be filed with the United States Tax Court. If
any Venturer intends to seek review of any court decision rendered as a
result of the proceeding instituted under the preceding part of this
subsection, such party shall notify the others of such intended action.
f. The TMP shall not bind the other Venturers to a settlement
agreement without the Approval of the Venturers. If any Venturer enters
into a settlement agreement with the Secretary of the Treasury with
respect to any partnership items, as defined by section 6231(a)(3) of the
Code, it shall notify the other Venturers of such settlement agreement and
its terms within thirty days from the date of settlement.
g. These provisions shall survive the termination of the Venture or
the termination of any Venturer's interest in the Venture and shall remain
binding on the Venturers for a period of time necessary to resolve with
the Internal Revenue Service or the Department of the Treasury any and all
matters regarding the Federal income taxation of the Venture and each of
the Venturers with respect to Venture matters.
4. Each Venturer (and any transferee of such Venturer) shall timely file
and shall use its best efforts to cause any of its Affiliates timely to file any
election permitted by law if, in the opinion of tax counsel for such Venturer
(or such Affiliate), the timely filing of such an election:
a. would prevent the Venture's assets from being treated in whole or
in part as "tax-exempt use property" within the meaning of Code section
168(j) (or any successor provision thereto); and
b. would not create a significant risk that such Venturer or any of
its Affiliates shall, as a result of the filing of such election, become
subject to a more onerous tax burden than the burden to which they would
have been subject had such an election not been made.
Such Venturer and its Affiliates shall be reimbursed by the Venture for
any reasonable expenses, including reasonable attorneys' fees, which they incur
in the determination of whether to make such election and the preparation and
filing of any such election.
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25
SECTION E. Distributions.
1. For purposes of this Agreement, the "Net Cash Flow" of the Venture
shall be computed in accordance with accepted cash basis accounting principles,
consistently applied, by deducting the sum of the amounts described in (ii) and
(iii) below from the amounts described in (i) below:
a. The gross cash (or cash equivalent) receipts (other than Sales or
Refinancing Proceeds and capital contributions by the Venturers) (computed
in accordance with accepted cash basis accounting principles, consistently
applied) derived by the Venture, any of the Venturers, Property Manager or
any other person on behalf of the Venture from all sources whatsoever as a
direct or indirect result of the ownership or operation of the Property or
the operation of the Venture including, but not limited to the gross
amounts received as rent, prepaid rent, additional rent, the proceeds of
rent insurance, fees, charges or otherwise (excluding security deposits
unless such security deposits are applied as payment of rent or forfeited
upon default under a lease), sundry receipts, concessionaire receipts,
interest on deposits provided that such interest is not the property of
tenants by lease or local law, the net amount of any refund of impositions
of tax applicable to any period of this Agreement (to the extent that the
Venture is not required to remit such refund to tenants), and the proceeds
of any sale of personal property or fixtures now or hereafter located on
the Property, but specifically excluding any capital contribution by the
Venturers.
b. The Operating Expenses of the Venture. For purposes of this
Agreement, the term "Operating Expenses" shall mean the operating expenses
actually paid by the Venture, computed in accordance with accepted cash
basis accounting principles, consistently applied for costs of: the
maintenance, management, operation, repair and replacement of any portion
of the Property except to the extent financed by borrowings of the
Venture, amounts paid by the Venture (including reimbursements) to the
Property Manager under the Management and Leasing Agreement or to the
Administrator under the Administration Agreement, accountants, attorneys
or other agents for services rendered in connection with the operation of
the Property, and all other costs specifically designated by or in
accordance with the provisions hereof to be Operating Expenses. Operating
Expenses shall include the costs of or charges for the following by way of
illustration but not limitation: interest and other periodic amortization,
if any, on any indebtedness of the Venture Approved by the Venturers,
whether or not secured by a lien on the Property, together with all other
costs incurred in connection with any such indebtedness or lien;
promotional and advertising costs; leasing commissions; real estate taxes
and assessments; all taxes upon the gross or net rental income of the
Venture derived from the Property; water and sewer charges; linkage
payments (or the alternative thereto) to the City or the BRA under the
Sale and Construction Agreement; insurance premiums; licenses, permits and
inspections (excepting building permits and inspections relating to the
initial construction of the improvements); heat, light and
<PAGE>
26
power; janitorial services; building staff; garbage services; costs of
providing air-conditioning; costs of supplies, materials, equipment and
tools; and the cost to the Venture of contesting by appropriate
proceedings the applicability to the Property or the validity of any
statute, ordinance, rule or regulation affecting the Property which might
increase Operating Expenses; provided, however, that Operating Expenses
shall not include depreciation, amortization of previously capitalized
expenditures or any other expense not involving a cash expenditure by the
Venture or any amounts paid from funds specifically excluded from the
gross cash receipts specified in Section 4.05(a)(i).
c. A reasonable reserve for contingencies, accrued but unpaid
Operating Expenses, and the general working capital requirements of the
Venture as Approved by the Venturers.
2. Within 10 days after the close of each calendar month, the Venture
shall distribute or otherwise apply the Net Cash Flow realized for the preceding
calendar month to the Company and Hines in proportion to their relative
Percentage Interests.
3. Sales or Refinancing Proceeds shall be distributed or otherwise applied
to Company and Hines in proportion to their relative Percentage Interests.
4. Anything in this Agreement to the contrary notwithstanding, in the
event of a liquidation of the Venture, the proceeds of such liquidation
remaining after the payment of or provision for the debts and liabilities of the
Venture shall be applied in accordance with the following order of priority:
a. First, to the payment of the expenses of liquidation;
b. Next, to the setting up of any reserves which the remaining
Venturers may deem necessary or appropriate for any contingent or
unforseen liabilities or obligations of the Venture (said reserves may be
transferred by the remaining Venturers to a bank or trust company
acceptable to the remaining Venturers, as escrowee, to be held by it for
distributing such reserves in payment of any of the aforementioned
liabilities or obligations) and at the expiration of such period as the
remaining Venturers shall deem advisable, if any, thereafter remaining in
the manner provided herein;
c. Thereafter, to the Venturers in proportion to their Percentage
Interests.
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27
SECTION F. Allocations of Profits, Gains and Losses.
1. Definitions. For purposes of this Section 4.06, the following terms
shall have the following meanings:
a. Adjusted Capital Account Deficit. The "Adjusted Capital Account
Deficit" of any Venturer means, as of any particular date, the deficit
balance, if any, in such Venturer's Capital Account as of such date, as
determined in the manner provided in Section 4.01 and by then adjusting
such Capital Account as so determined as follows:
(1) Such Capital Account shall be increased to reflect the
amount, if any, which such Venturer is obligated to restore to the
Venture under any provision of this Agreement or is deemed to be
obligated to restore pursuant to Sections 1.704-2(g) and
1.704-2(i)(5) of the Regulations; and
(2) Such Capital Account shall be reduced to reflect any items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the
Regulations.
b. Profits and Losses. The "Profits" and "Losses," as the case may
be, of the Venture for each year shall be an amount equal to the Venture's
taxable income or taxable loss under Section 703(a) of the Code and
Section 1.703-1 of the Regulations (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or
loss), but with the following adjustments:
(1) Any tax-exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Venture during such year
shall be taken into account in computing such taxable income or
taxable loss as if it were taxable income.
(2) Any expenditures of the Venture described in Section
705(a)(2)(B) of the Code for such year, including any items treated
under Section 1.704-1(b)(2)(iv)(i) of the Regulations as items
described in Section 705(a)(2)(B) of the Code, shall be taken into
account in computing such taxable income or taxable loss as if they
were deductible items.
(3) Any items that are specially allocated pursuant to
Sections 4.06(e) shall not be taken into account in computing such
taxable income or taxable loss.
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2. Allocation of Profits. Profits for any year of the Venture shall be
allocated as follows:
a. First, to the Venturers in proportion to, and to the extent of,
the negative balances, if any, in their respective Capital Accounts as of
the last day of such year; and then
b. To the Venturers in proportion to their respective Percentage
Interests.
3. Allocation of Losses. Losses for any year of the Venture shall be
allocated to the Venturers in proportion to their respective Percentage
Interests. Notwithstanding the preceding sentence, to the extent any Losses
allocated to a Venturer hereunder would cause such Venturer (hereafter, a
"Restricted Venturer") to have an Adjusted Capital Account Deficit as of the end
of the year to which such Losses relate, such Losses shall not be allocated to
such Restricted Venturer and instead shall be allocated to the other Venturer
(hereafter, a "Permitted Venturer") in proportion to, and to the maximum extent
that, the amounts in which such Losses may be allocated to the Permitted
Venturer without causing it to have an Adjusted Capital Account Deficit.
4. Special Allocations. The following special allocations shall be made in
the following order:
a. Minimum Gain Chargeback. If there is a net decrease in
"partnership minimum gain" (as that term is defined in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations) during any year, each
Venturer shall be specially allocated items of Venture income and gain for
such year in an amount equal to that Venturer's share of the net decrease
in partnership minimum gain. Allocations pursuant to the previous sentence
shall be made in accordance with Section 1.704-2(f)(6) of the Regulations.
This Section 4.06(d)(i) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Regulations and shall
be interpreted consistently therewith.
b. Partner Minimum Gain Chargeback. If there is a net decrease in
"partner nonrecourse debt minimum gain" (as that term is defined in
Sections 1.704-2(i)(2) and (3) of the Regulations) during any year, each
Venturer who has a share of that partner nonrecourse debt minimum gain as
of the beginning of the year shall, to the extent required by Section
1.704-2(i)(4) of the Regulations, be specially allocated items of Venture
income and gain for such year (and, if necessary, subsequent years) equal
to that Venturer's share of the net decrease in partner nonrecourse debt
minimum gain. Allocations pursuant to the previous sentence shall be made
in accordance with Section 1.704-2(i)(4) of the Regulations. This Section
4.06(d)(ii) is intended to comply with the requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
c. Qualified Income Offset. If any Venturer unexpectedly receives
any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Venture income
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29
and gain shall be specially allocated to each such Venturer in an amount
and manner sufficient to eliminate, to the extent required by the
Regulations, the Adjusted Capital Account Deficit of such Venturer as
quickly as possible, provided that an allocation pursuant to this Section
4.06(d)(iii) shall be made only if and to the extent that such Venturer
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Section 4.06 have been tentatively made as if this
Section 4.06(d)(iii) were not in the Agreement.
d. Gross Income Allocation. If any Venturer has a deficit capital
account at the end of any year that is in excess of the sum of (i) the
amount such Venturer is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Venturer is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g) and 1.704-2(i)(5), each such Venturer shall be
specially allocated items of Venture income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to
this Section 4.06(d)(iv) shall be made only if and to the extent that such
Venturer would have a deficit capital account in excess of such sum after
all other allocations provided for in this Section 4.06 have been made as
if Sections 4.06(d)(iii) and (iv) were not in the Agreement.
e. Nonrecourse Deductions. "Nonrecourse deductions" (as that term is
defined in Sections 1.704-2(b)(1) and (c) of the Regulations) for any year
or other period shall be specially allocated to the Venturers in
proportion to their respective Percentage Interests.
f. Partner Nonrecourse Deductions. "Partner nonrecourse deductions"
(as that term is defined in Section 1.704-2(i) of the Regulations) for any
year or other period shall be specially allocated to the Venturer who
bears the economic risk of loss with respect to the "partner nonrecourse
debt" (as that term is defined in Section 1.704-2(b)(4) of the
Regulations) to which such partner nonrecourse deductions are
attributable, in accordance with Regulations Section 1.704-2(i)(1).
g. Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining capital
accounts, the amount of such adjustment to capital accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Venturer in a manner consistent
with the manner in which their capital accounts are required to be
adjusted pursuant to such Section of the Regulations.
5. Curative Allocations. The allocations set forth in Section 4.06(d)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Venturers that, to the
extent possible, all Regulatory Allocations that are made be offset either with
other Regulatory Allocations or with special allocations pursuant to this
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30
Section 4.06(e). Therefore, notwithstanding any other provision of this Section
4.06 (other than the Regulatory Allocations), the Company, as Managing Partner,
shall make such offsetting special allocations in whatever manner it determines
appropriate so that, after such offsetting allocations are made, each Venturer's
capital account balance is, to the extent possible, equal to the capital account
balance such Venturer would have had if the Regulatory Allocations were not part
of this Agreement and all Venture items were allocated pursuant to Sections
4.06(b) and (c). In exercising its discretion under this Section 4.06(e), the
Managing Partner shall take into account future Regulatory Allocations under
Sections 4.06(d)(i) and (ii) that, although not yet made, are likely to offset
other Regulatory Allocations previously made under Sections 4.06(d)(v) and (vi).
6. Section 704(c) Allocation. Any item of income, gain, loss, and
deduction with respect to any property (other than cash) that has been
contributed by a Venturer to the capital of the Venture and which is required to
be allocated to the Venturers for income tax purposes under Section 704(c) of
the Code so as to take into account the variation between the tax basis of such
property and its agreed upon fair market value at the time of its contribution
shall be allocated to the Venturers for income tax purposes in the manner so
required or permitted. In addition, any deduction to which the Venture is
entitled in a year with respect to any accrued but unpaid item transferred to
the Venture by a Venturer that is required to be allocated to the Venturers
under Section 704(c)(3) of the Code shall be allocated in the manner so
required.
SECTION G. Accounting.
1. The fiscal year of the Venture shall be the calendar year.
2. The Managing Partner shall cause the Venture to maintain true and
correct books and records of the Venture in accordance with generally accepted
accounting principles, consistently applied, showing all costs, expenditures,
receipts, assets and liabilities and profits and losses and all other records
necessary, convenient or incidental to accurately record the business and
affairs of the Venture. The books of account of the Venture shall be kept and
maintained at all times at the Venture's principal place of business or such
other place or places Approved by the Venturers. The books of account shall be
maintained on an accrual basis of accounting and such method of accounting shall
be used for federal income tax reporting purposes.
3. The Venturers agree that the Venture's certified public accountants
shall be Coopers & Lybrand LLP or such other independent firm of certified
public accountants as Approved by the Venturers from time to time (the
"Accountant"); provided, however, that the termination of Coopers & Lybrand LLP
as the Accountant of the Venture shall be Approved by the Venturers. On or
before January 30 of each year, Hines (as long as Hines, an Affiliated Entity of
Hines or a Person Controlled by a member of the Hines Control Group is the
Property Manager) or Company (in all other instances) shall deliver to the
Accountant the information necessary to prepare an audited Balance Sheet,
Statement of Income or Loss and Statement of Change in Financial Position of the
Venture for the prior fiscal year. Thereafter, Hines (as long as Hines, an
Affiliated Entity of Hines or a Person
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31
Controlled by a member of the Hines Control Group is the Property Manager) or
Company (in all other instances) shall respond to any additional inquiries or
provide additional documentation required by the Accountant and will use its
best efforts to cause the Accountant to prepare and furnish to each of the
Venturers, within 60 days after the close of each fiscal year, an audited
balance sheet of the Venture dated as of the end of the fiscal year, and a
related audited statement of income or loss for the Venture for such fiscal
year. Hines (as long as Hines, an Affiliated Entity of Hines or a Person
Controlled by a member of the Hines Control Group is the Property Manager) or
Company (in all other instances) shall furnish to the other Venturers such other
reports on the Venture's operations and condition as may be reasonably requested
by either such Venturer.
4. Each Venturer shall have the right at all reasonable times during usual
business hours to audit, examine and make copies of or extracts from the books
of account of the Venture. Such right may be exercised through any agent or
employee of such Venturer designated by it or by an independent firm of
certified public accountants designated by such Venturer. Each Venturer shall
bear all expenses incurred in any examination made for such Venturer's account
unless there is an error of more than 3% in such books of account (including the
computation of Net Cash Flow of the Venture for any fiscal year) in which event
the Venture shall reimburse such Venturer for its costs and expenses. In
addition, if the Venture can qualify to forego payment of any withholding taxes
by preparing and filing the appropriate forms, the Venture shall prepare and
file such forms.
SECTION H. Bank Accounts.
Funds of the Venture shall be deposited in an account or accounts of a
type, in form and name Approved by the Venturers in Mellon Bank or another bank
or banks Approved by the Venturers. Withdrawals from bank accounts shall be made
only by parties Approved by the Venturers.
ARTICLE V.
TERM, TERMINATION AND BUY/SELL RIGHTS
SECTION A. Term.
The Venture commenced on April 13, 1989 and shall continue until April 13,
2064 or until sooner terminated in accordance with the provisions of this
Article V, which provisions shall not be mutually exclusive, i.e., the exercise
or use of one of the provisions of this Article shall not preclude the exercise
or use of any other provisions of this Agreement except as in this Article V
expressly provided. No Venturer shall have the right and each Venturer hereby
agrees not to dissolve, terminate or liquidate, or to petition a court for the
dissolution, termination or liquidation of, the Venture except as provided in
this Agreement.
SECTION B. Voluntary Termination-Buy/Sell.
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1. Either of Company or Hines (the "Offeror") shall, subject to the
conditions herein provided and only at the time specified in Section 5.02(b),
have the right to withdraw from the Venture by giving notice of such intention
to withdraw to the other Venturer (the "Offeree") and, in addition, by
delivering to the Offeree an offer in writing (the "Offer") stating the cash
price (determined as set forth below) at which the Offeror would be willing to
purchase or sell an undivided 100% interest in the Property. The price set forth
in the Offer (the "Offer Price") shall be the positive or negative amount which,
in the Offeror's sole and absolute opinion, is equal to the difference between
(x) the value of the Property free and clear of any mortgages, deeds of trust
and other liens and encumbrances and (y) the aggregate unpaid principal balance
plus accrued and unpaid interest and charges (including, without limitation,
prepayment premiums), if any, of the mortgages, deeds of trust and other liens
and encumbrances affecting the Property as of the date of the Offer, subject to
which the Property would be conveyed (the "Surviving Mortgages"). In each
instance all Surviving Mortgages shall be described in the Offer.
If the Improvements have been damaged or if there is a condemnation or
other taking for a public purpose pending, the Offer shall state whether or not
the Offer Price specified is contingent upon the Improvements being fully
repaired and whether or not the condemnation or other taking has been taken into
account in the calculation of the Offer Price. The Offer shall also specify as
to whether the Offer is contingent upon the Property being repaired and restored
prior to the closing, or whether the purchasing party will agree to accept the
Property in an unrepaired or unrestored condition and an assignment of the
insurance proceeds or condemnation award. The Managing Partner or the Property
Manager, as the case may be, shall furnish, or where appropriate, make available
to the Offeror and the Offeree, or use its best efforts to obtain from third
parties such certificates, documents and information as the Offeror and the
Offeree may reasonably request in order to enable the Offeror to prepare the
Offer and compute the Offer Price and the Offeree to make the decision described
in Section 5.02(c).
2. Neither Venturer may make the Offer to buy or sell described in Section
5.02(a) at any time prior to November 1, 2007.
3. Upon receipt of an Offer given and delivered pursuant to Section
5.02(a), each Offeree shall be obligated to elect, in accordance with the
provisions of Section 5.02(e), either to purchase the Offeror's entire interest
in the Venture or to sell to the Offeror the entire interest of such Offeree in
the Venture, in either case for a purchase price determined in the manner set
forth below in Section 5.02(d) and payable in cash at the closing described in
Section 5.03.
4. The purchase price payable for any purchase and sale of an interest of
a Venturer shall be equal to the amount of Sales or Refinancing Proceeds, if
any, that would have been distributed to such Venturer in accordance with the
provisions of Section 4.05(c), subject to reduction as provided in 4.02(e) to
take into account, under certain circumstances, any negative Capital Account
balance, had the Property been sold for an amount equal to the Offer Price.
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5. An Offeree shall give written notice of its election to the Offeror
within 60 days after receipt of the Offer. Failure of an Offeree to give notice
that such Offeree has elected to purchase the Offeror's entire interest in the
Venture shall be conclusively deemed to be an election of such Offeree to sell
such Offeree's entire interest in the Venture to the Offeror. In the event that
an Offeree elects to sell its interests in the Venture to the Offeror, the
Offeror shall purchase the interest of the Offeree.
6. If, by virtue of the election of the Offeror or Offeree to purchase the
selling Venturer's interest in the Venture pursuant to this Section 5.02, the
holder of any loan encumbering the Property has the right to, and notifies the
Venture of its intent to accelerate such loan, it shall be a condition to the
Closing that the purchasing Venturer repay such loan (plus any deferred and
accrued and unpaid interest thereon) at the Closing and the failure to do so
will constitute such Venturer a Defaulting Venturer. The purchasing Venturer who
shall be a Defaulting Venturer agrees to indemnify the selling Venturer and its
Affiliates and hold each of them harmless from and against any damage, loss or
liability to any of them as a result of the indemnifying party's failure to
repay such loan at the Closing in accordance with the provisions hereof.
7. If, following an election or a deemed election by an Offeree to
purchase or sell its interest, the purchasing Venturer fails to consummate the
purchase in accordance with Section 5.03, the purchasing Venturer shall be
deemed a Defaulting Venturer. The selling Venturer, in addition to all other
rights and remedies available at law or in equity against the Defaulting
Venturer (as set forth in Section 5.08), shall have the right (but not the
obligation) (i) to purchase the interest of the Defaulting Venturer in the
Venture as if the Defaulting Venturer had made an election to sell its interest
in the Venture pursuant to Section 5.02(c) or (ii) to sell the Property to a
bona fide third party who is not an Affiliate of any Non-Defaulting Venturer
without the consent of the Defaulting Venturer.
SECTION C. Closing.
1. The closing ("Closing") of any sale pursuant to this Article V (other
than pursuant to Section 5.05) shall be held at a mutually acceptable place, on
a mutually acceptable date but not more than 90 days after receipt by the
Offeror of the Offeree's written notice of election, or the expiration of the
time during which the Offeree is entitled to elect, as provided in Section
5.02(e). However, within 45 days after such receipt or expiration, there shall
be a preliminary closing at which the Venturers shall negotiate the form of the
instruments and documents that are reasonably necessary and desirable to
effectuate the sale and transfer to the purchasing party(ies).
2. At the Closing, an assignment and, if requested by the purchasing
party, a bill of sale (both with covenants against grantor's acts) from the
selling Venturer to the purchasing party of the selling Venturer's interest
therein, together with such other instruments and documents as may be reasonably
necessary or desirable to effectuate the sale and transfer to the purchasing
party, shall be deposited in escrow under an escrow agreement and with an escrow
agent which has been approved
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by the Venturers, which approval shall not be unreasonably withheld. If there is
any dispute between the parties, the title company which issued a fee title
policy to the Venture shall act as the escrow agent. The instruments and
documents to be deposited in escrow at the Closing shall be legally sufficient
to convey all of the selling Venturer's interest in the Venture to the
purchasing party, free and clear of all mortgages, deeds of trust, liens and
encumbrances, and, at such time, the Property shall be free and clear of all
mortgages, deeds of trusts, liens and encumbrances except the Surviving
Mortgages. The purchase price shall be paid to the selling Venturer by federal
wire transfer of "same day" funds to an account designated by the selling
Venturer. At Closing, all prepaid expenses of the Venture, including, without
limitation, lease payments, advance payments on service and maintenance
contracts and similar items, shall be calculated, and to the extent any
prepayment relates to a period beyond Closing, the selling Venturer's pro rata
share (based on the Percentage Interest of such Venturer) shall be credited to
the purchase price. All accrued but unpaid expenses of the Venture, including,
without limitation, interest and contract and other payments made in arrears,
shall be calculated, and to the extent any such accrued expenses relate to the
period prior to Closing, the selling Venturer's pro rata share (based on the
Percentage Interest of such Venturer) shall be debited against the purchase
price at Closing. To the extent the Venture has undistributed Net Cash Flow, the
selling Venturer's distributive share thereof shall be credited to the purchase
price at Closing and any funds received by the Venture after Closing which are
attributable to periods prior to Closing and were not included in the
computation of Net Cash Flow shall be prorated between the Venturers and the
selling Venturer's share shall be paid to it upon receipt by the Venture.
3. In the event there are any conveyance, transfer or similar taxes
payable as an incident to the conveyances at the preliminary closing or the
Closing, such taxes shall be expenses of the Venture. In the event that any
title insurance company insuring the title of the Venture to the Property shall
refuse to endorse its policy of title insurance to reinsure the Venture's title
to the Land and the Improvements effective immediately after the transfer to the
purchasing Venturer without exception other than as set forth in the original
policy of title insurance (other than exceptions for real estate taxes, rights
of tenants in possession, as tenants only, any Surviving Mortgages, any
easements created by the Venture in favor of utility suppliers providing utility
service to the Venture, and any other matter Approved by the Venturers at any
time or from time to time), then the assignment from the selling Venturer to the
purchasing Venturer shall contain general warranties of its title to its
interest in the Venture and the Land and Improvements.
4. The purchasing Venturer shall have the right, within its sole and
absolute discretion, to cause its nominee or designee to acquire the selling
Venturer's interest in the Venture at the Closing but nothing herein shall
relieve the purchasing Venturer of its other obligations hereunder. Any such
designee shall, upon Closing, become a Venturer only if expressly approved and
consented to by the purchasing Venturer.
SECTION D. Assumption of Liabilities.
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1. At the Closing held pursuant to this Article V (other than pursuant to
Section 5.05), the purchasing Venturer shall, by a legally enforceable
agreement, assume the payment of all obligations of the Venture accruing after
Closing, including, without limitation, any indebtedness under any lien on the
Property identified in the Offer to the extent that the Venturers have personal
liability therefor.
2. If, at the time of the purchase of the Venture interest, the Property
is subject to any mortgage, deed of trust, lien or encumbrance, other than a
Surviving Mortgage, the purchasing Venturer shall discharge, assume, or take
subject to such mortgage, deed of trust, lien or encumbrance and reduce the
amount of the Offer by the amount of money as would be required to discharge
such mortgage, deed of trust, lien or encumbrance (including, without
limitation, any and all prepayment premiums or penalties) with an appropriate
reduction in the purchase price under Section 5.02(d). In addition, if such an
encumbrance shall have been placed by the selling Venturer in contravention of
the terms and provisions of this Agreement then the purchasing Venturer shall
also have all of the rights provided in this Article V with respect to a default
by any Venturer.
3. If the Improvements are damaged by fire or other casualty, or if any
party possessing the right of eminent domain or such similar right (including
the BRA pursuant to its remedies set forth under the Sale and Construction
Agreement) shall give notice of an intention to take or acquire a substantial
part of the Land or any part of the Improvements, and such damage occurs, or
such notice is given between the date of the Offer and the Closing, the
following shall apply:
a. If the Improvements are damaged by an insured casualty (or an
uninsured casualty not resulting in significant damage, which for the
purposes of this subsection only shall mean damage the cost to repair of
which would not exceed $1,000,000), or if the taking or acquisition shall
not involve a substantial portion of the Land or any part of the
Improvements resulting in any other substantial reduction in income, then
the purchasing Venturer shall be required to complete the transaction and
accept an assignment of the insurance or condemnation proceeds, in which
case the purchase price shall be reduced by the amount of the uninsured
casualty, if any, and shall be further reduced by the sum of all
deductible amounts specified under the policies of insurance.
b. If the Improvements are damaged by an uninsured casualty
resulting in significant damage, or if the taking or acquisition shall or
may result in a substantial reduction in the income producing capacity of
the Property, then the purchasing Venturer shall have the option to either
(1) accept the Venture interest with the Property in an "as is" condition
together with any insurance proceeds, settlements and awards (in which
case the purchase price shall be reduced by the sum of all deductible
amounts specified under policies of insurance), or (2) cancel the
purchase.
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In the event that the purchase is canceled by the purchasing Venturer in
accordance with this Section 5.04(c), the terms of this Agreement shall remain
in effect and continue to be binding on the parties.
SECTION E. Right of First Offer. 1a. If Company or Hines wishes to offer
for sale all or any portion of its interest in the Venture (the "Offeror's
Interest") to a Person other than Venturer or Affiliated Entity of a Venturer
(the "Third Party") or receives an offer from a Third Party which it is willing
to accept, other than an entity which is directly or indirectly part of a
Prohibited Syndication Offering (which shall be prohibited under any
circumstances), then such Venturer (the "Offeror") shall give prompt notice in
writing to the other Venturer (the "Offeree"), setting forth the Percentage
Interest being offered for sale, the name and address of the Third Party, the
price and other terms of the proposed offer of sale (the "Terms of Sale") and
such financial and other information regarding the Third Party as the Offeree
may reasonably request. The Terms of Sale shall not provide for (a) any payment
to be made which is not legal tender or (b) any security or collateral to be
given other than a lien on an interest of a Venturer.
b. The giving of such notice by the Offeror to the Offeree shall
constitute an offer by the Offeror to sell or transfer the Offeror's
Interest to the Offeree upon the same terms and conditions as contained in
the Terms of Sale. Within 10 business days after receipt of such notice,
the Offeree shall request any and all further information regarding such
offer as Offeree may reasonably require in order to fully evaluate the
Offer.
c. Within 60 days after the Offeror has supplied all requested
information to the Offeree (the "election period"), Offeree may elect (by
sending notice to the Offeror) to purchase or acquire the Offeror's
Interest upon the same terms and conditions as contained in the Terms of
Sale. If the Offeree elects to purchase the Offeror's Interest, then on
the closing date (which date shall be the date set forth in the Offeree's
notice of election to the Offeror but shall not be sooner than 15 days nor
later than 90 days after the date of the giving of such notice of
election), Offeror shall convey, transfer and assign to Offeree (by
instruments prepared by Offeror's attorneys and in form and substance
reasonably satisfactory to Offeree's attorneys) all or the appropriate
portion of Offeror's Interest upon the same terms and conditions as
contained in the Terms of Sale (subject to the condition imposed by
paragraph (v) below).
d. If the Offeree shall fail to exercise its right to purchase the
entire Offeror's Interest or, if for any other reason the Offeree does not
elect to purchase the entire Offeror's Interest, the Offeror may sell or
transfer the entire Offeror's Interest to the Third Party only, provided
(A) such sale or transfer is made on no more favorable terms and
conditions than those set forth in the Terms of Sale, (B) such sale or
transfer is consummated within 180 days after the expiration of the
election period, and (C) such sale or transfer is not, directly or
indirectly, part of a Prohibited Syndication Offering. In the event that
such sale to the Third Party is not consummated in accordance with this
Section 5.05 or the Offeror wishes to sell
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to someone other than the Third Party listed in the Terms of Sale, the
provisions of this Section 5.05 shall be applicable as if the previous
Terms of Sale had never been submitted.
e. If, by virtue of the election of the Offeree to purchase the
Offeror's Interest in accordance with the provisions of this Section 5.05,
the holder of any loan encumbering the Property has the right to, and
notifies the Venture of its intent to accelerate such loan, it shall be a
condition to the closing that the Offeree repay such loan (plus any
deferred and accrued and unpaid interest thereon) at the closing of the
sale of the Offeror's Interest.
f. The failure of Offeree to repay such loan in accordance with
Section 5.05(a)(v) above shall make such Offeree a Defaulting Venturer as
defined in Section 5.08 hereof. Furthermore, regardless of whether the
Offeror is then a Venturer, such Offeree who shall be a Defaulting
Venturer agrees to indemnify the Offeror and its Affiliates and hold each
of them harmless from and against any damage, loss or liability to any of
them as a result of the failure of the indemnifying party to repay such
loan in the amount indicated herein at the time specified herein for such
repayment.
2. In the event of a sale to the Offeree or to a Third Party by the
Offeror permitted under Section 5.05, the Venture shall not be dissolved or
wound up but instead shall continue as before with, however, the replacement of
the Third Party or the Offeree as the successor in interest to the Offeror's
Interest or as a Venturer with an increased Percentage Interest, as the case may
be. No such sale shall relieve the Offeror from any of its obligations under
this Agreement accruing prior to such sale. Notwithstanding the foregoing, as a
condition to any sale by the Offeror to a Third Party, such Third Party must
execute this Agreement (as it may have been amended), or a separate consent
thereto, and agree to be bound by all of its terms and provisions; provided,
however, that such Third Party shall (i) neither become a Managing Partner by
virtue of its purchase of a Venturer's Percentage Interest nor (ii) have any
rights to participate in the management or decision-making of the Venture or to
vote on any Major Decisions, unless Company and Hines agree otherwise. In the
event Company transfers more than 50% of its Percentage Interest as of November
1, 1997 (91.5%) to the Offeree or to a Third Party pursuant to this Section 5.05
or otherwise, then from and after the date on which such transfer is
consummated, Company shall no longer have the right or authority granted under
the second sentence of Section 3.01(a) hereof to take all actions to be taken by
"the Managing Partner" hereunder and Hines shall thereafter have all such right
and authority, provided, however, that Company shall continue to remain a
Managing Partner of the Venture and shall have the right to participate in the
management and decision-making process of the Venture and to vote on Major
Decisions as provided herein with respect to all Venturers.
SECTION F. Liquidation and Distribution Procedure.
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38
1. Effective upon the deposit in escrow of the documents of transfer and
the purchase price pursuant to Section 5.03, at the election of the purchasing
Venturer, the Venture shall be deemed dissolved. In such event the Venture's
business and affairs shall be wound up, its just debts and obligations paid and
its remaining assets, if any, distributed to the remaining Venturers in
accordance with Section 4.05(d).
2. In the event of a liquidation and dissolution as a result of the
occurrence of an Event of Dissolution pursuant to Section 5.07 hereof or a
default pursuant to Section 5.08 hereof, the Withdrawing Venturer or the
Defaulting Venturer, as the case may be, shall have no power or authority to
bind the Venture or the other Venturer but shall assist the remaining Venturer
in the dissolution and winding up of the Venture and the distribution of the
assets thereof. Upon such distribution and winding up, the parties hereto shall
be relieved of all obligations hereunder except for obligations, duties or
rights which have not been determined or ascertained as of the date of such
termination and for rights or remedies which a Non-Defaulting Venturer may have
against a Defaulting Venturer in law or equity. The winding up of the Venture
and the termination of the business and affairs of the Venture shall be
conducted by the remaining Venturer. During the period of such winding up, the
business and affairs of the Venture shall be conducted so as to maintain and
preserve the assets of the Venture in a manner consistent with the winding up of
the affairs thereof.
SECTION G. Event of Dissolution.
1. The Venture shall not be wound up and terminated by the occurrence of
an Event of Dissolution unless all of the remaining Venturers shall so decide.
2. The term "Event of Dissolution" as used hereunder shall mean:
a. the death of any natural person who is now or who shall hereafter
become a Venturer;
b. the dissolution or termination of any partnership or corporation
(other than (x) as a result of a transfer of interests therein permitted
by this Agreement or (y)) a dissolution immediately followed by a
reconstitution of such partnership or corporation) which at the time is a
Venturer;
c. the declaration of any natural person who is now or who shall
hereafter become a Venturer as a lunatic in any judicial proceedings, or a
showing that such Venturer is of unsound mind;
d. the showing by competent medical evidence that any natural person
who is now or who shall hereafter become a Venturer is mentally or
medically unable to perform the duties required of him by the Venture;
<PAGE>
39
e. the occurrence of any one of the following events:
(1) if any Venturer (hereinafter referred to as the "Bankrupt
Party") shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself
under the present or any future federal bankruptcy act or any other
present or future applicable federal, state or other statute or law
relative to bankruptcy, insolvency or other relief for debtors, or
shall seek or consent to or acquiesce in the appointment of any
trustee, receiver, conservator or liquidator of the Bankrupt Party
or of any substantial part of said party's properties or said
party's interest in the Venture (the term "acquiesce" as used in
this Article includes but is not limited to, the failure to file a
petition or motion to vacate or discharge any order, judgment or
decree within 30 days after the date of such order, judgment or
decree); or
(2) if a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against the Bankrupt
Party seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy act or any other present or
future applicable federal, state or other statute or law relating to
bankruptcy, insolvency or other relief for debtors, and such party
shall acquiesce in the entry of such order, judgment or decree or
such order, judgment or decree shall remain unvacated or unstayed
for an aggregate of 90 days (whether or not consecutive) from the
date of entry thereof, or any trustee, receiver, conservator or
liquidator of such party or of all or any substantial part of such
party's property or interest in the Venture shall be appointed
without the consent or acquiescence of such party and such
appointment shall remain unvacated or unstayed for an aggregate of
90 days (whether or not consecutive); or
(3) if any Venturer shall admit in writing its inability to
pay its debts as they mature; or
(4) if any Venturer shall give notice to any governmental body
of insolvency or pending insolvency, or suspension of operations; or
(5) if any Venturer shall make a general assignment for the
benefit of creditors or take any other similar action for the
protection or benefit of creditors.
3. In the event of the occurrence of an Event of Dissolution or otherwise
upon the agreement of all the Venturers:
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40
a. Provided that the other Venturer has elected to wind up and
terminate the Venture, the Venturer as to whom the Event of Dissolution
has occurred ("Withdrawing Venturer") shall immediately cease to have any
right to participate in the management or decision-making processes of the
Venture (provided that the Withdrawing Venturer shall nevertheless be
entitled to continue to receive distributions of Net Cash Flow and Sales
or Refinancing Proceeds and liquidation proceeds and allocations of gain,
loss and credit as fully as if such Venturer were not a Withdrawing
Venturer) and the remaining Venturer may send notices of the dissolution
to such persons and entities as the remaining Venturer may deem
appropriate and necessary under the circumstances.
b. The remaining Venturer shall settle the business of the Venture
as expeditiously as its nature will permit and account for the interests
of the Venturers. Such settlement procedure may include, but shall not be
limited to, a purchase by the remaining Venturer of the interest of the
Withdrawing Venturer at a price determined in accordance with the
appraisal procedures set forth in Section 9.08 but otherwise in accordance
with Section 5.02(d), a public sale of all or any part of the assets of
the Venture, a winding up of the Venture, or a petition to a court of
appropriate jurisdiction requesting that such court supervise and approve
a partitioning of the Property. If by virtue of an Event of Dissolution,
the holder of any loan encumbering the Property has the right to, and
notifies the Venture of its intent to accelerate such loan, any settlement
shall require the Venture to cause such loan to be repaid in full.
c. The good will of the Venture (including the name, records and
files) shall belong to and remain solely vested in the Venture.
d. The prior written consent of the remaining Venturer shall be
required prior to any consent to any administration of the Property by any
referee, trustee or court of bankruptcy. The remaining Venturer shall have
the right at all times to continue the business and affairs of the Venture
pursuant to the terms of this Agreement.
SECTION H. Default.
If any Venturer fails to perform any of its obligations hereunder, or
violates the terms of this Agreement (the "Defaulting Venturer"), the other
Venturer (the "Non-Defaulting Venturer") shall have the right to give the
Defaulting Venturer a notice of default (the "Notice of Default") specifically
setting forth the nature of the default and stating that the Defaulting Venturer
shall have a period of 20 days to cure any such default, and if the Defaulting
Venturer shall fail to cure such default within such 20-day period, or if such
default is not capable of being cured within such period, the Defaulting
Venturer has not commenced in good faith the curing of such default within such
20-day period and does not thereafter prosecute to completion with diligence and
continuity the curing thereof, the Non-Defaulting Venturer shall (in addition to
any other rights under this Agreement, by law or in equity) have the right:
<PAGE>
41
a. to bring any proceeding in the nature of specific performance,
injunction or other equitable remedy, it being acknowledged by each of the
Venturers that damages at law may be an inadequate remedy for a default or
threatened breach of this Agreement;
b. to bring any action at law by or on behalf of the Venture or the
Non-Defaulting Venturer as may be permitted in order to recover damages;
c. to institute such proceedings (including but not limited to the
right to purchase the interest of the Defaulting Venturer at a price
determined in accordance with the appraisal procedures set forth in
Section 9.08) as may be appropriate to secure an accounting and to
dissolve, wind up and terminate the Venture; or
d. if such default is a material default, to institute the procedure
set forth in Section 5.02 hereof by giving a notice to such effect to the
Defaulting Venturer, notwithstanding the time limitations contained in
Section 5.02(b).
In addition to the remedies set forth above, the Non-Defaulting Venturer
shall have the right to remove the Defaulting Venturer as Managing Partner, and
if the Defaulting Venturer is Hines, terminate the Management and Leasing
Agreement and designate a new Property Manager under an agreement substantially
similar to the Management and Leasing Agreement in accordance with Section
3.02(b) hereof and if the Defaulting Venturer is Company, Hines shall succeed to
Company's management rights under Section 3.01(a) and shall be entitled to
terminate the Administration Agreement in accordance with the terms thereof.
SECTION I. Conversion to Limited Partnership.
1. Upon the occurrence of an Event of Dissolution or the occurrence of a
default pursuant to Section 5.08 which is not cured within the time period
specified in Section 5.08, then in addition to, and without excluding the
availability of any other remedy hereunder, the remaining Venturer or the
Non-Defaulting Venturer, as the case may be, may elect to convert the Venture to
a limited partnership organized and existing under the laws of the State of
Massachusetts and to convert the Withdrawing Venturer or Defaulting Venturer, as
the case may be, to a limited partner therein. Upon such conversion, the former
Withdrawing Venturer or Defaulting Venturer, as the case may be, shall have
absolutely no right whatsoever to participate in the management or decision
making processes of the Venture, regardless of whether the activity in question
constitutes a Major Decision. Specifically, without limiting the generality of
the foregoing, following such conversion the former Withdrawing Venturer or
Defaulting Venturer, as the case may be, will not have any right to participate
in any decisions with respect to a sale or refinancing of the Property.
2. In the event of any such conversion, the former Withdrawing Venturer or
Defaulting Venturer, as the case may be, agrees to execute, swear to, and
deliver any and all amendments to this Agreement, together with a certificate of
limited partnership in recordable form, in such form and
<PAGE>
42
substance as shall be reasonably specified by the other Venturer, all within ten
(10) days after demand and notice form the other Venturer. In order to
effectuate the foregoing, each Venturer hereby appoints the full and complete
power and authority in its name and stead to execute, swear to, deliver, and
record any and all such amendments and such certificates. This power has been
given between the Venturers upon good and adequate consideration; it is a power
coupled with an interest; it is irrevocable; and it shall survive any death,
incapacity, dissolution, or any other event concerning any such Venturer.
3. Any and all costs and expenses, including, without limitation attorneys
fees, recording costs, and other charges and expenses incurred in connection
with the conversion of the Venture to a limited partnership as described in this
Section 5.09 shall be paid in full by the former Withdrawing Venturer or
Defaulting Venturer, as the case may be.
ARTICLE VI.
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION
SECTION A. Prohibited Transfers.
1. Except as provided in Articles V and VI, no Venturer may sell,
transfer, assign or otherwise dispose of or mortgage, hypothecate, or otherwise
encumber or permit or suffer any encumbrance of all or any part of its or his
interest in the Venture whether voluntarily or involuntarily, by operation of
law or otherwise (hereinafter "Transfer") unless Approved by the Venturers, and
any attempt so to Transfer any such interest shall be void and shall constitute
a default hereunder by the Venturer attempting to do so. The foregoing
prohibition on Transfer shall also apply to a Transfer of stock or partnership
interests being held in any Venturer or the Transfer of partnership interests or
shares of stock, as the case may be, in such members or shareholders being held
by its members or shareholders, as the case may be, or the Transfer or other
agreement which results in Person(s) other than the present beneficial owners of
Hines or Company directly or indirectly having an interest in the Venture.
2. No Venturer, directly or indirectly, shall consolidate with or merge
into or become a member of any other partnership or other entity or convey or
transfer any part of its properties or assets except as hereby expressly
permitted. No Venturer, directly or indirectly, shall admit any new partners
(general or limited) nor shall any Venturer permit any of its general partners
to resign, except as specifically permitted under Section 6.02.
SECTION B. Permitted Transfers.
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43
1. Notwithstanding any other provision of this Agreement to the contrary
but subject to the provisions of Section 6.02(g) and 6.02(h), each
Venturer shall have the right, without the consent of any other Venturer,
to Transfer all of its interest in the Venture to an Affiliated Entity.
2. a. Subject to Sections 6.02(g) and 6.02(h), Hines shall have the
right, without the consent of any other Venturer, to transfer all of its
interest in the Venture to any Person Controlled by a member of the Hines
Control Group.
b. Subject to Sections 6.02(g) and 6.02(h), each partner of Hines
(or the partner of any partner of Hines) may, without the consent of any
Venturer, Transfer all or any part of its interest in Hines (or any
partner of Hines) to any Person as long as Hines continues to be
Controlled by a member of the Hines Control Group.
c. Subject to Sections 6.02(g) and 6.02(h), Company shall have the
right to Transfer all of its interest in the Venture to any limited
partnership whose sole general partner is Cornerstone or an Affiliated
Entity of Cornerstone provided that the limited partners have the right to
convert their limited partnership interest into the stock of Cornerstone
or Affiliated Entities of Cornerstone.
d. Notwithstanding anything contained herein to the contrary but
subject to Section 6.02(g) and Section 6.02(h), Company and Hines shall
each be permitted to pledge their respective interests in the Venture
(herein, a "Venture Interest") for any purpose (a "Venture Interest
Financing") (and any further Transfer to the initial lender providing such
Venture Interest Financing which lender satisfies the requirements under
clause (A) below pursuant to a foreclosure or execution upon such Venture
Interest in connection which such pledge shall be permitted) provided that
the Venture Interest Financing complies with the following:
(1) the lender providing such Venture Interest Financing is an
Institutional Lender approved by the non-borrowing Venturer (such
approval not to be unreasonably withheld or delayed);
(2) the loan-to-value ratio for the Venture Interest Financing
is not in excess of fifty percent (50%); where the "loan amount" is
the full amount committed by such Institutional Lender and the value
is the value of the applicable Venture Interest as determined by the
Institutional Lender and for these purposes any appraisal obtained
by or for the Institutional Lender shall be conclusive as to such
appraised value;
<PAGE>
44
(3) the Venture Debt Service Coverage Ratio for such Venture
Interest Financing shall be at least 1.75;
(4) the loan documents evidencing the Venture Interest
Financing shall provide for the giving of notice to the
non-borrowing Venturer of any default thereunder by the borrowing
Venturer with the same right to cure such default for the
non-borrowing Venturer as is given to the borrowing Venturer; and
(5) all fees and expenses of obtaining the Venture Interest
Financing shall be borne by the borrowing Venturer.
Notwithstanding anything contained in Section 5.02(b), the
non-borrowing Venturer may make an Offer under Section 5.02 at any time
after such non-borrowing Venturer has cured a default under any other
Venturer's Venture Interest Financing or after such Venture Interest has
been foreclosed, executed upon or otherwise transferred pursuant to such
Venture Interest Financing.
3. Any permitted transferee of an interest in the Venture shall become a
Venturer unless the terms of the Transfer expressly provide to the contrary;
provided, however, any such permitted transferee shall be required to (i)
execute a copy of this Agreement (or a separate consent thereto), and agree to
be bound by all of the terms and provisions hereof and (ii) assume all of its
transferor's obligations hereunder, and provided, further, that, notwithstanding
anything herein, no transferee of a partial interest of any Venturer shall have
any right to participate in the management of the Venture independently of the
Venturer making such transfer unless such participation is Approved by the
Venturers.
4. Notwithstanding anything contained herein to the contrary, the
Venturers acknowledge that the Company is beneficially owned and controlled by
Cornerstone Properties Inc. ("Cornerstone"), an entity which is publicly traded,
and that any change in the composition of the ownership of Cornerstone, even to
the extent of a change in control thereof, shall not constitute a Transfer for
any purpose hereunder and the provisions of Section 6.01(b) shall not be
applicable to Cornerstone. Notwithstanding the foregoing, in the event any
change in the composition of the ownership of Cornerstone results in a "change
in control" with respect to Cornerstone (as defined below), Company shall notify
Hines of such change in control within tewnty (20) days after the occurrence
thereof and Hines shall have the right, which must be exercised within thirty
(30) days after receiving such written notice of a change in control together
with all additional information reasonably requested by Hines pertaining to the
change in control and the new controlling Person, to (i) approve such change in
control (such approval not to be unreasonably withheld), or (ii) give Company
written notice that it may elect to cause Cornerstone or its successor or
designee to acquire its Venture Interest on the terms and for a purchase price
determined in accordance with the provisions set forth below and that Hines
desires to have the purchase price determined in the manner described below. As
used herein, a "change in control" shall mean the occurrence of any of the
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45
following (a) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) becoming the "beneficial owner(s)" (as defined in said Rule 13-d-3) of
shares of capital stock of Cornerstone which entitle the holder thereof to
control more than fifty percent (50%) of all voting rights with respect to all
shares of capital stock of Cornerstone; (b) approval of the stockholders of
Cornerstone of a merger, reorganization, consolidation, exchange of shares,
recapitalization, restructuring or other business combination which results in
beneficial ownership of more than fifty percent (50%) of the common stock of
Cornerstone being transferred to a person or persons (or entities) other than
DIHC Holding or an Affiliate as of the date of this Agreement; (c) sale of all
or substantially all of the Cornerstone's assets; (d) Incumbent Directors (as
defined below) cease to comprise a majority of the directors on Cornerstone's
board of directors; or (e) any transaction that results in the common stock of
Cornerstone no longer being required to be registered under Section 12 of the
Exchange Act. As used herein, the term "Incumbent Directors" shall mean (x) all
of the individuals constituting the Board of Directors of Cornerstone as of the
date of this Agreement, and (y) all individuals hereafter designated as nominees
to the board of directors of Cornerstone by holders of common stock or preferred
shares of Cornerstone as of the date of this Agreement which holders currently
have the right to nominate individuals to the board of directors.
In the event Hines gives the notice described in clause (ii) above, the
purchase price payable for the Venture Interest which shall be acquired shall be
determined by the Venture's Accountant as soon as practicable (and the Venturers
shall direct such Accountant to make such determination) and shall be equal to
the amount of Sales or Refinancing Proceeds, if any, that would have been
distributed to the transferring Venturer in accordance with the provisions of
Section 4.05(c) had the Property been sold for the value of the Property which
shall be determined in accordance with the appraisal procedure described in
Section 9.08. The Venture's Accountant shall be directed to communicate the
purchase price to the Venturers by written notice. Within fifteen (15) days
after receipt by Hines of a written determination of such purchase price
determined by the Venture's Accountant, Hines shall have the right to elect
(which election shall be irrevocable) to cause Company or its successor or
assignee to acquire its Venture Interest on the terms (including the purchase
price) determined in accordance with the terms of this Section 6.02(d), such
closing to be effected as soon as is practicable but in any event within thirty
(30) days after the making of such election by Hines. In the event Hines does
not so elect, Hines shall be deemed to have approved the change in control. At
the closing of such transfer, the transferring Venturer shall, at the request of
the transferee, execute and deliver to the transferee or its designee an
assignment and bill of sale (with covenants against grantor's acts) of the
transferring Venturer's Venture Interest, together with such other instruments
and documents as may be reasonably necessary or desirable to effectuate the sale
and transfer to the transferee. The purchase price shall be paid to the
transferring Venturer by a cashier's or certified check from a bank reasonably
acceptable to the transferring Venturer. At the closing, any closing adjustments
which are usual and customary in the locality of the Property shall be made
between the transferee and the transferring Venturer as of the date of closing.
In the event there are any conveyance, transfer or similar taxes payable as an
incident to the conveyances at the closing, such taxes shall be paid by the
transferee. At the closing, the transferee shall, by legally enforceable
<PAGE>
46
agreement, assume the payment of any indebtedness under any lien on the Property
to the extent the Venturers have personal liability therefor, and the transferee
must execute this Agreement (as it may have been amended), or a separate consent
thereto, and agree to be bound by all of its terms and provisions.
5. The Transfer of all or any part of the interest of any Venturer which
is permitted hereunder shall not result in a dissolution of the Venture as a
general partnership under the Massachusetts Uniform Partnership Act even though
such Transfer may result in the withdrawal of a Venturer as a general partner of
the Venture and/or the admission of a new general partner to the Venture. The
Transfer of all or any part of the interest of any Venturer which is permitted
pursuant to Section 6.02 shall not be subject to the "right of first offer"
requirements set forth in Section 5.05 hereof.
6. Intentionally deleted.
7. Notwithstanding the prior provisions of this Section 6.02 (but in no
event shall this provision affect Transfers pursuant to Sections 5.02 and 5.05),
a Venturer may not Transfer all or any part of its interest in the Venture nor
may a direct or indirect owner of a Venturer Transfer all or any part of its
interest in such Venturer, if, solely as a result of such Transfer, all or any
part of the Venture's assets would thereafter become "tax-exempt use property"
within the meaning of Section 168(j) (or any successor provision) of the Code.
8. The Venture or any Venturer shall have the right, as an absolute
condition precedent to the effectiveness or validity of any Transfer, to require
the transferor to provide the Venture and the non-transferring Venturer with
assurances that the Transfer does not violate any applicable state and federal
securities laws, that the Transfer is exempt from registration (i.e., no
Transfer shall be permitted which requires such registration), and that the
Venturer making the Transfer will indemnify and hold harmless the Venture and
the other Venturer from and against any and all costs, damage, injury, claims,
actions, and demands (including, without limitation, attorneys fees) suffered by
the Venture or the other Venturer as a result of any violation or claimed
violation or failure to conform or claimed failure to conform to any state or
federal securities laws. The Venture and such other Venturer may further require
the submission to the Venture and the other Venturer of a legal opinion from
counsel satisfactory to the Venture and the other Venturer in such form and
substance reasonably satisfactory to the Venture and the other Venturer.
<PAGE>
47
ARTICLE VII.
INSURANCE
SECTION A. Minimum Insurance Requirements.
1. The Venture shall carry and maintain in force the following insurance,
the premium for which shall be a cost and expense of the Venture:
a. Workers' Compensation Insurance (including Employer's Liability
Insurance for an amount not less than $500,000) covering all employees of
the Venture, if any, emloyed in, on or about the property of the Venture
to provide statutory benefits as required by the laws of the Commonwealth
of Massachusetts;
b. Commercial General Liability Insurance (including protective
liability insurance on operations of independent contractors, blanket
contractual liability insurance, and personal injury liability insurance)
for the benefit of the Venture and the Venturers as named insureds against
claims, including without limitation, bodily injury, death or property
damage liability with a limit of not less than $25,000,000 for any one
occurrence, such insurance which may be furnished under a "primary" policy
and an "umbrella" policy shall also include coverage against liability for
bodily injuries or property damage arising out of the use by or on behalf
of the Venture or the Venturers of any owned, non- owned or hired
automotive equipment for a limit of not less than that specified above;
c. All Risks Builder's Risk Insurance on any new construction,
including coverage against collapse, written on a completed value basis in
an amount not less than the total value of the Improvements under
construction (less the value of such of the Improvements as are
uninsurable under the policy, i.e., site preparation, grading, paving,
parking lots, excepting, however, foundations and other undersurface
installations subject to collapse or damage by other insured perils)
including, if applicable, the coverage available under the so-called
Installation Floater, all in form and amount as may from time to time be
required by any mortgagee of any Improvements under construction;
d. Fire, Extended Coverage and Vandalism and Malicious Mischief
Insurance on the Improvements in an amount not less than the balance of
any institutional mortgages on the Property or for such other amount (at
no time, however, less than the principal balance secured by said
mortgages) as may be required to prevent the Venture and the Venturers
from becoming coinsurers under the terms of the applicable policy, but in
any event, in an amount not less than 90% of the then actual replacement
cost of the Improvements (exclusive of excavation and foundation costs and
costs of underground tanks, conduits, pilings and other similar
underground items) without deduction for physical depreciation thereof;
such
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48
insurance on the completed Improvements shall contain the "Replacement
Cost Endorsement";
e. In the event that such equipment is installed in the
Improvements, Boiler and Machinery Equipment Insurance in the amount of
$1,000,000 or such greater amount as Approved by the Venturers covering
boilers, pressure vessels, pressure piping, all major components and of
any central air-conditioning or heating system and such additional
equipment as Approved by the Venturers at any time;
f. If the Improvements are situated in an area now or subsequently
designated as having special flood hazards as defined by the Flood
Disaster Protection Act of 1973, as amended from time to time, Flood
Insurance in an amount equal to the replacement cost of the Improvements
or the maximum amount of Flood Insurance available, whichever is the
lesser; and
g. Such other insurance or such additional coverage, including but
not limited to insurance on rental income, as may be Approved by the
Venturers or required by the holder of any mortgage covering the
Improvements or by the City or BRA under the Governmental Documents.
2. Evidence of all such aforesaid policies of insurance shall be delivered
to each Venturer and shall name the Venture and each of the Venturers, as named
insureds, as their respective interests may appear. All such insurance shall be
effected under policies issued by insurers and be in forms and for amounts
Approved by the Venturers and in compliance with the Governmental Documents and
the requirements of any loan encumbering the Property.
3. All of the aforementioned insurance coverage shall be contained in
insurance policies and issued by insurance companies Approved by the Venturers
and by the City or BRA and any mortgage lenders (to the extent their consent or
approval is required).
ARTICLE VIII.
Intentionally deleted.
ARTICLE IX.
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49
GENERAL
SECTION A. Notices.
1. All notices, demands or requests provided for or permitted to be given
pursuant to this Agreement must be in writing.
2. All notices, demands and requests to be sent to Hines or any permitted
assignee of the interest of Hines hereunder pursuant hereto shall be deemed to
have been properly given or served by (i) delivering the same personally
(including overnight courier), or (ii) transmitting the same by telefacsimile,
or (iii) depositing the same in the United States mail, addressed to Hines
postpaid and registered or certified with return receipt requested at the
following address:
If to Hines:
c/o Hines Interests Limited Partnership
222 Berkeley Street
Suite 1420
Boston, MA 02116-375l
Attn: David G. Perry
Telecopier: 617-236-4588
With a copy to:
Hines Interests Limited Partnership
East Coast Regional Office
885 Third Avenue, Suite 2700
New York, New York 10022-4834
Attn: Kenneth W. Hubbard
Telecopier: 212-230-2276
and to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attn: Hugh Tucker, Esq.
Telecopier 713-229-1522
<PAGE>
50
3. All notices, demands or requests to be sent to Company or any permitted
assignee of the interest of Company hereunder pursuant hereto shall be deemed to
have been properly given or served by (i) delivering the same personally, or
(ii) transmitting the same by telefacsimile, or (iii) depositing the same in the
United States mail, addressed to Company, postpaid and registered or certified
with return receipt requested at the following address:
If to Company:
Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Attn:John S. Moody
Rodney C. Dimock
Telecopier: 212-605-7199
and to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attn:Eileen P. Brumback, Esq.
Telecopier: 212-556-2222
4. All notices, demands and requests shall be effective upon personal
delivery, receipt, or upon being deposited in the United States mail. However,
if the notice, demand or request is delivered by U.S. mail, the time period in
which a response to any such notice, demand or request must be given shall
commence to run from the date of receipt on the return receipt of the notice,
demand or request by the addressee thereof. Rejection or other refusal to accept
or the inability to deliver because of changed address of which no notice was
given shall be deemed to be receipt of the notice, demand or request sent. In
the event that registered or certified mail is not being accepted for prompt
delivery, notices may then be served by personal service upon any officer,
director or partner of any Venturer or upon any individual who is a Venturer.
5. By giving to the other parties at least 30 days written notice thereof,
the parties hereto and their respective successors and assigns shall have the
right time to time and at any time during the term of this Agreement to change
their respective addresses and each shall have the right to specify as its
address any other address at which it has a place of business or up to two (2)
other addresses to which it wishes copies of any notice sent.
6. No transferee of any interest by any Venturer shall be entitled to
receive a notice independent of the notice sent to the Venturer making such
transfer. A notice sent or made to a Venturer shall be deemed to have been sent
and made to all transferees, if any, of such Venturer.
<PAGE>
51
SECTION B. Governing Laws. This Agreement and the obligations of the
Venturers hereunder shall be interpreted, construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
SECTION C. Exculpation/Indemnification.
1. Notwithstanding anything in this Agreement to the Contrary, no Venturer
(or any partner, director, officer or employee of any Venturer, direct or
indirect) shall be personally liable or personally responsible to any other
Venturer or to the Venture beyond its interest in the assets of the Venture for
damages or other liabilities (other than for capital contributions required of
such Venturer under Section 4.02(e)) caused by any act or omission performed or
omitted by it in respect of this Agreement or the Venture or the Property or
arising under any indemnity other than the indemnity set forth in Section
9.03(b) hereof, unless such damage or liability results from its gross
negligence, fraud or willful misconduct.
2. Each Venturer shall defend, indemnify and hold the other Venturer and
its officers, directors, partners, shareholders, agents and employees harmless
from and against any third party claims, demands, losses, damages or liabilities
suffered or incurred by it by reason of the fraud, gross negligence or willful
misconduct of such Venturer, its officers, directors, partners, agents or
employees. The Venture shall defend, indemnify, and hold harmless each Venturer
and its officers, directors, partners, shareholders, agents and employees from
and against any third party claims, demands, losses, damages, liabilities, or
costs and expenses, including, without limitation, attorney's fees and court
costs, suffered or incurred by any of them by reason of their actions or
omissions pursuant to this agreement or by reason of their being a Venturer in
the Venture, other than those involving willful misconduct, fraud or gross
negligence of the indemnified Venturer.
SECTION D. Entire Agreement.
This Agreement contains the entire agreement between the parties hereto
relative to the Venture. No variations, modifications or changes herein or
hereof shall be binding upon any party hereto unless set forth in a document
duly executed by or on behalf of such party.
SECTION E. Waiver.
No consent or waiver, express or implied, by any Venturer to or of any
breach or default by the other in the performance by the other of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other party of the
same or any other obligations of such Venturer hereunder.
<PAGE>
52
SECTION F. Severability.
If any provision of this Agreement or the application thereof to any
person or circumstances shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
SECTION G. Status Report.
Recognizing that each party hereto may find it necessary from time to time
to establish to third parties such as accountants, banks, mortgagees or the
like, the then current status of performance hereunder, each party agrees, upon
the written request of any other, made from time to time, to furnish promptly a
written statement (in recordable form, if requested) on the state of any matter
pertaining to this Agreement to the best of the knowledge and belief of the
party making such statement.
SECTION H. Appraisals.
Any valuations of the Property which the Venturers have agreed is to be
determined by appraisals shall be determined in Boston, Massachusetts as
follows:
The initiating Venturer shall designate by notice to the other Venturer a
disinterested member of the American Institute of Real Estate Appraisers ("MAI
Appraiser") to serve on the Appraisal Panel (as defined below). Upon receipt of
such notice from the initiating Venturer, the other Venturer shall have fourteen
(14) days in which to designate its own disinterested MAI Appraiser to serve on
the Appraisal Panel by serving notice of such designation to the other Venturer.
In the event that any Venturer shall fail to designate an MAI Appraiser within
such fourteen-day period, only those MAI Appraiser(s) who have been properly
selected by the Venturers shall serve on the Appraisal Panel. The MAI Appraisers
so designated by the Venturers in accordance with the foregoing shall then have
ten (10) days in which to designate a final MAI Appraiser (the "Final
Appraiser"). If the MAI Appraisers designated by the Venturers are unable to
unanimously agree on such Final Appraiser, any Venturer may request the Suffolk
Superior Court Judge in Suffolk County to appoint such Final Appraiser, and the
MAI Appraisers designated by the Venturers and the Final Appraiser (the
"Appraisal Panel") shall each appraise the Property taking into account
appropriate indicators of the value of such Property. Within 30 days after the
appointment of the Final Appraiser, each MAI Appraiser designated by a Venturer
shall submit his findings in writing to the Final Appraiser. Any such findings
which are not timely submitted to the Final Appraiser shall be disregarded for
purposes of calculating the fair market value of the Property. The Final
Appraiser shall then submit his findings along with the findings of all of the
other MAI Appraisers which have been timely submitted to each Venturer and the
average of the appraisal value of the Final Appraiser and the appraisal value
closest thereto shall be deemed the fair market value of the Property. Each
Venturer shall pay the fees and expenses of the MAI Appraiser appointed by it,
or in whose stead, as above provided, such appraiser was appointed, and the fees
and expenses of the Final Appraiser, if any, shall be borne equally by all the
Venturers; provided, however,
<PAGE>
53
that if the foregoing appraisal procedure is used to determine the value of the
Property pursuant to Section 6.02(d), all such fees and expenses shall be borne
by the Company. To be qualified to be selected or designated as an MAI Appraiser
for purposes of this Paragraph, such MAI Appraiser must demonstrate (1) current
good standing in the American Institute of Real Estate Appraisers as evidenced
by a certificate from such institute, and (2) past appraising experience in the
Metropolitan Boston market of at least seven (7) years for comparable commercial
properties.
SECTION I. Attorneys' Fees.
If the Venture or any Venturer obtains a judgment against any Venturer by
reason of its breach of this Agreement or failure to comply with the provisions
hereof, the defaulting Venturer shall pay the reasonable attorneys' fees of the
Venture or the prevailing Venturer.
SECTION J. Binding Agreement.
Subject to the restrictions on transfers and encumbrances set forth
herein, this Agreement shall inure to the benefit of and be binding upon the
undersigned Venturers and their respective successors and assigns. Whenever in
this instrument a reference to any party or Venturer is made, such reference
shall be deemed to include a reference to the heirs, executors, legal
representatives, successors and assigns of such party or Venturer.
SECTION K. Additional Remedies.
Except as otherwise provided herein, the rights and remedies of the
Venturers hereunder shall not be mutually exclusive, i.e., the exercise of one
or more of the provisions hereof shall not preclude the exercise of any other
provisions hereof.
SECTION L. Meetings.
Meetings of the Venturers may be called by any Venturer for any matter on
which the Venturers may act pursuant to the terms of this Agreement, upon the
giving of not less than five (5) days' advance written notice. The Venturers
will endeavor to conduct such meetings bytelephone.
SECTION M. Partition.
Each Venturer hereby waives any right of partition under the laws of
Massachusetts.
SECTION N. Transfer of Property.
<PAGE>
54
With respect to any and all real property and interests therein owned by
the Venture, any person dealing with the Venture or the Venturers may always:
(a) conclusively rely without further inquiry on a certificate signed by all
those who then appear of record at the Suffolk County Registry of Deeds to be
the Venturers in the Venture as to the existence or nonexistence of any facts
which are in any manner germane to the affairs of the Venture, and (b)
conclusively assume that this Agreement and the Venture have not been terminated
and that there has been no change in the provisions of this Section or in the
identity of the Venturers unless such termination or change is reflected by a
deed or certificate given in accordance with clause (a) and duly recorded with
said Deeds.
SECTION O. Confidentiality.
Each Venturer hereby covenants and agrees with the other that it will use
its best efforts, acting in good faith, not to disclose or permit the disclosure
of any information concerning the Property, the Venture or the Venturers which
is included within the scope of any matter which is identified as confidential
in any Public Relations Plan Approved by the Venturers.
SECTION P. Administratio Agreement.
Venturers hereby acknowledge and agree that on or about the effective date
of this Amendment, Cornerstone or an Affiliate thereof will acquire, directly or
indirectly, ownership of DIHC Management Corp. and, as a result, will acquire
the rights of such Affiliate under that certain Administration Agreement dated
April 13, 1989. Hines and any other Venturer hereby acknowledge such acquisition
and agree that the Administration Agreement is not terminable or otherwise
affected by such acquisition.
SECTION Q. Artwork.
The Venturers agree that the size and nature of the Property warrant the
continuation of a reasonable art program. The selection of any new artwork for
the Property shall be Approved by the Venturers.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first set forth above.
HINES 222 BERKELEY
LIMITED PARTNERSHIP,
a Texas limited partnership
By: Gerald D. Hines,
a General Partner
By: /s/ Jeffrey C. Hines
--------------------------
Jeffrey C. Hines, as
attorney-in-fact
for Gerald D. Hines
DIHC BERKELEY ASSOCIATES,
a Georgia general partnership
By: DIHC Berkeley Corp.,
a General Partner
By: /s/ John S. Moody
--------------------------
John S. Moody
President
By: /s/ Rodney C. Dimock
--------------------------
Rodney C. Dimock
Executive Vice President
<PAGE>
EXHIBIT A
Description of Land
[To be provided upon request.]
<PAGE>
EXHIBIT B
Description of Western Component
[To be provided upon request.]
<PAGE>
Exhibit 10.103
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
MARKET SQUARE DEVELOPMENT INVESTORS
By and Between
CORNERSTONE MARKET SQUARE LLC
and
DIHC MARKET SQUARE, INC.,
dated as of
January 30th, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINED TERMS.............................................................2
ARTICLE II
THE VENTURE...............................................................6
Section 2.01 Formation...............................................6
Section 2.02 Purposes and Scope of the Venture.......................7
Section 2.03 Assumed Name Certificate................................7
Section 2.04 Scope of Venturer's Authority...........................7
Section 2.05 Principal Place of Business.............................7
ARTICLE III
MANAGEMENT................................................................7
Section 3.01 Management of the Venture...............................7
Section 3.02 Execution and Performance of Documents..................8
Section 3.03 Liability of Managing Partner/Indemnity.................8
Section 3.04 Compensation and Expenses of Venturers and Venture......8
Section 3.05 Contracts with Related Parties..........................9
ARTICLE IV
ACCOUNTING, CONTRIBUTIONS, DISTRIBUTIONS
AND ALLOCATIONS...........................................................9
Section 4.01 Percentage Interests of Venturers.......................9
Section 4.02 Capital Contributions..................................10
Section 4.03 Optional Loans.........................................13
Section 4.04 Tax Status and Returns.................................14
Section 4.05 Distributions..........................................15
Section 4.06 Allocations of Profits, Gains and Losses...............17
Section 4.07 Accounting.............................................18
Section 4.08 Bank Accounts..........................................18
Section 4.09 Withholding............................................19
<PAGE>
Page
----
ARTICLE V
TERM AND TERMINATION.....................................................20
Section 5.01 Term...................................................20
Section 5.02 Liquidation and Distribution Procedure.................20
Section 5.03 Event of Dissolution...................................20
Section 5.04 Default................................................22
Section 5.05 Conversion to Limited Partnership......................23
ARTICLE VI
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION..........................24
Section 6.01 Prohibited Transfers...................................24
Section 6.02 Permitted Transfers....................................24
ARTICLE VII
BUY-SELL UNDER THE MSA VENTURE AGREEMENT................................26
ARTICLE VIII
RIGHT OF FIRST OFFER UNDER THE MSA VENTURE AGREEMENT.....................27
ARTICLE IX
GENERAL..................................................................28
Section 9.01 Notices................................................28
Section 9.02 Governing Laws.........................................29
Section 9.03 Exculpation/Indemnification............................29
Section 9.04 Entire Agreement.......................................30
Section 9.05 Waiver.................................................30
Section 9.06 Severability...........................................30
Section 9.07 Status Reports.........................................30
Section 9.08 Appraisals.............................................31
Section 9.09 Attorneys' Fees........................................31
Section 9.10 Terminology............................................31
Section 9.11 Binding Agreement......................................31
Section 9.12 Additional Remedies....................................31
Section 9.13 Meetings...............................................31
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<PAGE>
Page
----
Section 9.14 Partition..............................................32
Section 9.15 Conflicts with the MSA Venture Agreement and
AALP Partnership Agreement.............................32
Section 9.16. Conflicts with the DIHC Purchase Agreement.............32
EXHIBIT A Legal Description of Land
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<PAGE>
SECOND AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
FOR MARKET SQUARE DEVELOPMENT INVESTORS
THIS SECOND AMENDED AND RESTATED JOINT VENTURE AGREEMENT ("Agreement"),
made and entered into as of this 30th day of January, 1998, by and between
CORNERSTONE MARKET SQUARE LLC, a Delaware limited liability company ("C-Stone"),
and DIHC MARKET SQUARE, INC., a Georgia corporation ("DIHC").
WHEREAS, DIHC and Crow-Pennsylvania Avenue Limited Partnership
("Crow-PALP") previously entered into a District of Columbia general partnership
known as Market Square Associates ("MSA"); and
WHEREAS, MSA is a limited partner and the managing general partner of
Avenue Associates Limited Partnership ("AALP"), a District of Columbia limited
partnership, which is the owner of certain land on Pennsylvania Avenue in the
District of Columbia and all improvements thereon generally known as "Market
Square"; and
WHEREAS, DIHC subsequently sold and conveyed to DIHC-Pennsylvania Avenue,
Inc. ("DIHC-Pennsylvania") 41-2/3% of the interest of DIHC in MSA; and
WHEREAS, pursuant to that certain Joint Venture Agreement dated January
27, 1989 (the "Original Venture Agreement"), DIHC and DIHC-Pennsylvania formed a
District of Columbia general partnership known as Market Square Development
Investors (the "Original Venture"), and DIHC-Pennsylvania contributed its entire
interest in MSA, and DIHC contributed a portion of its interest in MSA, to the
Original Venture; and
WHEREAS, immediately following the execution and delivery of the Original
Venture Agreement, M.I. West Pennsylvania Limited Partnership ("M.I.
Pennsylvania") purchased from DIHC-Pennsylvania all of the right, title and
interest of DIHC-Pennsylvania in and to the Original Venture, and
contemporaneously therewith DIHC and M.I. Pennsylvania entered into that certain
Joint Venture Agreement dated January 27, 1989 (the "Amended Venture Agreement")
for the Original Venture, which Amended Venture Agreement amended and restated
the Original Venture Agreement; and
WHEREAS, prior to the execution and delivery of this Agreement, C-Stone
made a capital contribution to, and was admitted as a venturer in, the Original
Venture and the Original Venture redeemed the interest of M.I. Pennsylvania in
the Original Venture; and
WHEREAS, immediately following the redemption of the interest of M.I.
Pennsylvania in the Original Venture and immediately prior to the execution and
delivery of this Agreement, C-Stone made a loan to the Original Venture, and the
Original Venture redeemed all but one percent (1%) of the interest of DIHC in
the Original Venture; and
<PAGE>
WHEREAS, C-Stone and DIHC desire to amend and restate the Amended Venture
Agreement in order to set forth their respective rights, obligations and
relationships to one another with respect to MSA and AALP.
W I T N E S S E T H:
In consideration of the mutual covenants set forth herein, and for other
good and valuable consideration in hand paid, by each party to the other,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
As used herein, the following terms shall have the following meanings:
1.01. AALP. The term "AALP" shall mean Avenue Associates Limited
Partnership, a District of Columbia limited partnership.
1.02. AALP Partners. The term "AALP Partners" shall mean MSA and
WALP and their permitted successors and assigns from time to time as partners in
AALP.
1.03. AALP Partnership Agreement. The term "AALP Partnership
Agreement" shall mean the Third Amended and Restated Agreement of Limited
Partnership of AALP dated as of July 15, 1987, as the same may be amended or
restated from time to time.
1.04. AALP Partnership Property. The term "AALP Partnership
Property" shall mean the Land, the Improvements and all other assets of AALP.
1.05. Additional Ordinary Capital Contribution. The term "Additional
Ordinary Capital Contribution" shall mean the additional cash amounts
contributed by the Venturers to the Venture pursuant to Section 4.02(a).
1.06. Affiliate. The term "Affiliate" shall mean, as to any Person,
(i) any other Person directly or indirectly controlling, controlled by or under
common control with such Person; (ii) the officers, directors or partners of
such Person; and (iii) if such Person is an officer, director or partner, any
company for which such Person acts in any such capacity. For purposes of this
definition the term "control" means the ownership of 10% or more of the
beneficial or voting interest in the Person referred to.
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<PAGE>
1.07. Amended Venture Agreement. The term "Amended Venture
Agreement" shall mean the Joint Venture Agreement of Market Square Development
Investors, dated January 27, 1989 between DTHC and M.I. Pennsylvania.
1.08. Approved by the Venturers or Approval by (or of) the
Venturers. The term "Approved by the Venturers" or "Approval by (or of) the
Venturers shall mean approved in writing in advance by all Venturers in their
sole and absolute discretion.
1.09. Assignment and Assumption Agreement. The term "Assignment and
Assumption Agreement" shall have the meaning assigned to such term in Section
4.02(a)(iii).
1.10. Buffer Loan. The term "Buffer Loan" shall have the meaning set
forth in the MSA Venture Agreement.
1.11. Capital Account. The term "Capital Account" shall mean the
accounts maintained for each Venturer as set forth in Section 4.01.
1.12. Closing Date. The term "Closing Date" means the date of
C-Stone's admission as a Venturer in the Venture, which is the date of this
Agreement.
1.13. Code. The term "Code" shall mean the United States Internal
Revenue Code of 1986, as amended, and any successor statute thereto.
1.14. Construction/Permanent Loan. The term "Construction/Permanent
Loan" shall have the meaning set forth in the MSA Venture Agreement, which loan
has been assigned to the sole member of C-Stone.
1.15. Conversion and Conversion Date. The terms "Conversion" and
"Conversion Date" shall have the meaning set forth in the MSA Venture Agreement.
1.16. Crow-PALP. The term "Crow-PALP" shall mean Crow-Pennsylvania
Avenue Limited Partnership, a Texas limited partnership, and its permitted
successors and assigns, as a partner in MSA.
1.17. C-Stone Loan. The team "C-Stone Loan" shall mean the recourse
loan made by C-Stone to the Venture immediately prior to the execution and
delivery of this Agreement in the original principal amount of $2,908,230.00,
which loan is evidenced by that certain Promissory Note and Loan Agreement from
the Venture to C-Stone of even date herewith.
1.18. Defaulting Venturer. The term "Defaulting Venturer" shall have
the meaning assigned to such term in Sections 4.02(c), 4.02(d) and 5.04.
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<PAGE>
1.19. DIHC Finance Loan. The term "DIHC Finance Loan" shall mean the
recourse loan by DIHC Finance Corporation to the Venture in the original
principal amount of up to $41,900,000.00, which loan is evidenced by that
certain Promissory Note and Loan Agreement from the Venture to DIHC Finance
Corporation in said amount dated August 15, 1997, which loan has been assigned
to the sole member of C-Stone.
1.20. DIHC-Pennsylvania. The term "DIHC-Pennsylvania" shall mean
DIHC-Pennsylvania Avenue, Inc., a Georgia corporation.
1.21. DIHC Purchase Agreement. The term "DIHC Purchase Agreement"
shall have the meaning assigned to such term in Section 4.02(d).
1.22. Extraordinary Capital Contribution. The term "Extraordinary
Capital Contribution shall mean the cash amounts contributed by the Venturers to
the Venture pursuant to Section 4.02(b).
1.23. Gain and Loss. The terms "Gain" and "Loss" shall have the
meanings set forth in Section 4.06(a).
1.24. Improvements. The term "Improvements" shall mean the mixed use
development generally known as "Market Square" consisting of approximately
850,000 square feet of office, residential and residential and retail/commercial
space located in two 13-story buildings and a parking garage below grade
containing parking spaces for approximately 950 automobiles and any other
improvements from time to time owned by AALP or its successors and assigns as
owner of the Land.
1.25. Land. The term "Land" shall mean that certain parcel of real
property and the improvements presently located thereon in the District of
Columbia, owned by AALP, and more particularly described in Exhibit A attached
hereto and made a part hereof.
1.26. Manager. The term "Manager" shall have the meaning set forth
in the MSA Venture Agreement.
1.27. Managing Partner. The term "Managing Partner," from and after
the date hereof, shall mean C-Stone and its successors and assigns, except as
otherwise provided in Section 5.05(a).
1.28. Member. The term "Member" shall mean the corporate officer(s)
or general partner(s) or other authorized agent(s), as the case may be, through
whom a Venturer shall act in connection with decisions relating to its interests
in the Venture.
1.29. MSA. The term "MSA" shall mean Market Square Associates, a
District of Columbia general partnership.
-4-
<PAGE>
1.30. MSA Venture Agreement. The term "MSA Venture Agreement" shall
mean the Joint Venture Agreement for MSA, dated as of May 21, 1987, as amended
from time to time.
1.31. MSA Venture Property. The term "MSA Venture Property" shall
mean the interest of MSA in AALP, and any other assets of MSA.
1.32. MSA Venturers. The term "MSA Venturers" shall mean Crow-PALP
and the Venture, and their permitted successors and assigns as ventures in MSA.
1.33. Net Cash Flow. The term "Net Cash Flow" shall have the meaning
set forth in Section 4.05(a).
1.34. Non-Defaulting Venturer. The term "Non-Defaulting Venturer"
shall have the meaning assigned that term in Sections 4.02(c), 4.02(d) and 5.05.
1.35. Offer. The term "Offer" shall have the meaning assigned to
such term in the MSA Venture Agreement.
1.36. Operating Profits and Operating Losses. The terms "Operating
Profits" and "Operating Losses" shall have the meanings set forth in Section
4.06(a).
1.37. Optional Loan. The term "Optional Loan" shall have the meaning
set forth in Section 4.03.
1.38. Original Venture. The Term "Original Venture" shall mean
Market Square Development Investors, a District of Columbia general partnership
formed pursuant to the Original Venture Agreement.
1.39. Original Venture Agreement. The term "Original Venture
Agreement" shall mean the Joint Venture Agreement of Market Square Development
Investors, dated January 27, 1989 between DIHC and DIHC-Pennsylvania.
1.40. Percentage Interest. The term "Percentage Interest" shall have
the meaning set forth in Section 4.01(a).
1.41. Person. The term "Person" shall mean any individual,
partnership, association, corporation or other entity.
1.42. Property. The term "Property" shall mean the interest of the
Venture as a partner in MSA and all other assets of the Venture.
1.43. Sales or Refinancing Proceeds. The term "Sales or Refinancing
Proceeds" shall have the meaning set forth in Section 4.05(d).
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<PAGE>
1.44. TMP. The term "TMP" shall mean the tax matters partner as
defined in Section 4.04(c)(i).
1.45. Transfer. The term "Transfer" shall have the meaning set forth
in Section 6.01.
1.46. Venture. The term "Venture" shall mean the Original Venture as
formed pursuant to the Original Venture Agreement and modified by the Amended
Venture Agreement, and as further modified pursuant to this Agreement.
1.47. Venturer or Venturers. The term "Venturer" shall mean C-Stone
or DIHC, individually, and the term "Venturers" shall mean C-Stone and DIHC,
collectively, and each of their permitted successors and assigns under this
Agreement.
1.48. WALP. The term "WALP" shall mean Western Associates Limited
Partnership, a District of Columbia limited partnership, and its permitted
successors and assigns as a partner in AALP.
1.49. Terms which are capitalized but not separately defined in this
Agreement shall have the same meanings in this Agreement as in the MSA Venture
Agreement.
1.50. The recitals set forth above are true and correct, and are
hereby incorporated herein by reference.
ARTICLE II
THE VENTURE
Section 2.01. Formation
(a) DIHC and DIHC-Pennsylvania formed the Original Venture pursuant to the
Original Venture Agreement, as modified by DIHC and M.I. Pennsylvania pursuant
to the Amended Venture Agreement, for the limited purposes and scope set forth
therein. C-Stone and DIHC hereby agree to amend and restate the terms and
conditions of the Amended Venture Agreement as set forth herein. The Original
Venture, as modified by this Agreement, is hereinafter referred to as the
"Venture". The business and affairs of the Venture shall be conducted solely
under the name "Market Square Development Investors" and such name shall be used
at all times in connection with the Venture's business and affairs.
(b) Except as expressly herein to the contrary, the rights and obligations
of the Venturers and the administration and termination of the Venture shall be
governed by the Uniform Partnership Act of the District of Columbia.
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<PAGE>
Section 2.02. Purposes and Scope of the Venture
(a) Subject to the provisions of this Agreement, the Venture shall be
limited strictly to the participation as one of the venturers in MSA for all the
purposes set forth in the MSA Venture Agreement.
(b) Nothing in this Agreement shall be deemed to restrict in any way the
freedom of any Venturer (or any Affiliate of any Venturer) to conduct any other
business or activity whatsoever (including the acquisition, development,
leasing, sale, operation and management of real property) without any
accountability to the Venture or any other Venturer with respect to the income
or profits therefrom or the effect of such activity on the Property or the Land,
even if such business or activity competes with the business of the Venture.
Section 2.03. Assumed Name Certificate
The Venturers shall execute and file in the appropriate records any
assumed or fictitious name certificate or certificates (or amendments thereof)
required by law to be filed in connection with the formation (or continuation)
of the Venture.
Section 2.04. Scope of Venturer's Authority
Except as otherwise expressly and specifically provided in this Agreement,
no Venturer shall have any authority to act for, or assume any obligations or
responsibility on behalf of, any other Venturer or the Venture.
Section 2.05. Principal Place of Business
The principal place of business of the Venture shall be at the office of
C-Stone at 126 East 56th Street, New York, New York 10022, or at such other
place of business as Approved by the Venturers.
ARTICLE III
MANAGEMENT
Section 3.01. Management of the Venture
Except where herein expressly provided to the contrary, all decisions with
respect to the operation and control of the Venture shall be vested in the
Managing Partner. C-Stone is hereby designated as the Managing Partner of the
Venture and hereby accepts such designation and agrees to discharge all
obligations of the Managing Partner. Except where herein expressly provided to
the contrary, the Managing Partner shall be responsible for the operation and
control of the Venture, for
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making all decisions with respect to the Venture and its interest in MSA, and
the day to day supervision of all aspects of the business of the Venture.
Section 3.02. Execution and Performance of Documents
Documents to which the Venture is a party (including but not limited to
all documents on behalf of the Venture as an MSA Venturer) shall be executed
and/or performed on behalf of the Venture by the Managing Partner or by an agent
authorized by the Venture or the Managing Partner to execute such documents. No
mortgagee, person, firm, trustee, grantee, partnership, corporation or other
entity shall be required to inquire into said authority of the Venturers or the
Managing Partner to execute and/or perform any document on behalf of the
Venture. Except as otherwise expressly provided in this Agreement, no Venturer
or representative thereof shall have the authority or right to bind or act for
the Venture or any of the other Venturers.
Section 3.03. Liability of Managing Partner/Indemnity
The Managing Partner shall not be liable or accountable to the Venture or
to the other Venturers, in damages or otherwise, for any error of judgment, for
any mistake of law, or for any other act or thing which it may do or refrain
from doing in connection with the business and affairs of the Venture, except in
the case of (i) intentional misconduct, (ii) a knowing violation of law, or
(iii) bad faith in failing to perform its duties hereunder. The Venture (to the
extent of its assets, but without requiring any additional contribution of
capital by the Venturers) does hereby agree to indemnify and hold the Managing
Partner wholly harmless from any loss, expense or damage suffered by the
Managing Partner by reason of anything it may do or refrain from doing hereafter
for and on behalf of the Venture and in furtherance of the Venture's interests;
provided, however that the Venture shall not be required to indemnify the
Managing Partner for any loss, expense or damage which the Managing Partner may
suffer as a result of (i) intentional misconduct, (ii) a knowing violation of
law, or (iii) bad faith in failing to perform its duties hereunder.
Section 3.04. Compensation and Expenses of Venturers and Venture
(a) Except as may be expressly provided for herein or in the MSA Venture
Agreement or the AALP Partnership Agreement, no payment will be made by the
Venture to any Venturer for the services of such Venturer or any member,
stockholder director or employee of any Venturer.
(b) Except as expressly provided herein or in the MSA Venture Agreement or
the AALP Partnership Agreement, no Venturer shall be entitled to any
compensation or reimbursement from the Venture or any other Venturer for
expenses incurred in connection with the formation, business or affairs of the
Venture.
(c) Notwithstanding any provision of this Agreement to the contrary, the
Managing Partner and the TMP shall be entitled to reimbursement for
out-of-pocket expenses actually incurred on behalf of the Venture, provided only
that (i) the same are reasonable in amount and reasonably necessary or
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appropriate in the Venture's business, and (ii) the same are consistent with the
provisions of this Agreement, the MSA Venture Agreement and/or the AALP
Partnership Agreement.
(d) The Venture shall pay all legal and other expenses of the Venture or
of any Venturer incurred after the Closing Date, provided such expenses are
reasonable in amount and are of a nature customarily borne by a borrower or a
venturer on transactions of a similar nature; each of the Venturers' legal and
other expenses incurred up to and including the Closing Date shall be borne by
the respective Venturer.
Section 3.05. Contracts with Related Parties
After the date hereof and except as otherwise provided in Section 3.04, no
Venturer may contract with or employ on behalf of the Venture any person or
entity which is an Affiliate of any Venturer in connection with the performance
of any duties or providing any goods or services to the Venture specified in
this Agreement unless Approved by the Venturers.
ARTICLE IV
ACCOUNTING, CONTRIBUTIONS, DISTRIBUTIONS AND ALLOCATIONS
Section 4.01. Percentage Interests of Venturers
(a) Subject only to any changes occurring through the operation of Section
4.02(c)(iii), each Venturer's interest in the Venture ("Percentage Interest")
shall be as follows:
C-Stone 99%
DIHC 1%
(b) The Venture shall determine and maintain "Capital Accounts" for each
Venturer throughout the full term of the Venture in accordance with the rules of
Treasury Regulation section 1-704-1(b)(2)(iv), as such regulation may be amended
from time to time. To the extent not inconsistent with such rules, the following
provisions shall apply.
The Capital Account of each Venturer shall be credited with (1) an amount
equal to such Venturer's cash contributions and the fair market value of
property contributed to the Venture by such Venturer (net of liabilities
securing such contributed property that the Venture is considered to assume or
take subject to under section 752 of the Code) and (2) such Venturer's share of
the Venture's income and gain (or items thereof), including income exempt from
tax. The Capital Account of each Venturer shall be debited by (i) the amount of
cash distributions to such Venturer and the fair market value of property
distributed to such Venturer (net of liabilities assumed by such Venturer and
liabilities to which such distributed property is subject) and (ii) such
Venturer's share of the Venture's losses and
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deductions (or items thereof) and of expenditures which can neither be
capitalized nor deducted for tax purposes.
(c) In the case of a liquidation of the Venture or of any Venturer's
interest in the Venture, any Property which is not sold, but which is
distributed to one or more Venturers in connection with such liquidation shall
be valued at its then fair market value (determined by agreement of all of the
Venturers or in accordance with the appraisal procedures set forth in Section
9.08 hereof). Such fair market value shall be used to determine the Gain or Loss
which would have been recognized by the Venture if the Property had actually
been sold for its fair market value (subject to any debt secured by the
Property. The excess of such fair market value over the amount of any debt
secured by the Property shall be treated as Sales or Refinancing Proceeds for
purposes of determining the Venturers' rights to distributions pursuant to
Section 4.05. The Capital Accounts of the Venturers shall be adjusted to reflect
the allocation of the deemed Gain or Loss under Section 4.06 (as if the Property
had in fact been sold in such manner and the Gain or Loss which would thereby
have been recognized were in fact recognized) and the distribution of the deemed
Sales or Refinancing Proceeds under Section 4.05.
Section 4.02. Capital Contributions
(a) Subject to Section 4.02(d), the Venturers shall make the following
Additional Ordinary Capital Contributions to the Venture:
(i) On or before each date on which the Venture is required to make
a capital contribution to MSA pursuant to the MSA Venture Agreement, each
Venturer shall contribute to the Venture cash in an amount equal to its
Percentage Interest multiplied by the amount the Venture is required to
contribute to MSA on such date.
(ii) On or before the date on which the Venture is required to make
a Buffer Loan advance to MSA pursuant to the MSA Venture Agreement, each
Venturer shall contribute to the venture cash in an amount equal to its
Percentage Interest multiplied by the amount the Venture is required to advance
to MSA on such date as a Buffer Loan.
(iii) On or before the date the Venture is required to pay any
payments of the "Incentive Fee" (as defined in the Incentive Management
Agreement dated July 15, 1987 between Crow-PALP and DIHC) as required under the
Assignment and Assumption Agreement dated January 27, 1989 between the Venture
and DIHC (the "Assignment and Assumption Agreement"), each Venturer shall
contribute to the Venture cash in an amount equal to its Percentage Interest
multiplied by the total amount the Venture is required to pay on such date.
(iv) The contributions made to the Venture (a) under paragraph (i)
of this Section 4.02(a) shall be used by the Venture to satisfy its obligation
to make the capital contributions to MSA required of the Venture under the MSA
Venture Agreement; (b) under paragraph (ii) of this Section 4.02(a) shall be
used by the Venture to satisfy its obligation to make advances of the Buffer
Loan to
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MSA as required under the MSA Venture Agreement; and (c) under paragraph (iii)
of this Section 4.02(a) shall be used by the Venture to satisfy its obligation
to make the Incentive Fee payments required of the Venture under the Assignment
and Assumption Agreement.
(v) If Additional Ordinary Capital Contributions are required from
the Venturers in accordance with this Section 4.02(a), the Managing Partner
shall (or if the Managing Partner shall fail to do so, any Venturer may) send a
notice thereof to the other Venturers in the manner provided by Section 9.01 of
this Agreement, setting forth the amount of additional capital required in a
report from the Managing Partner or such Venturer, as the case may be, stating
the reasons therefor. Each Venturer shall, within fourteen (14) days of the
receipt of such notice, deposit cash in the amount of the Additional Ordinary
Capital Contribution required of it by such notice in an escrow account with a
bank designated by the Managing Partner pursuant to an escrow agreement Approved
by the Venturers (provided, however, if C-Stone is funding the Additional
Ordinary Capital Contribution on behalf of DIHC pursuant to Section 4.02(d)
below, then the escrow agreement need only be approved by C-Stone), and after
all the required Additional Ordinary Capital Contributions have been made by all
of the Venturers, such funds shall be released for the purposes intended.
(b) (i) The Venturers shall have no further obligation to contribute
additional capital to the Venture except to the extent the Venture elects (A) to
contribute additional capital to MSA or (B) to raise additional capital for
other purposes and either (A) or (B) is Approved by the Venturers. Any capital
contribution required under this Section 4.02(b)(i) shall be referred to as an
Extraordinary Capital Contribution and shall, subject to Section 4.02(d), be
made by the Venturers in proportion to their respective Percentage Interests.
(ii) If Extraordinary Capital Contributions are required from the
Venturers in accordance with Section 4.02(b)(i), the Managing Partner shall (or
if the Managing Partner shall fail to do so, any Venturer may) send a notice
thereof to the other Venturers in the manner provided by Section 9.01 of this
Agreement setting forth the amount of additional capital required and a report
from the Managing Partner or such Venturer, as the case may be, stating the
reasons therefor. Each Venturer shall, within fourteen (14) days of the receipt
of such notice, deposit cash in the amount of the Extraordinary Capital
Contribution required of it by such notice in an escrow account with a bank
designated by the Managing Partner pursuant to an escrow agreement Approved by
the Venturers (provided, however, if C-Stone is funding the Extraordinary
Capital Contribution on behalf of DIHC pursuant to Section 4.02(d) below, then
the escrow agreement need only be approved by C-Stone), and after all the
required Extraordinary Capital Contributions have been made by all of the
Venturers, such funds shall be released for the purposes intended.
(c) In the event that any Venturer fails to make an Additional
Ordinary Capital Contribution in the amount required of such Venturer under
Section 4.02(a) within the time period specified in Section 4.02(a)(v), or fails
to make an Extraordinary Capital Contribution in the amount required of such
Venturer under Section 4.02(b)(i) within the time period specified in Section
4.02(b)(ii), the Managing Partner shall (or, if the Managing Partner shall fail
to do so, any Venturer may) send an additional notice to such Venturer setting
forth the amount unpaid, and the Venturer
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which has not deposited its Additional Ordinary Capital Contribution or its
Extraordinary Capital Contribution shall have a further period of five (5) days
to make such Additional Ordinary Capital Contribution or Extraordinary Capital
Contribution. If such Additional Ordinary Capital Contribution or Extraordinary
Capital Contribution has not been made as of the end of such five (5) day
period, the Venturer who has failed to make the Additional Ordinary Capital
Contribution or Extraordinary Capital Contribution required of it under Section
4.02(a) or (b), as the case may be, shall be a "Defaulting Venturer". In such
event, each of the Venturers who has made its Additional Ordinary Capital
Contribution or Extraordinary Capital Contribution (a "Non-Defaulting Venturer")
shall have the right to:
(i) withdraw any Additional Ordinary Capital Contribution or
Extraordinary Capital Contribution made by it pursuant to Section 4.02(a) or
(b), as the case may be, from the escrow account provided therefor and seek the
remedies set forth in Section 5.05; or
(ii) advance, as a loan to the Defaulting Venturer, the amount of
the Additional Ordinary Capital Contribution or Extraordinary Capital
Contribution required of the Defaulting Venturer (to be contributed as such
Defaulting Venturer's Additional Ordinary Capital Contribution or Extraordinary
Capital Contribution, as the case may be) and seek the remedies set forth in
Section 5.05. The amount advanced as a loan hereunder shall be repayable on
demand and shall bear interest at the rate of twenty-four percent (24%) per
annum, compounded monthly, but in no event at a rate of interest which exceeds
the maximum rate permitted by law; or
(iii) make the Additional Ordinary Capital Contribution or
Extraordinary Capital Contribution required of the Defaulting Venturer, in which
event the Defaulting Venturer's Percentage Interest shall be decreased at the
rate of one percentage point for each $200,000 of Additional Ordinary Capital
Contribution or Extraordinary Capital Contribution, as the case may be, which
the Defaulting Venturer failed to make (except that its Percentage Interest
shall not be decreased below one percent (1%)); and the Percentage Interest of
the Non-Defaulting Venturer shall be increased by the same number of percentage
points, so that the total Percentage Interests continues to equal one hundred
percent (100%).
(d) Notwithstanding anything to the contrary contained in
subsections (b) through (d) of this Section 4.02, each of the Venturers
acknowledges and agrees that Cornerstone Properties Inc. ("Cornerstone"), an
Affiliate of C-Stone, has entered into that certain Redemption and Acquisition
Agreement, dated as of October 27, 1997, with the Venture, Dutch Institutional
Holding Company, Inc. and DIHC (the "DIHC Purchase Agreement"), and that,
pursuant to the terms of such agreement Cornerstone or its Affiliates may
purchase the remaining interest of DIHC in the Venture (the "Cornerstone
Purchase Option"). The DIHC Purchase Agreement provides that DIHC shall have no
obligation to fund its proportionate share of any Additional Ordinary Capital
Contributions or Extraordinary Capital Contributions, and shall be relieved and
released from any such obligation, unless the transactions contemplated by the
DIHC Purchase Agreement do not close for any reason other than a default by
Cornerstone thereunder. The Venturers therefore agree that until such time as
the DIHC Purchase Agreement has terminated pursuant to its terms or otherwise
without the Cornerstone
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Purchase Option having been consummated, other than by reason of a default by
Cornerstone thereunder, C-Stone will make all Additional Ordinary Capital
Contributions and Extraordinary Capital Contributions required to be made by
DIHC pursuant to this Section 4.02, and C-Stone shall further indemnify and hold
harmless DIHC and its respective affiliates, successors and permitted assigns
from any cost, claim, liability, damage or expense (including, but not limited
to, any reasonable attorneys' fees and disbursements) relating to the failure of
C-Stone to make any such Capital Contributions. In the event the DIHC Purchase
Agreement terminated pursuant to its terms or otherwise without the Cornerstone
Purchase Option having been consummated, other than by reason of a default by
Cornerstone thereunder, then within thirty (30) days of such termination, DIHC
shall reimburse to C-Stone the amount of all Additional Ordinary Capital
Contributions and Extraordinary Capital Contributions made by C-Stone on DIHC's
behalf pursuant to this Section 4.02(d). In the event DIHC shall fail to
reimburse the amount of any such Additional Ordinary Capital Contribution or
Extraordinary Capital Contribution as required in this Section 4.02(d), then
DIHC shall be deemed a "Defaulting Venturer," and C-Stone shall have the right
to:
(i) withdraw any such Additional Ordinary Capital Contribution or
Extraordinary Capital Contribution made by it on the Defaulting Venturer's
behalf from the capital of the Venture, and seek the remedies set forth in
Section 5.05 below; or
(ii) consider the amount of the Additional Ordinary Capital
Contribution or Extraordinary Capital Contribution made by it on behalf of the
Defaulting Venturer as a loan, and seek the remedies set forth in Section 5.05
below. The amount considered as a loan hereunder shall be repayable on demand,
and shall bear interest at the rate of twenty-four percent (24%) per annum,
compounded monthly, but in no event at a rate of interest which exceeds the
maximum rate permitted by law.
Section 4.03. Optional Loans
In the event that the Managing Partner determines that certain costs of
the Venture should be funded with loans from the Venturers, then the Managing
Partner may advance to the Venture a loan (hereinafter referred to as an
"Optional Loan") in such amount and on such terms as are acceptable to the
Managing Partner. Prior to advancing any Optional Loan, the Managing Partner
shall notify the other Venturer(s) of its intent to make such advance (at least
five (5) days prior to the date of such advance), and at any time within such
period, the other Venturer(s) may elect to participate in making the Optional
Loan. In the event the other Venturer(s) so elects to participate, such Venturer
shall advance its pro rata share, based upon its Percentage Interest. Principal
and interest of any Optional Loan shall be repayable solely from Net Cash Flow
or Sales or Refinancing Proceeds as provided in Section 4.05. In the event there
is more than one Optional Loan, the loans shall have priority and be repayable
on the basis of the oldest Optional Loan having the first priority. If more than
one of the Venturers have participated in an Optional Loan, then as among such
Venturers, repayments of the principal and interest of the Optional Loans shall
be made pari passu in accordance with the Percentage Interests of such
participating Venturers.
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Section 4.04. Tax Status and Returns
(a) Notwithstanding any provisions hereof to the contrary, each of the
Venturers hereby recognizes that the Venture will be a partnership for United
States federal income tax purposes and that the Venture will be subject to all
provisions of Subchapter K of Chapter 1 of Subtitle A of the Code; provided,
however, that the filing of U.S. Partnership Returns of Income shall not be
construed to extend the purposes of the Venture or expand the obligations or
liabilities of the Venturers. At the request of any Venturer, the Venture shall
file an election under section 754 of the Code.
(b) The Managing Partner shall prepare or cause to be prepared at the
expense of the Venture all tax returns and statements, if any, which must be
filed on behalf of the Venture regarding this transaction and the operation,
dissolution and liquidation of the Venture with any taxing authority, and shall
submit such returns and statements to all of the Venturers for their prior
approval at least thirty (30) days before such returns and statements are due
(including extensions), and when Approved by the Venturers, Make timely filing
thereof. In addition, within one hundred twenty (120) days after the end of each
fiscal year of the Venture, the Managing Partner shall furnish each Venturer
with a report setting forth in sufficient detail all data and information
regarding the business and affairs of the Venture as shall enable the Venture
and each Venturer to prepare its federal, state and local tax returns.
(c) (i) C-Stone is designated as tax matters partner (herein "TMP") as
defined in section 6231(a) (7) of the Code and the Venturers will take such
actions as may be necessary, appropriate, or convenient to effect the
designation of C-Stone as TMP. In the event that C-Stone shall no longer be the
Managing Partner, then the Venturers shall appoint a new TMP for all taxable
years beginning with the year during which C-Stone ceases to be the Managing
Partner. The TMP and the other Venturers shall use their best efforts to comply
with the responsibilities outlined in this section and in sections 6222 through
6231 of the Code (including, any Treasury Regulations promulgated thereunder).
In determining the TMP's responsibilities under section 6223(g) of the Code, the
term "each partner" shall be deemed to mean "each Venturer".
(ii) Each of the Venturers shall furnish the TMP with such
information as the TMP may reasonably request to permit it to provide the
Internal Revenue Service with sufficient information to allow proper notice to
the parties in accordance with section 6223 of the Code.
(iii) No Venturer shall file, pursuant to section 6227 of the Code,
a request for an administrative adjustment of partnership items for any
partnership taxable year without first notifying the other Venturers. If the
other Venturers agree with the requested adjustment, the TMP shall file the
request for administrative adjustment on behalf of the Venture. If the Venturers
do not reach agreement within thirty (30) days or within the period required to
timely file the request for administrative adjustment, if shorter, any Venturer
may file a request for administrative adjustment on its own behalf. If, under
section 6227 of the Code, a request for administrative adjustment which is to be
made by the TMP must be filed on behalf of Venture, the TMP shall also file such
a request on behalf of the Venture under the circumstances set forth in the
preceding sentence.
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(iv) If any Venturer intends to file a petition under section 6226
or 6228 of the Code with respect to any partnership item or other tax matter
involving the Venture, the Venturer so intending shall notify the other
Venturers of such intention and the nature of the contemplated proceeding. Such
notice shall be given in a reasonable time to allow the other Venturers to
participate in the choosing of the forum in which such petition will be filed.
If the Venturers do not agree on the appropriate forum, the petition shall be
filed with the United States Tax Court. If any Venturer intends to seek review
of any court decision rendered as a result of the proceeding instituted under
the preceding part of this subsection, such party shall notify the others of
such intended action.
(v) The TMP shall not bind the other Venturers to a settlement
agreement without the Approval of the Venturers. If any Venturer enters into a
settlement agreement with the Secretary of the Treasury with respect to any
partnership items, as defined by section 6231(a)(3) of the Code, it shall notify
the other Venturers of such settlement agreement and its terms within thirty
(30) days from the date of settlement.
(vi) These provisions shall survive the termination of the Venture
or the termination of any Venturer's interest in the Venture and shall remain
binding on the Venturers for a period of time necessary to resolve with the
Internal Revenue Service or the Department of the Treasury any and all matters
regarding the Federal income taxation of the Venture and each of the Venturers
with respect to Venture matters.
Section 4.05. Distributions
(a) The Net Cash Flow of the Venture shall be computed in accordance with
accepted cash basis accounting principles, consistently applied and shall
consist of the excess, if any, of the sum of items (i) and (ii) below over the
sum of items (iii) and (iv) below;
(i) distributions to the Venture from MSA of Cash Flow (as defined
in the MSA Venture Agreement); plus
(ii) any other income derived by the Venture other than
distributions to the Venture from MSA of Net Proceeds from a Capital Transaction
(as defined in the MSA Venture Agreement) or by reason of a sale or other
disposition of its interest in MSA; over
(iii) expenses of the Venture attributable to the income
described in items (i) or (ii) above; plus
(iv) a reserve for future expenses of the Venture as determined by
the Managing Partner.
(b) Sales or Refinancing Proceeds of the Venture shall consist of the
excess of the sum of items (i) and (ii) below over item (iii) below;
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(i) distributions to the Venture from MSA of Net Proceeds from a
Capital Transaction (as defined in the MSA Venture Agreement); plus
(ii) net proceeds of a sale or other disposition of the Venture's
interest in MSA; over
(iii) expenses of the Venture attributable to the items of income
described in (i) or (ii) above.
(c) Unless otherwise Approved by the Venturers, except as provided in
Sections 4.05(d) or 4.05(e) below, the Net Cash Flow or Sales or Refinancing
Proceeds of the Venture shall be distributed promptly after receipt thereof by
the Venture in the following manner and order of priority:
(i) First, to repayment of any interest then accrued and deferred
under the DIHC Finance Loan;
(ii) Next, to repayment of any Installment Payments (as defined in
the Promissory Note and Loan Agreement evidencing the DIHC Finance Loan) then
due under the DIHC Finance Loan;
(iii) Next, to repayment of the then outstanding principal balance
of the DIHC Finance Loan;
(iv) Next, to repayment of any interest then accrued and deferred
under the C-Stone Loan;
(v) Next, to repayment of any Installment Payments (as defined in
the Promissory Note and Loan Agreement evidencing the C-Stone Loan) then due
under the C-Stone Loan;
(vi) Next, to repayment of the then outstanding principal balance of
the C-Stone Loan; and
(vii) Thereafter, the remaining Net Cash Flow or Sales or
Refinancing Proceeds shall be distributed to the Venturers in proportion to
their respective Percentage Interests.
(d) Notwithstanding the provisions of Section 4.05(c), in the event
C-Stone has made Additional Ordinary Capital Contributions or Extraordinary
Capital Contributions on behalf of DIHC under Section 4.02(d), the portion of
the Net Cash Flow or Sales or Refinancing Proceeds that would, under such
Section 4.05(c), be distributed to DIHC shall instead be distributed to C-Stone
until C-Stone has recovered the amount of such contributions from such
distributions or from DIHC pursuant to the terms of such Section 4.02(d).
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(e) Notwithstanding the provisions of Section 4.05(c), in the event a
Venturer is a Non-Defaulting Venturer who makes a loan to a Defaulting Venturer
under Section 4.02(c)(ii) or 4.02(d)(ii), the portion of the Net Cash Flow or
Sales or Refinancing Proceeds that would, under such Section 4.05(c), be
distributed to the Defaulting Venturer shall instead be distributed to the
Non-Defaulting Venturer who made such loan until the Non-Defaulting Venturer has
recovered such loan with interest thereon as provided in Section 4.02(c)(ii) or
4.02(d)(ii) from such distributions or from the Defaulting Venturer. Any such
distributions shall be treated as having been made to the Defaulting Venturer to
the Non-Defaulting Venturer on account of such loan.
(f) Anything in this Agreement to the contrary notwithstanding, in the
event of a liquidation of the Venture, the proceeds of such liquidation
remaining after the payment of or provision for the debts and liabilities of the
Venture shall be applied in accordance with the following order of priority:
(i) First, to the payment of the expenses of liquidation;
(ii) Next, to the setting up of any reserves which the liquidating
Venturer may deem necessary or appropriate for any contingent or unforeseen
liabilities or obligations of the Venture (said reserves may be transactions
referred by the remaining Venturer to a bank or trust company acceptable to the
remaining Venturer, as escrowee, to be held by it for distributing such reserves
in payment of any of the aforementioned liabilities or obligations) and at the
expiration of such period as the remaining Venturer shall deem advisable,
distributing the balance, if any, thereafter remaining in the manner provided
herein;
(iii) Thereafter, to the Venturers in accordance with the provisions
of Section 4.05(c).
Notwithstanding the prior provisions of this Section 4.05(f), upon
the liquidation of the Venture or any Venturer's interest in the Venture, the
distributions to a Venturer shall not exceed the positive balance in such
Venturer's Capital Account after giving effect to all allocations to such
Venturer under Section 4.06 of Operating Profits, Operating Losses, and Gain and
Loss on the sale or other disposition of the Property (including the allocation
of deemed Gain or Loss pursuant to the provisions of Section 4.01(c)). For
purposes of this provision, the term "liquidation" shall have the meaning given
in the first two sentences of Treasury Regulation section 1. 704-1(b)(2)(ii)(g).
Section 4.06 Allocations of Profits, Gains and Losses
(a) "Operating Profits" and "Operating Losses" mean the net income and net
loss, respectively, of the Venture, as determined for federal income tax
purposes, but computed without regard to Gain or Loss. "Gain" and "Loss" means
the gain and loss, respectively, as determined for federal income tax purposes,
realized by the Venture from the sale or other disposition of all or any portion
of the Property other than stocks, securities, or cash equivalents held for
investment by the Venture, and Gain or Loss allocated to the Venture by MSA.
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(b) All Operating Profits and Operating Losses for any year of the Venture
or portion thereof, and any Gain or Loss, shall be allocated to the Venturers in
proportion to their respective Percentage Interests.
Section 4.07. Accounting
(a) The fiscal year of the Venture shall be the calendar year.
(b) The Managing Partner shall cause the Venture to maintain true and
correct books and records of the Venture in accordance with generally accepted
accounting principles, consistently applied, showing all costs, expenditures,
receipts, assets and liabilities and profits and losses and all other records
necessary, convenient or incidental to accurately record the business and
affairs of the Venture. The books of account of the Venture shall be kept and
maintained at all times at the Venture's or the Managing Partner's principal
place of business. The books of account shall be maintained on an accrual basis
of accounting and such method of accounting shall be used for federal income tax
reporting purposes.
(c) The Managing Partner shall from time to time designate an independent
firm of certified public accountants (the "Accountant") to review and audit the
books and records of the Venture. Within thirty (30) days after the necessary
information is made available to it, the Managing Partner shall deliver to the
Accountant the information necessary to prepare an audited balance sheet and
related audited statement of income or loss for the Venture for the prior fiscal
year. Thereafter, the Managing Partner shall respond to any additional inquiries
or provide additional documentation required by the Accountant and will use its
best efforts to cause the Accountant to prepare and furnish to each of the
Venturers, within thirty (30) days after the necessary information is made
available to it, an audited balance sheet of the Venture dated as of the end of
the fiscal year, and a related audited statement of income or loss for the
Venture for such fiscal year. The Managing Partner shall also furnish to the
other Venturer(s) such other reports on the Venture's operations and condition
as may be reasonably requested by such other Venturer(s).
(d) Each Venturer shall have the right at all reasonable times during
usual business hours upon at least three (3) business days' notice to the
Managing Partner to audit, examine and make copies of or extracts from the books
of account of the Venture. Such right may be exercised through any agent or
employee of such Venturer designated by it or by an independent firm of
certified public accountants designated by such Venturer. Each Venturer shall
bear all expenses incurred in any examination made for such Venturer's account.
In addition, if the Venture can qualify to forego payment of any withholding
taxes by preparing and filing the appropriate forms, the Venture shall prepare
and file such forms.
Section 4.08. Bank Accounts
Funds of the Venture shall be deposited in an account or accounts of a
type, in form and name, and in such bank or banks designated from time to time
by the Managing Partner.
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Section 4.09. Withholding
(a) The Venture shall be entitled to deduct, withhold, and/or pay any and
all future taxes or withholdings, and all liabilities with respect thereto
("Taxes"), to the extent that the Venture in good faith determines that such
deduction or withholding or payment is required by the Code or any rule or
regulation which is currently in effect or which may be promulgated hereafter
("Applicable Law").
(b) Any Taxes withheld from an actual distribution to a Venturer shall,
for all purposes of this Agreement, be treated as a distribution to such
Venturer of the same type and character as the distribution giving rise to the
withholding obligation.
(c) Any amount deducted, withheld or paid with respect to a Venturer in
accordance with Section 4.09(a) that is not described in Section 4.09(b),
including but not limited to any amount measured by a Venturer's distributive
share of any Venture item, shall be considered a loan (a "Special Loan") by the
Venture to such Venturer (the "Borrowing Venturer") made on such date. The
Borrowing Venturer shall repay any such Special Loan to the Venture within ten
(10) days after any Venturer delivers a written demand therefor, together with
interest at two (2%) percentage points above the "prime rate" announced from
time to time by Bankers Trust Company (or such other comparable financial
institution selected by the Managing Partner from time to time) from the date
such loan was made until the date of the repayment thereof. In addition to any
other rights of the Venture to enforce its right to receive payment of the
Special Loan, plus any accrued interest thereon, the Venture may deduct from any
actual distribution to be made to a Borrowing Venturer or any amount available
for distribution to a Borrowing Venturer an amount not greater than the
outstanding balance of any Special Loan, plus any accrued interest thereon, as a
payment in total or partial satisfaction thereof. In the event that the Venture
deducts the amount of the Special Loan plus any accrued interest thereon from
any actual distribution or amount available to be distributed, the amount that
was so deducted shall be treated as an actual distribution to the Borrowing
Venturer for all purposes of this Agreement.
(d) To the extent that any amount described in Section 4.09(c) is treated
as a distribution under the Applicable Law, repayment of the corresponding
principal amount of any Special Loan shall be treated for all purposes of this
Agreement as a Capital Contribution by the Borrowing Venturer to the Venture as
of the date of repayment.
(e) Notwithstanding paragraph (a) of this Section 4,09, the Venture shall
not withhold any Taxes (or, where appropriate, shall withhold Taxes at a lower
rate than is generally applicable) from amounts attributable to any Venturer who
has provided to the Venture the Prescribed Forms (as defined below) for the
applicable period. The term "Prescribed Forms" shall mean such duly executed
form(s) or statements(s) as may, from time to time, be prescribed by Applicable
Law and that, Pursuant to the applicable provisions of (x) any income tax treaty
between the United States and the country of residence or organization of the
person providing the form(s) or statement(s), (y) the Code or (z) any applicable
rule or regulation, permit the Venture to make payments free of withholding (or,
subject to withholding at a lower rate than is generally applicable).
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ARTICLE V
TERM AND TERMINATION
Section 5.01. Term
The Venture commenced on January 27, 1989 and shall continue for a term of
seventy-five (75) years or until sooner terminated in accordance with the
provisions of this Article V, which provisions shall not be mutually exclusive,
i.e., the exercise or use of one of the provisions of this Article shall not
preclude the exercise or use of any other provision of this Agreement except as
in this Article V expressly provided. No Venturer shall have the right, and each
Venturer hereby agrees not, to dissolve, terminate or liquidate, or to petition
a court for the dissolution, termination or liquidation of, the Venture except
as provided in this Agreement.
Section 5.02. Liquidation and Distribution Procedure
In the event of a liquidation and dissolution as a result of the
occurrence of an Event of Dissolution pursuant to Section 5.03 hereof or a
default pursuant to Section 5.04 hereof, the Withdrawing Venturer or the
Defaulting Venturer, as the case may be, shall have no power or authority to
bind the Venture or the other Venturers but shall assist the remaining Venturers
in the dissolution and winding up of the Venture and the distribution of the
assets thereof. Upon such distribution and winding up, the parties hereto shall
be relieved of all obligations hereunder except for obligations, duties or
rights which have not been determined or ascertained as of the date of such
termination and for rights or remedies which a Non-Defaulting Venturer may have
against a Defaulting Venturer in law or equity. The winding up of the Venture
and the termination of the business and affairs of the Venture shall be
conducted by the remaining Venturers. During the period of such winding up, the
business and affairs of the Venture shall be conducted so as to maintain and
preserve the assets of the Venture in a manner consistent with the winding up of
the affairs thereof.
Section 5.03. Event of Dissolution
(a) The Venture shall not be wound up and terminated by the occurrence of
an Event of Dissolution unless a majority in interest of the remaining Venturers
shall so decide.
(b) The term "Event of Dissolution" as used hereunder shall mean:
(i) the death of any natural person who is now or who shall
hereafter become a Venturer;
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(ii) the dissolution or termination of any partnership (other than
(x) as a result of a transfer of partnership interests therein permitted by this
Agreement and (y) a dissolution immediately followed by a reconstitution of such
partnership) or corporation which is now or which shall hereafter become a
Venturer;
(iii) the declaration of any natural person who is now or who shall
hereafter become a Venturer as a lunatic in any judicial proceedings, or a
showing that such Venturer is of unsound mind;
(iv) the showing by competent medical evidence that any natural
person who is now or who shall hereunder become a Venturer is mentally or
medically unable to perform the duties required of him by the Venture;
(v) the occurrence of any one of the following events:
(1) if any Venturer (hereinafter referred to as the
"Bankruptcy Party") shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under the present or any future federal
bankruptcy act or any other present or future applicable federal, state or other
statute or law relating to bankruptcy, insolvency or other relief for debtors,
or shall seek or consent to or acquiesce in the appointment of any trustee,
receiver, conservator or liquidator of the Bankrupt Party or of any substantial
part of said party's properties or said party's interest in the Venture (the
term "acquiesce" as used in this Article includes but is not limited to, the
failure to file a petition or motion to vacate or discharge any order, judgment
or decree within thirty (30) days after the date of such order, judgment or
decree); or
(2) if a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against the Bankrupt Party seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future federal bankruptcy
act or any other present or future applicable federal, state or other statute or
law relating to bankruptcy, insolvency or other relief for debtors, and such
party shall acquiesce in the entry of such order, judgment or decree or such
order, judgment or decree shall remain unvacated or unstayed for an aggregate of
ninety (90) days (whether or not consecutive) from the date of entry thereof, or
any trustee, receiver, conservator or liquidator of such party or of all or any
substantial part of such party's property or interest in the Venture shall be
appointed without the consent or acquiescence of such party and such appointment
shall remain unvacated or unstayed for an aggregate of ninety (90) days (whether
or not consecutive); or
(3) if any Venturer shall admit in writing its inability to
pay its debts as they mature; or
(4) if any Venturer shall give notice to any governmental body
of insolvency or pending insolvency, or suspension of operations; or
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(5) if any Venturer shall make an assignment for the benefit
of Creditors or take any other similar action for the protection or benefit of
creditors.
(c) In the event of the occurrence of an Event of Dissolution:
(i) Provided that the other Venturers have elected to wind up and
terminate the Venture, the Venturer as to whom the Event of Dissolution has
occurred ("Withdrawing Venturer") shall immediately cease to be a Venturer and
to have any right to participate in the management or decision-making processes
of the Venture (provided that the Withdrawing Venturer shall nevertheless be
entitled to continue to receive distributions of Net Cash Flow and liquidation
proceeds and allocations of gain, loss and credit as fully as if such Venturer
were not a Withdrawing Venturer) and the remaining Venturers may send notices of
the dissolution to such persons and entities as the remaining Venturers may deem
appropriate and necessary under the circumstances.
(ii) The remaining Venturers shall settle the business of the
Venture as expeditiously as its nature will permit and account for the interests
of the Venturers. Such settlement procedure may include, but shall not be
limited to, a purchase by the remaining Venturers of the interest of the
Withdrawing Venturer at a price determined in accordance with an appraisal or
appraisals of the interest of the Withdrawing Venturer made in accordance with
the appraisal procedures set forth in Section 9.08 hereof, a sale of the
Property in accordance with Article 8 hereof, a public sale of all or any part
of the assets of the Venture, a winding up of the Venture, or a petition to a
court of appropriate jurisdiction requesting that such court supervise and
approve a partitioning of the Property.
(iii) The good will of the Venture (including the name, records and
files) shall belong to and remain solely vested in the Venture.
(iv) The prior written consent of the remaining Venturers shall be
required prior to any consent to any administration of the Property by any
referee, trustee or court of bankruptcy. The remaining Venturers shall have the
right at all times to continue the business and affairs of the Venture pursuant
to the terms of this Agreement.
(v) In lieu of dissolution, the remaining Venturers may elect to
convert the Venture to a limited partnership and the Withdrawing Venturer to a
limited partner as provided in Section 5.05.
Section 5.04. Default
If any Venturer fails to perform any of its obligations hereunder, or
violates the terms of this Agreement (the "Defaulting Venturer"), the other
Venturers (the "Non-Defaulting Venturers") shall have the right to give the
Defaulting Venturer a notice of default (the "Notice of Default") specifically
setting forth the nature of the default and stating that the Defaulting Venturer
shall have a period of twenty (20) days (or such shorter period as set forth in
Section 4.02) to pay any sums of money specified therein as due and owing to the
Venture or to any Venturer and to cure all other defaults
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within such period, and if the Defaulting Venturer shall fail to pay such sums
of money or cure such other defaults within such period (or, if such other
defaults are not capable of being cured within such period, the Defaulting
Venturer has not commenced in good fath the curing of such other defaults within
such period and does not thereafter prosecute to completion with diligence and
continuity the curing thereof), the Non-Defaulting Venturers shall (in addition
to any other rights under this Agreement, by law or in equity) have the right:
(a) to bring any proceeding in the nature of specific performance,
injunction or other equitable remedy, it being acknowledged by each of the
Venturers that damages at law may be an inadequate remedy for a default or
threatened breach of this Agreement;
(b) to bring any action at law by or on behalf of the Venture or the
Non-Defaulting Venturers as may be permitted in order to recover damages;
(c) to institute such proceedings (including but not limited to the right
to purchase the interest of the Defaulting Venturer at a price determined by
applicable appraisal made in accordance with the appraisal procedures set forth
in Section 9.08) as may be appropriate to secure an accounting and to dissolve,
wind up and terminate the Venture; or
(d) to convert the Venture to a limited partnership and the Defaulting
Venturer to a limited partner as provided in Section 5.05.
Section 5.05. Conversion to Limited Partnership
(a) Upon the occurrence of an Event of Dissolution pursuant to Section
5.03 or the occurrence of a default pursuant to Section 5.04 which is not cured
within the time period specified in Section 5.04, then in addition to, and
without excluding the availability of any other remedy hereunder, the remaining
Venturers or the Non-Defaulting Venturers, as the case may be, may elect to
convert the Venture to a limited partnership organized and existing under the
laws of the State of New York or the District of Columbia and to convert the
Withdrawing Venturer or Defaulting Venturer, as the case may be, to a limited
partner therein. If the Withdrawing Venturer or Defaulting Venturer, as the case
may be, is then the Managing Partner of the Venture, then upon such conversion,
(i) the remaining Venturers or Non-Defaulting Venturers, as the case may be,
shall designate a new Managing Partner, and (ii) the former Withdrawing Venturer
or Defaulting Venturer, as the case may be, shall no longer be the Managing
Partner and shall have no right to participate in the management or
decision-making processes of the Venture.
(b) In the event of any such conversion, the former Withdrawing Venturer
or Defaulting Venturer, as the case may be, agrees to execute, swear to, and
deliver any and all amendments to this Agreement, together with a certificate of
limited partnership in recordable form, in such form and substance as shall be
reasonably specified by the Other Venturers, all within ten (10) days after
demand and notice from the other Venturers. In order to effectuate the
foregoing, each Venturer (effective upon the adjudication, whether by litigation
or by arbitration, whichever is appropriate, of an Event of
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Dissolution under Section 5.03 or a default under Section 5.04) hereby appoints
the other Venturers as its true and lawful attorneys-in-fact with the full and
complete power and authority in its name and stead to execute, swear to,
deliver, and record any and all such amendments and such certificate. This power
has been given between the parties upon good and adequate consideration; it is a
power coupled with an interest; it is irrevocable; and it shall survive any
death, incapacity, dissolution, or any other event concerning the Venturers.
(c) Any and all costs and expenses, including, without limitation,
attorneys' fees, recording costs, and other charges and expenses incurred in
connection with the conversion of the Venture to a limited partnership as
described in this Section 5.05, shall be paid in full by the Withdrawing
Venturer or Defaulting Venturer, as the case may be.
ARTICLE VI
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION
Section 6.01. Prohibited Transfers
Except as provided in Articles V, VI, VII and VIII, no Venturer may sell,
transfer, assign or otherwise dispose of or mortgage, hypothecate, or otherwise
encumber or permit or suffer any encumbrance of all or any part of its or his
interest in the Venture, or cause to be sold, transferred, assigned, disposed
of, mortgaged, hypothecated or otherwise encumbered, all or any part of the
Venture's interest in MSA, or cause to be sold, transferred, assigned, disposed
of, mortgaged, hypothecated or otherwise encumbered, all or any part of MSA's
interest in AALP, whether voluntarily or involuntarily, by operation of law or
otherwise (hereinafter "Transfer") unless approved by the Venturers, and any
attempt so to Transfer any such interest shall be void and shall constitute a
default hereunder by the Venturer attempting to do so.
Section 6.02. Permitted Transfers
(a) Notwithstanding any other provision of this Agreement to the contrary
but subject to the provisions of Section 6.02(g), each Venturer shall have the
right, without the consent of any other Venturer, to transfer all of its
interest in the Venture to an Affiliate of such Venturer, to any other Venturer,
or to any Affiliate of any other Venturer; provided, however, neither C-Stone
nor any of its Affiliates may consummate the Cornerstone Purchase Option until
the earlier of (i) January 1, 1999, or (ii) such time as a DIHC Transfer (as
defined in Section 6.02(d) below) has been completed.
(b) To the extent any Venturer is now or hereafter beneficially owned or
controlled, directly or indirectly, by any Person which is publicly traded, the
sale or transfer or other disposition of all or part of the stock in such
publicly traded Person, shall not be considered a prohibited Transfer within the
meaning of this Agreement.
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(c) Notwithstanding any provision of this Agreement to the contrary, the
sale, transfer or other disposition by C-Stone of its interest in the Venture to
a limited partnership in which the sole general partner is Cornerstone or an
Affiliate of Cornerstone, shall not be considered a prohibited Transfer within
the meaning of this Agreement.
(d) Notwithstanding any provision of this Agreement to the contrary, the
sale, transfer or other disposition of the stock of DIHC by Dutch Institutional
Holding Company, Inc., or the sale, transfer or other disposition of the stock
of Dutch Institutional Holding Company, Inc. by Stichting Pensioenfonds Voor de
Gezondheid, Geestelijke en Maatschappelijke Belangen ("PGGM") (in either case, a
"DIHC Transfer"), shall not be considered a prohibited Transfer within the
meaning of this Agreement; provided, however, that any such DIHC Transfer shall
be, and the proposed transferee of any such stock (the "DIHC Transferee") shall
take such stock, subject to the Cornerstone Purchase Option. At least sixty (60)
days prior to any such DIHC Transfer, DIHC shall provide, or cause Dutch
Institutional Holding Company, Inc. or PGGM, as the case may be, to provide,
written notice to C-Stone of the proposed DIHC Transfer and the identity of the
DIHC Transferee, and shall thereafter provide or cause to be provided to C-Stone
such information regarding the DIHC Transferee as C-Stone shall reasonably
request. At any time following its receipt of such notice, C-Stone, or any of
its Affiliates, may exercise the Cornerstone Purchase Option by written notice
to DIHC and the DIHC Transferee, which notice shall set forth the date of
closing of the Cornerstone Purchase Option, which shall be at least sixty (60)
days after the date of such notice, but which in all events shall occur after
the consummation of the DIHC Transfer.
(e) Any permitted transferee of an interest in the Venture shall become a
Venturer unless the terms of the Transfer expressly provide to the contrary;
provided, however, any such permitted transferee shall be required to (i)
execute a copy of this Agreement (or a separate consent thereto), and agree to
be bound by all of the terms and provisions hereof, (ii) assume all of its
transferor's obligations hereunder and sign any additional UCC-1 Financing
Statement, as required under this Agreement, and (iii) assume all of its
transferor's obligations under the DIHC Purchase Agreement. No such permitted
Transfer shall relieve the transferor from its obligations under the DIHC
Purchase Agreement, or from the transferor's obligations under Section 4.02(d)
hereof. Notwithstanding anything herein to the contrary, no transferee of a
partial interest of any Venturer shall have any right to participate in the
management of the Venture independents of the Venturer making such transfer
unless such participation is Approved by the Venturers.
(f) The Transfer of all or any part of the interest of any Venturer which
is permitted hereunder shall not result in a dissolution of the Venture as a
general partnership under applicable law even though such Transfer may result in
the withdrawal of a Venturer as a general partner of the Venture and/or the
admission of a new general partner to the Venture.
(g) Notwithstanding the prior provisions of this Section 6.02, a Venturer
may not Transfer all or any part of its interest in the Venture nor may a direct
or indirect owner of a Venturer Transfer all or any part of its interest in such
Venturer, if, solely as a result of such Transfer, all or any part of
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the Venture's assets would thereafter become "tax-exempt use property" within
the meaning of section 168(h)(6) (or any successor provision) of the Code.
ARTICLE VII
BUY-SELL UNDER THE MSA VENTURE AGREEMENT
The parties recognize that the MSA Venturers have certain so-called
"buy-sell" rights and obligations under Section 5.02 of the MSA Venture
Agreement with respect to the sale of the MSA Venture Property or of an MSA
Venturer's interest in MSA, Subject to the rights of the Venturers with respect
to a sale or Transfer of their respective interests in the Venture under
Articles V and VI hereof, the Venturers agree that (a) the Venture shall not
make an Offer to the other MSA Venturer under Section 5.02 of the MSA Venture
Agreement unless such Offer and the 100% Price (as defined in the MSA Venture
Agreement) is Approved by the Venturers, and (b) if the other MSA Venturer makes
an Offer under Section 5.02 of the MSA Venture Agreement, then (i) the Venturers
shall decide whether they wish to purchase such interest of the other MSA
Venturer pursuant to the Venture's right to do so under such Section 5.02 of the
MSA Venture Agreement within thirty (30) days after they are notified of such
Offer by the other MSA Venturer, (ii) if all of the Venturers wish to purchase
such interest of the other MSA Venturer pursuant to the Venture's right to do so
under such Section 5.02 of the MSA Venture Agreement, the Venture shall purchase
such interest for the account of the Venturers pro rata according to their then
Percentage Interests or pursuant to such other formula as is Approved by the
Venturers, (iii) if less than all of the Venturers wish to purchase such
interest, then the party(ies) wishing to purchase such interest shall have the
right to cause the Venture to purchase such interest solely for the account of
such purchasing Venturer(s) (either in its own name or in the name of a nominee
or designee), but such party(ies) shall not have the right to also purchase the
interest of the other party(ies) in this Venture which does not wish to
participate in such purchase of the interest of the other MSA Venturer, and (iv)
all Venturers shall cooperate with one another to accomplish such result by
giving notice, executing documents and taking such other action as may be
reasonably required by the other Venturers in order to effectuate such result
promptly, timely and efficiently. Notwithstanding the foregoing, DIHC
acknowledges and agrees that it has waived its rights and/or privileges under
this Article VII pursuant to the DIHC Purchase Agreement unless and until the
DIHC Purchase Agreement is terminated for any reason without the Cornerstone
Purchase Option having been consummated, other than by default of Dutch
Institutional Holding Company, Inc. or DIHC thereunder. DIHC therefore
acknowledges and agrees that, until such time as the DIHC Purchase Agreement is
terminated without the Cornerstone Purchase Option having been consummated,
other than by default of Dutch Institutional Holding Company, Inc. or DIHC
thereunder, C-Stone may cause the Venture to make an Offer to or respond to an
Offer from the other MSA Venturer regarding the Venture's purchase of the
interest of the other MSA Venturer, without the consent or approval of DIHC.
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ARTICLE VIII
RIGHT OF FIRST OFFER UNDER THE MSA VENTURE AGREEMENT
The parties recognize that the MSA Venturers have certain so-called
"rights of first offer" under Section 6.04 of the MSA Venture Agreement with
respect to the sale of all or a portion of WALP's interest in AALP. Subject to
the rights of the Venturers with respect to a sale or Transfer of their
respective interests in the Venture under Articles V and VI hereof, the
Venturers agree that (a) the Venture shall not make a sale or Transfer of its
interest in MSA or cause MSA to make a sale or Transfer of its interest in AALP
unless same is Approved by the Venturers and (b) if the Venture at any time
obtains the right or option to acquire any interest of the other MSA Venturer in
MSA or any interest of WALP in AALP through any provision of the MSA Venture
Agreement or the AALP Partnership Agreement, then (i) the Venturers shall decide
whether they wish to cause the Venture to purchase such interest of the other
MSA Venturer pursuant to the MSA Venture Agreement or to cause MSA to purchase
such interest of WALP pursuant to the AALP Partnership Agreement within ten (10)
days after they are notified of the election giving rise to such right or option
by the other MSA Venturer or by WALP, as the case may be, (ii) if all of the
Venturers wish to purchase such interest, the Venture shall purchase, or shall
cause MSA to purchase, such interest for the account of the Venturers pro rata
according to their then Percentage Interests or pursuant to such other formula
as is Approved by the Venturers, (iii) if less than all of the Venturers wish to
purchase such interest, then the party(ies) wishing to purchase such interest
shall have the right to have the Venture purchase, or cause MSA to purchase,
such interest solely for the account of the purchasing Venturer(s) (either in
its own name or in the name of a nominee or designee), but such party(ies) shall
not have the right to also purchase the interest of the other party(ies) in this
Venture which does not wish to participate in such purchase of the interest of
the other MSA Venturer or the interest of WALP, and (iv) all Venturers shall
cooperate with one another to accomplish such result by giving notice, executing
documents and taking such other action as may be reasonably required by the
other Venturers in order to effectuate such result promptly, timely and
efficiently. Notwithstanding the foregoing, DIHC acknowledges and agrees that it
has waived its rights and/or privileges under clause (b) of this Article VIII
pursuant to the DIHC Purchase Agreement, unless and until the DIHC Purchase
Agreement is terminated for any reason without the Cornerstone Purchase Option
having been consummated, other than by default of Dutch Institutional Holding
Company, Inc. or DIHC thereunder. DIHC therefore acknowledges and agrees that,
until such time as the DIHC Purchase Agreement is terminated without the
Cornerstone Purchase Option having been consummated, other than by default of
Dutch Institutional Holding Company, Inc. or DIHC thereunder, C-Stone may
exercise any such right or option to cause the Venture to purchase any interest
of the other MSA Venturer pursuant to the MSA Venture Agreement, or to cause MSA
to purchase any interest of WALP pursuant to the AALP Partnership Agreement,
without the consent or approval of DIHC. Notwithstanding anything contained in
Articles VII or VIII of this Agreement, until the earlier of (i) January 30,
2000, or (ii) such time as PGGM shall have sold the stock of Dutch Institutional
Holding Company, Inc., or Dutch Institutional Holding Company, Inc. shall have
sold the stock of DIHC or a DIHC Transfer pursuant to Section 6.02(d) above,
C-Stone, in its capacity as the Managing Partner of the Venture, shall not,
except with the prior written consent of Dutch Institutional Holding Company,
Inc., (A) cause the
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Venture to sell its interest in MSA, (B) cause the Venture to cause MSA to sell
its interest in AALP, or (C) cause the Venture to cause MSA to cause AALP to
sell the Land and the Improvements.
ARTICLE IX
GENERAL
Section 9.01. Notices
(a) All notices, demands or requests provided for or permitted to be given
pursuant to this Agreement must be in writing.
(b) All notices, demands and requests to be sent to a Venturer or any
permitted assignee of the interest of a Venturer hereunder pursuant hereto shall
be deemed to have been properly given or served either by (i) delivering the
same personally, (ii) by depositing the same in the United States mail,
addressed to such Venturer, postpaid and registered or certified with receipt
requested, or by sending by a recognized courier service, at the following
address or (iii) by sending a telecopy to such Venturer at the following
telecopy number:
If to DIHC:
200 Galleria Parkway N.W.
Suite 2000
Atlanta, Georgia 30339
Attention: Craig W. Johnston
Telecopy No.: (770) 951-9349
With a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022
Attention: Robert M. Safron, Esq.
Telecopy No.: (212) 750-9022
If to C-Stone:
c/o Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Attention: John S. Moody
Telecopy No.: (212) 605-7199
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With a copy to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036-4003
Attention: Eileen P. Brumback, Esq.
Telecopy No.: (212) 556-2222
(c) All notices, demands and requests shall be effective upon personal
delivery (including by courier, telecopy or telex) or upon receipt through the
United States mail. If the notice, demand or request is delivered by U.S. mail,
the time period in which a response to any such notice, demand or request must
be given shall commence to run from the date of receipt on the return receipt of
the notice, demand or request by the addressee thereof. Rejection or other
refusal to accept or the inability to deliver because of changed address (but
not because of changed telecopy or telex number) of which no notice was given
shall be deemed to be receipt of the notice, demand or request sent. In the
event that registered or certified mail is not being accepted for prompt
delivery, notices may then be served by personal service upon any officer,
director or partner of any Venturer or upon any individual who is a Venturer.
(d) By giving to the other parties at least ten (10) days' written notice
thereof, the parties hereto and their respective successors and assigns shall
have the right from time to time and at any time during the term of this
Agreement to change their respective addresses and each shall have the right to
specify as its address any other address at which it has a place of business or
up to two (2) other addresses to which it wishes copies of any notice sent.
Section 9.02. Governing Laws
This Agreement and the obligations of the Venturers hereunder shall be
interpreted, construed and enforced in accordance with the laws of the District
of Columbia.
Section 9.03. Exculpation/Indemnification
(a) No Venturer (or any partner, director, officer or employee of any
Venturer) shall be personally liable or personally responsible to any other
Venturer or to the Venture beyond its interest in the assets of the Venture for
damages or other liabilities (other than for capital contributions required of
such Venturer under Section 4.02) caused by any act or omission performed or
omitted by it in respect of this Agreement or the Venture or the Property or
arising under any indemnity other than the indemnity set forth in Section
9.03(b) hereof and any other indemnities specifically agreed to by the Venturers
wherein the Venturers' liability to each other is not limited to their interest
in the Venture, unless such damage or liability results from its gross
negligence, fraud or willful misconduct.
(b) Each Venturer shall defend, indemnify and hold the other Venturer and
its officers, directors, partners, shareholders, agents and employees harmless
from and against any third party
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<PAGE>
claims, demands, losses, damages or liabilities suffered or incurred by any of
them by reason of the fraud, gross negligence or wilful misconduct of such
Venturer, its officers, directors, partners, agents or employees.
(c) Each Venturer hereby agrees to indemnify and hold harmless the other
Venturers from and against all liability, costs, damages and expenses from any
claims for brokerage commissions or other similar fees in connection with the
transactions covered by this Agreement insofar as such claims shall be based
upon arrangements or agreements made the indemnifying Venturer or on its behalf.
Section 9.04. Entire Agreement
This Agreement contains the entire agreement between the parties hereto
relative to the formation of a Venture to own and operate the Property. No
variations, modifications or changes herein or hereof shall be binding upon any
party hereto unless set forth in a document duly executed by or on behalf of
such party.
Section 9.05. Waiver
No consent or waiver, express or implied, by any Venturer to or of any
breach or default by the other in the performance by the other of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other party of the
same or any other obligations of such Venturer hereunder.
Section 9.06. Severability
If any provision of this Agreement or the application thereof to any
person or circumstances shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
Section 9.07. Status Reports
Recognizing that each party hereto may find it necessary from time to time
to establish to third parties such as accountants, banks, mortgagees or the
like, the then current status of performance hereunder, each party agrees, upon
the written request of any other, made from time to time, to wish promptly a
written statement (in recordable form, if requested) on the state of any matter
pertaining to this Agreement to the best of the knowledge and belief of the
party making such statement.
Section 9.08. Appraisals
Any valuations of the Property or of the MSA Venture Property or of the
AALP Partnership
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<PAGE>
Property which the Venturers have agreed is to be determined by appraisals shall
be determined in accordance with the appraisal Procedure described in Exhibit I
to the MSA Venture Agreement. The appraised value of a Venturer's interest in
the Venture shall be the amount which such Venturer would have received under
this Agreement if the AALP Partnership Property had been sold for its fair
market value as determined in accordance with such appraisal procedure.
Section 9.09. Attorneys' Fees
If the Venture or either Venturer obtains a judgment against another
Venturer by reason of its breach of this Agreement or failure to comply with the
provisions hereof, the defaulting Venturer shall pay the reasonable attorneys'
fees of the Venture or the prevailing Venturer.
Section 9.10. Terminology
All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of Articles and
Sections are for convenience only, and neither limit nor amplify the provisions
of the Agreement itself, and all references herein to Articles, Sections or
subdivisions thereof shall refer to the corresponding Article, Section or
subdivision of this Agreement unless specific reference is made to such Article,
Sections or subdivisions of another document or instrument.
Section 9.11. Binding Agreement
Subject to the restrictions on transfers and encumbrances set forth
herein, this Agreement shall inure to the benefit of and be binding upon the
undersigned Venturers and their respective successors and permitted assigns.
Whenever in this instrument a reference to any party or Venturer is made, such
reference shall be deemed to include a reference to the heirs, executors, legal
representatives, successors and permitted assigns of such party or Venturer.
Section 9.12. Additional Remedies
Except as otherwise provided herein, the rights and remedies of the
Venturers hereunder shall not be mutually exclusive, i.e., the exercise of one
or more of the provisions hereof shall not preclude the exercise of any other
provisions hereof.
Section 9.13. Meetings
Meetings of the Venturers may be called by any Venturer for any matter on
which the Venturers may act pursuant to the terms of this Agreement, upon the
giving of not less than five (5) days' advance written notice. The Venturers
will endeavor to conduct such meetings by telephone.
Section 9.14. Partition
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<PAGE>
Each Venturer hereby waives any right of partition under the laws of the
District of Columbia.
Section 9.15. Conflict with the MSA Venture Agreement and AALP Partnership
Agreement
In the event of any conflicts or inconsistencies between the provisions of
this Agreement or the rights and obligations of the Venturers hereunder and the
provisions of the MSA Venture Agreement and/or the AALP Partnership Agreement
and the rights and obligations of the MSA Venturers or AALP Partners, as the
case may be, thereunder, the provisions of the AALP Partnership Agreement shall
govern and prevail over the MSA Venture Agreement and this Agreement, and the
Provisions of the MSA Venture Agreement shall govern and prevail over this
Agreement.
Section 9.l6. Conflicts with the DIHC Purchase Agreement
In the event of any conflicts or inconsistencies between the provisions of
this Agreement or the rights and obligations of the Venturers hereunder and the
provisions of the DIHC Purchase Agreement and the rights and obligations of the
Venturers thereunder, the provisions of this Agreement shall govern and prevail
over the DIHC Purchase Agreement.
[SIGNATURE PAGES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first set forth above.
"C-STONE"
CORNERSTONE MARKET SQUARE LLC, a Delaware
limited liability company
By: CORNERSTONE PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership, its
sole member
By: CORNERSTONE PROPERTIES INC., a
Nevada corporation, its sole general partner
By:____________________________________
Name:_____________________________
Title:____________________________
S-1
<PAGE>
"DIHC"
DIHC MARKET SQUARE, INC., a Georgia
corporation, a General Partner
By:____________________________________
Name:_____________________________
Title:____________________________
S-1
<PAGE>
EXHIBIT A
Legal Description of Land
A-1
<PAGE>
Exhibit 10.104
[EXECUTION COPY]
AMENDED AND RESTATED
MANAGEMENT AND LEASING AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT AND LEASING AGREEMENT (this
"Agreement") made and entered into as of this 27th day of October, 1997, by and
among Five Hundred Boylston West Venture (the "Venture"), a joint venture
subsisting pursuant to that certain Amended and Restated Joint Venture Agreement
dated of even date herewith (the "Venture Agreement") and consisting of Boylston
West 1986 Associates Limited Partnership, a Texas limited partnership ("Hines"),
and DIHC Boylston Associates, a Georgia partnership (the "Company") (Company and
Hines being sometimes referred to separately as a "Venturer" and collectively as
the "Venturers"), and Hines Interests Limited Partnership, a Delaware limited
partnership (the "Manager").
W I T N E S S E T H:
WHEREAS, the Venture and Gerald D. Hines Interests, Ltd. previously
entered into a Management and Leasing Agreement, dated May 29, 1986 (the "Prior
Agreement") wherein Gerald D. Hines Interests, Ltd. was appointed the sole and
exclusive managing and leasing agent for the parcel of real property (and
improvements situated thereon) known as 500 Hundred Boylston Street, Boston,
Massachusetts (the "Property") and the 25 story building thereon (the
"Building") (the Property and the Building being herein sometimes called the
"Premises") pursuant to the terms and conditions set forth therein.
WHEREAS, as permitted under Section 6.10 of the Prior Agreement, Gerald D.
Hines Interests, Ltd. assigned the prior Agreement to Manager as of January 1,
1990, Manager being an Affiliated Entity (as such term is defined in the Prior
Agreement) of Manager as required therein.
WHEREAS, the Venture and the Manager desire to amend and restate the Prior
Agreement in its entirety on the terms herein set forth.
NOW, THEREFORE, Manager and the Venture hereby amend and restate the Prior
Agreement as follows:
<PAGE>
2
ARTICLE I
ESTABLISHMENT OF MANAGERIAL RESPONSIBILITY
Section 1.1 Appointment of Manager. The Venture hereby appoints Manager,
and Manager hereby accepts appointment as sole and exclusive manager and leasing
agent of the Premises with the responsibilities and upon the terms and
conditions set forth herein. In order to facilitate Manager's responsibilities
to lease space in the Building, the Venture shall provide Manager with a
prototype lease, rental schedule and program and fit up cost schedule (all of
which shall have been previously approved by all of the Venturers). The
prototype lease and schedules referred to above shall be used by Manager in
negotiating tenant space leases until substitutes therefor are provided to
Manager by the Venture.
ARTICLE II
MANAGEMENT SERVICES TO BE PERFORMED BY MANAGER
Section 2.1 Preparation of Annual Budget. In preliminary draft form not
later than October 1 and in final submission form not later than November 1st of
each calendar year of the term of this Agreement, Manager shall deliver to the
Venture an operating business plan and budget ("Annual Plan Proposal") setting
forth in detail, as reasonably requested by the Venture, on a quarterly basis,
anticipated revenues, expenses and debt service payments respecting the
Premises, on a cash basis, during the Venture's next succeeding calendar year
(or portion thereof), including without limitation the amount of real estate
taxes, assessments, insurance premiums and maintenance and other expenses
relating to the Premises whether for operations or capital improvements (other
than anticipated leasehold improvements for tenants under leases entered into by
or on behalf of Venture) and an annual general operations plan for such calendar
year. The Annual Plan Proposal shall include (i) a detailed marketing plan
(which may be part of the Annual Plan Proposal) which shall specify the range of
suggested minimum acceptable rentals for individual spaces, the concessions for
major and minor tenants, the minimum and maximum acceptable terms (including
renewal options) for individual spaces and estimated "tenant fit-up" costs per
square foot and (ii) a detailed public relations plan which shall specify the
suggested advertising and public relations activities and actions which the
Venture should undertake. The Annual Plan Proposal shall show, among other
things, anticipated and proposed capital expenditures (other than leasehold
improvements for tenants) for the ensuing year and the source of funds in
respect thereto (including the projected time and amount for any required
advances by the Venture) and shall include a rent roll for the Building, taking
into account, without limitation, the general condition of the Premises, rate of
completion of any contemplated repairs to the Premises, the then current
occupancy level, lease expirations, physical condition and rentals charged in
competing office
<PAGE>
3
and commercial/retail buildings in the area. Each Annual Plan Proposal shall
also include a schedule of job descriptions and requirements for any and all
independent contractors and employees of Manager serving the Premises, a
reasonable estimate of wage rates and all other compensation to be paid such
contractor or employee and shall identify any contractor (or proposed
contractor) serving the Premises who is an Affiliate (as such term is defined in
the Venture Agreement) of Manager; provided, however, that the Annual Plan
Proposal shall not contain any other costs or expenses for which Manager is not
entitled to reimbursement hereunder. Within thirty (30) days after its receipt
of the final submission form of such Annual Plan Proposal, the Venture shall
respond in writing to Manager approving the Annual Plan Proposal with such
changes as the Venture shall desire, and such Annual Plan Proposal with such
changes by the Venture shall become the approved "Annual Budget" for such
succeeding calendar year. Manager may proceed in accordance with the Annual
Budget for such succeeding calendar year only if the same is approved by the
Venture as aforesaid. If for any calendar year an Annual Plan Proposal is not
approved prior to December 1, the Annual Budget for the then current calendar
year shall carry over and continue to apply in regard to operating expenses (but
not for capital expenditures) until approval of the new Annual Budget by the
Venture is obtained. Pending approval of a new Annual Budget, Manager may
continue all operations (but not capital expenditures) under the then effective
Annual Budget (as though the current Annual Budget had been approved as the
Annual Budget for the next calendar year) . Manager shall comply, except as
hereinafter provided, in all respects with each approved Annual Budget in the
performance of its duties hereunder and shall not, except as hereinafter
provided, during the period covered by such Annual Budget incur any expense in
the management, operation or maintenance of the Property not provided for in
such Annual Budget.
The budgets included in the Annual Budget shall distinguish between (i)
costs and expenses of management, maintenance and operations which are not
"capital expenditures" ("non-capital expenses") and (ii) costs and expenses of
management, maintenance and operation which are "capital" in nature (the
"capital expenses"); and further, the Annual Budget (in the marketing plan)
shall include the information on leasing guidelines provided for above, which
leasing guidelines shall include, without limitation, the anticipated costs to
be incurred by the Venture (on a per square foot basis) for new leases entered
into pursuant to the leasing guidelines provided for herein. The budgets for
capital expenses and non-capital expenses may each include a category or line
item for "contingency" and the amount allocated to contingency in each such
portion of the budgets in an approved Annual Budget may be reallocated (and
accordingly expended) for expenses in other line items within each such portion
of the budgets if expenses for a line item exceed the amount otherwise allocated
to such item. Without the Venture's consent, Manager shall not incur any expense
for any line item capital expense which exceeds the amount (including
contingency) budgeted for such capital expense; except that Manager shall have
the right, without the prior Approval of the Venturers, to make annual capital
expenditures of up to $50,000 for any one item and up to $200,000 per annum in
the
<PAGE>
4
aggregate (the "Allowance Amounts"), for items not contemplated in, or in excess
of the amounts reserved for certain line items in, the Annual Budget. The
Allowance Amounts shall be adjusted (up or down) to take into account changes in
the Consumer Price Index All Urban Consumers for the Massachusetts Area ("CPI")
as published by the United States Department of Labor for calendar year 1997 and
the calendar year immediately prior to the calendar year in question. The
adjusted Allowance Amounts for each such calendar year shall be determined by
multiplying the original Allowance Amounts by a fraction, the numerator of which
is the CPI for the calendar year immediately prior to the calendar year in
question and the denominator of which is the CPI for calendar year 1997. Without
the Venture's consent, Manager shall not incur any expense for non-capital
expenses which would cause the aggregate amounts expended for non-capital
expenses to exceed the budgeted amount (including contingency): by more than ten
(10%) percent, provided, however, that Manager may freely pay all real estate
taxes, utilities serving the Premises, debt service and other amounts due on
borrowings entered into by the Venture and insurance premiums (for insurance
approved by the Venture), may incur obligations to perform tenant construction
pursuant to the terms of leases entered into in accordance with this Agreement
and may incur expenses to provide additional services to tenants, if such
expenses are to be promptly, expressly and directly reimbursed by tenants. In
the event that Manager shall at any time determine that an expenditure is
required that will not conform to the foregoing guidelines, Manager shall notify
the Venture in the manner described in Article IV hereof by submitting a
Property Manager Recommendation with respect to such expense. Notwithstanding
the foregoing, Manager may make all expenditures necessary, whether or not
within the guidelines set forth hereinabove or provided for in the Annual
Budget, for any expenditure of an emergency nature as provided in Section 2.4
hereof. At any time that Manager determines that there is not sufficient income
to cover current operating expenses, it shall promptly notify the Venture.
Manager shall further provide such other financial information respecting actual
operations of the Premises as is reasonably requested by the Venture. No such
statement shall be deemed to be an official Annual Budget until the same shall
be approved by the Venture as hereinabove provided.
Section 2.2 Independent Contractors. Pursuant to the Annual Budget,
Manager shall investigate, contract with, pay, supervise and discharge any
personnel required for the routine maintenance and operation of the Premises on
a day-to-day basis, including architects, engineers and others. Such personnel
shall in every instance be independent contractors or employees of Manager and
shall not be employees of the Venture. After any major personnel (e.g. building
superintendent, engineer, architect, attorneys, etc.) have been engaged to
perform personal or professional services, Manager shall give the Venture notice
thereof and the Venture may require Manager to terminate the contracts of such
persons serving the Premises whom the Venture, in its sole discretion, deems
unsatisfactory (provided that the Venture shall be responsible for any such
termination if the same is actionable by such terminated personnel). Such
employees who handle or who are responsible for funds belonging to the Venture
shall be insured by fidelity insurance in an amount and with a
<PAGE>
5
company approved from time to time by the Venture as set forth in Section 7.4
hereof. Except as provided in Section 7.3 below, all salaries, wages and other
compensation of personnel contracted with by Manager hereunder, shall be
expenses of the Venture which shall be paid by Manager from funds of the Venture
or reimbursed to Manager by the Venture pursuant to the terms hereof. Manager
understands and agrees that its own relationship to the Venture is that of
independent contractor and that it will not represent to anyone that its
relationship to the Venture is other than that of independent contractor.
Section 2.3 Service Contracts. Manager shall make, when necessary, in the
name of the Venture and Venture shall execute the same at the request of
Manager, contracts for water, electricity, gas, fuel, oil, telephone, vermin,
elevator, extermination, trash removal, janitorial service, landscaping,
security service and other necessary services, or such of them as Manager shall
deem reasonably advisable in accordance with the Annual Budget provided each
such contract shall be cancelable, at the Venture's discretion, at the end of
one year on no more than thirty (30) days notice without penalty, except for the
elevator service contract which shall be cancelable, at the Venture's
discretion, at the end of five years without penalty. Manager shall also place
orders in the name of the Venture for such equipment, tools, appliances,
materials and supplies as are necessary properly to maintain the Premises,
subject to the limitations of the current Annual Budget approved by the Venture.
Section 2.4 Maintenance and Repair of Premises. Manager shall use
reasonable efforts to cause the Building, parking garage, appurtenances and
grounds of the Property to be maintained in accordance with standards acceptable
to the Venture, including within such maintenance, without limitation thereof,
supervision of the installation and removal of tenant improvements, interior and
exterior cleaning, painting and decorating (including lobby decorations),
plumbing, carpentry, and such other normal maintenance and repair work as may be
desirable, subject to limitations of the current Annual Budget approved by the
Venture and any other limitations imposed by the Venture in addition to those
contained herein. For any one item of repair or replacement, the expense or cost
incurred shall not exceed the amount allocated thereto in the current Annual
Budget (subject to the guidelines set forth in Section 2.1 hereof) excepting,
however, that emergency repairs immediately necessary to secure the preservation
and safety of the Premises or to avoid the suspension of any service to the
Premises or to avoid danger to life or property may be made by Manager without
such consent or authority contained in the current Annual Budget provided
Manager shall first make reasonable attempts to contact the Venture.
Notwithstanding such authority as to emergency repairs, it is understood and
agreed that Manager will confer as soon as possible with the Venture regarding
every such expenditure. Manager shall assure that any contractor performing work
on the Premises maintains insurance satisfactory to the Venture and any
mortgagee of the Premises, including but not limited to workmen's compensation
insurance, employees' liability insurance and insurance against liability for
injury to persons and property arising out of all of contractors' operations,
any subcontractors' operations, and the use of
<PAGE>
6
owned, non-owned or hired equipment, including automotive equipment in the
pursuit of all such operations.
Section 2.5 Insurance. Manager shall supervise and assist the Venture in
procuring and maintaining insurance for the Premises, with companies and through
brokers agreed upon by the Venture, of such kind and amounts as the Venture
shall from time to time be required to carry pursuant to the provisions of
applicable agreements with third parties, and of such other kind and amounts as
required in the Venture Agreement or as the Manager shall from time to time be
directed by the Venture.
Section 2.6 Collection of Moneys. Manager shall use all reasonable efforts
to collect all rent and other charges due from tenants, licensees,
concessionaires and any others in consequence of the authorized operation of
facilities in the Premises and otherwise due the Venture with respect to the
Premises. The Venture authorizes Manager to request, demand, collect, receive
and receipt for all such rent and other charges. With the prior written consent
of the Venture, Manager may institute legal proceedings and engage legal counsel
(approved by the Venture) in the name of the Venture, for the collection of
overdue rents and other charges and for the dispossession of tenants and other
persons from the Premises. The Venture will be informed as soon as possible
respecting any legal action which the Manager proposes to initiate for and on
behalf of the Venture. Any expense incurred in connection therewith shall be
deemed an operating expense of the Premises. All moneys collected by the Venture
shall be forthwith deposited in the Depository Account described in Section 7.2
below.
Section 2.7 Manager Disbursements. Except as otherwise directed by the
Venture, Manager shall from the funds on deposit in the Operating Account
described in Section 7.2 below, cause to be disbursed the amounts necessary to
pay regularly and punctually amounts due and payable as operating expenses of
the Premises authorized to be incurred under the terms of this Agreement,
including without limitation, payment of sums due on any mortgage loan affecting
the Premises, payment prior to delinquency and prior to the addition thereon of
interest or penalties of all real property taxes and assessments and other taxes
levied or assessed against the Premises, all rents, insurance premiums and other
impositions applicable to the Premises, the administration fee and the Manager's
fee provided for in Article VI. After disbursement as herein specified, any
balance remaining shall be disbursed or transferred as generally or specifically
directed from time to time by Venture. Manager shall have no obligation to pay
any of the aforementioned expenses or costs unless there are sufficient funds in
the Operating Account described in Section 7.2 below or the funds shall be
supplied to Manager by the Venture. In the event that at any time there are
insufficient funds on hand to meet such operating expenses, Manager shall
promptly notify the Venture, which shall supply such funds, and if Manager shall
have advanced its own funds to meet such expenses, the Venture shall promptly
reimburse Manager therefor. All checks to Manager for
<PAGE>
7
reimbursement of expenses and for the Management Fee (as defined below) shall be
co-signed by a Venturer of the Venture.
Section 2.8 Discounts. Manager shall (unless in its reasonable judgment
such discounts, commissions or rebates are not advisable) secure for and credit
to the Venture any discounts, commissions or rebates obtainable as a result of
any purchase of goods or services or as a result of other activities undertaken
pursuant to this Agreement. Should Manager perform any services to tenants which
are not required in their leases and for which a separate charge is made, then
all such separate charges shall be retained in the Operating Account described
in Section 7.2 for the account of the Venture, and, to the extent required, used
to pay for the services provided.
Section 2.9 Miscellaneous Duties of Manager.
a. Books and Records and Monthly Reports. Manager shall keep all books of
account and other records required by the Venture, keep vouchers, statements,
receipted bills and invoices and all other records in such form as may be
approved by the Venture, covering all collection, disbursements, and other data
in connection with the Premises; permit the Venture, or any person designated by
any Venturer, at any reasonable time, to audit the books, records and accounts
of Manager relating to the Premises, and Manager will exhibit such books,
records and accounts to any person designated by any Venturer for that purpose,
which accounts and records relating to the Premises, including all
correspondence and leases, shall be the property of the Venture and, upon any
termination of the appointment of Manager, shall be surrendered to the Venture
without charge therefor. On or before the 20th day of each month during the term
of this Agreement, Manager shall render to the Venture a detailed written report
(hereinafter called the "Monthly Report") covering the operations for the
preceding full calendar month. The Monthly Reports shall include designation of
all receipts and disbursements during such period (and shall set forth an
accurate list of accounts receivable and accounts payable) and moneys retained
in the Operating Account as of the last day of the preceding calendar month.
Such report shall include a copy or facsimile of all notices received from any
mortgagee with respect to payments made to such mortgagee in such preceding
calendar month, and a transmittal memorandum highlighting the past month's
operation.
b. Annual Report. Within forty-five (45) days after the end of each
calendar year, Manager shall deliver to the Venture a Profit and Loss Statement,
a Balance Sheet and a Statement of Change in Financial Position of the Venture,
showing the results of operations of the Premises for that calendar year, all
prepared in accordance with accepted accounting principles consistently applied.
Manager shall also furnish the Venture, within said forty-five (45) day period,
with a detailed list of all accounts receivable and accounts payable as of the
end of that calendar year and with such other information as the Venture shall
reasonably request.
<PAGE>
8
c. Tenant Complaints. Manager shall serve as liaison between the Venture
and tenants and maintain businesslike relations with tenants, whose service
requests shall be received, logged and considered in systematic fashion in order
to show the action taken with respect to each. Complaints of a serious nature
(i.e. involving claims in excess of $25,000) shall, after thorough
investigation, be reported to the Venture with appropriate recommendations.
Manager shall use its reasonable efforts to secure full compliance by the
tenants of the Premises with the terms and conditions of their respective
leases.
d. Returns Required by Law. Except when same are legally required to be
filed by the Venture, Manager shall execute and file punctually, when due, all
forms, reports, and returns required by law relating to the employment of
personnel and the operation of the Premises.
e. Compliance with Legal Requirements. Manager shall use its reasonable
efforts to ensure that the actions taken by Manager for or on behalf of the
Venture comply with the Governmental Documents (as defined in the Venture
Agreement) and with any and all orders or requirements affecting the Premises by
any federal, state, county, municipal other authority having jurisdiction
thereover, and orders of the Board of Fire Underwriters or other similar bodies,
subject to the same limitations contained in Section 2.4 hereof in connection
with the making of repairs and alterations. Manager, however, shall not take any
such action as long as: (i) the Venture is contesting any such order or
requirement provided that the Venturer has a legal right to contest such order
or requirement and Manager will incur no penalty as a result of the Venture
contesting any such order or requirement and (ii) the Venture requests Manager
not to take such action. Manager shall promptly, and in no event later than the
close of the next business day following its receipt, give written notice to the
Venture of any such order or notice of requirements.
f. Claims for Tax Abatements and Eminent Domain. When requested by the
Venture from time to time, Manager shall, without charge or reimbursement,
except for out-of-pocket expenses, render advice and assistance to the Venture
in the negotiation and prosecution of all claims for abatement of property and
other taxes affecting the Premises and for awards for taking by eminent domain
affecting the Premises.
g. Supervision of Repairs and Alterations. Manager shall use reasonable
efforts to supervise the performance of all matters coming within the terms of
this Agreement, including direct observation, inspection and supervision of all
repairs, decorations and alterations during the progress thereof and shall make
final inspection of the completed work and approve bills for payment; provided,
however, Manager may, in its reasonable discretion and unless otherwise directed
by the Venture, withhold payments and contest in good faith work done on the
Premises, provided that such contest is not in violation of any mortgage
encumbering the Premises or the Governmental Documents. Manager shall use
reasonable
<PAGE>
9
efforts obtain the necessary receipts, releases, waivers, discharges and
assurances to keep the Premises free from mechanics' and materialmen's liens and
other claims.
h. Management of Premises. Manager shall, generally, take all actions
reasonably necessary to protect and preserve the Premises and to manage and
operate the Premises in an efficient first-class manner and shall, at all times,
maintain an organization sufficient to enable it to perform all its obligations
and functions under this Agreement.
i. Tenant Improvements. Manager shall supervise tenant finishing work,
and alterations when new tenants take occupancy in the Building and shall
supervise and inspect modifications and alterations to existing tenant space
when requested for and paid for by an existing tenant.
j. Settlement of Claims; Cooperation. Should any claims, demands, suits
or other legal proceedings be made or instituted by any third party against the
Venture or any Venturer (as a partner in the Venture) which arise out of any
matter relating to the Premises or this Agreement or the Manager's performance
hereunder the Manager shall have the authority to adjust, settle or compromise
any such claim, demand, suit or judgment in an amount not in excess of $25,000
and shall at all times keep the Venture informed with respect to the status of
such claim, demand, suit or judgment. With respect to claims, demands, suits or
judgments for amounts in excess of $25,000 at the request of the Venture, the
Manager shall give the Venture all pertinent information and reasonable
assistance in the defense or disposition thereof. The obligation of Manager set
forth herein shall survive the termination of this Agreement.
(k) Compliance with REA. Manager shall use its reasonable efforts to
ensure that the actions taken by Manager for or on behalf of the Venture comply
with the REA (as defined in the Venture Agreement) and shall coordinate its
activities with the owner and/or manager of the Eastern Component (as defined in
the Venture Agreement) to the extent contemplated or required in the REA.
ARTICLE III
LEASING SERVICES TO BE PERFORMED BY MANAGER
Section 3.1 Locate Tenants. Manager shall use reasonable efforts to
locate suitable tenants and negotiate acceptable leases for the Building,
subject to the limitations hereinafter set forth. Manager's duties as to its
leasing services shall be those customarily performed by owners of comparable
buildings. Manager is authorized, without the approval of the Venture, to locate
tenants and negotiate leases (on the standard form of lease approved by the
Venture
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10
with no material changes thereto) for (i) a lease of retail space in the
Building up to 2,500 rentable square feet and (ii) a lease of office space in
the Building up to 10,000 rentable square feet (for purposes of the foregoing,
multiple leases to a single tenant shall be aggregated for purposes of
determining the square footage of any particular lease with such tenant)
provided such leases are in accordance with the Annual Budget approved by the
Venture. All other leases shall be subject to the prior approval of the Venture.
All leases proposed by Manager, and, if required under the foregoing sentence
approved by the Venture, shall be executed by the Venture. Manager shall not,
for any reason, have the authority to execute leases on behalf of the Venture;
the Venture acknowledges however, if the Venture does not execute a lease
submitted by the Manager that does not require the approval of the Venture,
Hines (in its capacity as a Managing Partner of the Venture) may execute such
lease on behalf of the Venture without the consent of Company as provided in
Section 3.01(a) of the Venture Agreement.
Section 3.2 Consulting. Manager shall, upon reasonable request(s) by
the Venture, act as a consultant to the Venture and provide the Venture, as and
when deemed necessary by the Venture, with the benefit of Manager's experience
as to the planning and leasing of the tenant space to be leased. Manager shall,
as to the tenant space, provide, for the Venture's approval, (i) an overall
marketing and leasing plan as set forth in Section 2.1, (ii) an anticipated rent
roll, including minimum rents, and (iii) the proposed tenant assessments and
other charges.
Section 3.3 Executing Leases. Upon obtaining commitments from
prospective tenants to lease all or a portion of the tenant space, and approval
of the terms and conditions of said commitments by the Venture if required
hereunder, Manager shall submit to each such prospective tenant a lease in the
form approved by the Venture, containing the terms of said commitment approved
by the Venture if required hereunder. Leases requiring the approval of the
Venture shall be submitted to the Venture in a Property Manager Recommendation
in the manner described in Article IV hereof.
Section 3.4 Advertising. Manager shall be responsible for the
promotion and advertising of available tenant space in the Building subject to
the prior approval of the Venture as to methods of advertising and in accordance
with the public relations plan referred to in Section 2.1.
Section 3.5 Reports. At reasonable times and in any event not less
than once each ninety (90) day period, and at such other times as the Venture
may reasonably request, Manager shall inform the Venture in writing as to the
progress of leasing operations and as to circumstances which might from time to
time require decisions by the Venture regarding such leasing operations. Each of
Manager's periodic reports shall include, but not necessarily be limited to, the
name and address of each prospect to whom space in the Building was offered
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11
by Manager during the period covered by such report, the date of each such
offering and a copy of any written submission made to any such prospect, the
status of negotiations of offers received by Manager in connection with such
submissions, and such additional data as shall be reasonably required by the
Venture.
Section 3.6 Brokers. Manager shall have the right to retain, at the
expense of the Venture, independent non-affiliated brokers or subagents
("Brokers") in connection with the leasing of any tenant space, provided that,
to the extent the retention of such broker is not contemplated in the Annual
Budget approved by the Venture, the Venture shall have approved in advance the
engagement of such Broker and brokerage fee and commission payable to such
Broker.
ARTICLE IV
PROPERTY MANAGER RECOMMENDATIONS
Section 4.1 Property Manager Recommendations. In the event any action
proposed to be taken by Manager or any other matter (including, without
limitation, the Annual Budget) in respect of the operation, maintenance, repair,
improvement or leasing of the Premises shall require the approval of the Venture
under the terms of this Agreement, Manager shall submit to the Venture a
recommendation with respect to such action or matter (a "Property Manager
Recommendation"). To the extent Company or the Venture intends to enter into a
new lease, adopt an Annual Budget or take action on any other matter involving
the leasing, management, operation, maintenance or improvement of the Premises
that is not the subject of a Property Manager Recommendation, Company shall give
written notice to Manager, together with a reasonably detailed explanation
thereof, at least ten (10) days prior to entering into such lease, adopting such
Annual Budget or taking such other action, as the case may be, to provide
Manager the opportunity to submit a Property Manager Recommendation with respect
thereto. Manager shall, at the expense of the Venture, furnish or where
appropriate make available to Venture, such documents and information as Venture
shall reasonably request in order to enable Venture to evaluate such
recommendation. The failure of Venture to approve or disapprove any Property
Manager Recommendation within ten (10) days after receipt by Venture of such
Property Manager Recommendation together with all additional information
reasonably requested by Venture pertaining thereto shall be deemed the approval
by Venture of such Property Manager Recommendation and Manager shall be entitled
to implement the same, provided, however, the Property Manager Recommendation
shall state in capitalized letters that: "THE FAILURE TO RESPOND TO THIS
PROPERTY MANAGER RECOMMENDATION WITHIN 10 DAYS AFTER RECEIPT OF THIS NOTICE AND
ANY REASONABLY REQUESTED ADDITIONAL INFORMATION PERTAINING HERETO SHALL BE
DEEMED YOUR APPROVAL TO SUCH PROPERTY
<PAGE>
12
MANAGER RECOMMENDATION." If the Venture fails to approve or disapproves such
Property Manager Recommendation after consultation and discussion with Manager,
then the resolution of such matters may be submitted by Venture or Manager to
the "Venture Operations Arbitration Process" for resolution.
The term "Venture Operations Arbitration Process" shall mean the
process for resolution of any dispute between the Company and the Manager in
connection with a Property Manager Recommendation. Either of the Manager or the
Company may invoke this arbitration process by the giving of written notice to
the other, which notice shall state that the invoking party believes an impasse
exists as to a Property Manager Recommendation.
If Manager or Company invokes the arbitration process, then, within
five (5) days after the non-invoking party receives notice from the invoking
party, Manager and Company shall each place in separate sealed envelopes its
final good faith proposal as to the Property Manager Recommendation and shall
open and exchange their final proposals in each other's presence (the "Final
Proposals"). If Manager and Company cannot then agree on the Property Manager
Recommendation within five (5) days thereafter, the matter shall be determined
in accordance with the rules of the American Arbitration Association, except as
modified by this provision. If Manager or Company fails to prepare its Final
Proposal or to cooperate with the other party to open and exchange the Final
Proposals of the parties, and if such failure shall continue for a period of
five (5) days after the date the Final Proposals were to be opened and
exchanged, the Final Proposal of the non-failing party shall constitute the
determination pursuant to this process.
Unless Manager and Company can agree upon a single arbitrator prior to
the time they are required to designate their party-arbitrators, there shall be
three arbitrators (the "Panel"), each of whom shall have significant experience
in dealing with matters similar to the matter in dispute with respect to
sizeable commercial properties in the Boston metropolitan area and none of whom
shall have any current or prior connection or affiliation with either of the
Venturers.
If Manager and Company cannot agree on a single arbitrator, the
following procedure shall be used for the selection of the Panel. Manager and
Company shall each specify by notice to the other on or prior to the fifth (5th)
day after the Final Proposals were exchanged the name and address of the person
designated to act as party-arbitrator on its behalf. The party-arbitrators so
chosen shall meet within five (5) days after their appointment and select a
third arbitrator. If Manager or Company fails to notify the other of the
appointment of its party-arbitrator, as aforesaid, within or by the time above
specified, then the Final Proposal of the party who timely selected a
party-arbitrator shall constitute the determination pursuant to this process.
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13
If, within five (5) days after the party-arbitrators are appointed,
the said two party-arbitrators are unable to agree upon the appointment of the
third arbitrator, then either party, on behalf of both, may request the American
Arbitration Association in Boston, Massachusetts to appoint the third arbitrator
in accordance with its rules. In the event of the failure, refusal or inability
of any arbitrator to act, a new arbitrator shall be appointed in his stead,
which appointment shall be made in the same manner as hereinabove provided for
the appointment of such arbitrator so failing, refusing or being unable to act.
Within five (5) days after the selection of the single arbitrator or,
if Manager and Company cannot agree on a single arbitrator, within one business
day after the selection of the Panel, Company and Manager shall submit a written
statement to the arbitrator or Panel specifying the reasons their Final Proposal
as to the Property Manager Recommendation should be selected. The arbitrator or
Panel shall make its decision within five (5) days after such submission. The
arbitrator or Panel shall select either the Manager's or Company's Final
Proposal, whichever in the arbitrator's or Panels's judgment represents the most
appropriate recommendation for preserving and enhancing the long-term value of
the Premises. The Panel shall reach its decision by majority vote. The
arbitrator or the Panel shall communicate its decision by written notice to the
Manager and Company.
Such determination shall be final, binding and conclusive upon both
the Company and the Manager and shall be non-appealable and enforceable in any
court having jurisdiction. All hearings and proceedings before the arbitrator or
the Panel shall be held in Boston, Massachusetts.
If a single arbitrator is selected, each party shall share such
arbitrator's fees and expenses equally. If a Panel is selected, each party shall
pay the fees and expenses of its party- arbitrator, and the fees and expenses of
the third arbitrator shall be borne equally by the parties. Notwithstanding the
foregoing, the arbitrator or the Panel may conclude that one of the parties
acted in bad faith, in which event such party shall pay 100% of the fees and
expenses of the arbitrator or the Panel, as the case may be.
ARTICLE V
TERM
Section 5.1 Term. The term of this Agreement commenced on July 25,
1988 and shall expire on the earlier to occur of (i) the termination of the
Venture in accordance with the Venture Agreement and (ii) May 29, 2061, unless
this Agreement is sooner terminated pursuant to Section 5.2 hereof or otherwise.
Upon the expiration or earlier termination of this Agreement, Manager shall: (1)
surrender and deliver to the Venture all rents and income of
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14
the Premises including the Depository Account and Operating Account referred to
in Section 7.2 hereof; (2) deliver to the Venture as received any monies
collected or received by Manager after termination hereof; (3) deliver to the
Venture all books, records, materials, supplies, keys, contracts and such other
documents and statements relating to the Premises; (4) assign such existing
contracts relating to the operation and maintenance of the Premises as the
Venture shall require; and (5) generally cooperate with the Venture in
accordance with Section 2.9(j).
Section 5.2 Termination for Cause. During the term of this Agreement,
this Agreement shall be terminated for cause, as "cause" is hereafter defined,
upon five (5) days' written notice to Manager; provided, however, if Manager
provides the Venture notice that it disagrees that "cause" has occurred, this
Agreement shall not be terminated until such determination is made pursuant to,
and in accordance with, the arbitration procedures set forth in Article VIII of
this Agreement and, during the pendency of such arbitration, the Venture and
Manager shall remain obligated to continue to perform their respective
obligations under this Agreement. "Cause" for termination by the Venture shall
mean the continuance, for more than thirty (30) days (or, if such curable event
cannot be cured in such period of time, then such additional period of time as
is necessary to cure same, provided Manager prosecutes to completion the cure of
same) after delivery of written notice by the Venture (or any Venturer except
Hines) to Manager of one or more of the following events:
k. A material default shall be made in the performance or observance
by Manager of any material covenant, condition or term in this Agreement;
l. Manager shall engage in conduct under this Agreement which
constitutes fraud;
m. Manager shall institute proceedings to be adjudicated a voluntary
bankrupt, or shall commence a case under the bankruptcy code, or shall file a
petition or answer or consent seeking reorganization, readjustment, arrangement,
composition or similar relief under the federal bankruptcy laws, or any other
similar applicable federal or state law, or shall consent to or fail reasonably
to oppose any such proceeding, or shall consent to the appointment of a receiver
or liquidator or trustee or assignee in bankruptcy or insolvency of it or of a
substantial part of its property, or shall make a general assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or corporate action shall be taken by Manager in
furtherance of any of the aforesaid purposes;
n. A decree or order by a court of competent jurisdiction shall have
been entered adjudging Manager bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, readjustment, arrangement, composition
or similar relief for Manager under the federal bankruptcy laws, or any other
similar applicable federal or state law, and
<PAGE>
15
such decree or order shall have continued undischarged or unstayed for a period
of ninety (90) days; or a decree or order of a court having jurisdiction for the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of Manager or a substantial part of its property, or the winding up
or liquidation of its affairs, shall have been entered, and such decree or order
shall have remained in force, undischarged and unstayed for a period of ninety
(90) days;
o. The Venturer in the Venture that is currently Hines (the "Hines
Venturer") shall no longer be Controlled by a Person Controlled by a member of
the Hines Control Group (as defined below); provided, however, if such failure
occurs solely as a result of the election by the Hines Venturer to put its
Venture Interest to Company or its designee pursuant to the provisions of
Subsection 6.02(d) of the Venture Agreement, this Agreement may only be
terminated pursuant to this clause (e) if:
(1) Company provides written notice to Manager of such termination
at least six (6) months prior to the Earliest Termination Date,
or
(2) Company provides written notice to Manager at any time after
the Earliest Termination Date, in which case, such termination
will be effective six (6) months following receipt by Manager
of such notice;
p. The Manager shall no longer be Controlled by a member of the Hines
Control Group;
q. Hines shall become a Defaulting Venturer under the Venture
Agreement and shall remain a Defaulting Venturer beyond the expiration of any
applicable cure period; or
(h) The Premises shall be sold by the Venture to a third party or to
one of the Venturers or in the event of the destruction or condemnation of all
or substantially all of the Building and the same is not rebuilt.
As used in this Section 5.2, the term "Earliest Termination Date" means the date
that is the later to occur of (i) November 1, 2007 or (ii) the fifth (5th)
anniversary of the date on which the consummation of the transfer by the Hines
Venturer to Company pursuant to the provisions of subsection 6.02(d) of the
Venture Agreement occurs; the terms "Controlled or Control", "Hines Control
Group", "Venture Interest", "Hines Management Group", "Hines Family" and
"Person" shall have the meanings ascribed to such terms in the Venture
Agreement.
Section 5.3 Payment to Manager in Event of Termination. In the event
this Agreement is terminated under Section 5.2 hereof, Manager shall be entitled
only to that portion of the Management Fee earned pursuant to Article VI of this
Agreement through the
<PAGE>
16
date of the notice specifying the cause, in full satisfaction of the Venture's
obligation to Manager for fees under this Agreement; provided, however, that
after being notified in writing of an event for which this Agreement may be
terminated for "cause" (unless Manager notifies the Venture that it disagrees
that "cause" has occurred, in which case, only after "cause" is determined by
arbitration to have occurred), the Management Fee payable to Manager shall be
withheld until such time as such cause" is cured prior to the termination
hereof. In the event this Agreement is so terminated, the Venture shall assume
the obligations under contracts entered into by Manager for the benefit or on
behalf of the Venture pursuant to its authority to do so under this Agreement.
ARTICLE VI
COMPENSATION
During the term of this Agreement, the Venture shall pay Manager an
annual management fee (the "Management Fee") equal to three percent (3%) of the
"gross rental receipts" (as hereinafter defined) actually received by the
Venture, or by Manager on behalf of the Venture, from the rental operations of
the Building. The term "gross rental receipts" as used herein shall mean the
gross amount of payments to the Venture made as rent, fees, charges,
reimbursement or otherwise for the use or occupancy of the Building, or any
portion thereof, but gross rental receipts shall not include (1) free rent
concessions granted by the Venture to tenants, (2) bills rendered to tenants for
improvements to the tenant space in the Building to the extent of Manager's
actual expenditures for such improvements, (3) security deposits delivered by
tenants to the Venture prior to the forfeiture of such deposits, (4) advance
rentals until such time as they are earned by the Venture, (5) any insurance
loss proceeds, condemnation awards or any proceeds from the sale, exchange,
financing or refinancing of the Premises and (6) any payments, fees and other
charges received by the Venture from the owner of the Eastern Component adjacent
to the Premises under the REA Agreement. Notwithstanding the foregoing, to the
extent a Management Fee is recovered from the tenants with respect to the items
set forth in (1) through (6) above, such items shall constitute "gross
receipts".
The annual Management Fee shall be payable on an estimated basis in monthly
installments on the first day of each month as an advance in respect of the fee
payable to Manager in respect of the immediately preceding calendar month. The
Management Fee, however, shall be determined and reconciled on an annual basis
with appropriate adjustments between Manager and Venture with respect thereto
following delivery of audited financial statements with respect to each calendar
year.
<PAGE>
17
ARTICLE VII
MISCELLANEOUS
Section 7.1 Use and Maintenance of Premises. Manager agrees to use
reasonable efforts not to permit the use of the Premises for any purpose which
might void any policy of insurance held by the Venture or Manager or render any
loss thereunder uncollectible, or which would be in violation of any law,
ordinance, by-law or governmental or other restrictions.
Section 7.2 Separation of the Venture's Moneys. The Venture shall
establish and maintain a bank account at a Boston, Massachusetts bank of the
Venture's choosing for the deposit of all revenues arising out of the Premises
(the "Depository Account"). Manager shall promptly deposit all revenues, as same
are collected, in the Depository Account and only the authorized representatives
of the Venture shall be able to withdraw funds from the Depository Account.
Manager shall establish and maintain an additional bank account at a Boston,
Massachusetts bank of the Venture's choosing, for the purpose of maintaining
those funds necessary to the operation of the Premises (the "Operating Account")
. The Venture shall from time to time, upon the advice of Manager, deposit into
the Operating Account, sufficient funds to cover the cost and expense of the
maintenance and operation of the Premises. Funds may be withdrawn from the
Operating Account upon the signature of duly authorized representatives of
Manager or any Venturer of the Venture.
Section 7.3 Expense of Manager. The Venture shall reimburse Manager
for direct expenses of Manager incurred on account of the Premises for the
payment of any proper obligation or necessary expense or Broker's commission
connected with the leasing, maintenance and operation of the Premises including
the wages, salary, benefits and other compensation of any full-time or part-time
property management and/or leasing personnel assigned to the Premises, the costs
(including, but not limited to rent, office equipment and office supplies) of
any management and leasing office approved by the Venture (the approximate
square footage of such office being 4000 rentable square feet, which amount the
Venture hereby approves) and reasonable training, travel and entertainment
expenses of such personnel as approved in the Annual Budget; provided, however,
the Venture shall not be obligated to reimburse Manager for any overhead
expenses of Manager or for any salaries of any executives or supervisory
personnel of Manager who do not provide a direct benefit to the Premises (except
the allocable cost of an off-site senior property manager and a regional chief
engineer, bookkeeping, accounting and financial management services, information
systems and technology support, payroll and human resources services, risk
management services (both insurance and engineering related), internal audits of
financial, operational, or engineering functions all of which the Venture agrees
do provide a direct benefit to the Premises and for which Manager is
appropriately entitled to reimbursement), provided that the cost to provide
<PAGE>
18
such off-site services is equal to or less than the cost that a third party
would charge for providing same). All payments to be made by Manager hereunder
shall be made by check drawn on the Operating Account except petty cash items
not exceeding $1,000.00, which may be paid from a fund to be maintained by
Manager for such purposes. Manager shall not be obligated to make any advance to
or for the account of the Venture or to pay any sums, except out of funds held
in the Operating Account, nor shall Manager be obligated to incur any liability
or obligation for the account of the Venture without assurance that the
necessary funds for the discharge thereof will be provided; and, if Manager
shall advance its own funds to meet expenses of the Venture in furtherance of
its duties hereunder, the Venture shall promptly reimburse Manager therefor.
Section 7.4 Bond. Manager shall maintain, at the expense of the
Venture, comprehensive dishonesty, disappearance and destruction insurance with
an insurer satisfactory to the Venture, in such amount and form approved by the
Venture, providing insurance with regard to the faithful accounting for funds of
the Venture collected or received by Manager.
Section 7.5 Notices. All notices, demands, requests or other similar
communications required or permitted to be sent to the respective parties
hereunder shall be deemed to have been properly given or served by (i)
delivering the same personally (including overnight courier), or (ii)
transmitting the same by telecopier, or (iii) depositing the same in the United
States mail, addressed to the respective parties postpaid and registered or
certified with return receipt requested at the following addresses:
To Venture or Hines: Boylston West 1986 Associates Limited
Partnership
c/o Hines Interests Limited Partnership
222 Berkeley Street
Suite 1420
Boston, Massachusetts 02116-3751
Attn: David G. Perry
Telecopier: 617-236-4588
and to:
Hines Interests Limited Partnership
East Coast Regional Office
885 Third Avenue, Suite 2700
New York, NY 10022-4835
Attn: Kenneth W. Hubbard
Telecopier: 212-230-2276
To Venture or Company: DIHC Boylston Associates
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19
c/o Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Attn: John S. Moody
Rodney C. Dimock
Telecopier: 212-605-7199
To Manager: Hines Interests Limited Partnership
222 Berkeley Street
Suite 1420
Boston, Massachusetts 02116-3751
Attn: David G. Perry
Telecopier: 617-236-4588
With a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002
Attn: Hugh Tucker, Esq.
Telecopier: 713-229-1522
All notices, demands, requests or other similar communications shall be
effective upon personal delivery, receipt or upon being deposited in the United
States mail. However, if the notice, demand, request or other similar
communication is delivered by US mail, the time period in which a response to
any such notice must be given shall commence to run from the date of receipt on
the return receipt of the notice, demand request or other similar communication
by the addressee thereof. Rejection or other refusal to accept or the inability
to deliver because of changed address of which no notice was given shall be
deemed to be receipt of the notice, demand request or other similar
communication sent. In the event that registered or certified mail is not being
accepted for prompt delivery, notices may then be served by personal service
upon any officer, director or partner of any party. By giving to the other
parties at least 30 days written notice thereof, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
and each shall have the right to specify as its address any other address at
which it has a place of business or up to two (2) other addresses to which it
wishes copies of any notice sent.
Section 7.6 Entire Agreement, This Agreement constitutes the entire
agreement between the Venture and Manager relating in any manner to the subject
matter of this
<PAGE>
20
Agreement. No prior agreement or understanding pertaining to the same (including
without limitation, the Prior Agreement) shall be valid or of any force or
effect (provided, however, that the foregoing shall not release the parties to
the Prior Agreement for any liability or obligation thereunder relating to
periods occurring prior to the date hereof), and the covenants and agreements
herein cannot be altered, changed or supplemented except in writing signed by
the Venture and Manager.
Section 7.7 Governing Law. This Agreement is made pursuant to, and
all of the rights and obligations of the parties hereto and all of the terms and
conditions herein shall be construed in accordance with and governed by, the
laws of the Commonwealth of Massachusetts, U.S.A.
Section 7.8 Severability. If any clause or provision of this
Agreement is illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then the remainder of this Agreement shall not
be affected thereby, and in lieu of each clause or provision of this Agreement
which is illegal, invalid or unenforceable, there shall be added, as part of
this Agreement, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and as may be
legal, valid and enforceable.
Section 7.9 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns.
Section 7.10 Assignment by Manager. The rights and obligations of
Manager hereunder shall not be assignable without the prior written consent of
the Venture except that the rights and obligations of Manager may be assigned by
Manager to an Affiliated Entity (as such term is defined in the Venture
Agreement) of Manager or to a Person Controlled by a member of the Hines Control
Group (as defined in the Venture Agreement)..
Section 7.11 Subordination. This Agreement and all fees due from the
Venture to Manager pursuant hereto shall be subject and subordinate in all
respects to (i) any mortgage upon the Premises or any portion thereof executed
by the Venture and (ii) any collateral assignment of rents due under the leases
of space in any improvements on the Premises. This provision shall be
self-executing but Manager shall, upon request, execute such instruments as may
reasonably be requested by the Venture, or any such mortgagee or lender to
evidence such subordination. Nevertheless, the Manager shall be deemed to have
earned (and shall be entitled to be paid) the pro rata portion of the Management
Fee to the date of termination of this Agreement.
Section 7.12 Exculpation. Notwithstanding anything in this Agreement to
the contrary other than Section 7.13, Manager and the Venture accept and agree
that each of the covenants,
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21
undertakings and agreements herein made on the part of Manager or the Venture,
while in the form purporting to be covenants, undertakings and agreements of the
Manager or the Venture, are, nevertheless, made and intended not as personal
covenants, undertakings and agreements by Manager's or the Venture's partners or
for the purpose of binding their respective partners personally or the assets of
their respective partners but are made and intended for the purpose of binding
only, (i) with respect to the partners of the Venture, their respective
partners' interests in the assets of the Venture, and (ii) with respect to
Manager and its partners, up to One Million Dollars ($1,000,000) in the
aggregate; and that no personal liability or personal responsibility is assumed
by, nor shall at any time be asserted or enforceable against the partners of the
Venture or the partners of Manager and their respective heirs, legal
representatives, successors and assigns on account of this Agreement or on
account of any covenant, undertaking or agreement of Manager or the Venture and
their respective partners in this document contained, all such personal
liability and personal responsibility, if any, being expressly waived and
released by Manager and the Venture, one to another, and Manager and the Venture
further agree not to seek or enforce any judgments (including but not limited to
specific performance, deficiency judgments, and any and all other judgments)
obtained against the Venture or Manager, as the case may be, or against their
partners beyond the interests and amount respectively set forth above. The
parties further acknowledge and agree that no officer, director, stockholder or
agent of any corporate Venturer or corporate partner of any Venturer shall have
any personal liability for any Venturer's obligations hereunder.
Section 7.13 Indemnity. The Venture shall indemnify the Manager and save
it harmless from and against all third party claims, losses and liabilities
arising out of damage to property, or injury to, or death of persons (including
the property and persons of the parties hereto, and their agents, subcontractors
and employees) occasioned by or in connection with acts or omissions of Manager,
the Venture or the Venture's other employees or subcontractors and all costs,
fees and reasonable attorneys' expenses in connection therewith unless such
claims, losses or liability result from Manager's fraud, gross negligence or
willful misconduct.
Manager (and its partners) shall be liable to the Venture only for any
fraud, gross negligence or willful misconduct committed by Manager hereunder.
Manager shall defend, indemnify and hold the Venture (and the Venture's
partners) harmless from and against any and all third party claims, demands,
losses, damages or liabilities (including, but not limited to, all costs and
reasonable attorneys' fees in connection therewith) incurred by the Venture or
its partners by reason of the fraud, gross negligence or willful misconduct of
Manager hereunder.
Section 7.14 Waivers. No delay or omission by either party in exercising
any right or power accruing upon the non-compliance or failure of performance by
the other party hereto of any provisions of this Agreement shall impair any such
right or power or be construed to be a waiver thereof. A waiver by either party
of any of the covenants, conditions or agreements
<PAGE>
22
hereof to be performed by the other must be in writing and signed by the party
who is waiving such covenants, conditions or agreements.
Section 7.15 Other Activities. Notwithstanding any other provisions of
this Agreement to the contrary, Manager may engage in or possess an interest in
other business ventures of every nature and description and in any vicinity
whatsoever, including without limitation the ownership, operation, management
and development of real property, and the Venture shall have no rights in or to
such independent ventures or to any profits therefrom. Any of such activities
may be undertaken with or without notice to or participation therein by the
Venture, and the Venture hereby waives any right or claim that it may have
against the Manager with respect to the income or profits therefrom or the
effect of such activity on the Premises; provided, however, that Manager shall
act as a reasonably prudent manager in not allowing the foregoing activities to
unreasonably interfere with its obligations under this Agreement. Furthermore,
nothing contained herein shall be deemed to require the personal services of
Gerald D. Hines, individually. The Venture acknowledges that Affiliates of
Manager have ownership and management interests in the Eastern Component and
that the foregoing provisions of this Section 7.15 are specifically applicable
to such interests. In performance of any of its obligations and duties
hereunder, Manager shall take such action as it considers appropriate in its
good faith business judgment and actions taken by Manager in its good faith
business judgment shall satisfy the obligation of Manager under this Agreement.
Section 7.16 Representatives. Manager may act through either one of its
representatives it has appointed to oversee and make decisions for Manager. Upon
notice, Manager may at any time and for any reason substitute another person as
its authorized representative. If a particular representative shall die, retire,
withdraw for any reason or become disabled, Manager shall designate a
replacement representative within the following ten business days. The Manager
initially designates as its authorized representatives Kenneth W. Hubbard and
David G. Perry.
ARTICLE VIII
ARBITRATION
Section 8.1 Selection of Arbitrators. Whenever in this Agreement it is
provided that a dispute shall be determined by arbitration (other than a dispute
regarding a Property Manager Recommendation which shall be handled in the matter
described in Article IV), the arbitration shall be conducted as provided in this
Article. The party desiring such arbitration shall give written notice to that
effect to the other, specifying the dispute to be arbitrated and the name and
address of the person designated to act as the arbitrator on its behalf. Within
ten (10) days after said notice is given, the other party shall give written
notice to the first party, specifying
<PAGE>
23
the name and address of the person designated to act as arbitrator on its
behalf. If the second party fails to notify the first party of the appointment
of its arbitrator as aforesaid by the time above specified, then the first
arbitrator shall determine the dispute. The arbitrators so chosen shall, within
ten (10) days after the second arbitrator is appointed, appoint a third
arbitrator and if they cannot agree upon said appointment, the third arbitrator
shall be appointed by the Suffolk Superior Court Judge in Suffolk County,
Massachusetts. The three arbitrators shall meet and decide the dispute and
tender a written decision to the parties within 30 days after the appointment of
the third arbitrator. A decision in which two of the three arbitrators concur
shall be binding and conclusive upon the parties and judgment thereon may be
entered in any court having jurisdiction thereof.
Section 8.2 Applicable Rules; Costs and Expenses. In designating
arbitrators and in deciding the dispute, the arbitrators shall act in accordance
with the rules then in force of the American Arbitration Association (or any
successor thereto) , subject, however, to such limitations or directions as may
be placed upon them by the provisions of this Agreement. Each party shall pay
the fees and expenses of its respective attorney and arbitrator and both shall
share equally the fee and expenses of the third arbitrator, if any, as well as
any fees payable to the American Arbitration Association or its successor. No
arbitrator shall be a person who is or has been a salaried employee of either
party during the 5 year period immediately preceding his appointment and each
such arbitrator shall have had at least seven (7) years experience in the
management of office buildings in the City of Boston. The arbitrators shall
consider all testimony and documentary evidence which may be presented at any
hearing as well as relevant facts and data which they may discover by
investigation and inquiry outside of such hearings. Each party shall have the
right to be represented by counsel and to cross examine witnesses.
Section 8.3 Applicability. The obligation of the parties to submit a
dispute to arbitration is limited to disputes arising under those Articles of
this Agreement which specifically provide for arbitration.
<PAGE>
24
S-1
IN WITNESS WHEREOF, the Venture and Manager have executed this Agreement
of the date first above written.
VENTURE: FIVE HUNDRED BOYLSTON WEST VENTURE
By: BOYLSTON WEST 1986 ASSOCIATES LIMITED
PARTNERSHIP, a Venturer
By: GDHI, Limited Partnership, a general partner
By: Hines Consolidated Investments, Inc., a
general partner
By: /s/ Jeffrey C. Hines
--------------------------------------------
Jeffrey C. Hines
Senior Executive Vice President
By: DIHC BOYLSTON ASSOCIATES, a
Georgia general partnership, a Venturer
By: DIHC Boylston Corp., a General Partner
By: /s/ John S. Moody
--------------------------------------------
John S. Moody
President
By: /s/ Rodney C. Dimock
--------------------------------------------
Rodney C. Dimock
Executive Vice President
MANAGER: HINES INTERESTS LIMITED PARTNERSHIP
By: HINES HOLDINGS, INC., a General Partner
By: /s/ Jeffrey C. Hines
--------------------------------------------
Jeffrey C. Hines
President
<PAGE>
Exhibit 10.105
[EXECUTION COPY]
AMENDED AND RESTATED
MANAGEMENT AND LEASING AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT AND LEASING AGREEMENT (this
"Agreement") made and entered into as of this 27th day of October 1997, by and
among Two Twenty-Two Berkeley Venture (the "Venture"), a joint venture
subsisting pursuant to that certain Amended and Restated Joint Venture Agreement
dated of even date herewith (the "Venture Agreement") and consisting of Hines
222 Berkeley Limited Partnership, a Texas limited partnership ("Hines"), and
DIHC Berkeley Associates, a Georgia partnership (the "Company") (Company and
Hines being sometimes referred to separately as a "Venturer" and collectively as
the "Venturers"), and Hines Interests Limited Partnership, a Delaware limited
partnership (the "Manager").
W I T N E S S E T H:
WHEREAS, the Venture and Gerald D. Hines previously entered into a
Management and Leasing Agreement, dated April 13, 1989 (the "Prior Agreement")
wherein Gerald D. Hines was appointed the sole and exclusive managing and
leasing agent for the parcel of real property (and improvements situated
thereon) known as 222 Berkeley Street, Boston, Massachusetts (the "Property")
and the 22 story building thereon (the "Building") (the Property and the
Building being herein sometimes called the "Premises") pursuant to the terms and
conditions set forth therein.
WHEREAS, as permitted under Section 6.10 of the Prior Agreement,
Gerald D. Hines assigned the Agreement to Manager as of July 1, 1990, Manager
being a Hines Successor (as such term is defined in the Prior Agreement) as
required therein.
WHEREAS, the Venture and the Manager desire to amend and restate the
Prior Agreement in its entirety on the terms herein set forth.
NOW, THEREFORE, Manager and the Venture hereby amend and restate the
Prior Agreement as follows:
<PAGE>
2
ARTICLE I
ESTABLISHMENT OF MANAGERIAL RESPONSIBILITY
Section 1.1 Appointment of Manager. The Venture hereby appoints
Manager, and Manager hereby accepts appointment as sole and exclusive manager
and leasing agent of the Premises with the responsibilities and upon the terms
and conditions set forth herein. In order to facilitate Manager's
responsibilities to lease space in the Building, the Venture shall provide
Manager with a prototype lease, rental schedule and program and fit up cost
schedule (all of which shall have been previously approved by all of the
Venturers). The prototype lease and schedules referred to above shall be used by
Manager in negotiating tenant space leases until substitutes therefor are
provided to Manager by the Venture.
ARTICLE II
MANAGEMENT SERVICES TO BE PERFORMED BY MANAGER
Section 2.1 Preparation of Annual Budget. In preliminary draft form
not later than October 1st and in final submission form not later than November
1st of each calendar year of the term of this Agreement, Manager shall deliver
to the Venture an operating business plan and budget ("Annual Plan Proposal")
setting forth in detail, as reasonably requested by the Venture, on a quarterly
basis, anticipated revenues, expenses and debt service payments respecting the
Premises, on a cash basis, during the Venture's next succeeding calendar year
(or portion thereof), including without limitation the amount of real estate
taxes, assessments, insurance premiums and maintenance and other expenses
relating to the Premises whether for operations or capital improvements (other
than anticipated leasehold improvements for tenants under leases entered into by
or on behalf of Venture) and an annual general operations plan for such calendar
year. The Annual Plan Proposal shall include (i) a detailed marketing plan
(which may be part of the Annual Plan Proposal) which shall specify the range of
suggested minimum acceptable rentals for individual spaces, the concessions for
major and minor tenants, the minimum and maximum acceptable terms (including
renewal options) for individual spaces and estimated "tenant fit-up" costs per
square foot and (ii) a detailed public relations plan which shall specify the
suggested advertising and public relations activities and actions which the
Venture should undertake. The Annual Plan Proposal shall show, among other
things, anticipated and proposed capital expenditures (other than leasehold
improvements for tenants) for the ensuing year and the source of funds in
respect thereto (including the projected time and amount for any required
advances by the Venture) and shall include a rent roll for the Building, taking
into account, without limitation, the general condition of the Premises, rate of
completion of any contemplated repairs to the Premises, the then current
occupancy level, lease expirations, physical condition and rentals charged in
competing office and commercial/retail buildings in the area. Each Annual Plan
Proposal shall also include a schedule of job descriptions and requirements for
any and all
<PAGE>
3
independent contractors and employees of Manager serving the Premises, a
reasonable estimate of wage rates and all other compensation to be paid such
contractor or employee and shall identify any contractor (or proposed
contractor) serving the Premises who is an Affiliate (as such term is defined in
the Venture Agreement) of Manager; provided, however, that the Annual Plan
Proposal shall not contain any other costs or expenses for which Manager is not
entitled to reimbursement hereunder. Within thirty (30) days after its receipt
of the final submission form of such Annual Plan Proposal, the Venture shall
respond in writing to Manager approving the Annual Plan Proposal with such
changes as the Venture shall desire, and such Annual Plan Proposal with such
changes by the Venture shall become the approved "Annual Budget" for such
succeeding calendar year. Manager may proceed in accordance with the Annual
Budget for such succeeding calendar year only if the same is approved by the
Venture as aforesaid. If for any calendar year an Annual Plan Proposal is not
approved prior to December 1, the Annual Budget for the then current calendar
year shall carry over and continue to apply in regard to operating expenses (but
not for capital expenditures) until approval of the new Annual Budget by the
Venture is obtained. Pending approval of a new Annual Budget, Manager may
continue all operations (but not capital expenditures) under the then effective
Annual Budget (as though the current Annual Budget had been approved as the
Annual Budget for the next calendar year). Manager shall comply, except as
hereinafter provided, in all respects with each approved Annual Budget in the
performance of its duties hereunder and shall not, except as hereinafter
provided, during the period covered by such Annual Budget incur any expense in
the management, operation or maintenance of the Property not provided for in
such Annual Budget.
The budgets included in the Annual Budget shall distinguish between
(i) costs and expenses of management, maintenance and operations which are not
"capital expenditures" ("non-capital expenses") and (ii) costs and expenses of
management, maintenance and operation which are "capital" in nature (the
"capital expenses"); and further, the Annual Budget (in the marketing plan)
shall include the information on leasing guidelines provided for above, which
leasing guidelines shall include, without limitation, the anticipated costs to
be incurred by the Venture (on a per square foot basis) for new leases entered
into pursuant to the leasing guidelines provided for herein. The budgets for
capital expenses and non-capital expenses may each include a category or line
item for "contingency" and the amount allocated to contingency in each such
portion of the budgets in an approved Annual Budget may be reallocated (and
accordingly expended) for expenses in other line items within each such portion
of the budgets if expenses for a line item exceed the amount otherwise allocated
to such item. Without the Venture's consent, Manager shall not incur any expense
for any line item capital expense which exceeds the amount (including
contingency) budgeted for such capital expense; except that Manager shall have
the right, without the prior Approval of the Venturers, to make annual capital
expenditures of up to $50,000 for any one item and up to $200,000 per annum in
the aggregate (the "Allowance Amounts"), for items not contemplated in, or in
excess of the amounts reserved for certain line items in, the Annual Budget. The
Allowance Amounts shall be adjusted (up or down) to take into account changes in
the Consumer Price Index All Urban Consumers for the Massachusetts Area ("CPI")
as published
<PAGE>
4
by the United States Department of Labor for calendar year 1997 and the calendar
year immediately prior to the calendar year in question. The adjusted Allowance
Amounts for each such calendar year shall be determined by multiplying the
original Allowance Amounts by a fraction, the numerator of which is the CPI for
the calendar year immediately prior to the calendar year in question and the
denominator of which is the CPI for calendar year 1997. Without the Venture's
consent, Manager shall not incur any expense for non-capital expenses which
would cause the aggregate amounts expended for non-capital expenses to exceed
the budgeted amount (including contingency) by more than ten (10%) percent;
provided, however, that Manager may freely pay all real estate taxes, utilities
serving the Premises, debt service and other amounts due on borrowings entered
into by the Venture and insurance premiums (for insurance approved by the
Venture), may incur obligations to perform tenant construction pursuant to the
terms of leases entered into in accordance with this Agreement and may incur
expenses to provide additional services to tenants, if such expenses are to be
promptly, expressly and directly reimbursed by tenants. In the event that
Manager shall at any time determine that an expenditure is required that will
not conform to the foregoing guidelines, Manager shall notify the Venture in the
manner described in Article IV hereof by submitting a Property Manager
Recommendation with respect to such expense. Notwithstanding the foregoing,
Manager may make all expenditures necessary, whether or not within the
guidelines set forth hereinabove or provided for in the Annual Budget, for any
expenditure of an emergency nature as provided in Section 2.4 hereof. At any
time that Manager determines that there is not sufficient income to cover
current operating expenses, it shall promptly notify the Venture. Manager shall
further provide such other financial information respecting actual operations of
the Premises as is reasonably requested by the Venture. No such statement shall
be deemed to be an official Annual Budget until the same shall be approved by
the Venture as hereinabove provided.
Section 2.2 Independent Contractors. Pursuant to the Annual Budget,
Manager shall investigate, contract with, pay, supervise and discharge any
personnel required for the routine maintenance and operation of the Premises on
a day-to-day basis, including architects, engineers and others. Such personnel
shall in every instance be independent contractors or employees of Manager and
shall not be employees of the Venture. After any major personnel (e.g. building
superintendent, engineer, architect, attorneys, etc.) have been engaged to
perform personal or professional services, Manager shall give the Venture notice
thereof and the Venture may require Manager to terminate the contracts of such
persons serving the Premises whom the Venture, in its sole discretion, deems
unsatisfactory (provided that the Venture shall be responsible for any such
termination if the same is actionable by such terminated personnel). Such
employees who handle or who are responsible for funds belonging to the Venture
shall be insured by fidelity insurance in an amount and with a company approved
from time to time by the Venture as set forth in Section 7.4 hereof. Except as
provided in Section 7.3 below, all salaries, wages and other compensation of
personnel contracted with by Manager hereunder, shall be expenses of the Venture
which shall be paid by Manager from funds of the Venture or reimbursed to
Manager by the Venture pursuant to the terms hereof. Manager understands and
agrees that its own
<PAGE>
5
relationship to the Venture is that of independent contractor and that it will
not represent to anyone that its relationship to the Venture is other than that
of independent contractor.
Section 2.3 Service Contracts. Manager shall make, when necessary,
in the name of the Venture and Venture shall execute the same at the request of
Manager, contracts for water, electricity, gas, fuel, oil, telephone, vermin,
elevator, extermination, trash removal, janitorial service, landscaping,
security service, parking garage operation, repair, labor, window washing and
other necessary services, or such of them as Manager shall deem reasonably
advisable in accordance with the Annual Budget provided each such contract shall
be cancelable, at the Venture's discretion, at the end of one year on no more
than thirty (30) days notice without penalty, except for the elevator service
contract which shall be cancelable, at the Venture's discretion, at the end of
five years without penalty. Manager shall also place orders in the name of the
Venture for such equipment, tools, appliances, materials and supplies as are
necessary properly to maintain the Premises, subject to the limitations of the
current Annual Budget approved by the Venture.
Section 2.4 Maintenance and Repair of Premises. Manager shall use
reasonable efforts to cause the Building, parking garage, appurtenances and
grounds of the Property to be maintained in accordance with standards acceptable
to the Venture, including within such maintenance, without limitation thereof,
supervision of the installation and removal of tenant improvements, interior and
exterior cleaning, painting and decorating (including lobby decorations),
plumbing, carpentry, and such other normal maintenance and repair work as may be
desirable, subject to limitations of the current Annual Budget approved by the
Venture and any other limitations imposed by the Venture in addition to those
contained herein. For any one item of repair or replacement, the expense or cost
incurred shall not exceed the amount allocated thereto in the current Annual
Budget (subject to the guidelines set forth in Section 2.1 hereof) excepting,
however, that emergency repairs immediately necessary to secure the preservation
and safety of the Premises or to avoid the suspension of any service to the
Premises or to avoid danger to life or property may be made by Manager without
such consent or authority contained in the current Annual Budget provided
Manager shall first make reasonable attempts to contact the Venture.
Notwithstanding such authority as to emergency repairs, it is understood and
agreed that Manager will confer as soon as possible with the Venture regarding
every such expenditure. Manager shall assure that any contractor performing work
on the Premises maintains insurance satisfactory to the Venture and any
mortgagee of the Premises, including but not limited to workmen's compensation
insurance, employees' liability insurance and insurance against liability for
injury to persons and property arising out of all of contractors' operations,
any subcontractors' operations, and the use of owned, non-owned or hired
equipment, including automotive equipment in the pursuit of all such operations.
Section 2.5 Insurance. Manager shall supervise and assist the
Venture in procuring and maintaining insurance for the Premises, with companies
and through brokers agreed upon by
<PAGE>
6
the Venture, of such kind and amounts as the Venture shall from time to time be
required to carry pursuant to the provisions of applicable agreements with third
parties, and of such other kind and amounts as required in the Venture Agreement
or as the Manager shall from time to time be directed by the Venture.
Section 2.6 Collection of Moneys. Manager shall use all reasonable
efforts to collect all rent and other charges due from tenants, licensees,
concessionaires and any others in consequence of the authorized operation of
facilities in the Premises and otherwise due the Venture with respect to the
Premises. The Venture authorizes Manager to request, demand, collect, receive
and receipt for all such rent and other charges. With the prior written consent
of the Venture, Manager may institute legal proceedings and engage legal counsel
(approved by the Venture) in the name of the Venture, for the collection of
overdue rents and other charges and for the dispossession of tenants and other
persons from the Premises. The Venture will be informed as soon as possible
respecting any legal action which the Manager proposes to initiate for and on
behalf of the Venture. Any expense incurred in connection therewith shall be
deemed an operating expense of the Premises. All moneys collected by the Venture
shall be forthwith deposited in the Depository Account described in Section 7.2
below.
Section 2.7 Manager Disbursements. Except as otherwise directed by
the Venture, Manager shall from the funds on deposit in the Operating Account
described in Section 7.2 below, cause to be disbursed the amounts necessary to
pay regularly and punctually amounts due and payable as operating expenses of
the Premises authorized to be incurred under the terms of this Agreement,
including without limitation, payment of sums due on any mortgage loan affecting
the Premises, payment prior to delinquency and prior to the addition thereon of
interest or penalties of all real property taxes and assessments and other taxes
levied or assessed against the Premises, all rents, insurance premiums and other
impositions applicable to the Premises, the administration fee and the Manager's
fee provided for in Article VI. After disbursement as herein specified, any
balance remaining shall be disbursed or transferred as generally or specifically
directed from time to time by Venture. Manager shall have no obligation to pay
any of the aforementioned expenses or costs unless there are sufficient funds in
the Operating Account described in Section 7.2 below or the funds shall be
supplied to Manager by the Venture. In the event that at any time there are
insufficient funds on hand to meet such operating expenses, Manager shall
promptly notify the Venture, which shall supply such funds, and if Manager shall
have advanced its own funds to meet such expenses, the Venture shall promptly
reimburse Manager therefor. All checks to Manager for reimbursement of expenses
and for the Management Fee (as defined below) shall be co-signed by a Venturer
of the Venture.
Section 2.8 Discounts. Manager shall (unless in its reasonable
judgment such discounts, commissions or rebates are not advisable) secure for
and credit to the Venture any discounts, commissions or rebates obtainable as a
result of any purchase of goods or services or as a result of other activities
undertaken pursuant to this Agreement. Should Manager perform
<PAGE>
7
any services to tenants which are not required in their leases and for which a
separate charge is made, then all such separate charges shall be retained in the
Operating Account described in Section 7.2 for the account of the Venture, and,
to the extent required, used to pay for the services provided.
Section 2.9 Miscellaneous Duties of Manager.
(a) Books and Records and Monthly Reports. Manager shall keep all
books of account and other records required by the Venture, keep vouchers,
statements, receipted bills and invoices and all other records in such form as
may be approved by the Venture, covering all collection, disbursements, and
other data in connection with the Premises; permit the Venture, or any person
designated by any Venturer, at any reasonable time, to audit the books, records
and accounts of Manager relating to the Premises, and Manager will exhibit such
books, records and accounts to any person designated by any Venturer for that
purpose, which accounts and records relating to the Premises, including all
correspondence and leases, shall be the property of the Venture and, upon any
termination of the appointment of Manager, shall be surrendered to the Venture
without charge therefor. On or before the 20th day of each month during the term
of this Agreement, Manager shall render to the Venture a detailed written report
(hereinafter called the "Monthly Report") covering the operations for the
preceding full calendar month. The Monthly Reports shall include designation of
all receipts and disbursements during such period (and shall set forth an
accurate list of accounts receivable and accounts payable) and moneys retained
in the Operating Account as of the last day of the preceding calendar month.
Such report shall include a copy or facsimile of all notices received from any
mortgagee with respect to payments made to such mortgagee in such preceding
calendar month, and a transmittal memorandum highlighting the past month's
operation.
(b) Annual Report. Within forty-five (45) days after the end of each
calendar year, Manager shall deliver to the Venture a Profit and Loss Statement,
a Balance Sheet and a Statement of Change in Financial Position of the Venture,
showing the results of operations of the Premises for that calendar year, all
prepared in accordance with accepted accounting principles consistently applied.
Manager shall also furnish the Venture, within said forty-five (45) day period,
with a detailed list of all accounts receivable and accounts payable as of the
end of that calendar year and with such other information as the Venture shall
reasonably request.
(c) Tenant Complaints. Manager shall serve as liaison between the
Venture and tenants and maintain businesslike relations with tenants, whose
service requests shall be received, logged and considered in systematic fashion
in order to show the action taken with respect to each. Complaints of a serious
nature (i.e. involving claims in excess of $25,000) shall, after thorough
investigation, be reported to the Venture with appropriate recommendations.
Manager shall use its reasonable efforts to secure full compliance by the
tenants of the Premises with the terms and conditions of their respective
leases.
<PAGE>
8
(d) Returns Required by Law. Except when same are legally required
to be filed by the Venture, Manager shall execute and file punctually, when due,
all forms, reports, and returns required by law relating to the employment of
personnel and the operation of the Premises.
(e) Compliance with Legal Requirements. Manager shall use its
reasonable efforts to ensure that the actions taken by Manager for or on behalf
of the Venture comply with the Governmental Documents (as defined in the Venture
Agreement) and with any and all orders or requirements affecting the Premises by
any federal, state, county, municipal or other authority having jurisdiction
thereover, and orders of the Board of Fire Underwriters or other similar bodies,
subject to the same limitations contained in Section 2.4 hereof in connection
with the making of repairs and alterations. Manager, however, shall not take any
such action as long as: (i) the Venture is contesting any such order or
requirement provided that the Venturer has a legal right to contest such order
or requirement and Manager will incur no penalty as a result of the Venture
contesting any such order or requirement and (ii) the Venture requests Manager
not to take such action. Manager shall promptly, and in no event later than the
close of the next business day following its receipt, give written notice to the
Venture of any such order or notice of requirements.
(f) Claims for Tax Abatements and Eminent Domain. When requested by
the Venture from time to time, Manager shall, without charge or reimbursement,
except for out-of-pocket expenses, render advice and assistance to the Venture
in the negotiation and prosecution of all claims for abatement of property and
other taxes affecting the Premises and for awards for taking by eminent domain
affecting the Premises.
(g) Supervision of Repairs and Alterations. Manager shall use
reasonable efforts to supervise the performance of all matters coming within the
terms of this Agreement, including direct observation, inspection and
supervision of all repairs, decorations and alterations during the progress
thereof and shall make final inspection of the completed work and approve bills
for payment; provided, however, Manager may, in its reasonable discretion and
unless otherwise directed by the Venture, withhold payments and contest in good
faith work done on the Premises, provided that such contest is not in violation
of any mortgage encumbering the Premises or the Governmental Documents. Manager
shall use reasonable efforts to obtain the necessary receipts, releases,
waivers, discharges and assurances to keep the Premises free from mechanics' and
materialmen's liens and other claims.
(h) Management of Premises. Manager shall, generally, take all
actions reasonably necessary to protect and preserve the Premises and to manage
and operate the Premises in an efficient first-class manner and shall, at all
times, maintain an organization sufficient to enable it to perform all its
obligations and functions under this Agreement.
<PAGE>
9
(i) Tenant Improvements. Manager shall supervise tenant finishing
work and alterations when new tenants take occupancy in the Building and shall
supervise and inspect modifications and alterations to existing tenant space
when requested for and paid for by an existing tenant.
(j) Settlement of Claims; Cooperation. Should any claims, demands,
suits or other legal proceedings be made or instituted by any third party
against the Venture or any Venturer (as a partner in the Venture) which arise
out of any matter relating to the Premises or this Agreement or the Manager's
performance hereunder, the Manager shall have the authority to adjust, settle or
compromise any such claim, demand, suit or judgment in an amount not in excess
of $25,000 and shall at all times keep the Venture informed with respect to the
status of such claim, demand, suit or judgment. With respect to claims, demands,
suits or judgments for amounts in excess of $25,000 at the request of the
Venture, the Manager shall give the Venture all pertinent information and
reasonable assistance in the defense or disposition thereof. The obligation of
Manager set forth herein shall survive the termination of this Agreement.
(k) Compliance with REA. Manager shall use its reasonable efforts to
ensure that the actions taken by Manager for or on behalf of the Venture comply
with the REA (as defined in the Venture Agreement) and shall coordinate its
activities with the owner and/or manager of the Western Component (as defined in
the Venture Agreement) to the extent contemplated or required in the REA.
ARTICLE III
LEASING SERVICES TO BE PERFORMED BY MANAGER
Section 3.1 Locate Tenants. Manager shall use reasonable efforts to
locate suitable tenants and negotiate acceptable leases for the Building,
subject to the limitations hereinafter set forth. Manager's duties as to its
leasing services shall be those customarily performed by owners of comparable
buildings. Manager is authorized, without the approval of the Venture, to locate
tenants and negotiate leases (on the standard form of lease approved by the
Venture with no material changes thereto) for (i) a lease of retail space in the
Building up to 2,500 rentable square feet and (ii) a lease of office space in
the Building up to 10,000 rentable square feet (for purposes of the foregoing,
multiple leases to a single tenant shall be aggregated for purposes of
determining the square footage of any particular lease with such tenant)
provided such leases are in accordance with the Annual Budget approved by the
Venture. All other leases shall be subject to the prior approval of the Venture.
All leases proposed by Manager, and, if required under the foregoing sentence
approved by the Venture, shall be executed by the Venture. Manager shall not,
for any reason, have the authority to execute leases on behalf of the Venture;
the Venture acknowledges however, if the Venture does not execute a lease
submitted by the Manager that does not require
<PAGE>
10
the approval of the Venture, Hines (in its capacity as a Managing Partner of the
Venture) may execute such lease on behalf of the Venture without the consent of
Company as provided in Section 3.01(a) of the Venture Agreement.
Section 3.2 Consulting. Manager shall, upon reasonable request(s) by
the Venture, act as a consultant to the Venture and provide the Venture, as and
when deemed necessary by the Venture, with the benefit of Manager's experience
as to the planning and leasing of the tenant space to be leased. Manager shall,
as to the tenant space, provide, for the Venture's approval, (i) an overall
marketing and leasing plan as set forth in Section 2.1, (ii) an anticipated rent
roll, including minimum rents, and (iii) the proposed tenant assessments and
other charges.
Section 3.3 Executing Leases. Upon obtaining commitments from
prospective tenants to lease all or a portion of the tenant space, and approval
of the terms and conditions of said commitments by the Venture if required
hereunder, Manager shall submit to each such prospective tenant a lease in the
form approved by the Venture, containing the terms of said commitment approved
by the Venture if required hereunder. Leases requiring the approval of the
Venture shall be submitted to the Venture in a Property Manager Recommendation
in the manner described in Article IV hereof.
Section 3.4 Advertising. Manager shall be responsible for the
promotion and advertising of available tenant space in the Building subject to
the prior approval of the Venture as to methods of advertising and in accordance
with the public relations plan referred to in Section 2.1.
Section 3.5 Reports. At reasonable times and in any event not less
than once each ninety (90) day period, and at such other times as the Venture
may reasonably request, Manager shall inform the Venture in writing as to the
progress of leasing operations and as to circumstances which might from time to
time require decisions by the Venture regarding such leasing operations. Each of
Manager's periodic reports shall include, but not necessarily be limited to, the
name and address of each prospect to whom space in the Building was offered by
Manager during the period covered by such report, the date of each such offering
and a copy of any written submission made to any such prospect, the status of
negotiations of offers received by Manager in connection with such submissions,
and such additional data as shall be reasonably required by the Venture.
Section 3.6 Brokers. Manager shall have the right to retain, at the
expense of the Venture, independent non-affiliated brokers or subagents
("Brokers") in connection with the leasing of any tenant space, provided that,
to the extent the retention of such broker is not contemplated in the Annual
Budget approved by the Venture, the Venture shall have approved in advance the
engagement of such Broker and brokerage fee and commission payable to such
Broker.
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11
ARTICLE IV
PROPERTY MANAGER RECOMMENDATIONS
Section 4.1 Property Manager Recommendations. In the event any
action proposed to be taken by Manager or any other matter (including, without
limitation, the Annual Budget) in respect of the operation, maintenance, repair,
improvement or leasing of the Premises shall require the approval of the Venture
under the terms of this Agreement, Manager shall submit to the Venture a
recommendation with respect to such action or matter (a "Property Manager
Recommendation"). To the extent Company or the Venture intends to enter into a
new lease, adopt an Annual Budget or take action on any other matter involving
the leasing, management, operation, maintenance or improvement of the Premises
that is not the subject of a Property Manager Recommendation, Company shall give
written notice to Manager, together with a reasonably detailed explanation
thereof, at least ten (10) days prior to entering into such lease, adopting such
Annual Budget or taking such other action, as the case may be, to provide
Manager the opportunity to submit a Property Manager Recommendation with respect
thereto. Manager shall, at the expense of the Venture, furnish or where
appropriate make available to Venture, such documents and information as Venture
shall reasonably request in order to enable Venture to evaluate such
recommendation. The failure of Venture to approve or disapprove any Property
Manager Recommendation within ten (10) days after receipt by Venture of such
Property Manager Recommendation together with all additional information
reasonably requested by Venture pertaining thereto shall be deemed the approval
by Venture of such Property Manager Recommendation and Manager shall be entitled
to implement the same, provided, however, the Property Manager Recommendation
shall state in capitalized letters that: "THE FAILURE TO RESPOND TO THIS
PROPERTY MANAGER RECOMMENDATION WITHIN 10 DAYS AFTER RECEIPT OF THIS NOTICE AND
ANY REASONABLY REQUESTED ADDITIONAL INFORMATION PERTAINING HERETO SHALL BE
DEEMED YOUR APPROVAL TO SUCH PROPERTY MANAGER RECOMMENDATION." If the Venture
fails to approve or disapproves such Property Manager Recommendation after
consultation and discussion with Manager, then the resolution of such matters
may be submitted by Venture or Manager to the "Venture Operations Arbitration
Process" for resolution.
The term "Venture Operations Arbitration Process" shall mean the
process for resolution of any dispute between the Company and the Manager in
connection with a Property Manager Recommendation. Either of the Manager or the
Company may invoke this arbitration process by the giving of written notice to
the other, which notice shall state that the invoking party believes an impasse
exists as to a Property Manager Recommendation.
If Manager or Company invokes the arbitration process, then, within
five (5) days after the non-invoking party receives notice from the invoking
party, Manager and Company shall each place in separate sealed envelopes its
final good faith proposal as to the Property Manager
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12
Recommendation and shall open and exchange their final proposals in each other's
presence (the "Final Proposals"). If Manager and Company cannot then agree on
the Property Manager Recommendation within five (5) days thereafter, the matter
shall be determined in accordance with the rules of the American Arbitration
Association, except as modified by this provision. If Manager or Company fails
to prepare its Final Proposal or to cooperate with the other party to open and
exchange the Final Proposals of the parties, and if such failure shall continue
for a period of five (5) days after the date the Final Proposals were to be
opened and exchanged, the Final Proposal of the non-failing party shall
constitute the determination pursuant to this process.
Unless Manager and Company can agree upon a single arbitrator prior
to the time they are required to designate their party-arbitrators, there shall
be three arbitrators (the "Panel"), each of whom shall have significant
experience in dealing with matters similar to the matter in dispute with respect
to sizeable commercial properties in the Boston metropolitan area and none of
whom shall have any current or prior connection or affiliation with either of
the Venturers.
If Manager and Company cannot agree on a single arbitrator, the
following procedure shall be used for the selection of the Panel. Manager and
Company shall each specify by notice to the other on or prior to the fifth (5th)
day after the Final Proposals were exchanged the name and address of the person
designated to act as party-arbitrator on its behalf. The party-arbitrators so
chosen shall meet within five (5) days after their appointment and select a
third arbitrator. If Manager or Company fails to notify the other of the
appointment of its party-arbitrator, as aforesaid, within or by the time above
specified, then the Final Proposal of the party who timely selected a
party-arbitrator shall constitute the determination pursuant to this process.
If, within five (5) days after the party-arbitrators are appointed,
the said two party-arbitrators are unable to agree upon the appointment of the
third arbitrator, then either party, on behalf of both, may request the American
Arbitration Association in Boston, Massachusetts to appoint the third arbitrator
in accordance with its rules. In the event of the failure, refusal or inability
of any arbitrator to act, a new arbitrator shall be appointed in his stead,
which appointment shall be made in the same manner as hereinabove provided for
the appointment of such arbitrator so failing, refusing or being unable to act.
Within five (5) days after the selection of the single arbitrator
or, if Manager and Company cannot agree on a single arbitrator, within one
business day after the selection of the Panel, Company and Manager shall submit
a written statement to the arbitrator or Panel specifying the reasons their
Final Proposal as to the Property Manager Recommendation should be selected. The
arbitrator or Panel shall make its decision within five (5) days after such
submission. The arbitrator or Panel shall select either the Manager's or
Company's Final Proposal, whichever in the arbitrator's or Panels's judgment
represents the most appropriate recommendation for preserving and enhancing the
long-term value of the Premises. The Panel shall reach its decision
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13
by majority vote. The arbitrator or the Panel shall communicate its decision by
written notice to the Manager and Company.
Such determination shall be final, binding and conclusive upon both
the Company and the Manager and shall be non-appealable and enforceable in any
court having jurisdiction. All hearings and proceedings before the arbitrator or
the Panel shall be held in Boston, Massachusetts.
If a single arbitrator is selected, each party shall share such
arbitrator's fees and expenses equally. If a Panel is selected, each party shall
pay the fees and expenses of its party-arbitrator, and the fees and expenses of
the third arbitrator shall be borne equally by the parties. Notwithstanding the
foregoing, the arbitrator or the Panel may conclude that one of the parties
acted in bad faith, in which event such party shall pay 100% of the fees and
expenses of the arbitrator or the Panel, as the case may be.
ARTICLE V
TERM
Section 5.1 Term. The term of this Agreement commenced on May 2,
1991 and shall expire on the earlier to occur of (i) the termination of the
Venture in accordance with the Venture Agreement and (ii) April 13, 2064, unless
this Agreement is sooner terminated pursuant to Section 5.2 hereof or otherwise.
Upon the expiration or earlier termination of this Agreement, Manager shall: (1)
surrender and deliver to the Venture all rents and income of the Premises
including the Depository Account and Operating Account referred to in Section
7.2 hereof; (2) deliver to the Venture as received any monies collected or
received by Manager after termination hereof; (3) deliver to the Venture all
books, records, materials, supplies, keys, contracts and such other documents
and statements relating to the Premises; (4) assign such existing contracts
relating to the operation and maintenance of the Premises as the Venture shall
require; and (5) generally cooperate with the Venture in accordance with Section
2.9(j).
Section 5.2 Termination for Cause. During the term of this
Agreement, this Agreement shall be terminated for cause, as "cause" is hereafter
defined, upon five (5) days' written notice to Manager; provided, however, if
Manager provides the Venture notice that it disagrees that "cause" has occurred,
this Agreement shall not be terminated until such determination is made pursuant
to, and in accordance with, the arbitration procedures set forth in Article VIII
of this Agreement and, during the pendency of such arbitration, the Venture and
Manager shall remain obligated to continue to perform their respective
obligations under this Agreement. "Cause" for termination by the Venture shall
mean the continuance, for more than thirty (30) days (or, if such curable event
cannot be cured in such period of time, then such additional period of time as
is necessary to cure same, provided Manager prosecutes to completion
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14
the cure of same) after delivery of written notice by the Venture (or any
Venturer except Hines) to Manager of one or more of the following events:
(a) A material default shall be made in the performance or
observance by Manager of any material covenant, condition or term in this
Agreement;
(b) Manager shall engage in conduct under this Agreement which
constitutes fraud;
(c) Manager shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall commence a case under the bankruptcy code, or
shall file a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition or similar relief under the federal
bankruptcy laws, or any other similar applicable federal or state law, or
shall consent to or fail reasonably to oppose any such proceeding, or
shall consent to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of a substantial part of its
property, or shall make a general assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts generally as they
become due, or corporate action shall be taken by Manager in furtherance
of any of the aforesaid purposes;
(d) A decree or order by a court of competent jurisdiction shall
have been entered adjudging Manager bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment,
arrangement, composition or similar relief for Manager under the federal
bankruptcy laws, or any other similar applicable federal or state law, and
such decree or order shall have continued undischarged or unstayed for a
period of ninety (90) days; or a decree or order of a court having
jurisdiction for the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of Manager or a substantial part of
its property, or the winding up or liquidation of its affairs, shall have
been entered, and such decree or order shall have remained in force,
undischarged and unstayed for a period of ninety (90) days;
(e) The Venturer in the Venture that is currently Hines (the "Hines
Venturer") shall no longer be Controlled by a Person Controlled by a
member of the Hines Control Group (as defined below); provided, however,
if such failure occurs solely as a result of the election by the Hines
Venturer to put its Venture Interest to Company or its designee pursuant
to the provisions of Subsection 6.02(d) of the Venture Agreement, this
Agreement may only be terminated pursuant to this clause (e) if:
(i) Company provides written notice to Manager of such
termination at least six (6) months prior to the Earliest
Termination Date, or
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15
(ii) Company provides written notice to Manager at any time
after the Earliest Termination Date, in which case, such termination
will be effective six (6) months following receipt by Manager of
such notice;
(f) The Manager shall no longer be Controlled by a member of the
Hines Control Group;
(g) Hines shall become a Defaulting Venturer under the Venture
Agreement and shall remain a Defaulting Venturer beyond the expiration of
any applicable cure period; or
(h) The Premises shall be sold by the Venture to a third party or to
one of the Venturers or in the event of the destruction or condemnation of
all or substantially all of the Building and the same is not rebuilt.
As used in this Section 5.2, the term "Earliest Termination Date" means the date
that is the later to occur of (i) November 1, 2007 or (ii) the fifth (5th)
anniversary of the date on which the consummation of the transfer by the Hines
Venturer to Company pursuant to the provisions of subsection 6.02(d) of the
Venture Agreement occurs; the terms "Controlled or Control", "Hines Control
Group", "Venture Interest", "Hines Management Group", "Hines Family" and
"Person" shall have the meanings ascribed to such terms in the Venture
Agreement.
Section 5.3 Payment to Manager in Event of Termination. In the event
this Agreement is terminated under Section 5.2 hereof, Manager shall be entitled
only to that portion of the Management Fee earned pursuant to Article VI of this
Agreement through the date of the notice specifying the cause, in full
satisfaction of the Venture's obligation to Manager for fees under this
Agreement; provided, however, that after being notified in writing of an event
for which this Agreement may be terminated for "cause" (unless Manager notifies
the Venture that it disagrees that "cause" has occurred, in which case, only
after "cause" is determined by arbitration to have occurred), the Management Fee
payable to Manager shall be withheld until such time as such cause" is cured
prior to the termination hereof. In the event this Agreement is so terminated,
the Venture shall assume the obligations under contracts entered into by Manager
for the benefit or on behalf of the Venture pursuant to its authority to do so
under this Agreement.
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16
ARTICLE VI
COMPENSATION
During the term of this Agreement, the Venture shall pay Manager an
annual management fee (the "Management Fee") equal to three percent (3%) of the
"gross rental receipts" (as hereinafter defined) actually received by the
Venture, or by Manager on behalf of the Venture, from the rental operations of
the Building. The term "gross rental receipts" as used herein shall mean the
gross amount of payments to the Venture made as rent, fees, charges,
reimbursement or otherwise for the use or occupancy of the Building, or any
portion thereof, but gross rental receipts shall not include (1) free rent
concessions granted by the Venture to tenants, (2) bills rendered to tenants for
improvements to the tenant space in the Building to the extent of Manager's
actual expenditures for such improvements, (3) security deposits delivered by
tenants to the Venture prior to the forfeiture of such deposits, (4) advance
rentals until such time as they are earned by the Venture, (5) any insurance
loss proceeds, condemnation awards or any proceeds from the sale, exchange,
financing or refinancing of the Premises and (6) any payments, fees and other
charges received by the Venture from the owner of the Western Component adjacent
to the Premises under the REA Agreement. Notwithstanding the foregoing, to the
extent a Management Fee is recovered from the tenants with respect to the items
set forth in (1) through (6) above, such items shall constitute "gross
receipts".
The annual Management Fee shall be payable on an estimated basis in
monthly installments on the first day of each month as an advance in respect of
the fee payable to Manager in respect of the immediately preceding calendar
month. The Management Fee, however, shall be determined and reconciled on an
annual basis with appropriate adjustments between Manager and Venture with
respect thereto following delivery of audited financial statements with respect
to each calendar year.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Use and Maintenance of Premises. Manager agrees to use
reasonable efforts not to permit the use of the Premises for any purpose which
might void any policy of insurance held by the Venture or Manager or render any
loss thereunder uncollectible, or which would be in violation of any law,
ordinance, by-law or governmental or other restrictions.
Section 7.2 Separation of the Venture's Moneys. The Venture shall
establish and maintain a bank account at a Boston, Massachusetts bank of the
Venture's choosing for the deposit of all revenues arising out of the Premises
(the "Depository Account"). Manager shall promptly
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17
deposit all revenues, as same are collected, in the Depository Account and only
the authorized representatives of the Venture shall be able to withdraw funds
from the Depository Account. Manager shall establish and maintain an additional
bank account at a Boston, Massachusetts bank of the Venture's choosing, for the
purpose of maintaining those funds necessary to the operation of the Premises
(the "Operating Account"). The Venture shall from time to time, upon the advice
of Manager, deposit into the Operating Account, sufficient funds to cover the
cost and expense of the maintenance and operation of the Premises. Funds may be
withdrawn from the Operating Account upon the signature of duly authorized
representatives of Manager or any Venturer of the Venture.
Section 7.3 Expense of Manager. The Venture shall reimburse Manager
for direct expenses of Manager incurred on account of the Premises for the
payment of any proper obligation or necessary expense or Broker's commission
connected with the leasing, maintenance and operation of the Premises including
the wages, salary, benefits and other compensation of any full-time or part-time
property management and/or leasing personnel assigned to the Premises, the costs
(including, but not limited to rent, office equipment and office supplies) of
any management and leasing office approved by the Venture (the approximate
square footage of such office being 4000 rentable square feet, which amount the
Venture hereby approves) and reasonable training, travel and entertainment
expenses of such personnel as approved in the Annual Budget; provided, however,
the Venture shall not be obligated to reimburse Manager for overhead expenses of
Manager or for any salaries of any executives or supervisory personnel of
Manager who do not provide a direct benefit to the Premises (except the
allocable cost of an off-site senior property manager and a regional chief
engineer, bookkeeping, accounting and financial management services, information
systems and technology support, payroll and human resources services, risk
management services (both insurance and engineering related), internal audits of
financial, operational, or engineering functions all of which the Venture agrees
do provide a direct benefit to the Premises and for which Manager is
appropriately entitled to reimbursement), provided that the cost to provide such
off-site services is equal to or less than the cost that a third party would
charge for providing same). All payments to be made by Manager hereunder shall
be made by check drawn on the Operating Account except petty cash items not
exceeding $1,000.00, which may be paid from a fund to be maintained by Manager
for such purposes. Manager shall not be obligated to make any advance to or for
the account of the Venture or to pay any sums, except out of funds held in the
Operating Account, nor shall Manager be obligated to incur any liability or
obligation for the account of the Venture without assurance that the necessary
funds for the discharge thereof will be provided; and, if Manager shall advance
its own funds to meet expenses of the Venture in furtherance of its duties
hereunder, the Venture shall promptly reimburse Manager therefor.
Section 7.4 Bond. Manager shall maintain, at the expense of the
Venture, comprehensive dishonesty, disappearance and destruction insurance with
an insurer satisfactory
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18
to the Venture, in such amount and form approved by the Venture, providing
insurance with regard to the faithful accounting for funds of the Venture
collected or received by Manager.
Section 7.5 Notices. All notices, demands, requests or other similar
communications required or permitted to be sent to the respective parties
hereunder shall be deemed to have been properly given or served by (i)
delivering the same personally (including overnight courier), or (ii)
transmitting the same by telecopier, or (iii) depositing the same in the United
States mail, addressed to the respective parties postpaid and registered or
certified with return receipt requested at the following addresses:
To Venture or Hines:
c/o Hines Interests Limited Partnership
222 Berkeley Street
Suite 1420
Boston, Massachusetts 02116-3751
Attn: David G. Perry
Telecopier: 617-236-4588
and to:
c/o Hines Interests Limited Partnership
East Coast Regional Office
885 Third Avenue, Suite 2700
New York, NY 10022-4835
Attn: Kenneth W. Hubbard
Telecopier: 212-230-2276
To Venture or Company:
DIHC Berkeley Associates
c/o Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Attn: John S. Moody
Rodney C. Dimock
Telecopier: 212-605-7199
To Manager:
Hines Interests Limited Partnership
222 Berkeley Street
Suite 1420
Boston, Massachusetts 02116-3751
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19
Attn: David G. Perry
Telecopier: 617-236-4588
With a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002
Attn: Hugh Tucker, Esq.
Telecopier: 713-229-1522
All notices, demands, requests or other similar communications shall
be effective upon personal delivery, receipt or upon being deposited in the
United States mail. However, if the notice, demand, request or other similar
communication is delivered by US mail, the time period in which a response to
any such notice must be given shall commence to run from the date of receipt on
the return receipt of the notice, demand request or other similar communication
by the addressee thereof. Rejection or other refusal to accept or the inability
to deliver because of changed address of which no notice was given shall be
deemed to be receipt of the notice, demand request or other similar
communication sent. In the event that registered or certified mail is not being
accepted for prompt delivery, notices may then be served by personal service
upon any officer, director or partner of any party. By giving to the other
parties at least 30 days written notice thereof, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
and each shall have the right to specify as its address any other address at
which it has a place of business or up to two (2) other addresses to which it
wishes copies of any notice sent.
Section 7.6 Entire Agreement. This Agreement constitutes the entire
agreement between the Venture and Manager relating in any manner to the subject
matter of this Agreement. No prior agreement or understanding pertaining to the
same (including without limitation, the Prior Agreement) shall be valid or of
any force or effect (provided, however, that the foregoing shall not release the
parties to the Prior Agreement for any liability or obligation thereunder
relating to periods occurring prior to the date hereof), and the covenants and
agreements herein cannot be altered, changed or supplemented except in writing
signed by the Venture and Manager.
Section 7.7 Governing Law. This Agreement is made pursuant to, and
all of the rights and obligations of the parties hereto and all of the terms and
conditions herein shall be construed in accordance with and governed by, the
laws of the Commonwealth of Massachusetts, U.S.A.
<PAGE>
20
Section 7.8 Severability. If any clause or provision of this
Agreement is illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then the remainder of this Agreement shall not
be affected thereby, and in lieu of each clause or provision of this Agreement
which is illegal, invalid or unenforceable, there shall be added, as part of
this Agreement, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and as may be
legal, valid and enforceable.
Section 7.9 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns.
Section 7.10 Assignment by Manager. The rights and obligations of
Manager hereunder shall not be assignable without the prior written consent of
the Venture except that the rights and obligations of Manager may be assigned by
Manager to an Affiliated Entity (as such term is defined in the Venture
Agreement) of Manager or to a Person Controlled by a member of the Hines Control
Group (as defined in the Venture Agreement).
Section 7.11 Subordination. This Agreement and all fees due from the
Venture to Manager pursuant hereto shall be subject and subordinate in all
respects to (i) any mortgage upon the Premises or any portion thereof executed
by the Venture and (ii) any collateral assignment of rents due under the leases
of space in any improvements on the Premises. This provision shall be
self-executing but Manager shall, upon request, execute such instruments as may
reasonably be requested by the Venture, or any such mortgagee or lender to
evidence such subordination. Nevertheless, the Manager shall be deemed to have
earned (and shall be entitled to be paid) the pro rata portion of the Management
Fee to the date of termination of this Agreement.
Section 7.12 Exculpation. Notwithstanding anything in this Agreement
to the contrary other than Section 7.13, Manager and the Venture accept and
agree that each of the covenants, undertakings and agreements herein made on the
part of Manager or the Venture, while in the form purporting to be covenants,
undertakings and agreements of the Manager or the Venture, are, nevertheless,
made and intended not as personal covenants, undertakings and agreements by
Manager's or the Venture's partners or for the purpose of binding their
respective partners personally or the assets of their respective partners but
are made and intended for the purpose of binding only, (i) with respect to the
partners of the Venture, their respective partners' interests in the assets of
the Venture, and (ii) with respect to Manager and its partners, up to One
Million Dollars ($1,000,000) in the aggregate; and that no personal liability or
personal responsibility is assumed by, nor shall at any time be asserted or
enforceable against the partners of the Venture or the partners of Manager and
their respective heirs, legal representatives, successors and assigns on account
of this Agreement or on account of any covenant, undertaking or agreement of
Manager or the Venture and their respective partners in this document contained,
all such personal liability and personal responsibility, if any, being expressly
waived and released by Manager and the Venture, one to another, and Manager and
the Venture further agree not to
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21
seek or enforce any judgments (including but not limited to specific
performance, deficiency judgments, and any and all other judgments) obtained
against the Venture or Manager, as the case may be, or against their partners
beyond the interests and amount respectively set forth above.
The parties further acknowledge and agree that no officer, director,
stockholder or agent of any corporate Venturer or corporate partner of any
Venturer shall have any personal liability for any Venturer's obligations
hereunder.
Section 7.13 Indemnity. (a) The Venture shall indemnify the Manager
and save it harmless from and against all third party claims, losses and
liabilities arising out of damage to property, or injury to, or death of persons
(including the property and persons of the parties hereto, and their agents,
subcontractors and employees) occasioned by or in connection with acts or
omissions of Manager, the Venture or the Venture's other employees or
subcontractors and all costs, fees and reasonable attorneys' expenses in
connection therewith unless such claims, losses or liability result from
Manager's fraud, gross negligence or willful misconduct.
(b) Manager (and its partners) shall be liable to the Venture only
for any fraud, gross negligence or willful misconduct committed by Manager
hereunder. Manager shall defend, indemnify and hold the Venture (and the
Venture's partners) harmless from and against any and all third party claims,
demands, losses, damages or liabilities (including, but not limited to, all
costs and reasonable attorneys' fees in connection therewith) incurred by the
Venture or its partners by reason of the fraud, gross negligence or willful
misconduct of Manager hereunder.
Section 7.14 Waivers. No delay or omission by either party in
exercising any right or power accruing upon the non-compliance or failure of
performance by the other party hereto of any provisions of this Agreement shall
impair any such right or power or be construed to be a waiver thereof. A waiver
by either party of any of the covenants, conditions or agreements hereof to be
performed by the other must be in writing and signed by the party who is waiving
such covenants, conditions or agreements.
Section 7.15 Other Activities. Notwithstanding any other provisions
of this Agreement to the contrary, Manager may engage in or possess an interest
in other business ventures of every nature and description and in any vicinity
whatsoever, including without limitation the ownership, operation, management
and development of real property, and the Venture shall have no rights in or to
such independent ventures or to any profits therefrom. Any of such activities
may be undertaken with or without notice to or participation therein by the
Venture, and the Venture hereby waives any right or claim that it may have
against the Manager with respect to the income or profits therefrom or the
effect of such activity on the Premises; provided, however, that Manager shall
act as a reasonably prudent manager in not allowing the foregoing activities to
unreasonably interfere with its obligations under this Agreement. Furthermore,
nothing contained herein shall be deemed to require the personal services of
Gerald
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22
D. Hines, individually. The Venture acknowledges that Affiliates of Manager have
ownership and management interests in the Western Component and that the
foregoing provisions of this Section 7.15 are specifically applicable to such
interests. In performance of any of its obligations and duties hereunder,
Manager shall take such action as it considers appropriate in its good faith
business judgment and actions taken by Manager in its good faith business
judgment shall satisfy the obligation of Manager under this Agreement.
Section 7.16 Representatives. Manager may act through either one of
its representatives it has appointed to oversee and make decisions for Manager.
Upon notice, Manager may at any time and for any reason substitute another
person as its authorized representative. If a particular representative shall
die, retire, withdraw for any reason or become disabled, Manager shall designate
a replacement representative within the following ten business days. The Manager
initially designates as its authorized representatives Kenneth W. Hubbard and
David G. Perry.
ARTICLE VIII
ARBITRATION
Section 8.1 Selection of Arbitrators. Whenever in this Agreement it
is provided that a dispute shall be determined by arbitration (other than a
dispute regarding a Property Manager Recommendation which shall be handled in
the matter described in Article IV), the arbitration shall be conducted as
provided in this Article. The party desiring such arbitration shall give written
notice to that effect to the other, specifying the dispute to be arbitrated and
the name and address of the person designated to act as the arbitrator on its
behalf. Within ten (10) days after said notice is given, the other party shall
give written notice to the first party, specifying the name and address of the
person designated to act as arbitrator on its behalf. If the second party fails
to notify the first party of the appointment of its arbitrator as aforesaid by
the time above specified, then the first arbitrator shall determine the dispute.
The arbitrators so chosen shall, within ten (10) days after the second
arbitrator is appointed, appoint a third arbitrator and if they cannot agree
upon said appointment, the third arbitrator shall be appointed by the Suffolk
Superior Court Judge in Suffolk County, Massachusetts. The three arbitrators
shall meet and decide the dispute and tender a written decision to the parties
within 30 days after the appointment of the third arbitrator. A decision in
which two of the three arbitrators concur shall be binding and conclusive upon
the parties and judgment thereon may be entered in any court having jurisdiction
thereof.
Section 8.2 Applicable Rules; Costs and Expenses. In designating
arbitrators and in deciding the dispute, the arbitrators shall act in accordance
with the rules then in force of the American Arbitration Association (or any
successor thereto), subject, however, to such limitations or directions as may
be placed upon them by the provisions of this Agreement. Each party shall
<PAGE>
23
pay the fees and expenses of its respective attorney and arbitrator and both
shall share equally the fee and expenses of the third arbitrator, if any, as
well as any fees payable to the American Arbitration Association or its
successor. No arbitrator shall be a person who is or has been a salaried
employee of either party during the 5 year period immediately preceding his
appointment and each such arbitrator shall have had at least seven (7) years
experience in the management of office buildings in the City of Boston. The
arbitrators shall consider all testimony and documentary evidence which may be
presented at any hearing as well as relevant facts and data which they may
discover by investigation and inquiry outside of such hearings. Each party shall
have the right to be represented by counsel and to cross examine witnesses.
Section 8.3 Applicability. The obligation of the parties to submit a
dispute to arbitration is limited to disputes arising under those Articles of
this Agreement which specifically provide for arbitration.
<PAGE>
24
In witness whereof, the Venture and Manager have executed this
Agreement of the date first above written.
VENTURE: TWO TWENTY-TWO BERKELEY VENTURE
By: HINES 222 BERKELEY LIMITED PARTNERSHIP,
a Venturer
By: Gerald D. Hines,
a General Partner
By: /s/ Jeffrey C. Hines
-----------------------------------------
Jeffrey C. Hines, as attorney-in-fact for
Gerald D. Hines
By: DIHC BERKELEY ASSOCIATES, a
Georgia general partnership, a Venturer
By: DIHC Berkeley Corp., a General Partner
By: /s/ John S. Moody
-----------------------------------------
John S. Moody
President
By: /s/ Rodney C. Dimock
-----------------------------------------
Rodney C. Dimock
Executive Vice President
MANAGER: HINES INTERESTS LIMITED PARTNERSHIP
By: HINES HOLDINGS, INC., a General Partner
By: /s/ Jeffrey C. Hines
-----------------------------------------
Jeffrey C. Hines
President
<PAGE>
Exhibit 10.106
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
THIS REAL ESTATE MANAGEMENT AND LEASING AGREEMENT ("Agreement") made and
effective as of the 1st day of March, 1997 between CHARLOTTE OFFICE TOWER
ASSOCIATES, a joint venture formed under the laws of the State of North Carolina
("Owner"), and TRAMMELL CROW SE, INC., a Delaware corporation ("Property
Manager").
WITNESSETH:
WHEREAS, Owner is the owner of an office building and parking garage
located on the real property described on Exhibit "A" attached hereto and by
this reference made a part hereof and commonly known as "Charlotte Plaza" (the
"Premises"), and Owner wishes to avail itself of the ability and experience of
Property Manager in the on-site management and leasing of the Premises; and
WHEREAS, Property Manager is willing to provide such management and
leasing services to the Premises on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the covenants herein contained, the
parties hereby agree as follows:
ARTICLE I
ENGAGEMENT AND AUTHORITY OF PROPERTY MANAGER
1.1 Engagement. Owner hereby engages Property Manager as an independent
contractor in the management, leasing and operation of the Premises and, subject
to the limitations set forth herein, hereby authorizes Property Manager to
exercise such powers with respect to the Premises as may be necessary for the
performance of Property Manager's obligations hereunder, and Property Manager
accepts such engagement on the terms and conditions hereinafter set forth.
Property Manager shall have no right or authority, express or implied, to commit
or otherwise obligate Owner in any manner whatsoever except to the extent
specifically provided herein.
ARTICLE II
PROPERTY MANAGER'S AGREEMENTS
2.1 Scope of Obligations. Property Manager shall conduct the ordinary and
usual business affairs of Owner relating to the management, leasing and
operation of the Premises and shall implement, or cause to be implemented the
policies of Owner for the conduct of such
<PAGE>
2
business affairs in accordance with the terms and conditions provided in this
Agreement and such other instructions as may be provided by Owner from time to
time. The scope of Property Manager's authority shall be limited to the express
authority granted hereunder. Property Manager agrees to use its best efforts to
diligently and efficiently manage, lease and operate the Premises in accordance
with the industry standards for operation and management of a first-class office
building in Charlotte, North Carolina and the "Approved Budget" (as hereinafter
defined) and, in connection therewith:
(a) Contracts. To contract, for periods limited to Owner's
possession of the Premises, but not in excess of one year without prior written
approval of Owner, in the name and at the expense of Owner, for gas,
electricity, water, and such other services as are necessary or convenient for
the proper operation of the Premises. Service contracts shall be written to
include a right of the Owner to terminate the agreement upon thirty (30) days
notice without payment of a fee unless otherwise approved by Owner. A schedule
of all service Contracts presently in effect with respect to the Premises is
attached hereto as Exhibit "B" and by this reference made a part hereof.
(b) Employees. To select, employ, pay, supervise, direct and
discharge all employees necessary for the operation, management, maintenance and
leasing of the Premises in accordance with the staffing plan attached hereto as
Exhibit "C" and by this reference made a part hereof (the "Staffing Plan"), and
at wages not in excess of those provided for in the Approved Budget or as
otherwise approved by Owner in writing, and to use reasonable care in the
selection and supervision of such employees. Owner shall have the right to
approve the hiring, change, or removal of any such employee contemplated by the
Staffing Plan from time to time. Likewise, Owner shall have the right to require
Property Manager to remove from the Premises any employee employed by Property
Manager in connection with the operation, management and leasing of the Building
who is not satisfactory to Owner in the exercise of Owner's good faith judgment.
Any change to the Staffing Plan must be approved by Owner in writing. All
persons employed or utilized in connection with the operation, management,
maintenance and leasing of the Premises shall be employees of Property Manager
or of such contractors as may be retained by Property Manager pursuant to the
Agreement, and not employees of Owner. Property Manager shall be responsible for
complying with all laws and regulations and collective bargaining agreements, if
any, affecting its employees, including without limitation laws and regulations
governing worker's compensation insurance and compulsory non-occupational
disability insurance. Property Manager is and will continue throughout the term
of this Agreement to be an Equal Opportunity Employer. All costs associated with
the operations of the Premises that have been included in the Approved Budget or
that have otherwise been approved by Owner in writing shall be reimbursed to
Property Manager or paid by Owner. In furtherance of the foregoing, the
salaries. wages, benefits, payroll taxes and other direct personnel expenses
incurred by Property Manager in connection with the employees retained by
Property Manager in accordance with the Staffing Plan shall be paid by Property
Manager in the percentages set forth on the Staffing Plan
<PAGE>
3
and shall be set forth in the Approved Budget. To the extent that the Staffing
Plan reflects that an employee of Property Manager is dedicating less than 100%
of its time toward the management or operation of the Premises, then Owner shall
have the right from time to time at its discretion to audit the responsibilities
of such employee for purposes of equitably reflecting the actual time allocated
by such employee to the Premises.
(c) Maintenance and Repairs; Building Improvements. To keep the
Premises in a clean and sightly condition and to make (or cause to be made by
contractors retained by Property Manager pursuant to contracts in the name of
the Owner) all repairs, alterations, replacements, and installations, do all
decorating and landscaping, and purchase all supplies necessary for the proper
operation of the Premises or the fulfillment of Owner's obligations under any
lease or other agreement of which Property Manager has notice, or compliance
with all known governmental and insurance requirements. Property Manager shall
not, however, make any non-budgeted purchase or do any non-budgeted work in
excess of $2,500.00 for any single expenditure (or $25,000 for all such
expenditures during any one year) without obtaining in each instance the prior
approval of Owner, except in circumstances which Property Manager shall deem to
constitute an emergency requiring immediate action for the protection of the
Premises or of tenants or other persons or to avoid the suspension of necessary
services. Property Manager shall promptly notify Owner immediately of the
necessity for, the nature of, and the cost of, any such emergency repairs or
compliance. Property Manager shall submit a list to Owner from time to time of
contractors and subcontractors performing tenant work, repairs, alterations or
services at the Premises under Property Manager's direction.
Property Manager shall supervise, administer and coordinate the
construction of all tenant improvements within the Premises ("Tenant Work") as a
part of its duties, including the supervision of any reconstruction of the
Premises or capital improvements. Notwithstanding the foregoing, Property
Manager acknowledges that Owner may from time to time enter into separate
agreements with third party consultants (including affiliates and/or
subsidiaries of Property Manager) to manage and supervise construction of such
Tenant Work and other improvements at the Premises. Property Manager shall
assist Owner in facilitating the efforts of such third party consultants.
Property Manager shall obtain the necessary receipts, releases, waivers,
discharges and assurances to keep the Premises free from mechanics' and
materialmen's liens and other claims. Owner shall receive the benefit of all
discounts and rebates obtainable by Property Manager in its operation,
management and maintenance of the Premises. Property Manager agrees to take
advantage of such discounts and rebates wherever available and reasonable.
If Property Manager desires to contract for repair, construction, or
any other service described in this subparagraph with a party with respect to
which any partner or shareholder of Property Manager holds a beneficial
interest, such interest shall be disclosed to and the contract must be approved
by Owner in writing before such services are procured. The cost of any such
services shall be at competitive rates, notwithstanding that tenants of the
Premises may
<PAGE>
4
be required to pay such costs. Property Manger shall not insist or require that
any tenant use Property Manager or any party with respect to which any party or
shareholder of Property Manager holds a beneficial interest to perform any
Tenant Work.
(d) Tenant Complaints and Requests. To handle promptly complaints
and requests from tenants and notify Owner promptly of any material complaint
made by a tenant. In addition, Property Manager shall, at the request of Owner,
cooperate with, coordinate and/or administer tenant surveys at no additional
cost to Owner. Property Manager shall communicate to the tenant and use its best
efforts to enforce all rules relating to the Premises as they may be established
by Owner from time to time.
(e) General Liability Insurance Requirements. To notify the general
liability insurance carrier for the Premises and Owner promptly of any personal
injury or property damage occurring to or claimed by any tenant or third party
on or with respect to the Premises and to promptly forward to the carrier, with
copies to Owner, any legal document delivered to Property Manager relating to
actual or alleged potential liability of Owner, Property Manager, or the
Premises. In no event and under no circumstances, however, shall Property
Manager be authorized or permitted to accept service of process on behalf of
Owner with respect to any legal proceeding. Property Manager shall carry
comprehensive general liability insurance with appropriate contractual and
indemnification coverage and employer liability and worker's compensation in
form, amount and from companies reasonably acceptable to Owner, shall include
Owner as an additional insured under the liability policy with appropriate
waivers of subrogation, and will deliver a copy of such liability policy or an
original certificate of insurance to Owner. The cost of such liability insurance
shall be at Property Manager's sole cost and expense. FICA, FUTA and worker's
compensation, social security and unemployment insurance for personnel employed
in connection with the operation and maintenance of the Premises at the position
and levels of staffing set forth on the Staffing Plan shall be at the expense of
Owner.
(f) Tenant Indemnifications. To advise Owner of pertinent covenants
in leases in which the tenants agree to hold Owner harmless with respect to
liability from any accidents and/or to replace broken glass, and to secure from
such tenants and forward to Owner any certificates of insurance, and renewals
thereof, required to be furnished by the terms of such leases.
(g) Bank Accounts and Disbursements. At the option of Owner, to
receive and collect rent and all other monies payable to Owner by all tenants
and licensees in the Premises and to deposit the same promptly with Wachovia
Bank of North Carolina, N.A. or such other bank as may be designated by Owner
from time to time (the "Bank") in an interest bearing account approved by Owner
and in the name of Owner (the "Bank Account'). The Bank Account shall be used
exclusively for such rent and other monies and shall in no event be commingled
with funds of Property Manager. Property Manager may disburse funds from said
Bank Account solely
<PAGE>
5
in payment for, or to reimburse Property Manager for payment of, authorized
expenses incurred in connection with the operation of the Premises in accordance
with the then current Approved Budget approved by Owner pursuant to this
Agreement. Property Manager shall obtain Owner's written approval of all checks
for payments in excess of $10,000 (with the exception of utility payments) and
for any payments to Property Manager. In the event state law requires that
tenant security deposits be held in a separate account, such account shall be
established by Property Manager in the name of Owner and may be non-interest
bearing (to the extent permitted by applicable law). Owner's representative
designated from time to time will be a signatory on all bank accounts maintained
by Property Manager.
(h) Administration of Leases. To administer all present and future
leases for the Premises including, but not limited to, the calculation and
billing of all rents, pass-throughs, CPT adjustments and "true-up"
reconciliations.
(i) Collection and Other Actions. Upon the prior written approval of
Owner, to institute all necessary legal actions or proceedings for the
collection of rent or other income from the Premises, or the ousting or
dispossessing of tenants or other persons therefrom, and all other matters
requiring legal attention. Property Manager agrees to use its best efforts to
collect rent and other charges from tenants in a timely manner and to pursue
Owner's legal remedies for non-payment of same. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises.
(j) Fidelity Bond. To bond Property Manager and/or all of Property
Manager's employees who may handle or be responsible for monies or property of
Owner with a "comprehensive 3-D" or "Commercial Blanket" fidelity bond, in an
amount not less than $2,000,000.
(k) Notifications. To notify Owner immediately of any fire, accident
or other casualty, condemnation proceedings, rezoning or other governmental
order, lawsuit or term thereof involving the Premises, and any violations
relative to the leasing, use, repair and maintenance of the Premises under
governmental laws, rules, regulations, ordinances, or like provisions, together
with copies of supporting documentation. In the case of any fire or other
material damage to the Premises, Property Manager shall immediately provide
telephone notice thereof to the insurance carrier so that an insurance adjuster
can view the damage before repairs are commenced, and complete customary loss
reports in connection with fire or other damage to the Premises. In addition,
Property Manager shall cooperate in such a manner as may be required for
purposes of adjusting and settling any claims relating to such damage.
(l) Ad Valorem Taxes. To assist in Owner's ad valorem tax review
program and to cooperate with Owner, when so requested, in efforts to reduce
such taxes. Property Manager shall promptly furnish Owner with copies of all
assessment notices and receipted tax
<PAGE>
6
bills.
(m) Compliance with Laws. As is reasonable and customary, to
promptly comply with all laws, ordinances, orders, rules, regulations and
requirements of all Federal, State and municipal or other governmental
authorities, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services Office having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing which may be applicable to the Premises or any part thereof or to
the leasing, use, repair, operation and management thereof. In the event such
compliance is undertaken in the name and on behalf of Owner, such compliance
shall be at Owner's expense in accordance with the Approved Budget, unless such
compliance is solely of an administrative nature. Property Manager shall give
prompt notice to Owner of any known violation or notice of alleged violation of
such laws, rules, regulations and requirements of which Property Manager has
knowledge. Property Manager shall not bear responsibility for failure of the
Premises or the operation thereof to comply with such laws, rules, regulations
and requirements unless Property Manager has committed negligence or a willful
act or omission in the performance of its obligations under this Agreement or in
the performance of any other duties owed to Owner or third parties by Property
Manager.
2.2 Reporting and Transfer of Funds. Property Manager agrees to prepare
and submit to Owner certain reports relating to the management, leasing and
operation of the Premises generally described on Exhibit "C" attached hereto and
by this reference made a part hereof at the time specified on such Exhibit "C".
Such reports, together with any other reports reasonably required by Owner from
time to time, shall be in a form satisfactory to Owner. Property Manager shall
remit to Owner the net receipts from the Premises as directed by Owner, and in
any event no less frequently than weekly. Property Manager agrees that Owner
shall have the right to require the transfer to Owner at any time of any funds
in the Bank Account considered by Owner to be in excess of an amount reasonably
required by Property Manager for disbursement purposes in connection with the
Premises.
Property Manager agrees to keep records with respect to the leasing,
management and operation of the Premises, including records of receipts and
disbursements, and to retain those records until the expiration or earlier
termination of this Agreement, at which time Property Manager shall turn over
all such records to Owner. Owner shall have the right to inspect such records
and audit the reports required by this Section during business hours until such
time as all such records have been delivered over to Owner following the
expiration or earlier termination of this Agreement.
2.3 Required Software. In connection with its management of the Premises,
Property Manager shall acquire and utilize such computer software as Owner may
require. Property Manager shall keep such software current and install all
upgrades, enhancements and new versions of the software which may be from time
to time released by the vendor and/or required by Owner
<PAGE>
7
(collectively, the "Required Software"). Property Manager shall cause all
personnel who use the Required Software to attend and complete basic system
training programs offered by the vendor and licensor of the Required Software.
Property Manager shall also be responsible for obtaining and maintaining any
equipment required for proper operation of the Required Software, including but
not limited to, the communications equipment required for transmission of data
to Owner. Owner may from time to time require additional or substitute software
to be included among the Required Software and shall provide not less than sixty
(60) days' advance notice to Property Manager of such additions or
substitutions. Owner shall not be unreasonable with respect to the frequency of
changes in the Required Software. Property Manager shall use the Required
Software to enter, process, store and transmit data to Owner as Owner may from
time to time require and shall comply with any data reporting standards as Owner
may establish.
2.4 Financial Controls. Property Manager shall exercise such control over
accounting and financial transactions as is reasonably required to protect
Owner's assets from loss or diminution due to error, negligence or willful
misconduct on the part of Property Manager's associates or employees. Losses
caused by such error, negligence or willful misconduct shall be borne by
Property Manager. Owner shall have the right to review control procedures and
within reason may require changes to the existing procedures.
2.5 Budgeting. Property Manager shall prepare and submit to Owner proposed
operating and capital budgets for the promotion, leasing, operation, repair, and
maintenance of the Premises in such form as Owner shall direct from time to
time. A preliminary version of the budget (the "Initial Budget") will be
delivered to Owner on or before August 1 of each calendar year, or as otherwise
stipulated by Owner. All budgets will be prepared on an accrual basis showing a
month by month projection of income and expense and capital expenditures for the
forthcoming calendar year, together with an annual business plan (including
proposed leasing guidelines) for the Premises, which budget and business plan
shall incorporate appropriate statements and schedules prepared in accordance
with generally accepted principles. In addition, at the time Property Manager
submits the Initial Budget to Owner, and at such other times as Owner may
reasonably request, Property Manager shall provide Owner with a written
description of the prevailing marketing conditions in the Charlotte, North
Carolina area for projects comparable to the Premises. The Initial Budget shall
also include any revisions to the Staffing Plan proposed by Property Manager,
and shall contain such other reports or data which the Owner in its reasonable
discretion deems to be relevant to the management, operation and leasing of the
Premises.
Owner and Property Manager shall consult together so as to revise
the Initial Budget in such a manner as may be required to obtain Owner's written
approval. After receiving Owner's written approval of the Initial Budget,
Property Manager shall implement such budget and shall be authorized to make the
expenditures and incur the obligations provided for therein (such Initial
Budget, as so approved by Owner, is referred to herein as the "Approved
Budget").
<PAGE>
8
If Owner has not approved the Initial Budget by the beginning of the year to
which it applies then, until such budget is so approved by Owner, Property
Manager shall operate the Premises according to the previous year's approved
budget until the proposed Initial Budget is fully approved by Owner. Property
Manager shall obtain Owner's specific approval prior to contracting for any
capital expenditures, even if already included in the Approved Budget. Property
Manager agrees to use its best efforts to ensure that the actual costs of
operating the Premises do not exceed said Approved Budget. Property Manager
shall not spend any non-budgeted amount in excess of $2,500 for any single
expenditure (or $25,000 for all such expenditures during any one year) without
Owner's prior written approval.
2.6 Leasing Responsibilities. Property Manager agrees to use its best
efforts to cause the Premises to be rented and remain rented to desirable
tenants satisfactory to Owner and, in connection therewith:
(a) Scope of Obligations. To negotiate leases, renewals, extensions
and expansions of leases fairly at appropriate times on an exclusive basis, it
being understood that all inquiries to Owner with respect to leasing any portion
of the Premises shall be referred to Property Manager. Property Manager agrees
to use its best efforts to retain existing tenants and to lease any vacate space
in the Premises to desirable tenants in accordance with instructions articulated
by Owner from time to time in writing pursuant to approved business plans, or
otherwise. All leasing documentation shall be prepared by Owner's counsel (or by
Property Manager, as directed by Owner) on Owner's approved form of lease
agreement, and shall be submitted to the Owner's designated representative for
approval and execution by Owner. Any and all proposals submitted by Property
Manager to prospective tenants from time to time shall be expressly nonbinding
by their terms until a final lease has been executed by Owner and all other
authorized parties thereto. References of prospective tenants, as well as their
varying use requirements, shall be investigated carefully by Property Manager,
and Property Manager shall obtain such financial statements, credit reports, and
other documentation concerning the creditworthiness of any prospective tenant as
may be reasonably required for purposes of fully and fairly evaluating such
creditworthiness. Property Manager agrees to prepare and submit the reports
described on Exhibit "D" attached hereto and by this reference made a part
hereof relating to the leasing of the Premises in a form and at the time
specified by Owner from time to time.
(b) Marketing. With Owner's prior written approval and at Owner's
expense in accordance with the Approved Budget, to advertise the Premises or
portions thereof for rent by means of periodicals, plans, brochures and other
means appropriate to the Premises. All signage and other promotional materials
placed on the Premises or otherwise distributed by Property Manager shall be
approved by Owner.
2.7 Confidentiality. Property Manager agrees for itself and all persons
retained or employed by Property Manager in performing its services, during the
term of this Agreement and
<PAGE>
9
thereafter, to hold in confidence and not to use or disclose to others any
confidential or proprietary information of Owner heretofore or hereafter
disclosed to Property Manager, including but not limited to any data,
information, plans, programs, processes, costs, operations, or tenants which may
come within the knowledge of Property Manager in the performance or as a result
of its services, except where Owner specifically authorizes Property Manager to
disclose any of the foregoing to others or such disclosure reasonably results
from the performance of Property Manager's duties hereunder.
2.8 Indemnification. Property Manager shall indemnify and save harmless
Owner from and against all liability to or suits, claims, and demands
(including, without limitation, all costs and attorney's fees and expenses
incurred in connection therewith) made by or on behalf of any person, firm,
corporation or other entity arising out of any negligence or willful misconduct
on the part of the Property Manager, its employees, contractors or
subcontractors in connection with Property Manager's performance of its
obligations under this Agreement.
2.9 Liens. Property Manager shall use its best efforts to ensure that no
third party files or suffers to be filed any materialman's or mechanic's lien
against the Premises arising out of material incorporated therein or work
performed therein or thereon upon the request or order of Property Manager.
2.10 Maintenance of Operations. Property Manager agrees at all times to
maintain an organization sufficient to enable it to perform all of its
obligations and functions under this Agreement. Property Manager shall cause any
and all licenses, permits and other approvals required from time to time to use,
operate, maintain and manage the Premises to remain in full force and effect. In
addition, Property Manager shall, at its own expense, qualify to do business in
the State of North Carolina, shall cause its business and any other licenses or
permits required for purposes of performing its obligations hereunder to remain
in full force and effect at all times, and shall provide written notice of any
required extension, replacement or renewal to Owner prior to the expiration
thereof.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner Payments. Owner, at its option. may pay directly all of the
following charges relating to the Premises: taxes, special assessments, ground
rents, legal fees and expenses, insurance premiums (other than premiums for
which Property Manager is responsible) and mortgage payments.
3.2 Insurance. Owner shall self-insure or, at its option. require Property
Manager to coordinate the placement of insurance upon the Premises including
both liability and all risk
<PAGE>
10
insurance and shall look solely to such insurance or self-insurance for
indemnity against any loss or damage to the Premises, except in the case of
Property Manager's negligence or willful misconduct. To the extent that policies
shall be procured, Owner shall obtain waivers of subrogation against Property
Manager under such policies. Property Manager shall be an additional insured as
real estate manager under Owner's liability policy.
3.3 Indemnity. With respect to liabilities arising out of the use and
operations of the Premises and arising under this Agreement, other than
liabilities arising out of the employment relationships between Property Manager
and its employees, Owner shall indemnify and save harmless Property Manager from
and against all claims, losses and liabilities (including, without limitation,
all costs and attorney's fees and expenses incurred in connection therewith)
resulting from damage to property or injury to, or death of, persons (including,
but not limited to, the property and persons of the parties hereto and their
agents, contractors, subcontractors and employees) occasioned by or arising out
of, acts or omissions (other than criminal acts) of (a) Property Manager (except
in cases of willful misconduct, negligence or breach of this Agreement), (b) the
employees, contractors or subcontractors of Property Manager (except in cases of
willful misconduct, negligence or breach of this Agreement), or (c) Owner or
Owner's agents, employees, contractors and subcontractors. Nothing contained in
this Section 3.3 shall be construed as creating or evidencing an employment
relationship between Owner and any or all persons employed or utilized by
Property Manager for the operation and maintenance of the Premises.
ARTICLE IV
PROPERTY MANAGER'S FEES
AND LEASING COMMISSIONS
4.1 Management Fees. As management fees for the services performed
pursuant to management and operation of the Premises. Owner agrees to pay
Property Manager a sum payable in monthly installments equal to two and three
quarters percent (2.75%) of the monthly base rent, additional rent, rental
escalations, operating expenses, real estate pass-throughs, and other income
from the use or occupancy of the Premises actually collected. Said management
fee shall be payable monthly and shall be based on actual collected receipts
from the immediately preceding calendar month. Property Manager shall withdraw
said fee from the Bank Account pursuant to a draft signed by Owner and Property
Manager, and shall account for such fees as provided for herein. It is expressly
understood and agreed that management fees shall be applicable only to rent or
other income actually collected, and that there shall be excluded therefrom the
following: direct charges for taxes, insurance, fuel, electricity, water, labor
or any other expense pertaining to the operation and maintenance of the Premises
which are paid directly by a tenant to any taxing authority, utility or service
company; fire loss proceeds; condemnation proceeds; capital improvements;
remodeling and tenant change or improvement costs (including
<PAGE>
11
any overhead factor payable by tenants); amortization for tenant work or any
loan or advance relating thereto; security deposits; and any charges paid by a
tenant for building maintenance such as lighting, maintaining, policing or
supervising the public areas or common facilities of the Premises.
Notwithstanding the foregoing, to the extent base rent is stated on a partially
net basis (i.e., a component of the base rent is intended to represent only a
portion of base year operating expenses and/or real estate taxes), an amount
equal to the then current estimate on a rentable square foot basis of the
operating expenses and/or real estate taxes not included in the base rent,
projected for the fiscal year in which the lease commencement date is projected
to occur, shall be added to the base rent for purposes of calculating Property
Manager's management fees hereunder. In the event that a tenant shall pay rent
in advance, no compensation shall be due based on such collected rent until the
month for which such rent is payable. In the event that the term of this
Agreement expires or is terminated on any day other than the end of a calendar
month, the management fees payable by Owner to Property Manager hereunder shall
be prorated based on the actual number of days during such month in which this
Agreement was in full force and effect.
4.2 Leasing Commissions. For acting as Owners' exclusive representative
for leasing of space in the Premises, Owner shall pay Property Manager for its
services in connection with the procurement of such leases as follows:
(a) New Leases. For new leases signed during the term of this
Agreement, Owner agrees to pay Property Manager a cash-out commission in the
amount of four percent (4.0%) of "Aggregate Base Rental" (as hereinafter
defined) due and payable with respect to any such new lease. In the event that a
third party cooperating broker is involved in the procurement of such new lease
(a "Co-Broker"), Property Manager's commission shall be reduced to two percent
(2.0%) of Aggregate Base Rental. In addition, Owner shall enter into a separate
agreement with the Co-Broker pursuant to which Owner shall agree to pay
Co-Broker an amount not to exceed four percent (4.00%) of Aggregate Base Rental.
For purposes of this Agreement, "Aggregate Base Rental" shall mean the total of
base rent and pre-determined fixed increases in rent stated in the lease to be
paid by the tenant during the original lease term up to a maximum of ten (10)
years (unless otherwise agreed by Owner in writing), and shall specifically
exclude percentage rent, variable escalations, CPI escalations, operating
expense escalations, real estate tax escalations or similar pass-throughs or any
portion of said base rent attributable to free rent or abatements. In the event
a lease provides that the tenant is to pay directly for some or all of the
operating expenses and/or real estate taxes associated with its space then, for
purpose of calculating Aggregate Base Rental, such rental shall be increased by
an amount equivalent to the estimated annual expenses that will be paid by
tenant during the first year of its lease. Unless otherwise agreed by Owner in
writing, no commission will be paid for any portion of a lease term that exceeds
ten (10) years.
(b) Renewals, Extensions and Expansions. For renewals, extensions or
expansions of existing leases exercised or otherwise consummated during the term
of this
<PAGE>
12
Agreement, Owner agrees to pay Property Manager a cash-out commission in the
amount of two percent (2.0%) of Aggregate Base Rental due and payable with
respect thereto. In the event that a Co-Broker is involved in the procurement of
such renewal, extension or expansion, Property Manager's commission shall be
reduced to one percent (1.0%) of Aggregate Base Rental. In addition, Owner shall
enter into a separate agreement with the Co-Broker pursuant to which Owner shall
agree to pay Co-Broker an amount not to exceed two percent (2.0%) of Aggregate
Base Rental. Unless otherwise agreed by Owner in writing, no commissions will be
due for any portion of a renewal, extension or expansion that exceeds ten (10)
years. In no event and under no circumstances shall the Property Manager be
entitled to any leasing commissions, fees, or other charges for the lease,
renewal, extension or expansion of any lease in the Premises after the
expiration of this Agreement (as opposed to upon termination, as more
particularly addressed in paragraph 5.4, below), regardless of whether such
renewal, extension or expansion arises under or by virtue of an option or other
right contained in a lease procured by Property Manager.
(c) Payment Terms. Leasing commissions for new leases and expansions
shall be paid fifty percent (50%) within thirty (30) days after lease execution
or modification, as the case may be, by all parties and fifty percent (50%)
within thirty (30) days after rent commencement. In the event of a renewal or
extension, any commission payment due shall be paid within thirty (30) days of
the execution of the renewal or extension documentation or the exercise of any
written option therefor. In the event that Owner signs a direct lease with a
subtenant for the period following the expiration of the sublease and
corresponding prime lease, Owner shall pay a commission on such direct lease at
the rate specified above for new leases at the time and in the manner provided
with respect to commissions on new leases. In the event a new lease contains a
cancellation option exercisable by the tenant, leasing commissions will be paid
through and including the termination date, with the commission for the balance
of the lease term payable when and if such tenant does not terminate the lease
in accordance with such cancellation option.
(d) Cooperation with Brokers. Property Manager shall cooperate with
outside brokers, and all commissions to such brokers shall be subject to the
written approval of Owner. The cost of all approved commissions will be paid by
Owner. Property Manager will assist Owner in negotiating the terms of fees to
outside brokers, and will submit recommendations to Owner regarding the
percentage rate for outside brokerage commissions. In addition, Property Manager
shall cooperate with and assist Owner in connection with the sale, disposition,
financing or refinancing of the Premises from time to time.
4.3 Expenses of Property Manager. Owner will be responsible to reimburse
Property Manager for expenses or costs incurred by or on behalf of Property
Manager pursuant to the terms of the Approved Budget in connection with the
leasing of the Premises. Unless included in the Approved Budget or allowed
elsewhere in this Agreement, all leasing and marketing expenses shall be paid by
Property Manager.
<PAGE>
13
4.4 Acknowledgments Regarding Compensation. The leasing commissions
provided for in this Agreement are the only commissions, finders fees, or
similar charges which Property Manager is entitled to receive with respect to
the leasing of space in the Premises; provided, however, that Property Manager
may be retained by tenants for purposes of providing general construction
services, construction management, move management and subleasing services so
long as any such agreements are disclosed to and approved by Owner in writing as
required by the provisions of subparagraph 2(c), above. No salary, wages,
benefits, or other payments shall be paid by Owner to Property Manager on
account of the services of its employees to be rendered for purposes of
performing such leasing responsibilities other than the commissions described in
this Agreement. Property Manager shall remit to Owner any other fee, commission
or reimbursement received by it from any tenant, broker or other party for the
leasing of space in the Premises. (A) Further, no commission shall be due to
Property Manager on any sale, disposition or refinance of the Premises unless
such commission is specifically provided for in a separate written commission
agreement hereinafter executed by Owner and Property Manager.
(A): except as provided for above in regard to general construction services,
construction management, move management and subleasing services
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 Term. This Agreement shall become effective as of the date hereof and
will continue in full force and effect for a term of one (1) year.
5.2 Termination. This Agreement may be terminated by Owner or Property
Manager at any time (a) automatically and without notice if the Premises are
sold to a bona fide third party purchaser or the Premises are acquired through
foreclosure of a mortgage or deed in lieu of foreclosure, or (b) for cause by
the non-defaulting party, at its option, upon the happening of any of the
following events of default
(i) Bankruptcy. If Property Manager makes a general assignment
for the benefit of creditors; files in the courts a petition in bankruptcy, or
insolvency, or for a reorganization, or for the appointment of a receiver or
trustee of all or a substantial part of its property; voluntarily takes any
advantage of any bankruptcy or insolvency law; an involuntary petition or any
answer is filed against the other proposing the adjudication as a bankrupt which
is not discharged or denied within sixty (60) days thereafter; or if Property
Manager is insolvent by reason of being unable to pay debts as they mature or
otherwise is adjudicated bankrupt;
(ii) General Breach. Upon the occurrence of a breach, default,
or non compliance by Property Manager of any of the obligations, agreements or
covenants to be performed by Property Manager hereunder contained in this
Agreement, and the failure of Property Manager to cure such breach, default or
non-compliance within thirty (30) days following receipt of written notice from
the Owner specifying such breach, default or compliance
<PAGE>
14
provided that if the breach, default or non-compliance is not curable within
said thirty (30) day period, then upon Property Manager's failure to commence
the curing of such breach, default or non-compliance within said thirty (30) day
period and thereafter diligently and continuously pursue such cure to completion
within said (60) days from the date of receipt of such written notice of default
from Owner;
(iii) Non-Payment. Failure of Owner to pay or reimburse
Manager any sums stipulated in this Agreement, said termination to become
effective upon Manager's having served Owner written notice of such failure and
Owner's continued failure to remedy or correct such non-payment within thirty
(30) days after receipt of such notice;
(iv) Casualty or Condemnation. If the Premises are damaged by
fire or any other casualty or are taken through the exercise of the power of
eminent domain or sale in lieu thereof and, in Owner's reasonable opinion, such
damage or taking materially affects the operation of the Premises for their
intended purpose and the Premises cease to be operated for such purpose;
(v) Acts of Moral Turpitude. An adjudication of violation of
any criminal or civil statute, law or regulation involving or related to moral
turpitude applicable to Property Manager (as opposed to building codes and other
statutes, laws, orders, regulations or rulings applicable to the Premises);
(vi) Authority. Property Manager acts outside the scope of its
authority created herein in some material manner; and
(vii) Fraud and Embezzlement. Property Manager commits any act
of fraud or misappropriates or embezzles any funds hereunder, or furnishes any
statement, report, notice, rider or schedule to Owner which is knowingly untrue
or misleading in any material respect on the date as of which the facts set
forth therein are stated or certified.
5.3 Transition of Premises. Upon termination of this Agreement for any
reason, Property Manager shall deliver the following to Owner or Owner's duly
appointed representative on or before thirty (30) days following the termination
date:
(a) A final accounting reflecting the balance of income and expenses
for the Premises as of the date of termination,
(b) Any balance or monies due to Owner or tenant security deposits,
or both, held by Property Manager with respect to the Premises, and
(c) All records, contracts, drawings, leases, correspondence,
receipts for
<PAGE>
15
deposits, unpaid bills, summary of all leases in existence at the time of
termination, and all other papers or documents which pertain to the Premises.
Such data and information and all such documents shall at all times be the
property of Owner.
5.4 Leasing Commissions After Termination. If this Agreement is terminated
by Property Manager or Owner, Owner shall recognize Property Manager as the
broker in any ongoing negotiations with a "Prospective Tenant" (as hereinafter
defined) for a lease, renewal, extension or expansion with respect to any part
of the Premises pending as of the date of receipt of such notice of termination
(the "Notice Date") that is subsequently consummated within six (6) months from
such Notice Date. "Prospective Tenant" shall mean any tenant with whom
substantial, active, continuous and ongoing negotiations are currently underway
and who has (a) visited the Premises with Property Manager (or whose leasing
broker has visited the Premises with Property Manager on Prospective Tenant's
behalf) prior to the Notice Date, and (b) has received a written proposal from
Property Manager or submitted a written proposal to Property Manager prior to
the Notice Date. Property Manager shall provide a list of Prospective Tenants
(the "Prospect List") to Owner on or before the effective date of any such
termination. The Prospect List will be subject to the review and approval of
Owner, which approval shall not be unreasonably denied. Unless otherwise agreed
to in writing by all parties, in the event of the consummation of a lease,
renewal, extension or expansion with a Prospective Tenant appearing on the
approved Prospect List within six (6) months of the Notice Date, Owner shall pay
to Property Manager a leasing commission with respect thereto in the amount, at
the time, and in the manner set forth in Section 4.2 hereof. Property Manager
shall not begin negotiations for any new lease, renewal, extension or expansion
after the Notice Date without the prior written consent of Owner. No commissions
shall be paid to Property Manager in the event of the consummation of a lease
more than six (6) months after the Notice Date. Except as otherwise provided
hereinabove in this Section 5.3, in no event and under no circumstances shall
the Property Manager be entitled to any leasing commissions, fees, or other
charges for the lease, renewal, extension or expansion of any lease in the
Premises after the termination of this Agreement, regardless of whether any such
renewal, extension or expansion arises under or by virtue of an option or other
right contained in a lease procured by Property Manager. In addition, in the
event that this Agreement is terminated by Owner as a result of any default by
Property Manager under the provisions of Section 5.2(g) of this Agreement, Owner
shall not have any further obligation or responsibility for payment of any
leasing commissions heretofore or thereafter accruing hereunder, or for any
commissions payable to Property Manager's affiliate. Trammell Crow Company,
Brokerage Division, Ltd. ("Crow Brokerage"), under or by virtue of the "Prior
Leasing Agreement" (as defined hereinbelow), which commissions under the Prior
Leasing Agreement are more fully and specifically set forth on Exhibit "E"
attached hereto and by this reference made a part hereof. Property Manager
hereby represents and warrants to Owner that no other person, firm or entity is
entitled to be paid all or any part of the commissions described on the attached
Exhibit "E", and Property Manager hereby indemnifies and agrees to hold Owner
harmless from and against any claims, causes of action, damages or expenses
(including reasonable attorneys
<PAGE>
16
fees) resulting from any claim by any person, firm or entity for payment of all
or any portion of the commissions described on the attached Exhibit "E". In
addition, Property Manager hereby expressly acknowledges and agrees that it is
not owed or entitled to any leasing commissions, fees, or other charges with
respect to the leasing of space in the Premises as of the date hereof.
ARTICLE VI
ASSIGNMENT; CHANGE IN CONTROL
6.1 Assignment; Change in Control. This Agreement shall not be assignable
by either party and can be changed only by a writing signed by the parties
hereto. A sale or transfer of fifty percent (50%) or more of the issued and
outstanding stock of Property Manager shall be deemed to be an assignment
subject to Owner's consent hereunder. No services to be performed by Property
under this Agreement shall be delegated by Property Manager to any other person
or firm without the prior written consent of Owner, except that Property Manager
may engage independent subcontractors to provide incidental services usually
performed by independent contractors under sound property management practices
customary in the Charlotte, North Carolina metropolitan area. Subject to Owner's
direction, Property Manager will cooperate with accountants, lawyers or
consultants pursuant to contracts in the name of the Owner to file income tax
returns, respond to audit requests, perform real estate tax appeals, property
audits, and other normal and customary services required in connection with
operation of the Premises.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. Any statement, notice, recommendation, request, demand,
consent or approval under this Agreement shall be in writing and shall be deemed
delivered and received when deposited in the United States mail certified or
registered mail, return receipt requested, postage prepaid, or deposited with a
nationally recognized overnight courier service such as Federal Express, and
addressed to the respective parties at the addresses specified below, or at such
other address as they shall each specify in a notice addressed and mailed as
hereinabove set forth:
to Owner: Charlotte Office Tower Associates
c/o DIHC Management Corporation
200 Galleria Parkway, NW
Suite 2000
Atlanta, Georgia 30339
Attn: Mr. Barrington H. Branch
<PAGE>
17
with a Copy to: Long Aldridge Norman LLP
One Peachtree Center
303 Peachtree Street, NE, Suite 5300
Atlanta, Georgia 30308
Attn: W. Gregory Null, Esq.
to Property Manager: Trammell Crow SE, Inc.
130 Charlotte Plaza
201 S. College Street
Charlotte, North Carolina 28244
Attn: Mr. James Apple
with a Copy to: Trammell Crow Company
2001 Ross Avenue
Dallas, Texas 75201
Attn: Legal Department
7.2 Severable Provisions. Each provision of this Agreement is intended to
be severable. If any term or provision hereof shall be determined by a court of
competent jurisdiction to be illegal or invalid for any reason whatsoever, such
provision shall be severed from this Agreement and shall not affect the validity
of the remainder of this Agreement.
7.3 Expenses of a Dispute. In the event either of the parties to this
Agreement shall institute any action or proceeding against the other party
relating to this Agreement, the unsuccessful party in such action or proceeding
shall reimburse the successful party for its disbursements incurred in
connection therewith and for reasonable attorney's fees actually incurred.
7.4 No Consent or Waiver. No consent or waiver, express or implied, by
either party hereto or of any breach or default by the other party in the
performance by the other of its obligations hereunder shall be valid unless in
writing, and no such consent or waiver shall be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such party hereunder.
Failure on the part of either party to complain of any act or failure to act of
the other party or to declare the other party in default, irrespective of how
long such failure continues shall not constitute a waiver by such party of its
rights hereunder. The granting of any consent or approval in any one instance by
or on behalf of Owner shall not be construed to waive or limit the need for such
consent in any other or subsequent instance.
7.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of North Carolina. The venue of any action or
proceeding brought by either party
<PAGE>
18
against the other arising out of this Agreement shall, to the extent legally
permissible, be Mecklenburg County, North Carolina.
7.6 Competitive Ventures. It is understood that Property Manager is
engaged in the development, management, leasing and sale of real estate similar
to the business of Owner and may, from time to time, agree to develop, manage,
lease and sell other real estate which may compete with the business of Owner.
Owner hereby consents to the pursuit of such competitive ventures by Property
Manager and acknowledges that such ventures shall not be deemed wrongful or
improper so long as neither Property Manager nor its affiliates shall solicit
any Tenants in the Premises or attempt to induce such Tenants to relocate out of
the Premises and into a competing property owned, controlled, or managed
directly or indirectly by Property Manager or any affiliate thereof during the
term of such Tenant's lease in the Premises. Property Manager agrees to fulfill
its duties under this Agreement in a first class manner and shall use its best
efforts to market the Premises to all qualified prospective tenants interested
in occupying Class A office space in Charlotte, North Carolina.
7.7. Limited Recourse. Enforcement of any provisions hereof against Owner
shall be limited to the property of Owner, and no recourse shall be had by
Property Manager against any officer, director, shareholder, employee or partner
of Owner. In addition, no recourse shall be had by Owner against any officer,
director, shareholder, employee or partner of Property Manager.
7.8 Subordination to Rights of Mortgage Holders. The rights of Property
Manager hereunder are subject and subordinate to any deed of trust now or
hereafter placed on the Premises by Owner, to the rights of any successful
bidder at any foreclosure sale conducted pursuant to such deed of trust, and to
the rights of any successor in title to the Premises by virtue of a deed in lieu
of foreclosure. Any and all of the foregoing parties shall take title to the
Premises free and clear of any claims of the Property Manager hereunder.
7.9 Prior Agreements. The parties hereto do hereby covenant and agree that
the terms of that certain Leasing Agreement (the "Prior Leasing
Agreement"),dated as of January 21, 1987, between Owner and Crow Brokerage, and
that certain Management Agreement, dated as of January 21, 1987, between Owner
and Crow Brokerage, and any amendments or modifications thereto, and any and all
other agreements, side letters, and other understandings to which Owner and Crow
Brokerage are parties pertaining to the management and leasing of Premises have
been terminated and are of no further force or effect except with respect to the
indemnity obligations of Owner and Crow Brokerage thereunder. Owner and Property
Manager acknowledge and agree that Owner has no obligation or agreement to pay
Property Manager any leasing commissions, charges, fees, or other remuneration
in consideration for leasing space in the Premises except as expressly set forth
in this Agreement, and that no other agreements or understandings, written or
oral, exist between Owner and Property Manager pertaining to the management and
leasing of the Premises.
<PAGE>
19
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
OWNER:
CHARLOTTE OFFICER TOWER ASSOCIATES
By: BALSAM MOUNTAIN, INC., a joint venturer
By: /s/
------------------------------------
Name: Robert T. Sorrentino
Title: Vice President
By: CHARLOTTE PLAZA PROPERTIES,
INC., a joint venturer
By: /s/
------------------------------------
Name: Robert T. Sorrentino
Title: Vice President
PROPERTY MANAGER:
TRAMMELL CROW SE, INC.,
a Delaware corporation
By: /s/
-----------------------------------------
Name: James W. Apple, Jr.
Title: EVP
<PAGE>
20
SCHEDULE OF EXHIBITS
Exhibit "A" - Legal Description
Exhibit "B" - Schedule of Service Contracts
Exhibit "C" - Staffing Plan
Exhibit "D" - Schedule of Required Reports for Premises
Exhibit "E" - Schedule of Leasing Commissions Under Prior Leasing Agreement
[Exhibits to be provided by Company upon request]
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
The land, and all improvements thereon, beginning at an iron pin located at the
intersection of the southeasterly margin of the right of way of South College
Street (which said margin is located parallel to and 35 feet southeasterly from
the center line of the existing paving of South College Street) with the
southwesterly margin of the 80 foot wide right of way of East Fourth Street, and
running thence from said Beginning Point along said margin of the right of way
of East Fourth Street, South 41-18-17 East 387.05 feet to a point; thence South
51-30-37 West 174.93 feet to a point; thence North 38-25-42 West 11.00 feet to a
point; thence North 43-23-06 West 14.54 feet to a point; thence North 43-16-42
West 158.40 feet to a point; thence North 43-38-48 West 27.16 feet to a point;
thence South 50-47-54 West 186.42 feet to a point located in the northeasterly
margin of the 80 foot wide right of way of East Third Street; thence with the
aforesaid margin of said right of way, North 42-42-36 West 176.61 feet to an
iron pin located intersection of said right of way with the aforesaid
southeasterly margin of the right of way of South College Street; thence with
said margin of the right of way for South College Street, North 51-08-30 East
372.24 feet to the point or place of Beginning; all as shown on that certain map
of the Area Bounded by East Third Street, South College Street, East Fourth
Street and Southern Railway by Ralph Whitehead & Associates, dated June 27, 1979
(Drawing No. D-1293.1), and further as shown on that certain Map of Southern
Railway Property showing Parcel Lines by Ralph Whitehead & Associates, dated
June 11, 1980, revised July 24, 1980 (Drawing No. D-1293.1A).
Said premises are located in the City of Charlotte, County of Mecklenburg and
State of North Carolina.
<PAGE>
Exhibit 10.107
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
by and between
TransCanal Properties, Inc.
"Owner"
and
Faison & Associates, Inc.
"Property Manager"
<PAGE>
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
Premises: 11 Canal Center Plaza
Alexandria, Virginia
THIS AGREEMENT ("Agreement") is made as of the 1st day of January,
1996 by and between TransCanal Properties, Inc. ("Owner"), and Faison &
Associates, Inc. ("Property Manager"):
WITNESSETH:
WHEREAS, Owner is the owner of the above described premises, and
Owner wishes to avail itself of the ability and experience of Property Manager
in the on-site management of said premises; and
WHEREAS, Property Manager is willing to provide such management
services to said premises on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
ENGAGEMENT AND AUTHORITY OF PROPERTY MANAGER
1.1 Owner hereby engages Property Manager as an independent contractor in the
management, leasing and operation of the above property (the "Premises"), and,
subject to the limitations set forth herein, hereby authorizes and directs
Property Manager to exercise such powers with respect to the Premises as may be
necessary for the performance of Property Manager's obligations under Article II
hereof, and Property Manager accepts such engagement on the terms and conditions
hereinafter set forth. Property Manager shall have no right or authority,
express or implied, to commit or otherwise obligate Owner in any manner
whatsoever except to the extent specifically provided herein.
ARTICLE II
PROPERTY MANAGER'S AGREEMENTS
2.1 Property Manager shall conduct the ordinary and usual business affairs of
Owner relating to the management, leasing and operation of the Premises in an
efficient and satisfactory manner in accordance with first class buildings in
the Old Town, Alexandria area, and shall implement,
<PAGE>
or cause to be implemented, the policies of Owner for the conduct of such
business affairs in accordance with the guidelines provided in this Agreement.
The scope of Property Manager's authority shall be limited to said guidelines.
Property Manager agrees to use its best efforts in the management, leasing and
operation of the Premises in an efficient and satisfactory manner in accordance
with first class buildings in the Old Town, Alexandria area and said guidelines,
and agrees to comply with Owner's written and oral instructions, and in
connection therewith:
(a) To contract, for periods limited to Owner's possession of the Premises, but
not in excess of one year without prior written approval of Owner, in the name
and at the expense of Owner, for gas, electricity, water, and such other
services at commercially reasonable rates as are necessary or convenient for the
proper operation of the Premises. Service contracts shall be written to include
a right of the Owner to terminate the agreement upon thirty (30) days' written
notice, unless otherwise agreed to by Owner in writing.
(b) To select, employ, pay, supervise, direct and discharge all employees
necessary for the efficient, effective, safe, and proper operation and
maintenance of the Premises, in number and at wages not in excess of those
provided for in the Approved Budget (as defined below) or as approved by the
Owner in writing, and to use reasonable care in the selection and supervision of
such employees, as reviewed and approved by Owner. Property Manager shall be
responsible for complying with all laws and regulations and collective
bargaining agreements, if any, affecting such employment, including without
limitation laws and regulations governing worker's compensation insurance and
compulsory non-occupational disability insurance. Property Manager is and will
continue throughout the term of this Agreement to be an Equal Opportunity
Employer. All persons employed or utilized in connection with the operation and
maintenance of the Premises shall be employees of Property Manager, or of such
contractors as may be retained by Property Manager pursuant to this Agreement,
and not employees of Owner; but all costs associated with the operations of the
Premises that have been included in the Approved Budget, or that have otherwise
been approved by Owner, shall be reimbursed to Property Manager by Owner. Unless
included in the Approved Budget or allowed elsewhere in this Agreement, all
leasing and marketing expenses will be at Property Manager's cost.
(c) To keep the Premises in a safe, clean, and sightly condition and to make (or
cause to be made by contractors retained by Property Manager pursuant to
contracts in the name of Owner) all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation of the Premises in a first class condition,
the fulfillment of Owner's obligations under any lease or other agreement of
which Property Manager has notice, and the compliance with all known
governmental and insurance requirements, provided that Property Manager shall
not make any non-budgeted purchase or do any non-budgeted work, the cost of
which shall exceed the amount set forth in Exhibit A, paragraph 3, without
obtaining in each instance, the prior approval of Owner, except in circumstances
which Property Manager shall reasonably deem to constitute an emergency
requiring immediate action for the protection of the Premises or of tenants or
other persons or to avoid the suspension of necessary services. Property Manager
shall notify Owner immediately of the necessity for, the
2
<PAGE>
nature of, and the cost of, any such emergency repairs or compliance. If Owner
shall require, Property Manager shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Property Manager's direction to Owner for Owner's approval. Owner
may from time to time require that any or all construction or other contracts
have Owner's prior written approval or otherwise comply with criteria set forth
on Exhibit B or otherwise established by Owner and delivered to Property
Manager.
Property Manager shall supervise all tenant improvements within the
Premises as a part of its duties. Owner shall not pay Property Manager any fees
for any such construction services.
It is understood that Property Manager shall not be required to undertake
the making or supervision of any reconstruction of the Premises or major capital
improvements except in the case of an emergency. If Property Manager supervises
the reconstruction of the Premises or major capital improvement for the Owner,
Owner may agree to pay Property Manager a fee for such services upon the mutual
agreement of Owner and Property Manager. Notwithstanding the foregoing, Property
Manager acknowledges that Owner may, from time to time, enter into separate
agreements with third party consultants (including affiliates and/or
subsidiaries of Property Manager) to manage and supervise construction work at
the Premises. Upon Owner's request, Property Manager shall assist Owner in
facilitating the efforts of such third party consultants and, if substantial
time or resources of Property Manager shall be required in connection therewith,
Property Manager may receive an additional reasonable fee for such services,
based on prior written approval from Owner. The determination as to whether
substantial time or resources of Property Manager are required shall be made by
Owner.
Owner shall receive the benefit of all discounts and rebates obtainable by
Property Manager in its operation of the Premises. Property Manager agrees to
take advantage of such discounts and rebates wherever available and reasonable.
If Property Manager desires to contract for repair, construction, or any
other service described in this section 2.1 (c) with a party with respect to
which any partner, employee, or shareholder of Property Manager holds a
beneficial interest, such interest shall be disclosed to, and approved in
writing by Owner before such services are procured. The cost of any such
services shall likewise be at competitive rates, notwithstanding that tenants of
the Premises may be required to pay such costs.
Property Manager, or a general contractor working under the supervision of
Property Manager, is authorized to make and perform work at a tenant's request
and at such tenant's sole expense ("Tenant Work") to the extent such Tenant Work
is permitted by the tenant's lease, and Property Manager may collect from
tenants requesting such work or from general contractors performing Tenant Work,
for Property Manager's sole account, a reasonable charge for supervisory
overhead on all such Tenant Work, other than with respect to initial build-out;
provided, however, that Owner shall have no liability or obligation for any such
Tenant Work. If Property Manager performs the Tenant Work at tenant's request
for a supervisory overhead fee
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at tenant's expense, Owner shall not also be responsible to pay a supervisory
overhead fee to Property Manager. Property Manager, however, shall not require
any tenant to use Property Manager, its subsidiary, affiliate or related
corporation to perform any Tenant Work.
(d) To handle promptly complaints and requests from tenants in a first class
manner and notify Owner immediately in writing of any major complaint made by a
tenant or any alleged default on the part of Owner.
(e) To notify Owner immediately in writing (together with copies of supporting
documentation) of any notice of violation of any governments requirements; any
known defect in the Premises; any fire or other damage to the Premises; and, in
the case of any serious fire or other serious damage to the Premises, to also
immediately provide telephone notice thereof to the insurance carrier, so that
an insurance adjuster can view the damage before repairs are started, and
complete customary loss reports in connection with fire or other damage to the
Premises. The Property Manager shall use its best efforts to comply with all
laws regarding the leasing, use, operation, and maintenance of the Premises.
(f) To notify the general liability insurance carrier for the Premises and Owner
immediately in writing of any personal injury or property damage occurring to or
claimed by any tenant or third party on or with respect to the Premises and to
promptly forward to the carrier, with copies to Owner, any summons, subpoena, or
other like legal document served upon Property Manager relating to actual or
alleged potential liability of Owner, Property Manager, or the Premises.
(g) To advise Owner of pertinent covenants in leases in which the tenants agree
to hold Owner harmless with respect to liability from any accidents and/or to
replace broken glass, and to secure from such tenants and forward to Owner any
certificates of insurance, and renewals thereof, required to be furnished by the
terms of such leases.
(h) At the option of Owner, expressed to Property Manager in writing, to receive
and collect rent and all other monies payable to Owner by all tenants and
licensees in the Premises and to deposit the same within three (3) business days
in the bank named in Exhibit A, paragraph 4 (the "Bank"), in an account approved
by Owner and in the name of and for the benefit of Owner (the "Bank Account"),
which Bank Account shall be used exclusively for such funds which shall in no
event be commingled with funds of Property Manager and to disburse such funds
from said Bank Account solely in payment for, or to reimburse Property Manager
for payment of, authorized expenses incurred in connection with the operation of
the Premises in accordance with the then current budgets approved by Owner
pursuant to section 2.5 of this Agreement and otherwise in accordance with the
terms and provisions of this Agreement. Property Manager or any affiliate
thereof shall obtain Owner's written approval on all payments to Property
Manager and all payments in excess of $25,000 with the exception of utility
payments. In the event state law requires that tenant security deposits be held
in a separate account, such account shall be established by Property Manager in
the name of Owner as approved in writing by Owner. If requested in writing,
Owner's designated representative will be a signatory on all bank accounting
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maintained by Property Manager. Property Manager acknowledges and agrees that
Property Manager shall act in a fiduciary capacity for the benefit of Owner with
respect to the Bank Account.
(i) Upon the prior written approval of Owner, to institute all necessary legal
actions or proceedings for the collection of rent or other income from the
Premises, or the ousting or dispossessing of tenants or other persons therefrom,
and all other matters requiring legal attention. Property Manager agrees to use
its best efforts to collect rent and other charges from tenants in a timely
manner and to pursue Owner's legal remedies for non-payment of same. Owner
reserves the right to designate or approve counsel and to control litigation of
any character affecting or arising out of the operation of the Premises.
Property Manager agrees to fully cooperate with said counsel.
(j) To maintain fidelity bond/crime insurance naming Owner as loss payee as its
interest may appear with limits of not less than $1 million, commercial general
liability insurance with a combined single limit of not less than $5 million
each occurrence and general aggregate, errors and omissions coverage with limits
of not less than $1 million.
(k) To notify Owner immediately of any fire, accident or other condemnation
proceedings, rezoning or other governmental order, lawsuit or threat thereof
involving the Premises and any material violations relative to the leasing, use,
repair and maintenance of the Premises under governmental laws, rules,
regulations, ordinances, or like provisions. Property Manager will not bear
responsibility for noncompliance, unless such noncompliance is due to the gross
negligence or willful misconduct of Property Manager or its employees.
(l) To assist in Owner's ad valorem tax review program and to cooperate with
Owner, when so requested, in efforts to reduce such taxes. Property Manager
shall promptly furnish Owner with copies of all assessment notices and receipted
tax bills.
(m) To promptly comply with all laws, ordinances, orders, rules, regulations and
requirements of all Federal, State and Municipal or other governmental
authorities, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services Office having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing which may be applicable to the Premises or any part thereof or to
the leasing, use, repair, operation and management thereof. In the event such
compliance is undertaken in the name and on behalf of Owner, such compliance
shall be at Owner's expense, unless such compliance is solely of an
administrative nature. Property Manager shall give prompt notice to Owner of any
known violation or written notice of alleged violation of such laws, rules,
regulations and requirements of which Property Manager has knowledge and
Property Manager shall not bear responsibility for failure of the Premises or
the operation thereof to comply with such laws, rules, regulations and
requirements unless Property Manager has committed gross negligence or a willful
act or emission in the performance of its obligations under this Agreement or in
the performance of any other duties owed to Owner or third parties by Property
Manager.
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(n) Property Manager shall be required to maintain an on-site office with
specified business hours, provided that Owner will provide rent-free space.
(o) Property Manager shall require all tenants to comply with all of the
provisions of their leases and any rules and regulations applicable to the
Premises, unless otherwise directed in writing by Owner.
(p) Property Manager shall promptly pay all taxes, utilities, and other bills
relating to the operation of the Premises, unless otherwise limited in writing
by Owner.
2.2 Property Manager agrees to prepare and submit to Owner initial monthly
reports relating to the management and operation of the Premises for the
preceding calendar month, on or before the tenth (10th) day of each month with
all additional reports due on or before the twentieth (20th) day of the month in
form satisfactory to Owner, such form to be subject to change from time to time,
as Owner shall reasonably require. The Property Manager shall also report to
Owner such other information known to Property Manager of which Owner should be
made aware. Property Manager shall remit to Owner the net receipts from the
Premises, including any net income received from the garage operation as
described in Section 2.10, as directed by Owner within ten (10) days after
receipt thereof. Property Manager agrees that Owner shall have the right to
require the transfer to Owner at any time of any funds in the Bank Account
considered by Owner to be in excess of an amount reasonably required by Property
Manager for disbursement purposes in connection with the Premises. Property
Manager agrees to prepare and submit reports relating to the leasing of the
Premises in form satisfactory to Owner as requested by Owner.
Property Manager agrees to keep records with respect to the leasing,
management and operation of the Premises, including records of receipts and
disbursements, all of which shall be deemed the property of Owner, and to retain
those records until the termination of this Agreement at which time Property
Manager shall immediately turn over all such records to Owner. Owner shall have
the right to inspect such records and audit the reports required by this Section
during business hours until such time as all such records have been delivered
over to Owner following the termination of this Agreement in accordance with
Section 5.2 hereof.
2.3 In connection with its management of the Property, Property Manager shall
acquire and utilize such computer software as Owner may require. Property
Manager shall keep such software current and install all upgrades, enhancements
and new versions of the software which may be from time to time released by the
vendor and/or required by Owner (collectively, the "Required Software").
Property Manager shall cause all personnel who use the Required Software to
attend and complete basic system training programs offered by the vendor and
licensor of the Required Software. Property Manager shall also be responsible
for obtaining and maintaining any equipment required for proper operation of the
Required Software, including but not limited to, the communications equipment
required for transmission of data to Owner. Owner may from time to time require
additional or substitute software to be included among the Required Software and
shall provide not less than sixty (60) days' advance notice to Property Manager
of such additions
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or substitutions. Owner shall not be unreasonable with respect to the frequency
of changes in the Required Software. Property Manager shall use the Required
Software to enter, process, store, and transmit data to Owner, as Owner may from
time to time require and shall comply with any data reporting standards as Owner
may establish. Owner shall be responsible for all costs of the required
software, initial training, and additional equipment that is required solely by
Owner and used by Property Manager solely for the Premises.
2.4 Property Manager shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to negligence (when Property Manager is acting outside of the
scope of its employment or in violation of this Agreement), gross negligence or
willful misconduct on the part of Property Manager's associates or employees.
Losses caused by such gross negligence or willful misconduct shall be borne by
Property Manager. Owner shall have the right to review control procedures and
within reason may require changes to the existing procedures.
2.5 Property Manager shall prepare and submit to Owner proposed operating and
capital budgets for the promotion, leasing, operation, repair, and maintenance
of the Premises. Preliminary versions of the budget ("Initial Budget") will be
due as stipulated by Owner based on a schedule to be provided by Owner. Property
Manager shall prepare an update of the Initial Budget ("Updated Budget") every
three (3) months reflecting any changes that have occurred since the submission
of the Initial Budget and incorporating Owner's comments. All budgets will be
prepared on an accrual basis showing a month by month projection of income and
expense and capital expenditures for the forthcoming calendar year and proposed
leasing guidelines, together with a marketing plan for all space that is
currently vacant or that is scheduled to become vacant during the next year. The
Initial Budget and Updated Budget shall also contain any other reports or data
which the Owner in its reasonable discretion deems to be relevant to the
management and/or leasing of the Premises. Property Manager will also provide
Owner with additional reports, as reasonably requested from time to time by
Owner.
After receiving Owner's approval of the Updated Budget ("Approved Budget"),
Property Manager shall implement such budget and shall be authorized to make the
expenditures and incur the obligations provided for in the budget except as set
forth herein. Property Manager shall obtain Owner's specific approval prior to
contracting for any capital expenditures, even if already included in the
Approved Budget. Except for amounts of less than five percent (5) of any line
item or except in the event of an emergency, Property Manager shall not spend
any non-budgeted amount in excess of that specified on Exhibit A, paragraph 3,
without Owner's prior written approval. Property Manager shall operate the
Premises according to the previous year's Approved Budget until current budget
is fully approved. Property Manager shall furnish to Owner prior to January 31
an unaudited statement of income and disbursements reflecting the operation of
the Premises for the previous calendar year on an accrual basis. Property
Manager is not allowed to reclassify expenses to meet the Approved Budget.
Property Manager must charge all items to the appropriate account within the
Approved Budget.
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2.6 Subject to the terms hereof, Property Manager agrees to use it best efforts
to cause the Premises to be rented and kept rented to desirable tenants,
satisfactory to Owner, and in connection therewith:
(a) Subject to the terms hereof, to negotiate leases and renewals of leases at
appropriate times on an exclusive basis, it being understood that all inquiries
to Owner with respect to leasing any portion of the Premises shall be referred
to Property Manager. Property Manager is responsible for keeping abreast of all
time limits and requirements in the leases (by way of example and not of
limitation, when options are arising, leases are expiring, etc.), and act in a
timely manner to give any required notice thereof in accordance with all tenant
leases. All leases and renewals must be prepared by counsel selected by Owner
and reviewed by Property Manager in accordance with Owner's leasing guidelines
and on Owner's approved form of lease agreement and be submitted to the Owner's
designated representative for execution by Owner. Unless agreed to and directed
otherwise, Property Manager agrees it will strictly observe the specific leasing
guidelines provided by Owner, cooperating with counsel and acting in a timely
manner, and agrees to hold Owner harmless from any damages sustained by Owner,
including the cost of defending any litigation arising out of Property Manager's
failure gross negligence or willful misconduct in failing to observe such
guidelines. References of prospective tenants, as well as their varying use
requirements, shall be investigated carefully by Property Manager, however, all
decisions concerning creditworthiness and suitability of tenant shall be solely
that of Owner, and Property Manager shall not be required to warrant or
guarantee any tenant's performance.
(b) With Owner's prior written approval and at Owner's expense, to advertise the
Premises or portions thereof for rent by means of periodicals, plans, brochures,
and other means appropriate to the Premises. No sign shall be placed on the
Premises by the Property Manager without the Owner's prior written approval.
2.7 Property Manager agrees for itself and all persons retained or employed by
Property Manager in performing its services, during the term of this Agreement
and thereafter, to use reasonable efforts to hold in confidence and not to use
or disclose to others any confidential or proprietary information of Owner
heretofore or hereafter disclosed to, learned by or prepared by Property
Manager, including but not limited to any data, information, plans, programs,
processes, costs, operations, or tenants which may come within the knowledge of
Property Manager in the performance of, or as a result of, its services, except
where Owner specifically authorizes Property Manager to disclose any of the
foregoing to others or such disclosure reasonably results from the performance
of Property Managers duties hereunder.
2.8 Property Manager shall indemnify and save harmless Owner from and against
all liability, suits, claims, and demands (including, without limitation, all
costs and attorney's fees and expenses incurred in connection therewith) by or
on behalf of any person, firm, corporation or other entity due to or arising out
of any gross negligence or willful misconduct on the part of the Property
Manager, its employees, contractors or subcontractors in connection with
Property Manager's performance of its obligations under this Agreement.
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2.9 Property Manager shall use its best efforts to insure that no third party
files or suffers to be filed, any materialman's or mechanic's lien against the
Premises arising out of material incorporated therein or work performed therein
or thereon upon the request or order of Property Manager.
2.10 If Owner has entered into a separate agreement with a parking management
company ("Parking Manager") or property association to operate the parking
facility of the Premises, Property Manager will coordinate and cooperate with
Parking Manager or property association as directed by Owner, and will
incorporate budgets and monthly statements submitted by Parking Manager into
Property Manager's budgets and monthly statements. If so directed by Owner,
Property Manager shall receive net revenues from Parking Manager for deposit
into the Bank Account described in Section 2.1(g).
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all of the following charges relating
to the Premises: taxes, special assessments, ground rents, insurance premiums
(other than premiums arising out of Section 2.1(b) for which Property Manager is
responsible), and mortgage payments. If Owner does not elect to make any or all
of said payments, Property Manager shall do so out of the Bank Account, if so
directed in writing by Owner.
3.2 Owner shall self-insure or, at its option, require Property Manager to
coordinate the placement of property insurance upon the Premises including both
liability and all risk property insurance and shall look first to such insurance
or self-insurance for indemnity against any loss or damage to the Premises or to
any tenant insurance, except in the case of Property Manager's negligence (when
Property Manager is acting outside of the scope of its employment or in
violation of this Agreement), gross negligence or willful misconduct, or as
otherwise provided herein. To the extent that policies shall be procured, Owner
shall obtain waivers of subrogation in favor of Property Manager under such
policies. Property Manager shall be as insured as real estate manager on Owner's
liability policy.
3.3 With respect to liabilities arising out of the use and operation of the
Premises and arising under this Agreement except for liabilities arising out of
section 2.1 (b), Owner shall indemnify and save harmless Property Manager from
and against all claims, losses and liabilities (including, without limitation,
all costs and attorney's fees and expenses in connection therewith) resulting
from damage to property or injury to, or death of persons, defamation and false
arrest (including, but not limited to, the property and persons of the parties
hereto and their agents, contractors, subcontractors and employees), occasioned
by or arising out of, acts or omissions (other than criminal acts), of (i)
Property Manager (except in the case of Property Manager's negligence when
Property Manager is acting outside of the scope of its employment or in
violation of this Agreement), gross negligence or willful misconduct, or (ii)
Owner or Owner's agents, employees,
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contractors or subcontractors. Nothing contained in this Section 3.3 shall be
construed as creating or evidencing an employment relationship between Owner and
any or all persons employed or utilized by Property Manager pursuant to Section
2.1 (b) for the operation and maintenance of the Premises.
ARTICLE IV
PROPERTY MANAGER'S FEES
AND COMMISSIONS: REIMBURSEMENTS
4.1 As management fees for the services performed pursuant to Article II, Owner
agrees to pay Property Manager on the basis specified in Exhibit A, paragraph 6.
Said fee shall be payable monthly on the tenth (10th) day of the month and shall
be based on receipts from the previous calendar month. Property Manager shall
withdraw said fee from the operating account for the Premises and shall account
for same as provided for in Section 2.2 hereof. If fees are based on rent or
income, it is understood that they shall be applicable to rent or income
actually collected, including parking receipts, and that there shall be excluded
therefrom: direct charges for taxes, insurance, fuel, electricity, water, labor
or any other expense in connection with the operation and maintenance of the
Premises which are paid directly by a tenant to any taxing authority, utility or
service company, fire loss proceeds, capital improvements, remodeling and tenant
change costs (including any overhead factor payable by tenants); amortization
for tenant work; security deposits; however, tax, utility, service charges and
operating expense escalation charges required to be calculated, billed and
collected from individual tenants by Property Manager will be included in
collectively income for the purpose of calculating management fee. Management
fees shall be paid based on actual receipts, not estimates. Owner shall be
entitled to pay Property Manager directly rather than permitting Property
Manager to pay itself out of the Bank Account. To the extent any amounts are
refunded to tenants, gross rent shall be reduced accordingly. Any rent paid more
than thirty (30) days in advance or sales proceeds shall be excluded from gross
rent.
4.2 As leasing commissions, if any, for new leases secured pursuant to Section
2.6, including renewals, expansions or extensions exercised during the term of
this Agreement, Owner agrees to pay Property Manager at the rate specified in
Exhibit A, paragraph 7. A commission will be paid on direct leases signed with
subtenants for the period following the expiration date of the original tenant's
master lease. If a new lease contains a cancellation option exercisable by the
tenant and the cancellation fee does not include an amount for the unamortized
leasing commission remaining at the cancellation date, a leasing commission will
be paid on the initial term, which is prior to such termination date, with the
commission for the balance of the lease term payable when and if such Tenant
does not terminate the lease on or before such date as set forth herein.
Commissions will be based on base rents and pre-determined fixed escalations
payable to Owner only and will exclude: percentage rent; variable escalations;
operating expense escalations; real estate tax escalations; any portion of said
base rent attributable to parking; and free rent. In the event a lease provides
that the tenant is to pay directly for some or all of the operating expenses
and/or real estate taxes associated with its space, then for purpose of
calculating the commissions
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listed in Exhibit A, the tenant's annual base rent shall be increased by an
amount equivalent to the estimated annual expenses that will be paid by tenant
during the first year of its lease as determined by Owner. No commission will be
due for any portion of a lease term that exceeds ten (10) years. Leasing
commissions for new leases and expansions shall be paid fifty percent (50%)
within thirty (30) days after lease execution by all parties and fifty percent
(50%) within thirty (30) days after lease commencement and actual occupancy. In
the event of a renewal or extension, any commission payment due shall be paid
within thirty (30) days of the execution of the renewal or extension
documentation. When leases are negotiated on behalf of tenant by outside
brokers, Property Manager shall cooperate with such brokers, Property Manager
shall be responsible for paying all commissions to such outside brokers, and all
commissions to such outside broker shall be subject to the written approval of
Owner. The cost of all approved commissions will be borne by Owner, unless
already paid to Property Manager in accordance with the terms hereof Property
Manager will assist Owner in negotiating the terms of fees to outside brokers,
and will submit recommendations to Owner regarding the percentage rate for
outside brokerage commissions in conjunction with the budget submissions
provided for in Section 2.5.
4.3 To the extent expressly identified in the Approved Budget, Owner shall be
responsible to Property Manager for the following expenses or costs incurred by
or on behalf of Property Manager in connection with the management and leasing
of the Premises. At Owner's option such expenses can come out of be paid from
the established Bank Account.
(a) Cost of gross salary, wages, bonuses, payroll taxes, insurance, worker's
compensation, pension benefits and any other benefits of Property Manager,
property management clerical support, engineering personnel, and engineering
clerical support as allocated to the Premises.
(b) Necessary general accounting and reporting services, as allocated to the
Premises.
(c) Necessary cost of forms, stationery, ledgers, and other supplies and
equipment used in Property Manager's office, as allocated to the Premises for
property management purposes.
(d) Cost of continuing education for personnel allocated to the Premises.
(e) Cost of parking for personnel allocated to the Premises.
(f) Necessary cost of telecommunications, couriers, and postage allocated to the
Premises.
All of the enumerated items in section 4.3 must be at commercially
reasonable rates.
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ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on January 1, 1996 and will continue
in full force and effect for an initial term of one (1) year, unless terminated
earlier in accordance with the terms of this Agreement. Upon the expiration of
the initial one (1) year term and each subsequent renewal period, unless
terminated, as is hereinafter addressed, this Agreement will automatically renew
for one (1) year renewal periods.
5.2 This Agreement may be terminated by Owner or Property Manager at any time
(a) without cause by giving the other party written notice of the election to
terminate no less than thirty (30) days prior to the date for termination or (b)
automatically and without notice if the Premises are sold to a bona fide third
party purchaser, except as provided herein, or the Premises are acquired through
foreclosure of a mortgage or deed in lieu of foreclosure.
This Agreement may also be terminated for cause by the non-defaulting party, at
its option, upon the happening of any of the following events of default:
(i) If the Property Manager makes a general assignment for the benefit of
creditors; files in the courts a petition in bankruptcy, insolvency, for a
reorganization, or for the appointment of a receiver or trustee of all or part
of its property; voluntarily takes any advantage of any bankruptcy or insolvency
law; an involuntary petition or any answer is filed against the other proposing
the adjudication as a bankrupt which is not discharged or denied within sixty
(60) days thereafter, or if the Property Manager is insolvent by reason of being
unable to pay debts as they mature or otherwise is adjudicated bankrupt.
(ii) Upon the occurrence of a breach, default, or noncompliance by Property
Manager of any of the obligations, agreements or covenants to be performed by
Property Manager hereunder contained in this Agreement, and the failure of
Property Manager to cure such breach, default or non-compliance within five (5)
days following receipt of written notice from the Owner for monetary defaults
and fifteen (15) days following receipt of written notice from Owner specifying
such breach, default or non-compliance for non-monetary defaults; provided that
if the non-monetary breach, default or noncompliance is not curable within said
fifteen (15) day period, then upon Property Manager's failure to commence the
curing of such non-monetary breach, default or non-compliance within said
fifteen (15) day period and thereafter diligently and continuously pursue such
cure to completion in no event more than ninety (90) days. Notwithstanding
anything herein to the contrary, Owner may cure any breach, default or
noncompliance and Property Manager shall immediately reimburse Owner for all
costs or expenses in connection therewith.
(iii) Failure of Owner to reimburse Property Manager any sums stipulated in this
Agreement; said termination to become effective upon Property Manager's having
served Owner written notice of the failure and Owner's continued failure to
remedy or correct such noncompliance within thirty (30) days after receipt of
such notice.
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(iv) If the Premises are damaged by fire or any other casualty or are taken
through the exercise of the power of eminent domain or sale in lieu thereof and,
in Owner's reasonable opinion, such damage or taking materially affects the
operation of the Premises for their intended purpose and the Premises cease to
be operated for such purpose.
Upon termination of this Agreement for any reason, Property Manager shall
deliver the following to Owner or Owner's duly appointed representative on or
before thirty (30) days following the termination date:
(a) A final accounting, reflecting the balance of income and expenses for the
Premises as of the date of termination;
(b) Any balance or monies due to Owner or tenant security deposits, or both,
held by Property Manager with respect to the Premises; and
(c) All records, contracts, drawings, leases, correspondence, receipts for
deposits, unpaid bills, summary of all leases in existence at the time of
termination, and all other papers or documents which pertain to the Premises.
Such data and information and all such documents shall at all times be the
property of Owner.
5.3 If leasing commissions are or will become payable under Section 4.2 and if
this Agreement is terminated by Property Manager or Owner under Section 5.2,
Owner shall recognize Property Manager as the broker in any ongoing contact with
a Prospective Tenant (as hereinafter defined) for a lease, renewal, extension or
expansion with respect to any part of the Premises pending at the date of
termination of this Agreement unless mutually agreed to otherwise by Owner and
Property Manager. "Prospective Tenant" shall be defined as a tenant with whom
active negotiations are currently underway or who has both visited the Premises
with Property Manager (or whose leasing broker has visited the Premises with
Property Manager on Prospective Tenant's behalf) or has received a written
proposal from Property Manager or submitted a written proposal to Property
Manager prior to the date of termination of this Agreement. Property Manager
shall provide a list of Prospective Tenants ("Prospect List") to Owner within
thirty (30) business days of the effective date of termination of this
Agreement. The Prospect List will be subject to the review and approval of
Owner, which approval shall not be unreasonably denied. Unless otherwise agreed
to in writing by all parties, in the event of the consummation of a lease with a
Prospective Tenant appearing on the approved Prospect List within six (6) months
of the termination of this Agreement, Owner shall pay to Property Manager a
leasing commission with respect thereto pursuant to Section 4.2; provided,
however, that Property Manager shall not begin negotiations for any new lease or
renewal after giving or receiving a notice of termination, without the prior
written consent of Owner. No commissions shall be paid to Property Manager in
the event of the consummation of a lease more than six (6) months after the
termination of this Agreement. In the event that Property Manager has been
terminated and a lease is being negotiated with a Prospective Tenant, Property
Manager must continue with such negotiations or agree to split its commission
with Owner's new representative.
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ARTICLE VI
ASSIGNMENT; CHANGE IN CONTROL
6.1 This Agreement shall be unassignable by either party and can be changed only
by a writing signed by the parties hereto, provided, however, that Owner shall
have the right to assign this Agreement in the event a bona fide sale by Owner
of the Premises and such assignment shall not constitute a breach of this
paragraph 6.1, however, in the event of such an assignment, the term of this
Agreement shall expire ninety (90) days after the sale, unless Property Manager
consents to the assignment in writing, in which event the expiration date of the
term of this Agreement shall remain as provided in Article V. No services to be
performed by Property Manager under this Agreement shall be delegated by
Property Manager to any other person or firm without the prior written consent
of Owner, provided that Property Manager may engage independent subcontractors,
at no additional cost to Owner (except as provided in Section 2.1 hereof) and at
Property Manager's sole risk, without such consent, to provide incidental
services usually performed by independent contractors under good property
management practices customary in the locale of the Premises. Subject to Owner's
direction, Property Manager will cooperate with lawyers or consultants, pursuant
to contracts in the name of the Owner, to perform real estate tax appeals,
property audits and its other standard services required in connection with the
operating of the Premises.
6.2 Notwithstanding the foregoing, Property Manager may, upon thirty (30) days
prior written notice to Owner, assign this Agreement to an affiliate provided
that the affiliate is the successor to all or substantially all of Property
Manager's management and leasing business; provided, however, that Owner shall
retain its right to cancel this Agreement upon thirty (30) days' written notice,
in accordance with the terms of Article V.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's Representative ("Owner's Representative") whose name and address are
set forth on Exhibit A, paragraph 1, shall be the duly authorized representative
of Owner for the purposes of this Agreement. Any statement, notice,
recommendation, request, demand, consent, or approval under this Agreement shall
be in writing and shall be deemed given (a) by Owner when made by Owner's
Representative or any officer of Owner and delivered personally to Property
Manager, if an individual, or to an officer of Property Manager, if a
corporation, or when mailed, overnight couriered, or telefaxed (provided
original hard copy of said telefacsimile is then sent via United States Postal
Service or an overnight courier service) addressed to Property Manager, at the
address set forth in Exhibit A, paragraph 2, and (b) by Property Manager when
delivered personally to or when mailed, overnight courriered, or telefaxed
(provided original hard copy of said telefacsimile is then sent via United
States Postal Service or an overnight courier service)
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addressed to Owner's Representative at the address set forth in Exhibit A,
paragraph I. Either party may, by written notice, designate a different address.
7.2 Property Manager shall, at its own expense, qualify to do business in the
local jurisdiction and obtain and maintain such licenses from the appropriate
authorities of said jurisdiction as may be required for the performance by
Property Manager of its services. Property Manager shall comply with all laws,
rules, and regulations of said jurisdiction.
7.3 Each provision of this Agreement is intended to be severable. If any term or
provision hereof shall be determined by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such provision shall be severed
from this Agreement and shall not affect the validity of the remainder of this
Agreement.
7.4 In the event either of the parties to this Agreement shall institute any
action or proceeding against the other party relating to this event, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of any
breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 This Agreement shall be governed and construed in accordance with the laws
of the State of Virginia. The venue of any action or proceeding brought by
either party against the other arising out of this Agreement shall, to the
extent legally permissible, be the State of Virginia.
7.7 It is understood that the Property Manager is engaged in the development,
management, leasing and sale of real estate similar to the business of Owner,
and may, from time to time, agree to develop, manage, lease and sell other real
estate which may compete with the business of Owner. Owner hereby consents to
the pursuit of such competitive ventures by Property Manager and acknowledges
that such ventures shall not be deemed wrongful or improper; provided that
neither Property Manager nor its affiliates shall solicit any Tenants in the
Premises or attempt to induce such Tenants to relocate out of the Premises and
into a competing property owned, controlled, or managed directly or indirectly
by Property Manager or any affiliate thereof during the term of such Tenant's
lease in the Premises; provided, however, that Property Manager
15
<PAGE>
devotes such time, attention, and personnel to the management, operating, and
leasing of the Premises as is necessary to perform all of its obligations under
this Agreement.
7.8 There shall be no third-party beneficiaries to this Agreement, other than
affiliates of Owner of Property Manager.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
TransCanal Properties, Inc.
Owner
Witness:
[signature illegible By: /s/ V. Costen
- --------------------------- -----------------------------------
Name: V. Costen
Title: VP
Faison & Associates, Inc.
Property Manager
Witness:
/s/ M. Suzanne Smith By: /s/ Chip Wood
- --------------------------- -----------------------------------
Commission Expires 4/30/98 Name: Chip Wood
Title: Managing Director, Asset Mgmt.
16
<PAGE>
EXHIBIT A
Addresses/Approvals/Fee Schedule
1. Owner: TransCanal Properties, Inc.
c/o DIHC Management Corporation
Attention: Wout Coster
200 Galleria Parkway
Suite 2000
Atlanta, Georgia 30339
2. Property Faison & Associates
Manager: Attention: Chip Wood
1155 21st Street
Suite 200
Washington, DC 20036
3. Property Manager will require Owner's consent for any non-budgeted repair
in excess of $1,000.00.
4. Property Manager shall direct tenants to pay their rents to Owner. Owner
will deposit these rents and provide Property Manager with a statement of
deposits. The bank account at Sun Trust Bank is in the name of the Owner.
5. Any checks written by Property Manager payable to Property Manager in
excess of $2,000.00 need to co-signature of Owner.
6. Property Manager will be paid 3% on the actual rental receipts as defined
under 4.1.
7. Property Manager will be paid a leasing commission in accordance to 4.2 as
follows:
Any new leases without cooperating broker - 3%.
Any new leases with cooperating broker - 5%.
(Property Manager to pay cooperating broker 3%)
Any expansion of an existing office tenant without cooperating
broker - 2%.
Any expansion of an existing retail tenant without cooperating
broker - 3%.
Any expansion of an existing tenant with a cooperating broker
- 4%.
Any extension of an existing office tenant without cooperating
broker - 2%.
Any extension of an existing retail tenant without cooperating
broker - 3%.
Any extension of an existing tenant with a cooperating broker
- 4%.
17
<PAGE>
EXHIBIT B
General Requirements for Contractors/Subcontractors
1. Possess commercially reasonable insurance, including, without limitation,
worker's compensation insurance and errors and omissions insurance.
2. Possess all necessary licenses, permits, governmental approvals, etc.
3. Possess at least three (3) years experience in the relevant field of
expertise.
4. Provide evidence, if requested, of each of the foregoing.
5. Provide, if requested, payment and/or performance bond(s).
6. Provide, if requested, an affidavit regarding its financial status,
business experience and other relevant information.
7. Provide information necessary for Property Manager to obtain a credit
report.
18
<PAGE>
Exhibit 10.108
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
by and between
Canal Center Properties, Inc.
"Owner"
and
Faison & Associates, Inc.
"Property Manager"
<PAGE>
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
Canal Center Plaza
Alexandria, Virginia
THIS AGREEMENT ("Agreement") is made as of the 1st day of January,
1996 by and between Canal Center Properties, Inc. ("Owner"), and Faison &
Associates, Inc. ("Property Manager"):
WITNESSETH:
WHEREAS, Owner is the owner of the above described premises, and
Owner wishes to avail itself of the ability and experience of Property Manager
in the on-site management of said premises; and
WHEREAS, Property Manager is willing to provide such management
services to said premises on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants herein contained
and other valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
ENGAGEMENT AND AUTHORITY OF PROPERTY MANAGER
1.1 Owner hereby engages Property Manager as an independent
contractor in the management, leasing and operation of the above described
property (the "Premises"), and, subject to the limitations set forth herein,
hereby authorizes and directs Property Manager to exercise such powers with
respect to the Premises as may be necessary for the performance of Property
Manager's obligations under Article II hereof, and Property Manager accepts such
engagement on the terms and conditions hereinafter set forth. Property Manager
shall have no right or authority, express or implied, to commit or otherwise
obligate Owner in any manner whatsoever except to the extent specifically
provided herein.
<PAGE>
2
ARTICLE II
PROPERTY MANAGER'S AGREEMENTS
2.1 Property Manager shall conduct the ordinary and usual business
affairs of Owner relating to the management, leasing and operation of the
Premises in an efficient and satisfactory manner in accordance with first class
buildings in the Old Town, Alexandria area, and shall implement, or cause to be
implemented, the policies of Owner for the conduct of such business affairs in
accordance with the guidelines provided in this Agreement. The scope of Property
Manager's authority shall be limited to said guidelines. Property Manager agrees
to use its best efforts in the management, leasing and operation of the Premises
in an efficient and satisfactory manner in accordance with first class buildings
in the Old Town, Alexandria area and said guidelines, and agrees to comply with
Owner's written and oral instructions, and in connection therewith:
(a) To contract, for periods limited to Owner's possession of the
Premises, but not in excess of one year without prior written approval of
Owner, in the name and at the expense of Owner, for gas, electricity,
water, and such other services at commercially reasonable rates as are
necessary or convenient for the proper operation of the Premises. Service
contracts shall be written to include a right of the Owner to terminate
the agreement upon thirty (30) days' written notice, unless otherwise
agreed to by Owner in writing.
(b) To select, employ, pay, supervise, direct and discharge all
employees necessary for the efficient, effective, safe, and proper
operation and maintenance of the Premises, in number and at wages not in
excess of those provided for in the Approved Budget (as defined below) or
as approved by the Owner in writing, and to use reasonable care in the
selection and supervision of such employees, as reviewed and approved by
Owner. Property Manager shall be responsible for complying with all laws
and regulations and collective bargaining agreements, if any, affecting
such employment, including without limitation laws and regulations
governing worker's compensation insurance and compulsory non-occupational
disability insurance. Property Manager is and will continue throughout the
term of this Agreement to be an Equal Opportunity Employer. All persons
employed or utilized in connection with the operation and maintenance of
the Premises shall be employees of Property Manager, or of such
contractors as may be retained by Property Manager pursuant to this
Agreement, and not employees of Owner; but all costs associated with the
operations of the Premises that have been included in the Approved Budget,
or that have otherwise been approved by Owner, shall be reimbursed to
Property Manager by Owner. Unless included in the Approved Budget or
allowed elsewhere in this Agreement, all leasing and marketing expenses
will be at Property Manager's cost.
<PAGE>
3
(c) To keep the Premises in a safe, clean and sightly condition and
to make (or cause to be made by contractors retained by Property Manager
pursuant to contracts in the name of Owner) all repairs, alterations,
replacements, and installations, do all decorating and landscaping, and
purchase all supplies necessary for the proper operation of the Premises
in a first class condition, the fulfillment of Owner's obligations under
any lease or other agreement of which Property Manager has notice, and the
compliance with all known governmental and insurance requirements,
provided that Property Manager shall not make any non-budgeted purchase or
do any non-budgeted work, the cost of which shall exceed the amount set
forth in Exhibit A, paragraph 3, without obtaining in each instance, the
prior approval of Owner, except in circumstances which Property Manager
shall reasonably deem to constitute an emergency requiring immediate
action for the protection of the Premises or of tenants or other persons
or to avoid the suspension of necessary services. Property Manager shall
notify Owner immediately of the necessity for, the nature of, and the cost
of, any such emergency repairs or compliance. If Owner shall require,
Property Manager shall submit a list of contractors and subcontractors
performing tenant work, repairs, alterations or services at the Premises
under Property Manager's direction to Owner for Owner's approval. Owner
may from time to time require that any or all construction or other
contracts have Owner's prior written approval or otherwise comply with
criteria set forth on Exhibit B or otherwise established by Owner and
delivered to Property Manager.
Property Manager shall supervise all tenant improvements within the
Premises as a part of its duties. Owner shall not pay Property Manager any
fees for any such construction services.
It is understood that Property Manager shall not be required to
undertake the making or supervision of any reconstruction of the Premises
or major capital improvements except in the case of an emergency. If
Property Manager supervises the reconstruction of the Premises or major
capital improvement for the Owner, Owner may agree to pay Property Manager
a fee for such services upon the mutual agreement of Owner and Property
Manager. Notwithstanding the foregoing, Property Manager acknowledges that
Owner may, from time to time, enter into separate agreements with third
party consultants (including affiliates and/or subsidiaries of Property
Manager) to manage and supervise construction work at the Premises. Upon
Owner's request, Property Manager shall assist Owner in facilitating the
efforts of such third party consultants and, if substantial time or
resources of Property Manager shall be required in connection therewith,
Property Manager may receive an additional reasonable fee for such
services, based on prior written approval from Owner. The determination as
to whether substantial time or resources of Property Manager are required
shall be made by Owner.
<PAGE>
4
Owner shall receive the benefit of all discounts and rebates
obtainable by Property Manager in its operation of the Premises. Property
Manager agrees to take advantage of such discounts and rebates wherever
available and reasonable.
If Property Manager desires to contract for repair, construction, or
any other service described in this section 2.1(c) with a party with
respect to which any partner, employee, or shareholder of Property Manager
holds a beneficial interest, such interest shall be disclosed to, and
approved in writing by Owner before such services are procured. The cost
of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such
costs.
Property Manager, or a general contractor working under the
supervision of Property Manager, is authorized to make and perform work at
a tenant's request and at such tenant's sole expense ("Tenant Work") to
the extent such Tenant Work is permitted by the tenant's lease, and
Property Manager may collect from tenants requesting such work or from
general contractors performing Tenant Work, for Property Manager's sole
account, a reasonable charge for supervisory overhead on all such Tenant
Work, other than with respect to initial build-out; provided, however,
that Owner shall have no liability or obligation for any such Tenant Work.
If Property Manager performs the Tenant Work at tenant's request for a
supervisory overhead fee at tenant's expense, Owner shall not also be
responsible to pay a supervisory overhead fee to Property Manager.
Property Manager, however, shall not require any tenant to use Property
Manager, its subsidiary, affiliate or related corporation to perform any
Tenant Work.
(d) To handle promptly complaints and requests from tenants in a
first class manner and notify Owner immediately in writing of any major
complaint made by a tenant or any alleged default on the part of Owner.
(e) To notify Owner immediately in writing (together with copies of
supporting documentation) of any notice of violation of any governmental
requirements; any known defect in the Premises; any fire or other damage
to the Premises; and, in the case of any serious fire or other serious
damage to the Premises, to also immediately provide telephone notice
thereof to the insurance carrier, so that an insurance adjuster can view
the damage before repairs are started, and complete customary loss reports
in connection with fire or other damage to the Premises. The Property
Manager shall use its best efforts to comply with all laws regarding the
leasing, use, operation, and maintenance of the Premises.
(f) To notify the general liability insurance carrier for the
Premises and Owner immediately in writing of any personal injury or
property damage occurring to
<PAGE>
5
or claimed by any tenant or third party on or with respect to the Premises
and to promptly forward to the carrier, with copies to Owner, any summons,
subpoena, or other like legal document served upon Property Manager
relating to actual or alleged potential liability of Owner, Property
Manager, or the Premises.
(g) To advise Owner of pertinent covenants in leases in which the
tenants agree to hold Owner harmless with respect to liability from any
accidents and/or to replace broken glass, and to secure from such tenants
and forward to Owner any certificates of insurance, and renewals thereof,
required to be furnished by the terms of such leases.
(h) At the option of Owner, expressed to Property Manager in
writing, to receive and collect rent and all other monies payable to Owner
by all tenants and licensees in the Premises and to deposit the same
within three (3) business days in the bank named in Exhibit A, paragraph 4
(the "Bank"), in an account approved by Owner and in the name of and for
the benefit of Owner (the "Bank Account"), which Bank Account shall be
used exclusively for such funds which shall in no event be commingled with
funds of Property Manager and to disburse such funds from said Bank
Account solely in payment for, or to reimburse Property Manager for
payment of, authorized expenses incurred in connection with the operation
of the Premises in accordance with the then current budgets approved by
Owner pursuant to section 2.5 of this Agreement and otherwise in
accordance with the terms and provisions of this Agreement. Property
Manager or any affiliate thereof shall obtain Owner's written approval on
all payments to Property Manager and all payments in excess of $25,000
with the exception of utility payments. In the event state law requires
that tenant security deposits be held in a separate account, such account
shall be established by Property Manager in the name of Owner as approved
in writing by Owner. If requested in writing, Owner's designated
representative will be a signatory on all bank accounting maintained by
Property Manager. Property Manager acknowledges and agrees that Property
Manager shall act in a fiduciary capacity for the benefit of Owner with
respect to the Bank Account.
(i) Upon the prior written approval of Owner, to institute all
necessary legal actions or proceedings for the collection of rent or other
income from the Premises, or the ousting or dispossessing of tenants or
other persons therefrom, and all other matters requiring legal attention.
Property Manager agrees to use its best efforts to collect rent and other
charges from tenants in a timely manner and to pursue Owner's legal
remedies for non-payment of same. Owner reserves the right to designate or
approve counsel and to control litigation of any character affecting or
arising out of the operation of the Premises. Property Manager agrees to
fully cooperate with said counsel.
<PAGE>
6
(j) To maintain fidelity bond/crime insurance naming Owner as loss
payee as its interest may appear with limits of not less than $1 million,
commercial general liability insurance with a combined single limit of not
less than $5 million each occurrence and general aggregate, errors and
omissions coverage with limits of not less than $1 million.
(k) To notify Owner immediately of any fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises and any material
violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances, or like
provisions. Property Manager will not bear responsibility for
noncompliance, unless such noncompliance is due to the gross negligence or
willful misconduct of Property Manager or its employees.
(l) To assist in Owner's ad valorem tax review program and to
cooperate with Owner, when so requested, in efforts to reduce such taxes.
Property Manager shall promptly furnish Owner with copies of all
assessment notices and receipted tax bills.
(m) To promptly comply with all laws, ordinances, orders, rules,
regulations and requirements of all Federal, State and municipal or other
governmental authorities, courts, departments, commissions, boards and
offices, any national or local Board of Fire Underwriters or Insurance
Services Office having jurisdiction, or any other body exercising
functions similar to those of any of the foregoing which may be applicable
to the Premises or any part thereof or to the leasing, use, repair,
operation and management thereof. In the event such compliance is
undertaken in the name and on behalf of Owner, such compliance shall be at
Owner's expense, unless such compliance is solely of an administrative
nature. Property Manager shall give prompt notice to Owner of any known
violation or written notice of alleged violation of such laws, rules,
regulations and requirements of which Property Manager has knowledge and
Property Manager shall not bear responsibility for failure of the Premises
or the operation thereof to comply with such laws, rules, regulations and
requirements unless Property Manager has committed gross negligence or a
willful act or omission in the performance of its obligations under this
Agreement or in the performance of any other duties owed to Owner or third
parties by Property Manager.
(n) Property Manager shall be required to maintain an on-site office
with specified business hours, provided that Owner will provide rent-free
space.
<PAGE>
7
(o) Property Manager shall require all tenants to comply with all of
the provisions of their leases and any rules and regulations applicable to
the Premises, unless otherwise directed in writing by Owner.
(p) Property Manager shall promptly pay all taxes, utilities, and
other bills relating to the operation of the Premises, unless otherwise
limited in writing by Owner.
2.2 Property Manager agrees to prepare and submit to Owner initial
monthly reports relating to the management and operation of the Premises for the
preceding calendar month, on or before the tenth (10th) day of each month with
all additional reports due on or before the twentieth (20th) day of the month,
in form satisfactory to Owner, such form to be subject to change from time to
time, as Owner shall reasonably require. The Property Manager shall also report
to Owner such other information known to Property Manager of which Owner should
be made aware. Property Manager shall remit to Owner the net receipts from the
Premises, including any net income received from the garage operation as
described in Section 2.10, as directed by Owner within ten (10) days after
receipt thereof. Property Manager agrees that Owner shall have the right to
require the transfer to Owner at any time of any funds in the Bank Account
considered by Owner to be in excess of an amount reasonably required by Property
Manager for disbursement purposes in connection with the Premises. Property
Manager agrees to prepare and submit reports relating to the leasing of the
Premises in form satisfactory to Owner as requested by Owner.
Property Manager agrees to keep records with respect to the leasing,
management, and operation of the Premises, including records of receipts and
disbursements, all of which shall be deemed the property of Owner, and to retain
those records until the termination of this Agreement at which time Property
Manager shall immediately turn over all such records to Owner. Owner shall have
the right to inspect such records and audit the reports required by this Section
during business hours until such time as all such records have been delivered
over to Owner following the termination of this Agreement in accordance with
Section 5.2 hereof.
2.3 In connection with its management of the Property, Property
Manager shall acquire and utilize such computer software as Owner may require.
Property Manager shall keep such software current and install all upgrades,
enhancements and new versions of the software which may be from time to time
released by the vendor and/or required by Owner (collectively, the "Required
Software"). Property Manager shall cause all personnel who use the Required
Software to attend and complete basic system training programs offered by the
vendor and licensor of the Required Software. Property Manager shall also be
responsible for obtaining and maintaining any equipment required for proper
operation of the Required Software, including but not limited to, the
communications equipment required for transmission of data to Owner. Owner may
from time to time require additional or substitute
<PAGE>
8
software to be included among the Required Software and shall provide not less
than sixty (60) days' advance notice to Property Manager of such additions or
substitutions. Owner shall not be unreasonable with respect to the frequency of
changes in the Required Software. Property Manager shall use the Required
Software to enter, process, store, and transmit data to Owner, as Owner may from
time to time require and shall comply with any data reporting standards as Owner
may establish. Owner shall be responsible for all costs of the required
software, initial training, and additional equipment that is required solely by
Owner and used by Property Manager solely for the Premises.
2.4 Property Manager shall ensure such control over accounting and
financial transactions as is reasonably required to protect Owner's assets from
loss or diminution due to negligence (when Property Manager is acting outside of
the scope of its employment or in violation of this Agreement), gross negligence
or willful misconduct on the part of Property Manager's associates or employees.
Losses caused by such gross negligence or willful misconduct shall be borne by
Property Manager. Owner shall have the right to review control procedures and
within reason may require changes to the existing procedures.
2.5 Property Manager sham prepare and submit to Owner proposed
operating and capital budgets for the promotion, leasing, operation, repair, and
maintenance of the Premises. Preliminary versions of the budget ("Initial
Budget") will be due as stipulated by Owner based on a schedule to be provided
by Owner. Property Manager shall prepare an update of the Initial Budget
("Updated Budget") every three (3) months reflecting any changes that have
occurred since the submission of the Initial Budget and incorporating Owner's
comments. All budgets will be prepared on an accrual basis showing a month by
month projection of income and expense and capital expenditures for the
forthcoming calendar year and proposed leasing guidelines, together with a
marketing plan for all space that is currently vacant or that is scheduled to
become vacant during the next year. The Initial Budget and Updated Budget shall
also contain any other reports or data which the Owner in its reasonable
discretion deems to be relevant to the management and/or leasing of the
Premises. Property Manager will also provide Owner with additional reports, as
reasonably requested from time to time by Owner.
After receiving Owner's approval of the Updated Budget ("Approved
Budget"), Property Manager shall implement such budget and shall be authorized
to make the expenditures and incur the obligations provided for in the budget
except as set forth herein. Property Manager shall obtain Owner's specific
approval prior to contracting for any capital expenditures, even if already
included in the Approved Budget. Except for amounts of less than five percent
(5) of any line item or except in the event of an emergency, Property Manager
shall not spend any non-budgeted amount in excess of that specified on Exhibit
A, paragraph 3, without Owner's prior written approval. Property Manager shall
operate the Premises according to the previous year's Approved Budget until
current budget is fully
<PAGE>
9
approved. Property Manager shall furnish to Owner prior to January 31 an
unaudited statement of income and disbursements reflecting the operation of the
Premises for the previous calendar year on an accrual basis. Property Manager is
not allowed to reclassify expenses to meet the Approved Budget. Property Manager
must charge all items to the appropriate account within the Approved Budget.
2.6 Subject to the terms hereof, Property Manager agrees to use it
best efforts to cause the Premises to be rented and kept rented to desirable
tenants, satisfactory to Owner, and in connection therewith:
(a) Subject to the terms hereof, to negotiate leases and renewals of
leases at appropriate times on an exclusive basis, it being understood
that all inquiries to Owner with respect to leasing any portion of the
Premises shall be referred to Property Manager. Property Manager is
responsible for keeping abreast of all time limits and requirements in the
leases (by way of example and not of limitation, when options are arising,
leases are expiring, etc.), and act in a timely manner to give any
required notice thereof in accordance with all tenant leases. All leases
and renewals must be prepared by counsel selected by Owner and reviewed by
Property Manager in accordance with Owner's leasing guidelines and on
Owner's approved form of lease agreement and be submitted to the Owner's
designated representative for execution by Owner. Unless agreed to and
directed otherwise, Property Manager agrees it will strictly observe the
specific leasing guidelines provided by Owner, cooperating with counsel
and acting in a timely manner, and agrees to hold Owner harmless from any
damages sustained by Owner, including the cost of defending any litigation
arising out of Property Manager's failure gross negligence or willful
misconduct in failing to observe such guidelines. References of
prospective tenants, as well as their varying use requirements, shall be
investigated carefully by Property Manager, however, all decisions
concerning creditworthiness and suitability of tenant shall be solely that
of Owner, and Property Manager shall not be required to warrant or
guarantee any tenant's performance.
(b) With Owner's prior written approval and at Owner's expense, to
advertise the Premises or portions thereof for rent by means of
periodicals, plans, brochures, and other means appropriate to the
Premises. No sign shall be placed on the Premises by the Property Manager
without the Owner's prior written approval.
2.7 Property Manager agrees, for itself and all persons retained or
employed by Property Manager in performing its services, during the term of this
Agreement and thereafter, to use reasonable efforts to hold in confidence and
not to use or disclose to others any confidential or proprietary information of
Owner heretofore or hereafter disclosed to, learned by or prepared by Property
Manager, including but not limited to any data,
<PAGE>
10
information, plans, programs, processes, costs, operations, or tenants which may
come within the knowledge of Property Manager in the performance of, or as a
result of, its services, except where Owner specifically authorizes Property
Manager to disclose any of the foregoing to others or such disclosure reasonably
results from the performance of Property Manager's duties hereunder.
2.8 Property Manager shall indemnify and save harmless Owner from
and against all liability, suits, claims, and demands (including, without
limitation, all costs and attorney's fees and expenses incurred in connection
therewith) by or on behalf of any person, firm, corporation or other entity due
to or arising out of any gross negligence or willful misconduct on the part of
the Property Manager, its employees, contractors or subcontractors in connection
with Property Manager's performance of its obligations under this Agreement.
2.9 Property Manager shall use its best efforts to insure that no
third party files or suffers to be filed, any materialman's or mechanic's lien
against the Premises arising out of material incorporated therein or work
performed therein or thereon upon the request or order of Property Manager.
2.10 If Owner has entered into a separate agreement with a parking
management company ("Parking Manager") or property association to operate the
parking facility of the Premises, Property Manager will coordinate and cooperate
with Parking Manager or property association as directed by Owner, and will
incorporate budgets and monthly statements submitted by Parking Manager into
Property Manager's budgets and monthly statements. If so directed by Owner,
Property Manager shall receive net revenues from Parking Manager for deposit
into the Bank Account described in Section 2.1(g).
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all of the following
charges relating to the Premises: taxes, special assessments, ground rents,
insurance premiums (other than premiums arising out of Section 2.1 (b) for which
Property Manager is responsible), and mortgage payments. If Owner does not elect
to make any or all of said payments, Property Manager shall do so out of the
Bank Account, if so directed in writing by Owner.
3.2 Owner shall self-insure or, at its option, require Property
Manager to coordinate the placement of property insurance upon the Premises
including both liability and all risk property insurance and shall look first to
such insurance or self-insurance for indemnity against any loss or damage to the
Premises or to any tenant insurance, except in the case of Property Manager's
negligence (when Property Manager is acting outside of the scope of its
<PAGE>
11
employment or in violation of this Agreement), gross negligence or willful
misconduct, or as otherwise provided herein. To the extent that policies shall
be procured, Owner shall obtain waivers of subrogation in favor of Property
Manager under such policies. Property Manager shall be an insured as real estate
manager on Owner's liability policy.
3.3 With respect to liabilities arising out of the use and operation
of the Premises and arising under this Agreement except for liabilities arising
out of section 2.1(b), Owner shall indemnify and save harmless Property Manager
from and against all claims, losses and liabilities (including, without
limitations all costs and attorney's fees and expenses incurred in connection
therewith) resulting from damage to property or injury to, or death of, persons,
defamation and false arrest (including, but not limited to, the property and
persons of the parties hereto and their agents, contractors, subcontractors and
employees), occasioned by or arising out of, acts or omissions (other than
criminal acts), of (i) Property Manager (except in the case of Property
Manager's negligence when Property Manager is acting outside of the scope of its
employment or in violation of this Agreement), gross negligence or willful
misconduct, or (ii) Owner or Owner's agents, employees, contractors or
subcontractors. Nothing contained in this Section 3.3 shall be construed as
creating or evidencing an employment relationship between Owner and any or all
persons employed or utilized by Property Manager pursuant to Section 2.1(b) for
the operation and maintenance of the Premises.
ARTICLE IV
PROPERTY MANAGER'S FEES
AND COMMISSIONS: REIMBURSEMENTS
4.1 As management fees for the services performed pursuant to
Article II, Owner agrees to pay Property Manager on the basis specified in
Exhibit A, paragraph 6. Said fee shall be payable monthly on the tenth (10th)
day of the month and shall be based on receipts from the previous calendar
month. Property Manager shall withdraw said fee from the operating account for
the Premises and shall account for same as provided for in Section 2.2 hereof.
If fees are based on rent or income, it is understood that they shall be
applicable to rent or income actually collected, including parking receipts, and
that there shall be excluded therefrom: direct charges for taxes, insurance,
fuel, electricity, water, labor or any other expense in connection with the
operation and maintenance of the Premises which are paid directly by a tenant to
any taxing authority, utility or service company; fire loss proceeds, capital
improvements, remodeling and tenant change costs (including any overhead factor
payable by tenants); amortization for tenant work; security deposits; however,
tax, utility, service charges and operating expense escalation charges required
to be calculated, billed and collected from individual tenants by Property
Manager will be included in collectively income for the purpose of calculating
management fee. Management fees shall be paid based on actual
<PAGE>
12
receipts, not estimates. Owner shall be entitled to pay Property Manager
directly rather than permitting Property Manager to pay itself out of the Bank
Account. To the extent any amounts are refunded to tenants, gross rent shall be
reduced accordingly. Any rent paid more than thirty (30) days in advance or
sales proceeds shall be excluded from gross rent.
4.2 As leasing commissions, if any, for new leases secured pursuant
to Section 2.6, including renewals, expansions or extensions exercised during
the term of this Agreement, Owner agrees to pay Property Manager at the rate
specified in Exhibit A, paragraph 7. A commission will be paid on direct leases
signed with subtenants for the period following the expiration date of the
original tenant's master lease. If a new lease contains a cancellation option
exercisable by the tenant and the cancellation fee does not include an amount
for the unamortized leasing commission remaining at the cancellation date, a
leasing commission will be paid on the initial term, which is prior to such
termination date, with the commission for the balance of the lease term payable
when and if such Tenant does not terminate the lease on or before such date as
set forth herein. Commissions will be based on base rents and pre-determined
fixed escalations payable to Owner only and will exclude: percentage rent;
variable escalations; operating expense escalations; real estate tax
escalations; any portion of said base rent attributable to parking; and free
rent. In the event a lease provides that the tenant is to pay directly for some
or all of the operating expenses and/or real estate taxes associated with its
space, then for purpose of calculating the commissions listed in Exhibit A, the
tenant's annual base rent shall be increased by an amount equivalent to the
estimated annual expenses that will be paid by tenant during the first year of
its lease as determined by Owner. No commission will be due for any portion of a
lease term that exceeds ten (10) years. Leasing commissions for new leases and
expansions shall be paid fifty percent (50%) within thirty (30) days after lease
execution by all parties and fifty percent (50%) within thirty (30) days after
lease commencement and actual occupancy. In the event of a renewal or extension,
any commission payment due shall be paid within thirty (30) days of the
execution of the renewal or extension documentation. When leases are negotiated
on behalf of tenant by outside brokers, Property Manager shall cooperate with
such brokers, Property Manager shall be responsible for paying all commissions
to such outside brokers, and all commissions to such outside broker shall be
subject to the written approval of Owner. The cost of all approved commissions
will be borne by Owner, unless already paid to Property Manager in accordance
with the terms hereof. Property Manager will assist Owner in negotiating the
terms of fees to outside brokers, and will submit recommendations to Owner
regarding the percentage rate for outside brokerage commissions in conjunction
with the budget submissions provided for in Section 2.5.
4.3 To the extent expressly identified in the Approved Budget, Owner
shall be responsible to reimburse Property Manager for the following expenses or
costs incurred by or on behalf of Property Manager in connection with the
management and leasing of the
<PAGE>
13
Premises. At Owner's option such expenses can come out of be paid from the
established Bank Account.
(a) Cost of gross salary, wages, bonuses, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Property
Manager, property management clerical support, engineering personnel, and
engineering clerical support as allocated to the Premises.
(b) Necessary general accounting and reporting services, as
allocated to the Premises.
(c) Necessary cost of forms, stationary, ledgers, and other supplies
and equipment used in Property Manager's office, as allocated to the Premises
for property management purposes.
(d) Cost of continuing education for personnel allocated to the
Premises.
(e) Cost of parking for personnel allocated to the Premises.
(f) Necessary cost of telecommunications, couriers, and postage
allocated to the Premises.
All of the enumerated items in section 4.3 must be at commercially
reasonable rates.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on January 1, 1996 and
will continue in full force and effect for an initial term of one (1) year,
unless terminated earlier in accordance with the terms of this Agreement. Upon
the expiration of the initial one (1) year term and each subsequent renewal
period, unless terminated, as is hereinafter addressed, this Agreement will
automatically renew for one (1) year renewal periods.
5.2 This Agreement may be terminated by Owner or Property Manager at
any time (a) without cause by giving the other party written notice of the
election to terminate no less than thirty (30) days prior to the date for
termination or (b) automatically and without notice if the Premises are sold to
a bonafide third party purchaser, except as provided herein, or the Premises are
acquired through foreclosure of a mortgage or deed in lieu of foreclosure.
<PAGE>
14
This Agreement may also be terminated for cause by the
non-defaulting party, at its option, upon the happening of any of the following
events of default:
(i) If the Property Manager makes a general assignment for the
benefit of creditors; files in the courts a petition in bankruptcy,
insolvency, for a reorganization, or for the appointment of a receiver or
trustee of all or a substantial part of its property; voluntarily takes
any advantage of any bankruptcy or insolvency law; an involuntary petition
or any answer is filed against the other proposing the adjudication as a
bankrupt which is not discharged or denied within sixty (60) days
thereafter; or if the Property Manager is insolvent by reason of being
unable to pay debts as they mature or otherwise is adjudicated bankrupt.
(ii) Upon the occurrence of a breach, default, or non-compliance by
Property Manager of any of the obligations, agreements or covenants to be
performed by Property Manager hereunder contained in this Agreement, and
the failure of Property Manager to cure such breach, default or
non-compliance within five (5) days following receipt of written notice
from the Owner for monetary defaults and fifteen (15) days following
receipt of written notice from Owner specifying such breach, default or
non-compliance for non-monetary defaults, provided that if the
non-monetary breach, default or non-compliance is not curable within said
fifteen (15) day period, then upon Property Manager's failure to commence
the curing of such non-monetary breach, default or non-compliance within
said fifteen (15) day period and thereafter diligently and continuously
pursue such cure to completion in no event more than ninety (90) days.
Notwithstanding anything herein to the contrary, Owner may cure any
breach, default or non-compliance and Property Manager shall immediately
reimburse Owner for all costs or expenses in connection therewith.
(iii) Failure of Owner to reimburse Property Manager any sums
stipulated in this Agreement; said termination to become effective upon
Property Manager's having served Owner written notice of the failure and
Owner's continued failure to remedy or correct such noncompliance within
thirty (30) days after receipt of such notice.
(iv) If the Premises are damaged by fire or any other casualty or
are taken through the exercise of the power of eminent domain or sale in
lieu thereof and, in Owner's reasonable opinion, such damage or taking
materially affects the operation of the Premises for their intended
purpose and the Premises cease to be operated for such purpose.
Upon termination of this Agreement for any reason, Property Manager
shall deliver the following to Owner or Owner's duly appointed representative on
or before thirty (30) days following the termination date:
<PAGE>
15
(a) A final accounting, reflecting the balance of income and
expenses for the Premises as of the date of termination;
(b) Any balance or monies due to Owner or tenant security deposits,
or both, held by Property Manager with respect to the Premises, and
(c) All records, contracts, drawings, leases, correspondence,
receipts for deposits, unpaid bills, summary of all leases in existence at
the time of termination, and all other papers or documents which pertain
to the Premises. Such data and information and all such documents shall at
all times be the property of Owner.
5.3 If leasing commissions are or will become payable under Section
4.2 and if this Agreement is terminated by Property Manager or Owner under
Section 5.2, Owner shall recognize Property Manager as the broker in any ongoing
contact with a Prospective Tenant (as hereinafter defined) for a lease, renewal,
extension or expansion with respect to any part of the Premises pending at the
date of termination of this Agreement unless mutually agreed to otherwise by
Owner and Property Manager. "Prospective Tenant" shall be defined as a tenant
with whom active negotiations are currently underway or who has both visited the
Premises with Property Manager (or whose leasing broker has visited the Premises
with Property Manager on Prospective Tenant's behalf) or has received a written
proposal from Property Manager or submitted a written proposal to Property
Manager prior to the date of termination of this Agreement. Property Manager
shall provide a list of Prospective Tenants ("Prospect List") to Owner within
thirty (30) business days of the effective date of termination of this
Agreement. The Prospect List will be subject to the review and approval of
Owner, which approval shall not be unreasonably denied. Unless otherwise agreed
to in writing by all parties, in the event of the consummation of a lease with a
Prospective Tenant appearing on the approved Prospect List within six (6) months
of the termination of this Agreement, Owner shall pay to Property Manager a
leasing commission with respect thereto pursuant to Section 4.2; provided,
however, that Property Manager shall not begin negotiations for any new lease or
renewal after giving or receiving a notice of termination, without the prior
written consent of Owner. No commissions shall be paid to Property Manager in
the event of the consummation of a lease more than six (6) months after the
termination of this Agreement. In the event that Property Manager has been
terminated and a lease is being negotiated with a Prospective Tenant, Property
Manager must continue with such negotiations or agree to split its commission
with Owner's new representative.
ARTICLE VI
ASSIGNMENT; CHANGE IN CONTROL
<PAGE>
16
6.1 This Agreement shall be unassignable by either party and can be
changed only by a writing signed by the parties hereto, provided, however, that
Owner shall have the right to assign this Agreement in the event a bona fide
sale by Owner of the Premises and such assignment shall not constitute a breach
of this paragraph 6.1, however, in the event of such an assignment, the term of
this Agreement shall expire ninety (90) days after the sale, unless Property
Manager consents to the assignment in writing, in which event the expiration
date of the term of this Agreement shall remain as provided in Article V. No
services to be performed by Property Manager under this Agreement shall be
delegated by Property Manager to any other person or firm without the prior
written consent of Owner, provided that Property Manager may engage independent
subcontractors, at no additional cost to Owner (except as provided in Section
2.1 hereof) and at Property Manager's sole risk, without such consent, to
provide incidental services usually performed by independent contractors under
good property management practices customary in the locale of the Premises.
Subject to Owner's direction, Property Manager will cooperate with lawyers or
consultants, pursuant to contracts in the name of the Owner, to perform real
estate tax appeals, property audits and its other standard services required in
connection with the operating of the Premises.
6.2 Notwithstanding the foregoing, Property Manager may, upon thirty
(30) days prior written notice to Owner, assign this Agreement to an affiliate
provided that the affiliate is the successor to all or substantially all of
Property Manager's management and leasing business; provided, however, that
Owner shall retain its right to cancel this Agreement upon thirty (30) days'
written notice, in accordance with the terms of Article V.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's Representative ("Owner's Representative") whose name and
address are set forth on Exhibit A, paragraph 1, shall be the duly authorized
representative of Owner for the purposes of this Agreement. Any statement,
notice, recommendation, request, demand, consent, or approval under this
Agreement shall be in writing and shall be deemed given (a) by Owner when made
by Owner's Representative or any officer of Owner and delivered personally to
Property Manager, if an individual, or to an officer of Property Manager, if a
corporation, or when mailed, overnight couriered, or telefaxed (provided
original hard copy of said telefacsimile is then sent via United States Postal
Service or an overnight courier service) addressed to Property Manager, at the
address set forth in Exhibit A, paragraph 2, and (b) by Property Manager when
delivered personally to or when mailed, overnight couriered, or telefaxed
(provided original hard copy of said telefacsimile is then sent via United
States Postal Service or an overnight courier service) addressed to Owner's
<PAGE>
17
Representative at the address set forth in Exhibit A, paragraph 1. Either party
may, by written notice, designate a different address.
7.2 Property Manager shall, at its own expense, qualify to do
business in the local jurisdiction and obtain and maintain such licenses from
the appropriate authorities of said jurisdiction as may be required for the
performance by Property Manager of its services. Property Manager shall comply
with all laws, rules, and regulations of said jurisdiction.
7.3 Each provision of this Agreement is intended to be severable. If
any term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties to this Agreement shall
institute any action or proceeding against the other party relating to this
Agreement, the unsuccessful party in such action or proceeding shall reimburse
the successful party for its disbursements incurred in connection therewith and
for its reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto
or of any breach or default by the other party in the performance by the other
of its obligations hereunder shall be valid unless in writing, and no such
consent or waiver shall be deemed or construed to be a consent or waiver to or
of any other breach or default in the performance by such other party of the
same or any other obligations of such party hereunder. Failure on the part of
either party to complain of any act or failure to act of the other party or to
declare the other party in default, irrespective of how long such failure
continues shall not constitute a waiver by such party of its rights hereunder.
The granting of any consent or approval in any one instance by or on behalf of
Owner shall not be construed to waive or limit the need for such consent in any
other or subsequent instance.
7.6 This Agreement shall be governed and construed in accordance
with the laws of the State of Virginia. The venue of any action or proceeding
brought by either party against the other arising out of this Agreement shall,
to the extent legally permissible, be the State of Virginia.
7.7 It is understood that the Property Manager is engaged in the
development, management, leasing and sale of real estate similar to the business
of Owner, and may, from time to time, agree to develop, manage, lease and sell
other real estate which may compete with the business of Owner. Owner hereby
consents to the pursuit of such competitive ventures by Property Manager and
acknowledges that such ventures shall not be deemed wrongful or improper;
provided that neither Property Manager nor its affiliates shall solicit any
Tenants in the Premises or attempt to induce such Tenants to relocate out of the
<PAGE>
18
Premises and into a competing property owned, controlled, or managed directly or
indirectly by Property Manager or any affiliate thereof during the term of such
Tenant's lease in the Premises; provided, however, that Property Manager devotes
such time, attention, and personnel to the management, operating, and leasing of
the Premises as is necessary to perform all of its obligations under this
Agreement.
7.8 There shall be no third-party beneficiaries to this Agreement,
other than affiliates of Owner of Property Manager.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
Canal Center Properties, Inc.
Owner
Witness:
/s/ [signature illegible By: /s/ W. Coster
- -------------------------------- -----------------------------------
Name: W. Coster
Title: V.P.
Faison & Associates, Inc.
Property Manager
Witness:
/s/ M. Suzanne Smith By: /s/ Chip Wood
- -------------------------------- -----------------------------------
Commission expires: 9/30/98 Name: Chip Wood
Title: Managing Director, Asset Mgmt.
<PAGE>
EXHIBIT A
Addresses/Approvals/Fee Schedule
1. Owner: Canal Center Properties, Inc.
c/o DIHC Management Corporation
Attention: Wout Coster
200 Galleria Parkway
Suite 2000
Atlanta, Georgia 30339
2. Property Faison & Associates
Manager: Attention: Chip Wood
1155 21st Street
Suite 200
Washington, DC 20036
3. Property Manager will require Owner's consent for any non-budgeted repair
in excess of $1,000.00.
4. Property Manager shall direct tenants to pay their rents directly to
Owner. Owner will deposit these rents and provide Property Manager with a
statement of deposits. The bank account at Sun Trust Bank is in the name
of the Owner.
5. Any checks written by Property Manager payable to Property Manager in
excess of $2,000.00 need to co-signature of Owner.
6. Property Manager will be paid 3% on the actual rental receipts as defined
under 4.1.
7. Property Manager will be paid a leasing commission in accordance to 4.2 as
follows:
Any new leases without cooperating broker - 3%.
Any new leases with cooperating broker - 5%.
(Property Manager to pay cooperating broker 3%)
Any expansion of an existing office tenant without cooperating
broker - 2%.
Any expansion of an existing retail tenant without cooperating
broker - 3%.
Any expansion of an existing tenant with a cooperating broker - 4%.
Any extension of an existing office tenant without cooperating
broker - 2%.
Any extension of an existing retail tenant without cooperating
broker - 3%.
Any extension of an existing tenant with a cooperating broker - 4%.
<PAGE>
EXHIBIT B
General Requirements for Contractors/Subcontractors
1. Possess commercially reasonable insurance, including, without limitation,
worker's compensation insurance and errors and omissions insurance.
2. Possess all necessary licenses, permits, governmental approvals, etc.
3. Possess at least three (3) years experience in the relevant field of
expertise.
4. Provide evidence, if requested, of each of the foregoing.
5. Provide, if requested, payment and/or performance bond(s).
6. Provide, if requested, an affidavit regarding its financial status,
business experience and other relevant information.
7. Provide information necessary for Property Manager to obtain a credit
report.
<PAGE>
Exhibit 10.109
[DIHC Letterhead]
SENT VIA FAX
July 15, 1997
Mr. Charles Nash
President
Concord Realty Advisors, Inc.
535 N. Michigan Avenue
Suite 613
Chicago, Illinois 60611
Re: Dearborn Site - Management Agreement
Dear Charles:
This letter outlines the services and fees for managing the site
located at Dearborn, State and Adams. We are confident that you and your firm
will protect our interest in Chicago while we formulate a strategy for the site.
Services and Term
o Ensure that contracts are in place to maintain the property's appearance
and condition, including landscaping, fence maintenance, rodent control,
trash removal and weed control. Prior to each contract's expiration,
evaluate the service provider, and renew/relet the contract for one year
with a 30 day cancellation provision. Please coordinate with Richard
Ellis, Inc. to obtain current contracts, and provide a summary of
contractors and contract terms currently in place. Any and all contracts
and expenditures will be signed or approved by DIHC Management Inc. if
they exceed $3,000.00 in any one year.
o Ensure that invoices from contractors are accurate, then submit to DIHC
Management Corporation for payment. We will pay the service providers
directly on a monthly basis when we make our management fee payment to
Concord Realty Advisors Inc.
<PAGE>
2
o Inspect the property at least twice a month and document your findings in
a monthly inspection report. This report should be submitted to DIHC along
with approved invoices by the 10th of the month.
o Act as liaison with local and state government.
o Monitor interior of site for structural changes.
o Coordinate public relations efforts.
o Provide budget and accounting for DIHC service providers.
o Coordinate and supervise the current water removal process with STS and
Morse Diesel.
o The term of this agreement commences on July 1, 1997 and expires on
December 31, 1997. It may be canceled by either party with thirty days
written notice.
Insurance
o Please provide us with a certificate of Insurance and have all DIHC
entities involved named as additional insured.
o DIHC will provide Concord Realty Advisors with a certificate of insurance,
where they are named as additional insured.
Management Fee
o The management fee for these services will be $2,500 per month, plus out
of pocket expenses paid upon receipt and review of the monthly report (due
on the 10th). This fee will be prorated for any partial month in the term.
o Billings for special projects are billed on an hourly basis at a blended
hourly rate of $100.00.
It is herewith agreed upon that the water removal project might
involve additional work beyond the regular property management arrangement and
will be billed on an hourly basis.
If any other work or project is beyond the management scope
described above, you will notify us thereof, and we will make arrangements for
additional compensation if necessary. Charles, thank you for agreeing to assist
with this asset in Chicago.
Sincerely,
/s/ Wout Coster
- ------------------------------------
Wout Coster
Vice President and Senior Investment Manager
<PAGE>
Exhibit 10.110
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
by and between
DIHC Properties I, Inc.
"Owner"
and
CK Atlanta Office Management, Inc.
"Property Manager"
<PAGE>
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
TABLE OF CONTENTS
Page
----
ARTICLE I Engagement and Authority of Property Manager..................1
1.1 Engagement....................................................1
ARTICLE II Property and Manager's Agreements.............................1
2.1(a) Contracts.....................................................2
2.1(b) Employees.....................................................2
2.1(c) Maintenance and repairs, building improvements................2
2.1(d) Tenant complaints and requests................................3
2.1(e) Notices.......................................................3
2.1(f) General liability insurance requirements......................3
2.1(g) Tenant indemnification........................................3
2.1(h) Bank accounts and fund disbursements..........................4
2.1(i) Collection of rent and legal action...........................4
2.1(j) Bonding.......................................................4
2.1(k) Notifications.................................................4
2.1(l) Tax bills and assessments.....................................4
2.1(m) Energy Conservation...........................................4
2.2 Reporting and transfer of funds...............................5
2.3 Required Software.............................................5
2.4 Control over accounting and financial transactions............6
2.5 Property budgets..............................................6
2.6 Leasing Responsibilities......................................6
2.7 Non-disclosure................................................7
2.8 Indemnification...............................................7
2.9 Materialmen and mechanics' liens..............................7
2.10 Parking Operations............................................7
ARTICLE III Owner's Agreements............................................8
3.1 Owner Payments................................................8
3.2 Insurance.....................................................8
3.3 Indemnity.....................................................8
ARTICLE IV Property Manager's Fees and Commissions; Reimbursements.......9
4.1 Management fees...............................................9
4.2 Leasing commissions...........................................9
4.3 Property Manager expenses....................................10
ARTICLE V Duration, Termination, Default...............................11
<PAGE>
5.1 Effective date...............................................11
5.2 Termination..................................................11
5.3 Leasing Commissions after termination........................12
ARTICLE VI Assignment; Change in Control................................12
6.1 Assignment...................................................12
6.2 Change in control............................................13
ARTICLE VII Miscellaneous................................................13
7.1 Notices......................................................13
7.2 Licenses.....................................................13
7.3 Severable provisions.........................................13
7.4 Payment of expenses in the event of dispute..................13
7.5 Consent or waiver............................................14
7.6 Jurisdiction.................................................14
7.7 Competitive Ventures.........................................14
EXHIBITS:
A. Miscellaneous Provisions
B. Property Description
C. List of Reports
<PAGE>
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
Premises: 200 Galleria
Atlanta, Georgia
THIS AGREEMENT ("Agreement") made as of the 2nd day of July, 1995 between
DIHC Properties I, Inc. ("Owner") and CK Atlanta Office Management, Inc.
("Property Manager"),
WITNESSETH:
WHEREAS, Owner is the owner of the above described premises, and Owner
wishes to avail itself of the ability and experience of Property Manager in the
on-site management of said premises; and
WHEREAS, Property Manager is willing to provide such management services
to said premises on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants herein contained, the
parties hereby agree as follows:
ARTICLE I
ENGAGEMENT AND AUTHORITY OF PROPERTY MANAGER
1.1 Owner hereby engages Property Manager as an independent contractor in the
management, leasing and operation of the above described property (the
"Premises"), and subject to the limitations set forth herein, hereby authorizes
Property Manager to exercise such powers with respect to the Premises as may be
necessary for the performance of Property Manager's obligations under Article II
hereof, and Property Manager accepts such engagement on the terms and conditions
hereinafter set forth. Property Manager shall have no right or authority,
express or implied, to commit or otherwise obligate Owner in any manner
whatsoever except to the extent specifically provided herein.
ARTICLE II
PROPERTY AND MANAGER'S AGREEMENTS
2.1 Property Manager shall conduct the ordinary and usual business affairs of
Owner relating to the management, leasing and operation of the Premises and
shall implement, or cause to be implemented, the policies of Owner for the
conduct of such business affairs in accordance with the guidelines provided in
this Agreement. The scope of Property Manager's authority shall be limited to
said guidelines. Property Manager agrees to use its best efforts in the
management, leasing and operation of the Premises, and agrees to comply with
Owner's instructions, and in connection therewith.
- 1 -
<PAGE>
(a) To contract, for periods limited to Owner's possession of the Premises, but
not in excess of one year without prior written approval of Owner, in the name
and at the expense of Owner, for gas, electricity, water, and such other
services as are necessary or convenient for the proper operation of the
Premises. Service contracts should be written to include a right of the Owner to
terminate the agreement upon thirty (30) days notice wherever possible.
(b) To select, employ, pay, supervise, direct and discharge all employees
necessary for the operation and maintenance of the Premises, in number and at
wages not in excess of those provided for in the Approved Budget or as approved
by the Owner in writing and to use reasonable care in the selection and
supervision of such employees, as reviewed and approved by Owner. Property
Manager shall be responsible for complying with all laws and regulations and
collective bargaining agreements, if any, affecting such employment, including
without limitation laws and regulations governing worker's compensation
insurance and compulsory non-occupational disability insurance. Property Manager
is and will continue throughout the term of this Agreement to be an Equal
Opportunity Employer. All persons employed or utilized in connection with the
operation and maintenance of the Premises shall be employees of Property
Manager, or of such contractors as may be retained by Property Manager pursuant
to the Agreement, and not employees of Owner, but all costs associated with the
operations of the Premises that have been included in the Approved Budget or
that have otherwise been approved by Owner, shall be reimbursed to Property
Manager by Owner. Unless included in the Approved Budget or allowed elsewhere in
this Agreement all leasing and marketing expenses win be at the Property
Manager's cost.
(c) To keep the Premises in a clean and sightly condition and to make (or cause
to be made by contractors retained by Property Manager pursuant to contracts in
the name of the Owner) all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation of the Premises or the fulfillment of Owner's
obligations under any lease or other agreement of which Property Manager has
notice, or compliance with all known governmental and insurance requirements,
provided that Property Manager shall not make any non-budgeted purchase or do
any non-budgeted work, the cost of which shall exceed the amount set forth in
Exhibit A, paragraph 3, without obtaining in each instance, the prior approval
of Owner, except in circumstances which Property Manager shall deem to
constitute an emergency requiring immediate action for the protection of the
Premises or of tenants or other persons or to avoid the suspension of necessary
services. Property Manager shall notify Owner immediately of the necessity for,
the nature of, and the cost of, any such emergency repairs or compliance. If
Owner shall require, Property Manager shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Property Manager's direction.
Property Manager shall supervise all tenant improvements within the
Premises as a part of its duties including the supervision of any reconstruction
of the Premises or capital improvements. Notwithstanding the foregoing, Property
Manager acknowledges that Owner may, from time to time, enter into separate
agreements with third party consultants (including affiliates
- 2 -
<PAGE>
and/or subsidiaries of Property Manager) to manage and supervise construction
work at the Premises. Property Manager shall assist Owner in facilitating the
efforts of such third party consultants. Manager shall obtain the necessary
receipts, releases, waivers, discharges and assurances to keep the Premises free
from mechanics' and materialmen's liens and other claims.
Owner shall receive the benefit of all discounts and rebates obtainable by
Property Manager in its operation of the Premises. Property Manager agrees to
take advantage of such discounts and rebates wherever available and reasonable.
If Property Manager desires to contract for repair, construction, or any
other service described in this paragraph (2.1c) with a party with respect to
which any partner or shareholder of Property Manager holds a beneficial
interest, such interest shall be disclosed to, and approved in writing by Owner
before such services are procured. The cost of any such services shall likewise
be at competitive rates, notwithstanding that tenants of the Premises may be
required to pay such costs.
Property Manager, or a general contractor working under the supervision of
Property Manager, is authorized to make and perform work at a tenant's request
and at such tenant's sole expense ("Tenant Work"), and Property Manager may
collect from tenants requesting such work or from general contractors performing
Tenant Work for the benefit of Owner, a charge for overhead on all such Tenant
Work. Property Manager, however, shall not require any tenant to use Property
Manager, its subsidiary, affiliate or related corporation to perform Tenant
Work.
(d) To handle promptly complaints and requests from tenants and notify Owner
promptly of any major complaint made by a tenant.
(e) To notify Owner promptly (together with copies of supporting documentation)
of any notice of violation of any governmental requirements; any known defect in
the Premises; any fire or other damage to the Premises; and, in the case of any
serious fire or other serious damage to the Premises, to also immediately
provide telephone notice thereof to the insurance carrier, so that an insurance
adjuster can view the damage before repairs are started and complete customary
loss reports in connection with fire or other damage to the Premises.
(f) To notify the general liability insurance carrier for the Premises and Owner
promptly of any personal injury or property damage occurring to or claimed by
any tenant or third party on or with respect to the Premises and to promptly
forward to the carrier, with copies to Owner, any summons, subpoena, or other
like legal document served upon Property Manager relating to actual or alleged
potential liability of Owner, Property Manager, or the Premises.
(g) To advise Owner of pertinent covenants in leases in which the tenants agree
to hold Owner harmless with respect to liability from any accidents and/or to
replace broken glass, and to secure from such tenants and forward to Owner any
certificates of insurance, and renewals thereof, required to be furnished by the
terms of such leases.
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(h) At the option of Owner, to receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and to deposit the
same promptly in the bank named in Exhibit A (the "Bank") in an account approved
by Owner and in the name of Owner (the "Bank Account"), which Bank Account shall
be used exclusively for such funds which shall in no event be commingled with
funds of Property Manager and to disburse such funds from said Bank Account
solely in payment for, or to reimburse Property Manager for payment of,
authorized expenses incurred in connection with the operation of the Premises in
accordance with the then current budgets approved by Owner pursuant to section
2.5 of this Agreement and otherwise in accordance with the terms and provisions
of this Agreement. Property Manager shall obtain Owner's written approval on all
payments in excess of $10,000 with the exception of utility payments. In the
event state law requires that tenant security deposits be held in a separate
account, such account shall be established by Property Manager in the name of
Owner as approved in writing by Owner. If requested, Owner's designated
representative will be a signatory on all bank accounts maintained by Property
Manager.
(i) Upon the prior approval of Owner, to institute all necessary legal actions
or proceedings for the collection of rent or other income from the Premises, or
the ousting or dispossessing of tenants or other persons therefrom, and all
other matters requiring legal attention. Property Manager agrees to use its best
efforts to collect rent and other charges from tenants in a timely manner and to
pursue Owner's legal remedies for non-payment of same. Owner reserves the right
to designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises.
(j) To bond Property Manager and/or all of Property Manager's employees who may
handle or be responsible for monies or property of Owner with a "comprehensive
3-D" or "Commercial Blanket" bond, in an amount of $2,000,000.
(k) To notify Owner immediately of any fire, accident or other casualty,
condemnation proceedings, rezoning or other governmental order, lawsuit or
threat thereof involving the Premises; and any material violations relative to
the leasing, use, repair and maintenance of the Premises under governmental
laws, rules, regulations, ordinances, or like provisions. Property Manager will
not bear responsibility for noncompliance, unless such noncompliance is due to
the gross negligence or willful misconduct of Property Manager or its employees.
(l) To assist in Owner's ad valorem tax review program and to cooperate with
Owner, when so requested, in efforts to reduce such taxes. Property Manager
shall promptly furnish Owner with copies of all assessment notices and receipted
tax bills.
(m) As is reasonable and customary, to promptly comply with all laws,
ordinances, orders, rules, regulations and requirements of all Federal, State
and municipal or other governmental authorities, courts, departments,
commissions, boards and offices, any national or local Board of Fire
Underwriters or Insurance Services Office having jurisdiction, or any other body
exercising functions similar to those of any of the foregoing which may be
applicable to the Premises or any
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part thereof or to the leasing, use, repair operation and management thereof. In
the event such compliance is undertaken in the name and on behalf of Owner, such
compliance shall be at Owner's expense, unless such compliance is solely of an
administrative nature. Property Manager shall give prompt notice to Owner of any
known violation or notice of alleged violation of such laws, rules, regulations
and requirements of which Property Manager has knowledge and Property Manager
shall not bear responsibility for failure of the Premises or the operation
thereof to comply with such laws, rules, regulations and requirements unless
Property Manager has committed gross negligence or a willful act or omission in
the performance of its obligations under this Agreement or in the performance of
any other duties owed to Owner or third parties by Property Manager.
2.2 Property Manager agrees to prepare and submit to Owner initial monthly
reports relating to the management and operation of the Premises for the
preceding calendar month, on or before the tenth (10th) day of each month with
all additional reports due on or before the twentieth (20th) day of the month,
in a form satisfactory to Owner, such form to be subject to change from time to
time, as Owner shall reasonably require. Property Manager shall remit to Owner
the net receipts from the Premises as directed by Owner. Property Manager agrees
that Owner shall have the right to require the transfer to Owner at any time of
any funds in the Bank Account considered by Owner to be in excess of an amount
reasonably required by Property Manager for disbursement purposes in connection
with the Premises. Property Manager agrees to prepare and submit reports
relating to the leasing of the Premises in form satisfactory to Owner as
requested by Owner.
Property Manager agrees to keep records with respect to the leasing, management
and operation of the Premises, including records of receipts and disbursements,
and to retain those records until the termination of this Agreement at which
time Property Manager shall turn over all such records to Owner. Owner shall
have the right to inspect such records and audit the reports required by this
Section during business hours until such time as all such records have been
delivered over to Owner following the termination of this Agreement in
accordance with Section 5.2 hereof.
2.3 In connection with its management of the Property, Manager shall acquire and
utilize such computer software as Owner may require. Property Manager shall keep
such software current and install all upgrades, enhancements and new versions of
the software which may be from time to time released by the vendor and/or
required by Owner (collectively, the "Required Software"). Property Manager
shall cause all personnel who use the Required Software to attend and complete
basic system training programs offered by the vendor and licensor of the
Required Software. Property Manager shall also be responsible for obtaining and
maintaining any equipment required proper operation of the Required Software,
including but not limited to, the communications equipment required or
transmission of data to Owner. Owner may from time to time require additional or
substitute software to be included among the Required Software and shall provide
not less than sixty (60) days' advance notice to Property Manager of such
additions or substitutions. Owner shall not be unreasonable with respect to the
frequency of changes in the Required Software. Property Manager shall use the
Required Software to enter, process, store and transmit data to Owner as Owner
may from time to time require and shall comply with any data reporting standards
as Owner may establish.
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2.4 Property Manager shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to error, gross negligence or willful misconduct on the part of
Property Manager's associates or employees. Losses caused by such error, gross
negligence or willful misconduct shall be borne by Property Manager. Owner shall
have the right to review control procedures and within reason may require
changes to the existing procedures.
2.5 Property Manager shall prepare and submit to Owner proposed operating and
capital budgets for the promotion, leasing, operation, repair, and maintenance
of the Premises. Preliminary versions of the budget ("Initial Budget") will be
due August 1 of each calendar year, or as otherwise stipulated by Owner.
Property Manager shall prepare updates of the Initial Budget ("Updated Budget")
during each calendar year reflecting any changes that have occurred since the
submission of the Initial Budget and incorporating Owner's comments. All budgets
will be prepared on an accrual basis showing a month by month projection of
income and expense and capital expenditures for the forthcoming calendar year
and proposed leasing guidelines, together with an annual Business Plan for the
property. The Initial Budget and Updated Budget shall also contain any other
reports or data which the Owner in its reasonable discretion deems to be
relevant to the management and/or leasing of the Premises. Property Manager will
also provide Owner with additional reports, as listed on Exhibit C, according to
a mutually determined schedule.
After receiving Owner's approval of the Updated Budget, Property Manager shall
implement such budget and shall be authorized to make the expenditures and incur
the obligations provided for in the budget ("Approved Budget"). Property Manager
shall obtain Owner's specific approval prior to contracting for any capital
expenditures, even if already included in the Approved Budget. Property Manager
agrees to use diligence and to employ all reasonable efforts to ensure that the
actual costs of operating the Premises shall not exceed said Approved Budget.
Property Manager shall not spend any non-budgeted amount in excess of that
specified on Exhibit A, Paragraph 3, without Owner's prior written approval.
Property Manager shall operate the Premises according to the previous year's
approved Budget until current budget is fully approved. Property Manager shall
furnish to Owner within seventy five (75) days of the end of each calendar year
an unaudited statement of income and disbursements reflecting the operation of
the Premises for the previous calendar year on an accrual basis and a schedule
of the accrual accounting adjustments which were made to convert the cash year
end statement to an accrual year end statement.
2.6 Property Manager agrees to use its best efforts to cause the Premises to be
rented and kept rented to desirable tenants, satisfactory to Owner, and in
connection therewith.
(a) To negotiate leases and renewals of leases at appropriate times on an
exclusive basis, it being understood that all inquiries to Owner with respect to
leasing any portion of the Premises shall be referred to Property Manager. All
leases and renewals must be prepared by Owner's counsel and reviewed by Property
Manager in accordance with Owner's leasing guidelines and on Owner's approved
form of lease agreement and be submitted to the Owner's designated
representative for execution by Owner. Unless agreed to and directed otherwise,
Property
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manager agrees it will strictly observe the specific leasing guidelines provided
by Owner and agrees to hold Owner harmless from any damages sustained by Owner,
including the cost of defending any litigation arising out of Property Manager's
failure to observe such guidelines. References of prospective tenants, as well
as their varying use requirements, shall be investigated carefully by Property
Manager, however, all decisions concerning creditworthiness and suitability of
tenant shall be solely that of Owner, and Property Manager shall not be required
to warrant or guarantee tenant's performance.
(b) With Owner's prior written approval and at Owner's expense, to advertise the
Premises or portions thereof for rent by means of periodicals, plans, brochures
and other means appropriate to the Premises. No sign shall be placed on the
Premises by the Property Manager without the Owner's prior written approval.
2.7 Property Manager agrees, for itself and all persons retained or employed by
Property Manager in performing its services, during the term of this Agreement
and thereafter, to use best efforts to hold in confidence and not to use or
disclose to others any confidential or proprietary information of Owner
heretofore or hereafter disclosed to Property Manager, including but not limited
to any data, information, plans, programs, processes, costs, operations, or
tenants which may come within the knowledge of Property Manager in the
performance of, or as a result of, its services, except where Owner specifically
authorizes Property Manager to disclose any of the foregoing to others or such
disclosure reasonably results from the performance of Property Manager's duties
hereunder.
2.8 Property Manager shall indemnify and save harmless Owner from and against
all liability, suits, claims, and demands (including, without limitation, all
costs and attorney's fees and expenses incurred in connection therewith) by or
on behalf of any person, firm, corporation or other entity due to or arising out
of any gross negligence or willful misconduct on the part of the Property
Manager, its employees, contractors or subcontractors in connections with
Property Manager's performance of its obligations under this Agreement.
2.9 Property Manager shall use its best efforts to insure that no third party
files or suffers to be filed, any materialman's or mechanic's lien against the
Premises arising out of material incorporated therein or work performed therein
or thereon upon the request or order of Property Manager.
2.10 Property Manager agrees, at all times, to maintain an organization
sufficient to enable it to perform all of its obligations and functions under
this Agreement.
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ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all of the following charges relating
to the Premises: taxes, special assessments, ground rents, insurance premiums
(other than premiums arising out of Section 2.1(b) for which Property Manager is
responsible) and mortgage payments.
3.2 Owner shall self-insure or, at its option, require Property Manager to
coordinate the placement of insurance upon the Premises including both liability
and all risk insurance and shall look solely to such insurance or self-insurance
for indemnity against any loss or damage to the Premises, except in the case of
Property Manager's gross negligence or willful misconduct. To the extent that
policies shall be procured, Owner shall obtain waivers of subrogation against
Property Manager under such policies. Property Manager shall be an insured as
real estate manager on Owner's liability policy.
3.3 With respect to liabilities arising out of the use and operation of the
Premises and arising under this Agreement except for liabilities arising out of
section 2.1(b), Owner shall indemnify and save harmless Property Manager from
and against all claims, losses and liabilities (including, without limitation,
all costs and attorney's fees and expenses incurred in connection therewith)
resulting from damage to property or injury to, or death of, persons, defamation
and false arrest (including, but not limited to, the property and persons of the
parties hereto and their agents, contractors, subcontractors and employees),
occasioned by or arising out of acts or omissions, (other than criminal acts),
of (i) Property Manager (except in cases of willful misconduct or gross
negligence), (ii) the employees, contractors or subcontractors of Property
Manager (except in cases of willful misconduct or gross negligence), or (iii)
Owner or Owner's agents, employees, contractors and subcontractors. Nothing
contained in this Section 3.3 shall be construed as creating or evidencing an
employment relationship between Owner and any or all persons employed or
utilized by Property Manager pursuant to Section 2.1(b) for the operation and
maintenance of the Premises.
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ARTICLE IV
PROPERTY MANAGER'S FEES
AND COMMISSIONS; REIMBURSEMENTS
4.1 As management fees for the services performed pursuant to Article II, Owner
agrees to pay Property Manager on the basis specified in Exhibit A. Said fee
shall be payable monthly and shall be based on receipts from the previous
calendar month. Property Manager shall withdraw said fee from the operating
account for the Premises and shall account for same as provided for in Section
2.2 hereof. If fees are based on rent or income, it is understood that they
shall be applicable to rent or income actually collected, and that there shall
be excluded therefrom: direct charges for taxes, insurance, fuel, electricity,
water, labor or any other expense in connection with the operation and
maintenance of the Premises which are paid directly by a tenant to any taxing
authority, utility or service company; fire loss proceeds, capital improvements,
remodeling and tenant change costs (including any overhead factor payable by
tenants); amortization for tenant work; security deposits; however, tax, utility
service charges and operating expense escalation charges required to be
calculated, billed and collected from individual tenants by Property Manager
will be included in collected income for the purpose of calculating management
fee.
4.2 As leasing commissions, if any, for new leases secured pursuant to Section
2.6, including renewals, expansions or extensions exercised during the term of
this Agreement, Owner agrees to pay Property Manager a cash-out commission at
the rate specified in Exhibit A. A commission will be paid on direct leases
signed with subtenants for the period following the expiration date of the
original tenant's master lease. If a new lease contains a cancellation option
exercisable by the tenant, a leasing commission will be paid through the
termination date, with the commission for the balance of the lease term payable
when and if such Tenant does not terminate the lease on or before such date.
Commissions will be based on base rents and pre-determined fixed escalations
payable to Owner only and will exclude: percentage rent; variable escalations;
operating expense escalations; real estate tax escalations; any portion of said
base rent attributable to free rent. In the event a lease provides that the
tenant is to pay directly for some or all of the operating expenses and/or real
estate taxes associated with its space, then for purpose of calculating the
commissions listed in Exhibit A, the tenant's annual base rents shall be
increased by an amount equivalent to the estimated annual expenses that will be
paid by tenant during the first year of its lease. No commission will be due for
any portion of a lease term that exceeds ten (10) years. Leasing commissions for
new leases and expansions shall be paid fifty percent (50%) within thirty (30)
days after lease execution by all parties and fifty percent (50%) within thirty
(30) days after rent commencement. In the event of a renewal or extension, any
commission payment due shall be paid within thirty (30) days of the execution of
the renewal or extension documentation. When leases are negotiated by outside
brokers, Property Manager shall cooperate with such brokers, Property Manager
shall be responsible for paying all commissions to such outside brokers, and all
commissions to such outside broker shall be subject to the written approval of
Owner. The cost of all approved commissions will be borne by Owner. Property
Manager will assist Owner in negotiating the terms of fees to outside brokers,
and will submit
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recommendations to Owner regarding the percentage rate for outside brokerage
commissions in conjunction with the budget submissions provided for in Section
2.5.
4.3 As expressly identified in the Approved Budget or otherwise provided herein,
Owner will be responsible to reimburse Property Manager for the following
expenses or costs incurred by or on behalf of Property Manager in connection
with the management and leasing of the Premises. A schedule of approved
reimbursable expenses for the balance of 1995 is attached as Exhibit E.
(a) Cost of gross salary, wages, bonuses, payroll taxes, insurance, worker's
compensation, pension benefits and any other benefits of property manager,
property management clerical support, engineering personnel, and engineering
clerical support.
(b) General accounting and reporting services, as allocated to the Premises.
(c) Cost of forms, stationary, ledgers, supplies and equipment and other
property-specific expenses used in Property Manager's office, as allocated to
the Premises for property management purposes.
(d) Cost of continuing education for personnel allocated to the Premises.
(e) Cost of telecommunications, couriers, and postage allocated to the Premises.
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ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective, on the date specified in Exhibit A
and will continue in full force and effect for an initial term of one (1) year.
Upon the expiration of the initial one (1) year term and each subsequent renewal
period, unless terminated, as is hereinafter addressed, this Agreement will
automatically renew for one (1) year renewal periods.
5.2 This Agreement may be terminated by Owner or Property Manager at any time
(a) without cause by giving the other party written notice of the election to
terminate no less than sixty (60) days prior to the date for termination or (b)
automatically and without notice if the Premises are sold to a bonafide third
party purchaser or the Premises are acquired through foreclosure of a mortgage
or deed in lieu of foreclosure.
This Agreement may also be terminated for cause by the non-defaulting party, at
its option, upon the happening of any of the following events of default:
(i) If the Property Manager makes a general assignment for the benefit of
creditors; files in the courts a petition in bankruptcy, or insolvency, or for a
reorganization, or for the appointment of a receiver or trustee of all or a
substantial part of its property; voluntarily takes any advantage of any
bankruptcy or insolvency law; an involuntary petition or any answer is filed
against the other proposing the adjudication as a bankrupt which is not
discharged or denied within sixty (60) days thereafter, or if the Property
Manager is insolvent by reason of being unable to pay debts as they mature or
otherwise is adjudicated bankrupt.
(ii) Upon the occurrence of a breach, default, or non-compliance by Property
Manager of any of the obligations, agreements or covenants to be performed by
Property Manager hereunder contained in this Agreement, and the failure of
Property Manager to cure such breach, default or non-compliance within thirty
(30) days following receipt of written notice from the Owner specifying such
breach, default or non-compliance, provided that if the breach, default or
non-compliance is not curable within said thirty (30) day period, then upon
Property Manager's failure to commence the curing of such breach, default or
non-compliance within said thirty (30) day period and thereafter diligently and
continuously pursue such cure to completion.
(iii) Failure of Owner to reimburse Manager any sums stipulated in this
Agreement; said termination to become effective upon Manager's having served
Owner written notice of the failure and Owner's continued failure to remedy or
correct such non-compliance within thirty (30) days after receipt of such
notice.
(iv) If the Premises are damaged by fire or any other casualty or are taken
through the exercise of the power of eminent domain or sale in lieu thereof and,
in Owner's reasonable opinion, such damage or taking materially affects the
operation of the Premises for their intended purpose and the Premises cease to
be operated for such purpose.
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Upon termination of this Agreement for any reason, Property Manager shall
deliver the following to Owner or Owner's duly appointed representative on or
before thirty (30) days following the termination date:
(a) A final accounting, reflecting the balance of income and expenses for the
Premises as of the date of termination;
(b) Any balance or monies due to Owner or tenant security deposits, or both,
held by Property Manager with respect to the Premises, and
(c) All records, contracts, drawings, leases, correspondence, receipts for
deposits, unpaid bills, summary of all leases in existence at the time of
termination, and all other papers or documents which pertain to the Premises.
Such data and information and all such documents shall at all times be the
property of Owner.
5.3 If leasing commissions are or will become payable under Section 4.2 and if
this Agreement is terminated by Property Manager or Owner under Section 5.2,
Owner shall recognize Property Manager as the broker in any ongoing contact with
a Prospective Tenant (as hereinafter defined) for a lease, renewal, extension or
expansion with respect to any part of the Premises pending at the date of
termination of this Agreement unless mutually agreed to otherwise by Owner and
Property Manager. "Prospective Tenant" shall be defined as a tenant with whom
active negotiations are currently underway or who has both visited the Premises
with Property Manager (or whose leasing broker has visited the Premises with
Property Manager on Prospective Tenant's behalf) or has received a written
proposal from Property Manager or submitted a written proposal to Property
Manager prior to the date of termination of this Agreement. Property Manager
shall provide a list of Prospective Tenants ("Prospect List") to Owner within
thirty (30) business days of the effective date of termination of this
Agreement. The Prospect List will be subject to the review and approval of
Owner, which approval shall not be unreasonably denied. Unless otherwise agreed
to in writing by all parties, in the event of the consummation of a lease with a
Prospective Tenant appearing on the approved Prospect List within six (6) months
of the termination of this Agreement, Owner shall pay to Property Manager a
leasing commission with respect thereto pursuant to Section 4.2; provided,
however, that Property Manager shall not begin negotiations for any new lease or
renewal after giving or receiving a notice of termination, without the prior
written consent of Owner. No commissions shall be paid to Property Manager in
the event of the consummation of a lease more than one year after the
termination of this Agreement.
ARTICLE VI
ASSIGNMENT; CHANGE IN CONTROL
6.1 This Agreement shall be unassignable by either party and can be changed only
by a writing signed by the parties hereto, provided, however, that Owner shall
have the right to assign this Agreement in the event of a bona fide sale by
Owner of the Premises and such assignment, shall
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not constitute a breach of this paragraph 6.1, however, in the event of such an
assignment the term of this Agreement shall expire ninety (90) days after the
date of sale, unless Property Manager consents to the assignment in writing, in
which event the expiration date of the term of this agreement shall remain as
provided in Article V. Nor shall any of the services to be performed by Property
Manager under this Agreement be delegated by Property Manager to any other
person or firm without the prior written consent of Owner, provided that
Property Manager may engage independent subcontractors, at no additional cost to
Owner (except as provided in Section 2.1 hereof) and at Property Manager's sole
risk, without such consent, to provide incidental services usually performed by
independent contractors under good property management practices customary in
the locale of the Premises. Subject to Owner's direction, Property Manager will
cooperate with lawyers or consultants, pursuant to contracts in the name of the
Owner, to perform real estate tax appeals, property audits and its other
standard services required in connection with the operating of the Premises.
6.2 Notwithstanding the foregoing, Property Manager may, upon thirty (30) days
prior written notice to Owner, assign this Agreement to an affiliate provided
that the affiliate is the successor to all or substantially all of Property
Manager's management and leasing business.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's Representative ("Owner's Representative") whose name and address are
set forth on Exhibit A shall be the duly authorized representative of Owner for
the purposes of this Agreement. Any statement, notice, recommendation, request,
demand, consent or approval under this Agreement shall be in writing and shall
be deemed given (a) by Owner when made by Owner's Representative or any officer
of Owner and delivered personally to Property Manager, if an individual, or to
an officer of Property Manager, if a corporation, or when mailed addressed to
Property Manager, at the address set forth in Exhibit A, and (b) by Property
Manager when delivered personally to or when mailed addressed to Owner's
Representative at the address set forth in Exhibit A. Either party may, by
written notice, designate a different address.
7.2 Property Manager shall, at its own expense, qualify to do business in the
local jurisdiction and obtain and maintain such licenses from the appropriate
authorities of said jurisdiction as may be required for the performance by
Property Manager of its services.
7.3 Each provision of this Agreement is intended to be severable. If any term or
provision hereof shall be determined by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such provision shall be severed
from this Agreement and shall not affect the validity of the remainder of this
Agreement.
7.4 In the event either of the parties to this Agreement shall institute any
action or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or
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proceeding shall reimburse the successful party for its disbursements incurred
in connection therewith and for its reasonable attorney's fees as fixed by the
court.
7.5 No consent or waiver, express or implied, by either party hereto or of any
breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default irrespective of how long such failure continues shall not
constitute a waiver by such party of its rights hereunder. The granting of any
consent or approval in any one instance by or on behalf of Owner shall not be
construed to waive or limit the need for such consent in any other or subsequent
instance.
7.6 This Agreement shall be governed and construed in accordance with the laws
of Atlanta, Cobb County, Georgia. The venue of any action or proceeding brought
by either party against the other arising out of this Agreement shall, to the
extent legally permissible, be Atlanta, Cobb County, Georgia.
7.7 It is understood that the Property Manager is engaged in the development,
management, leasing and sale of real estate similar to the business of Owner,
and may, from time to time, agree to develop, manage, lease and sell other real
estate which may compete with the business of Owner. Owner hereby consents to
the pursuit of such competitive ventures by Property Manager and acknowledges
that such ventures shall not be deemed wrongful or improper, provided that
neither Property Manager nor its affiliates shall solicit any Tenants in the
Premises or attempt to induce such Tenants to relocate out of the Premises and
into a competing property owned, controlled, or managed directly or indirectly
by Property Manager or any affiliate thereof during the term of such Tenant's
lease in the Premises.
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IN WITNESS WHEREOF, the parties have executed and delivered this agreement
as of the date first above written.
DIHC Properties I, Inc.
Owner
Witness:
[signature illegible] By: /s/ Jan Koeman
- ------------------------------- -------------------------------------
Name: Jan Koeman
-----------------------------------
Title: Vice President
----------------------------------
CK-ATLANTA OFFICE MANAGEMENT, INC.
a Texas corporation
Witness: By: /s/ J. Donald Childress
-------------------------------------
J. Donald Childress, President
Rhonda Williams
- -------------------------------
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EXHIBIT A
AGREEMENT dated July 2, 1995 between DIHC Properties I, Inc. ("Owner") and
Childress Klein Properties, Inc. ("Proper Manager").
1. Effective date (5.1):
July 2, 1995
2. Name and address of Owner's and Property Manager's Representatives (7.1):
Owner: DIHC Properties I, Inc.
c/o DIHC Management Corporation
200 Galleria Parkway, N.W., Suite 2000
Atlanta, Georgia 30339
Attention: Barrington H. Branch
Manager: Childress Klein Properties
300 Galleria Parkway, N.W., Suite 300
Atlanta, Georgia 30339
Attention: J. Donald Childress
3. Limit of amount authorized for non-budgeted, non-emergency purchases and
repairs (2.1(c)(2.5)):
Two thousand five hundred dollars ($2,500)
4. Name of bank (2.1(g) Trust Company Bank
5. Description of Bank Account (Name of passbook (2.1(h)): DIHC Properties I,
Inc.
6. Management fees (4.1):
Two and three quarters (2.75%) percent of monthly collected gross
receipts, as defined in Section 4.1. For purposes of the calculation, the term
monthly gross receipts, as used in Section 4.1 and above, shall be defined to
include all minimum annual base rents, additional rents, and percentage rents,
as well as, without limitation, all rent escalations and operating expense and
real estate pass throughs actually collected from tenants in the Property in any
calendar month during the term hereof.
In the event the term hereof expires or is terminated on any date other
than the end of a calendar month, the management fee for such period of less
than a full calendar month shall be prorated on a daily basis.
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7. Rate of leasing commissions, if any (4.2):
OFFICE and RETAIL SPACE LEASES
a. New Leases in the Property:
i. Tenants Procured without Outside Broker Participation:
Four Percent (4%) of aggregate base rent to Property
Manager.
ii. Tenants Procured with Outside Broker Participation: Two
Percent (2%) to Property Manager and four percent (4%)
of aggregate base rent to Co-broker. Owner may also pay
a procurement fee equal to one (1) month's rent, if
required by market conditions to Co-broker.
b. Leases After Initial Leases (Including Extension, Renewals,
Expansions):
i. Tenants Procured without Outside Broker Participation:
Two Percent (2%) of aggregate base rent to Property
Manager.
ii. Tenants Procured with Outside Broker Participation: One
Percent (1%) of aggregate base rent to Property Manager
and two percent (2%) of aggregate base rent to Co-broker
c. The parties acknowledge Property Manager is eligible for
annuity commission for leases consummated during the initial
term of the Leasing Agreement (a list is included and made a
part of this Agreement as Exhibit D), and these annuities
shall continue for the remaining term of those leases.
d. Property Manager shall continue to be responsible for any
on-going annuity commissions payable to outside brokers as
future cash-out payments which Property Manager is obligated
to pay under the term of the initial Leasing Agreement.
- 17 -
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EXHIBIT B
AGREEMENT dated July 2, 1995, between DIHC Properties I, Inc. ("Owner") and
Childress Properties, Inc. ("Property Manager").
PROPERTY DESCRIPTION
The land, and all improvements thereon, located on the lot(s) numbered 947 or
the 17th District, 2nd Section, Cobb County, Georgia
- 18 -
<PAGE>
Exhibit 10.111
RESIDENTIAL MANAGEMENT AGREEMENT
THIS RESIDENTIAL MANAGEMENT AGREEMENT ("Agreement") is made and
entered into as of the 15th day of July 1987, by and between AVENUE ASSOCIATES
LIMITED PARTNERSHIP, a District of Columbia limited partnership ("Owner"), and
CROW-WASH1NGTON OFFICE MANAGEMENT COMPANY, INC., a Texas corporation
("Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of a parcel of land located on
Pennsylvania Avenue, N.W., Washington, D.C. between 7th, 9th and D Streets, N.W.
("Property") and proposes to construct thereon two (2) multi-use structures
including retail, residential and commercial space and a parking garage(s)
("Buildings") (the Property and the Buildings being collectively referred to as
the "Premises"); and
WHEREAS, Owner has agreed to appoint Manager as the sole and
exclusive managing agent for the residential portion of the Buildings and
Manager has agreed to serve as such, all subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, one Dollar
($1.00), the terms set forth below, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Manager and Owner
hereby agree as follows:
ARTICLE I
ESTABLISHMENT OF MANAGERIAL RESPONSIBILITY
Section 1.1 Appointment of Manager. Owner hereby appoints Manager,
and Manager hereby accepts appointment, on the terms and conditions hereinafter
provided, as sole and exclusive Manager of the residential portion of the
Premises.
ARTICLE II
SERVICES TO BE PERFORMED BY MANAGER
Section 2.1 Preparation of Annual Budget. (a) Within ninety (90)
days after the certificate of occupancy permitting occupancy of the residential
portion of either of the Buildings is obtained and on or before every August 1
during the term hereof, Manager shall prepare and deliver to Owner an operating
and capital budget in form satisfactory to Owner in preliminary draft form
setting forth an itemized statement of the estimated receipts and
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2
disbursements (capital, operating and other) for the next fiscal year. Such
preliminary budget shall include a rent roll for the residential portion of the
Buildings, taking into account, without limitation, the general condition of the
residential portion of the Premises, rate of completion of any contemplated
repairs to the residential portion of the Premises, the then current occupancy
level, lease expirations, the physical condition of the residential portion of
the Buildings and rentals charged in the competing buildings in the area. Each
such preliminary budget shall also include suggested leasing guidelines
(including rental rates, terms, parameters for tenant creditworthiness,
escalation clauses, remodeling and parking charges, and other pertinent matters)
to serve as a basis for negotiating with prospective or renewal residential
tenants, a schedule of proposed job descriptions and requirements for any and
all independent contractors and employees of Manager serving the residential
portion of the Premises, a reasonable estimate of wage rates and all other
compensation to be paid such contractors and employees.
(b) After review and approval by Owner in accordance with Section
2.05 of the Joint Venture Agreenent of Market Square Associates ("Joint Venture
Agreement"), Manager shall refine each such preliminary budget into final draft
form not later than thirty (30) days after delivery of such preliminary budget;
following its approval in final form by Owner, said budget (hereinafter called
an "Annual Budget") shall constitute a standard to which Manager shall adhere.
Notwithstanding the foregoing, sums shown in the Annual Budget for tenant
improvement work are for illustrative purposes only and no sums for tenant
improvement work will be spent except on a lease-by-lease basis as approved by
Owner. Except with the prior consent, which will not be unreasonably withheld or
delayed, of Owner or in the case of emergency repairs Permitted under Section
2.4 hereof, no expense or cost may be incurred or commitment made by Manager in
connection with the maintenance, repair or operation of the residential portion
of the Premises in excess of ten percent (10%) of each base item and in the
aggregate five percent (5%) over the Annual Budget for operating expenses
("Excess Payment"); no overspending of the individual items or the aggregate
amount of the Annual Budget for capital expenses is permitted by this Section.
The making of any Excess Payment by Manager shall not be in default under this
Agreement; provided, however, the amount of such Excess Payment shall be an
obligation of Manager and shall not be paid from funds of Owner and Owner shall
be under no obligation to reimburse Manager for such expenditures unless such
excess Payment is subsequently approved by Owner in its reasonable discretion.
Section 2.2 Independent Contractors. Pursuant to the Annual Budget,
Manager shall investigate, contract with, pay, supervise and discharge any
personnel required for the routine maintenance and operation of the residential
portion of the Premises on a day-to-day basis, including architects, engineers,
accountants, attorneys and others. Such personnel shall in every instance be
independent contractors or employees of Manager and shall not be employees of
Owner. After any party has been engaged to perform personal or
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3
professional services for Owner, Manager shall give Owner notice thereof and
Owner may require Manager to terminate the contracts of such persons serving the
Premises whom Owner, in its sole discretion, deems unsatisfactory. Except as
provided in Section 5.3 below, all salaries, wages and other compensation of
personnel contracted with by Manager hereunder shall be paid by Manager from
funds of Owner or reimbursed to Manager by Owner pursuant to the terms hereof.
Section 2.3 Service Contracts. Manager shall make, when necessary,
in the name of Owner, contracts for water, electricity, gas, fuel, oil,
telephone, vermin extermination, trash removal, janitorial service, landscaping,
security service and other necessary services, or such of them as Manager shall
deem reasonably advisable, for the residential portion of the Premises, provided
each such contract shall be for no longer than a one-year term or shall be
cancellable on no more than thirty (30) days notice after one year without
penalty. Manager shall also place orders in the name of Owner for such
equipment, tools, appliances, materials and supplies as are necessary properly
to maintain the residential portion of the Premises, subject to the limitations
of the current Annual Budget (as it is subject to the provisions of Section
2.1(b) above) approved by Owner.
Section 2.4 Maintenance and Repair of Premises. Manager shall cause
the residential portion of the Premises to be maintained in accordance with the
standards not less than those set forth in Section 2.9(h) below, including
(without limitation) the performance of ordinary alterations and improvements,
supervision of the installation and removal of tenant improvements, interior and
exterior cleaning, painting and decorating, plumbing, carpentry, and such other
normal maintenance and repair work as may be desirable, subject to limitations
of the current Annual Budget approved by Owner and any other reasonable
limitations imposed in writing by Owner in addition to those contained herein.
For any one item of repair or replacement, the expense or cost incurred shall
not exceed the amount allocated thereto in the current Annual Budget, except as
permitted by Section 2.1(b) above and further except that emergency repairs
immediately necessary to secure the preservation and safety of the residential
portion of the Premises or to avoid the suspension of any service reasonably
necessary for the operation of the residential portion of the Premises or to
avoid danger to life or property may be made by Manager without such consent or
authority contained in the current Annual Budget provided Manager shall first
make reasonable attempts to contact Owner. Notwithstanding such authority as to
emergency repairs, it is understood and agreed that Manager will confer as soon
as possible with Owner regarding every such expenditure. Manager shall assure
that any contractor performing work on the residential portion of the Premises
maintains insurance satisfactory to Owner and any mortgagee of the residential
portion of the Premises, including (but not limited to) workmen's compensation
insurance, employers' liability insurance and insurance against liability for
injury to persons and property arising out of all of contractors' operations,
any subcontractors' operations, and the use of
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4
owned, non-owned or hired equipment, including automotive equipment in the
pursuit of all such operations.
Section 2.5 Insurance. If requested by Owner, Manager shall
supervise the maintenance of insurance for the residential portions of the
Premises, with companies and through brokers agreed upon by Owner, of such kind
and amounts as Owner shall from time to time be required to carry pursuant to
the provisions of applicable agreements with third parties, and of such other
kind and amounts as Owner shall from time to time require.
Section 2.6 Collection of Moneys. Manager shall prepare and deliver
all rent bills and other invoices to residential tenants and shall calculate all
rent escalations and percentage rents due. Manager shall collect all rent and
other charges due from tenants, licensees, concessionaires and any others in
consequence of the authorized operation of facilities in the residential
portions of the Premises and otherwise due Owner with respect to the residential
portion of the Premises. Owner authorizes Manager to request, demand, collect,
receive and receipt for all such rent and other charges. With the prior written
consent of Owner, Manager may institute legal proceedings and engage legal
counsel in the name of Owner for the collection of overdue rents and other
charges and for the dispossession of tenants and other persons from the
residential portions of the Premises. Owner will be informed as soon as possible
respecting any legal action which may be contemplated. Any expense incurred
in connection therewith shall be paid by Owner. All moneys collected by
Manager shall be forthwith deposited in the Depository Account (defined in
SECTION 5.2 below).
Section 2.7 MANAGER DISBURSEMENTS. Except as otherwise directed
by Owner and subject to the limitations of SECTION 2.1(B), Manager shall,
from the funds on deposit in the Operating Account (defined in SECTION 5.2
below), cause to be disbursed regularly and punctually amounts due and
payable as operating expenses of the residential portions of the Premises
authorized to be incurred under the terms of this Agreement, including
(without limitation) payment of utility bills, telephone bills, custodial
bills, trash removal bills, water and sewer rents, vault charges and leasing
commissions, payment (if directed by Owner) prior to delinquency and prior to
the addition thereof of interest or penalties of all real property taxes and
assessments and other taxes levied or assessed against the residential
portions of the Premises, all rents, insurance premiums and other impositions
applicable to the residential portions of the Premises. Manager's fees
provided for in ARTICLE IV, any reimbursement due to Manager pursuant to
SECTION 5.3, and if requested by Owner, payment of sums due on any mortgage
loan affecting the residential protions of the Premises. Manager may also pay
sums due on such mortgage loans if permitted by the terms of the Joint
Venture Agreement. After disbursement as herein specified, any balance
remaining shall be disbured or transferred as generally or specifically
directed from time to time by Owner. Manager shall have no obligation to pay
any of the aforementioned expenses or costs unless there are sufficent funds
in the Operating Account or the funds are supplied to Manager by Owner. In
the event that at any time there are insufficient funds on hand to meet such
operating expenses, Manager shall promptly notify Owner, which shall supply
such funds, and if Manager shall have advanced its own funds to meet such
expenses Owner shall promptly reimburse Manager therefor. All checks to
Manger for reimbursement of expenses and for Manger's fees and all checks for
payment of leasing commissions shall be co-signed by Owner.
Section 2.8 DISCOUNTS. Manager shall at all times be under a duty
to use its best efforts to secure for and credit to Owner any discounts,
commissions or rebates obtainable as a result of any purchase of goods or
services or as a result of other activities undertaken pursuant to this
Agreement unless otherwise directed by Owner.
Section 2.9 Miscellaneous Duties of Manager.
(a) Books and Records and Monthly Reports. Manager shall keep all
books of account and other records required by Owner, keep vouchers, statements,
receipted bills and invoices and all other records in such form as may be
required by Owner, covering all collection, disbursements, and other data in
connection with the residential portion of the Premises; permit Owner, or any
person designated by any general partner in Owner, at any reasonable time, to
audit the books, records and accounts of Manager relating to the residential
portion of the Premises, and Manager will exhibit such books, records and
accounts to any person designated by any general partner in Owner for that
purpose, which accounts and records relating to the residential portion of the
Premises, including all correspondence and leases, shall be the property of
Owner and, upon any termination of the appointment of Manager, shall be
surrendered to Owner without charge therefor within ten (10) days after such
termination date. As soon as reasonably practicable, and in any event on or
before the 15th day of each month during the term of this Agreement, Manager
shall render to Owner a detailed written report (hereinafter called the "Monthly
Report") covering the operations for the preceding full calendar month. The
Monthly Reports shall include designation of all receipts and disbursements
during such period (and shall set forth an accurate list of accounts receivable
and accounts payable) and moneys retained in the Operating Account as of the
last
<PAGE>
5
day of the preceding calendar month. Such report shall include a copy or
facsimile of all notices received from any mortgagee or land lessor with respect
to payments made to such mortgagee or land lessor in such preceding calendar
month, a brief narrative summary highlighting the past month's operation, a
statement setting forth the variances between actual operating results and the
budgeted results, and a detailed rent roll (the form of which shall be supplied
to Manager by Owner).
(b) Annual Report. Within sixty (60) days after the end of each
fiscal year, Manager shall deliver to Owner a preliminary and unaudited profit
and loss statement, balance sheet, and statement of changes in financial
position of Owner. Within one hundred twenty (120) days after the end of each
fiscal year, Manager shall deliver to Owner an audited profit and loss
statement, a balance sheet and a statement of change in financial position of
Owner, showing the results of operations of the residential portion of the
Premises for that fiscal year, all prepared in accordance with generally
accepted accrual basis accounting principles consistently applied. The audit
shall be performed by Seidman & Seidman or another firm of independent
accountants as Owner may designate. The fees and charges of all accountants
shall be an expense of Owner. Manager shall also furnish Owner, within said one
hundred twenty-day period, with a detailed list of all accounts receivable and
accounts payable as of the end of that fiscal year and with such other
information as Owner shall reasonably request. In addition, within thirty (30)
days after the end of each of the first three (3) quarters of the fiscal year,
Manager shall deliver an unaudited financial statement for the preceding quarter
consisting of a balance sheet and a statement of profit and loss.
(c) Tenant Complaints. Manager shall serve as liaison between Owner
and residential tenants and maintain business-like relations with residential
tenants, whose service requests shall be received, logged and considered in
systematic fashion (in accordance with standards used by the managers of
first-class residential projects in Washington, D.C.) in order to show the
action taken with respect to each. Complaints of a serious nature (i.e.
involving claims in excess of $1,000) shall, after thorough investigation, be
reported to Owner with appropriate recommendations. Notwithstadning anything to
the contrary set forth in this Agreement, Owner reserves the right to contact
its tenants directly, but Owner agrees to exercise this right in such manner so
as not to interfere with Manager's performance under this Agreement and to make
all such contacts as provided in the Joint Venture Agreement.
(d) Returns Required by Law. Except when same are legally required
to be filed by Owner, Manager shall execute and file punctually, when due, all
forms, reports, and returns required by law relating to the employment of
personnel and the operation of the residential portion of the Premises,
including all property, franchise and other tax returns. If directed in writing
by Owner, all of such tax returns shall be reviewed by Seidman & Seidman or such
other firm of independent accountants as shall be designated by Owner. Returns
shall
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6
be furnished to Owner in sufficient time that they may be reviewed by Owner and
filed without the necessity for extensions of time for filing.
(e) Compliance with Legal Requirements. Manager shall take such
action as may be necessary to comply with any and all orders or requirements
affecting the residential portion of the Premises by any federal, state, county,
municipal or other authority having jurisdiction thereover, and orders of the
board of fire underwriters or other similar bodies, subject to the same
limitations contained in Section 2.4 hereof in connection with the making of
repairs and alterations. Manager, however, shall not take any such action as
long as: (i) Owner is contesting any such order or requirement, (ii) Owner
requests Manager not to take such action, and (iii) Owner indemnifies Manager
from and against any civil liability incurred by Manager in failing to take such
action; provided, however, that if failure to comply with any such order or
requirement would or might expose Manager to criminal liability, Manager shall,
without approval of Owner, cause the same to be complied with. Manager shall
promptly, and in no event later than the close of the next business day
following its receipt, give written notice to Owner of any such order or notice
of requirements.
(f) Claims for Tax Abatements and Eminent Domain Awards. When
requested by Owner from time to time, Manager shall, without charge or
reimbursement, except for out-of-pocket expenses (including attorneys' fees),
render advice and assistance to Owner in the negotiation and prosecution of all
claims for the abatement of property and other taxes affecting the residential
portion of the Premises and for awards for taking by eminent domain affecting
the residential portion of the Premises.
(g) Supervision of Repairs and Alterations. Manager shall supervise
the performance of all matters coming within the terms of this Agreement,
including direct observation, inspection and supervision of all repairs,
decorations, alterations and improvements during the progress thereof and shall
make final inspection of the completed work and approve bills for payment.
Manager shall obtain the necessary receipts, releases, waivers, discharges and
assurances to keep the residential portion of the Premises free from mechanics'
and materialmen's liens and other claims.
(h) Management of Premises. Manager shall, generally, take all
actions reasonably necessary to protect and preserve the residential portion of
the Premises and to manage and operate the residential portion of the Premises
in an efficient first-class manner consistent with similar buildings in the
downtown Washington, D.C. market to maximize net operating income and shall, at
all times, maintain an organization sufficient to enable it to perform all of
its obligations and functions under this Agreement.
(i) Tenant Improvements. Manager shall supervise tenant finishing
work and alterations when new tenants take occupancy in the Building and shall
supervise and
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7
inspect modifications and alterations to existing tenant space when requested
for and paid for by existing tenant. Manager shall contract for tenant finishing
work required under leases executed by Owner after the Conversion Date as
defined in Section 2.1 of the Building Loan Agreement. Any sums payable by
tenants to Manager for supervision of such work shall be in addition to, and not
in lieu of, the fees otherwise due to Manager under this Agreement; provided,
however, that the payment of such a fee by a tenant to Manager may not be
subsidized by another lease consession granted by Owner to the tenant if the
effect of such a concession would be to otherwise reduce Manager's fees
hereunder.
ARTICLE III
TERM
Section 3.1 Term. The term of this Agreement shall commence on the
execution of this Agreement (the "Commencement Date"), and shall expire on the
fifteenth (15th) anniversary of the date the first certificate of occupancy
permitting occupancy of the residential portion of the Buildings is issued,
unless this Agreement is sooner terminated pursuant to Section 3.2 hereof.
Notwithstanding the foregoing sentence, Manager acknowledges that the term of
this Agreement may be limited by law upon the conversion of all or a portion of
the Buildings to condominium or cooperative status and that, in such event, the
term of this Agreement (or, if permitted by applicable law, only the term of
this Agreement as it pertains to the converted portion of the Buildings) shall
automatically expire on the latest date permitted by applicable law at such time
(but subject to the expiration date set forth in the first sentence of this
Section). In the event it is necessary or advisable for Owner (as declarant of
the condominium or cooperative regime or as the controlling unit owner therein)
to terminate this Agreement upon or following the creation of such a regime and
in connection with such creation, Owner shall immediately enter into a new
management agreement with Manager if so permitted by applicable law and as
identical as is possible to this Agreement for the maximum term permissible (but
subject to the expiration date set forth in the first sentence of this Section).
Within ten (10) days after the expiration or earlier termination of this
Agreement, Manager shall deliver to Owner all books, records and materials
relating to the residential portion of the Premises.
Section 3.2 Termination for Cause. During the term of this
Agreement, this Agreement may be terminated by Owner for cause, as "cause" is
hereafter defined. In the event that Owner believes there is cause for the
termination of this Agreement, Owner shall deliver written notice to Manager
specifying which of the items enumerated below constitutes cause for the
termination of this Agreement. This Agreement shall terminate thirty (30) days
after delivery of such written notice to Manager if Manager fails to cure the
item specified within such period, except that such thirty (30) day period shall
be extended if a cure is not
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8
possible within such period but is possible within a reasonable period and
Manager commences such cure and thereafter prosecutes it diligently to
completion. "Cause" for termination by Owner shall include the continuation of
any of the following beyond the aforesaid grace period.
(a) Default shall be made in the performance or observance by
Manager of any covenant, condition or term in this Agreement;
(b) Manager shall fail to exercise the level of managerial skill,
knowledge and judgment required for the operation of a major residential
building;
(c) Manager shall engage in conduct constituting fraud, breach of
its fiduciary obligations, or misappropriation of funds;
(d) Manager shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking
reorganization, re-adjustment, arrangement, composition or similar relief under
the federal bankruptcy laws, or any other similar applicable federal or state
law, or shall consent to or fail reasonably to oppose any such proceeding, or
shall consent to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of a substantial part of its
property, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
corporate action shall be taken by Manager in furtherance of any of the
aforesaid purposes;
(e) A decree or order by a court of competent jurisdiction shall
have been entered adjudging Manager bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment, arrangement,
composition or similar relief for Manager under the federal bankruptcy laws, or
any other similar applicable federal or state law, and such decree or order
shall have continued undischarged or unstayed for a period of ninety (90) days;
or a decree or order of a court having jurisdiction for the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of
Manager or a substantial part of its property, or the winding up or liquidation
of its affairs, shall have been entered, and such decree or order shall have
remained in force, undischarged and unstayed for a period of ninety (90) days;
(f) Developer shall become a Defaulting Venturer (as defined in the
Joint Venture Agreement) and shall remain a Defaulting Venturer beyond the
expiration of any applicable grace period;
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9
(g) Subject to the provisions of Section 3.1 and if the third-party
elects to terminate this Agreement, Owner shall sell the residential portion of
the Premises to a third-party which is not an "Affiliate" (as defined in the
Joint venture Agreement) of Owner and any of its partners in an arm's-length
transaction;
(h) Crow-Pennsylvania Avenue Limited Partnership ("Crow-PA") is a
joint venturer in Market Square Associates, Market Square Associates is the sole
(or managing) general partner of Owner, and (i) Owner is in default (beyond the
expiration of any applicable notice and/or grace period) under the terms of the
loan documents of even date herewith between Owner and DIHC Finance Corporation
for any reason which is the fault of Crow-PA (as opposed to being the fault of
DIHC Market Square, Inc.) or (ii) there is a default (beyond the expiration of
any applicable notice and/or grace period) under the terms of that certain
Guaranty of completion, of even date herewith, for the benefit of DIHC Finance
Corporation, DIHC Market Square, Inc., and Market Square Associates;
(i) The indirect interest of Crow-PA in Owner shall be less than
five percent (5%). For example (and not by limitation), if the direct interest
of Crow-PA in Market Square Associates is 7.14%, and the direct interest of
Market Square Associates in Owner is 70%, then said indirect interest shall be
deemed to be 5% and any further dilution of Crow-PA's interest in Market Square
Associates shall result in a lesser indirect interest in Owner.
Nothwithstanding anything to the contrary set forth in the preamble
of this Section 3.2, no cure period shall be afforded for defaults under Section
3.2(c) (except for breach of fiduciary duty not constituting fraud or
misappropriation of funds) and the only cure period for defaults under Section
3.2(e) shall be the period specified therein.
In the event of any dispute between the partners in the general
partner in Owner or between DIHC Market Square, Inc. and Manager as to whether
or not Owner has "cause" to terminate this Agreement pursuant to the provisions
of this Section 3.2, such dispute shall be determined by arbitration pursuant to
Article VI hereof.
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10
Section 3.3 Payment to Manager in Event of Termination. In the event
this Agreement is terminated under Section 3.2 hereof, Manager shall be entitled
only to that portion of the management fee earned pursuant to Article IV of this
Agreement through the date of such termination, in full satisfaction of Owner's
obligation to Manager under this Agreement.
ARTICLE IV
COMPENSATION
Section 4.1. Management Fee. (a) During the term of this Agreement,
if the residential units are operated on a rental basis, Owner shall pay Manager
monthly in arrears on the last day of each month a residential management fee
equal to four percent (4%) of all residential rents and forfeited residential
security deposits collected by it during that month. Upon receipt of the fee,
Manager shall promptly pay DIHC Management Corporation 12.5% of such amount as a
consulting fee. If the residential units are operated on a condominium or
cooperative basis, Owner shall pay Manager a monthly fee based on then-current
market rates for such services as they may mutually agree (or as may be
determined by arbitration as set forth below if allowed by law).
(b) The fee set forth in Section 4.1(a) shall be unchanged for the
first twelve and one-half (12-1/2) years of the term hereof. In the event
Manager desires to increase said fee at that time, Manager shall give Owner
thirty (30) days notice of the increase requested and evidence of the then
current market rates justifying said increase. In the event Owner denies or
fails to approve the requested increase within the thirty (30) day period, then
the increase shall be deemed denied and Manager may resign as managing agent at
any time. In the event Owner approves the requested increase, the increased
fee(s) shall be effective as of the date requested by Manager.
ARTICLE V
MISCELLANEOUS
Section 5.1 Use and Maintenance of Premises. Manager agrees to use
best efforts not to permit the use of the residential portion of the Premises
for any purpose which might void any policy of insurance held by Owner or
Manager or render any loss thereunder uncollectible, or which would be in
violation of any law, ordinance, bylaw or governmental or other restrictions. It
shall be the duty of Manager at all times during the term of this Agreement to
operate and maintain the residential portion of the Premises in a first-class
manner consistent with the expressed plan of Owner and the budgetary constraints
set by Owner. Full compliance by the residential tenants with the terms and
conditions of their
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11
respective leases shall be pursued, and to this end, Manager shall see that all
residential tenants are informed with respect to rules, regulations and notices
contained therein. Manager shall be expected to perform such other acts and
deeds as are reasonable, necessary and proper in the discharge of its duties
under this Agreement.
Section 5.2 Separation of Owner's Moneys. Owner shall establish and
maintain a bank account at a financial institution in the Baltimore, Maryland or
Washington, D.C. metropolitan areas of Owner's choosing for the deposit of all
revenues arising out of the residential portion of the Premises (the "Depository
Account"). Manager shall promptly deposit all (the "Depository Account").
Manager shall promptly deposit all revenues, as same are collected, in the
Depository Account and only the authorized representatives of Owner shall be
able to withdraw funds from the Depository Account. Manager shall establish and
maintain an additional account at a financial institution in the Baltimore,
Maryland or Washington, D.C. metropolitan areas of Owner's choosing for the
purpose of maintaining those funds necessary to the operation of the residential
portion of the Premises (the "Operating Account"). Owner shall from time to
time, upon the advice of Manager, deposit into the Operating Account sufficient
funds to cover the cost and expense of the maintenance and operation of the
residential portion of the Premises. Funds may be withdrawn from the Operating
Account upon the signature of duly authorized representatives of Manager or
Owner. Manager shall not deposit in the Depository Account or Operating Account
any funds belonging to Market Square Associates or any person or entity other
than Owner and shall not commingle funds between Owner, Market Square
Associates, or any other person or entity.
Section 5.3 Expenses of Manager. Owner shall reimburse Manager for
direct expenses of manager incurred solely on account of the residential portion
of the Premises for the payment of any proper obligation or necessary expense
connected with the maintenance and operation of the residential portion of the
Premises, including the wages, salary and other compensation of any approved
full-time on-site property manager(s), all reasonable costs incurred in the
operation of a residential management office in the Building, including office
rental, personnel positions, supplies, postage, equipment and telephone, and all
travel and entertainment costs reasonably incurred by Manger related to its
management services. As a consultant, DIHC Management Corporation shall also be
entitled to reimbursement by Owner of its reasonable travel costs incurred in
connection with the Premises. All payments to be made by Manager hereunder shall
be made by check drawn on the Operating account, except for petty cash items not
exceeding Two Hundred Dollars ($200.00), which may be paid from a fund to be
maintained by Manager for such purposes. Manager shall not be obligated to make
any advance to or for the account of Owner or to pay any sums except out of
funds held in the Operating Account, nor shall Manager be obligated to incur any
liability or obligation for the account of Owner without assurance that the
necessary funds for the discharge thereof will be provided. Any reimbursement to
Manager hereunder shall be in addition to, and not in lieu of, Manager's fees
under Article IV hereof.
<PAGE>
12
Section 5.4 Bond. Manager shall furnish, at the expense of Manager,
a fidelity bond with a commercial surety satisfactory to Owner, in the penal
amount and form approved by Owner, conditioned upon the faithful accounting for
funds of Owner collected or received by Manager.
Section 5.5 Notices. All notices, demands, requests or other similar
communications required or permitted hereunder shall be deemed delivered when
received if sent by hand delivery (or overnight courier) or if deposited in the
United States certified or registered mail, return receipt requested, postage
prepaid, and addressed to the respective parties at the addresses specified
below, or at such other address as they shall each specify in a notice addressed
and mailed as hereinabove set forth:
To Owner: c/o DIHC Market Square, Inc.
200 Galleria Parkway, N.W.
Suite 2000
Atlanta, Georgia 30339
Attn: Mr. Charles W. Strawser, Jr.
with a copy to: DIHC Management Corporation
200 Galleria Parkway, N.W.
Suite 2000
Atlanta, Georgia 30339
Attn: Mr. Charles W. Strawser, Jr.
To Manager: c/o Trammell Crow Company
1001 30th Street, N.W.
Suite 500
Washington, D.C. 20007
Attn: Mr. T. Christopher Roth
with copies to: Mr. J. McDonald Williams
Trammell Crow Company
3500 LTV Tower
2001 Ross Avenue
Dallas, Texas 75201
and to: William E. Sudow, Esq.
Jones, Day, Reavis & Pogue
655 15th Street, N.W.
Washington, D.C. 20005
<PAGE>
13
All notices from Owner relating to an alleged default hereunder
shall contain the following language: "A default by manager under the Agreement
would constitute an Event of Default under the Joint Venture Agreement of Market
Square Associates by Crow-Pennsylvania Avenue Limited Partnership."
Section 5.6 Entire Agreement. This Agreement constitutes the entire
agreement between owner and Manager relating in any manner to the subject matter
of this Agreement. No prior agreement or understanding pertaining to the same
shall be valid or of any force or effect, and the covenants and agreements
herein cannot be altered, changed or supplemented except in writing signed by
Owner and Manager.
Section 5.7 Governing Law. This Agreement is made pursuant to, and
all of the rights and obligations of the parties hereto and all of the terms and
conditions herein shall be construed in accordance with and governed by, the
laws of the District of Columbia.
Section 5.8 Severability. If any clause or provision of this
Agreement is illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then the remainder of this Agreement shall not
be affected thereby, and in lieu of each clause a provision of this Agreement
which is illegal, invalid or unenforceable, there shall be added, as part of
this Agreement, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and as may be
legal, valid and enforceable.
Section 5.9 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns.
Section 5.10 Assignment by Manager. The rights and obligations of
Manager hereunder shall not be assignable without the prior written consent of
Owner.
Section 5.11 Subordination. This Agreement and all fees due from
Owner to Manager pursuant hereto shall be subject and subordinate in all
respects to (a) any mortgage or deed of trust upon the residential portion of
the Premises or any portion thereof and (b) any collateral assignment of rents
due under the leases of space in any improvements on the residential portion of
the Premises given to any lender to secure a loan the proceeds of which were
used, directly or indirectly, in connection with the residential portion of the
Premises. This provision shall be self-executing but Manager shall, upon
request, execute such instruments as may reasonably be requested by Owner or any
such mortgagee or lender to evidence such subordination.
<PAGE>
14
Section 5.12 Exculpation. Anything in this Agreement to the contrary
notwithstanding, Manager accepts and agrees that each of the covenants,
undertakings and agreements herein made on the part of Owner, while in the form
purporting to be covenants, undertakings and agreements of Owner, are,
nevertheless, made and intended not as personal covenants, undertakings and
agreements by its partners or the partners therein or for the purpose of binding
its partners personally or the assets of its partners but are made and intended
for the purpose of binding only its partners' interests, or the interests of the
partners therein, in the assets of Owner and that no personal liability or
personal responsibility is assumed by, nor shall at any time be asserted or
enforceable against the partners of Owner or the partners therein or their
respective heirs, legal representatives, successors and assigns on account of
this Agreement or on account of any covenant, undertaking or agreement of Owner
and its partners in this document contained, all such personal liability and
personal responsibility, if any, being expressly waived and released by Manager,
and Manager further agrees not to seek or enforce any judgments (including but
not limited to specific performance, deficiency judgments, and any and all other
judgments) obtained against Owner or against its partners or the partners
therein beyond the interests of the partners in the assets of Owner.
Section 5.13 Indemnity. To the extent not covered by Owner's
insurance, Manager shall indemnify Owner and save it harmless from and against
all claims, losses and liabilities arising out of damage to property, or injury
to, or death of persons (including the property and persons of the parties
hereto, and their agents, subcontractors and employees) occasioned by or in
connection with the gross negligence or willful misconduct of Manager or
Manager's employees or subcontractor's and all costs, fees and reasonable
attorneys' expenses in connection therewith.
Section 5.14 Waivers. No delay or omission by either party in
exercising any right or power accruing upon the non-compliance or failure of
performance by the other party hereto of any provisions of this Agreement shall
impair any such right or power or be construed to be a waiver thereof. A waiver
by either party of any of the covenants, conditions or agreements hereof to be
performed by the other must be in writing and signed by the party who is waiving
such covenants, conditions or agreements.
ARTICLE VI
ARBITRATION
Section 6.1 Whenever in this Agreement it is provided that a dispute
shall be determined by arbitration, the arbitration shall be conducted as
provided in this Article. The party desiring such arbitration shall give written
notice to that effect to the other, specifying the dispute to be arbitrated.
Within ten (10) days after said notice is given, the other party
<PAGE>
15
shall give written notice to the first party, specifying the name and address of
the person it proposes to act as arbitrator. If the second party fails to notify
the first party of its choice of arbitrator as aforesaid by the time above
specified, then the first party shall select the arbitrator to determine the
dispute. If the first party does not object to the arbitrator proposed by the
second party within ten (10) days after notice is given of such nomination, the
arbitrator proposed by the second party shall determine the dispute. If the
first party rejects the proposed arbitrator during said period and if they
cannot agree upon said appointment, an arbitrator shall be appointed upon their
application or upon the application of either party by the Chief Judge of the
District of Columbia Court of Appeals. The arbitrator shall decide the dispute
and tender a written decision to the parties within thirty (30) days after his
or her appointment. A decision shall be binding and conclusive upon the parties
and judgment thereon may be entered in any court having jurisdiction thereof.
Section 6.2 In designating an arbitrator and in deciding the
dispute, the arbitrator shall act in accordance with the rules then in force of
the American Arbitration Association (or any successor thereto), subject,
however, to such limitations or directions as may be placed upon him or her by
the provisions of this Agreement. Each party shall pay the fees and expenses of
its respective attorneys and both shall share equally the fee and expenses of
the arbitrator as well as any fees payable to the American Arbitration
Association or its successor. No arbitrator shall be a person who is or has been
a director, officer, shareholder, partner, associate, employee or other
principal of either party. The arbitrator shall consider all testimony and
documentary evidence which may be presented at any hearing as well as relevant
facts and data which he or she may discover by investigation and inquiry outside
of such hearings. Each party shall have the right to be represented by counsel
and to cross examine witnesses.
Section 6.3 An arbitration to determine whether or not Owner has
"cause" to terminate this Agreement under Section 3.2 hereof shall be submitted
to an arbitrator who has had at least ten (10) years experience in the
management of multi-story residential buildings in the District of Columbia.
<PAGE>
16
Section 6.4 The obligation of the parties to submit a dispute to
arbitration is limited to disputes arising under those Articles of this
Agreement which specifically provide for arbitration.
MANAGER:
CROW-WASHINGTON OFFICE
MANAGEMENT COMPANY, INC.
By: /s/ T.C. Roth (Seal)
----------------------------
T. Christopher Roth
Vice President
OWNER:
AVENUE ASSOCIATES LIMITED PARTNERSHIP
By: MARKET SQUARE ASSOCIATES
By: CROW-PENNSYLVANIA AVENUE
LIMITED PARTNERSHIP
By: CROW-WASHINGTON CBD
DEVELOPMENT
CORPORATION
By: /s/ T.C. Roth
----------------------------
T. Christopher Roth
Vice President
(Seal)
By: DIHC MARKET SQUARE, INC.
By: /s/ T.C. Roth
----------------------------
Herman A. Vonhof
President
(Seal)
<PAGE>
17
ACKNOWLEDGED AND AGREED:
DIHC MANAGEMENT CORPORATION
By: /s/ C.W. Strawser (Seal)
--------------------------
Charles W. Strawser, Jr.
Senior Vice President
<PAGE>
Exhibit 10.112
COMMERCIAL MANAGEMENT AGREEMENT
THIS COMMERCIAL MANAGEMENT AGREEMENT ("Agreement") is made and
entered into as of the 15th day of July, 1987, by and between AVENUE ASSOCIATES
LIMITED PARTNERSHIP, a District of Columbia limited partnership ("Owner"), and
CROW-WASHINGTON OFFICE MANAGEMENT COMPANY, INC., a Texas corporation
("Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of a parcel of land located on
Pennsylvania Avenue, N.W., Washington, D.C. between 7th, 9th and D Streets, N.W.
("Property") and proposes to construct thereon two (2) multi-use structures
including retail, residential and commercial space and a parking garage(s)
("Buildings") (the Property and the Buildings being collectively referred to as
the "Premises"); and
WHEREAS, Owner has agreed to appoint Manager as the sole and
exclusive managing agent for the commercial (which term includes all
non-residential) space in the Buildings and Manager has agreed to serve as such,
all subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, One Dollar
($1.00), the terms set forth below, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Manager and Owner
hereby agree as follows:
ARTICLE I
ESTABLISHMENT OF MANAGERIAL RESPONSIBILITY
Section 1.1 Appointment of Manager. Owner hereby appoints Manager,
and Manager hereby accepts appointment, on the terms and conditions hereinafter
provided, as sole and exclusive Manager of the commercial portion of the
Premises.
ARTICLE II
SERVICES TO BE PERFORMED BY MANAGER
Section 2.1 Preparation of Annual Budget. (a) Within ninety (90)
days after the certificate of occupancy permitting occupancy of the commercial
portion of either of the
<PAGE>
Buildings is obtained and on or before every August 1 during the term hereof,
Manager shall prepare and deliver to Owner an operating and capital budget in
form satisfactory to Owner in preliminary draft form setting forth an itemized
statement of the estimated receipts and disbursements (capital, operating and
other) for the next fiscal year. Such preliminary budget shall include a rent
roll for the commercial portion of the Buildings, taking into account, without
limitation, the general condition of the commercial portion of the Premises,
rate of completion of any contemplated repairs to the commercial portion of the
Premises, the then current occupancy level, lease expirations, the physical
condition of the commercial portion of the Buildings and rentals charged in the
competing office and retail buildings in the area. Each such preliminary budget
shall also include suggested leasing guidelines (including rental rates, terms,
parameters for tenant creditworthiness, escalation clauses, remodeling and
parking charges, and other pertinent matters) to serve as a basis for
negotiating with prospective or renewal commercial tenants, a schedule of
proposed job descriptions and requirements for any and all independent
contractors and employees of Manager serving the commercial portion of the
Premises, a reasonable estimate of wage rates and all other compensation to be
paid such contractors and employees.
(b) After review and approval by Owner in accordance with Section
2.05 of the Joint Venture Agreement of Market Square Associates ("Joint Venture
Agreement"), Manager shall refine each such preliminary budget into final draft
form not later than thirty (30) days after delivery of such preliminary budget;
following its approval in final form by Owner, said budget (hereinafter called
an "Annual Budget") shall constitute a standard to which Manager shall adhere.
Notwithstanding the foregoing, sums shown in the Annual Budget for tenant
improvement work are for illustrative purposes only and no sums for tenant
improvement work will be spent except on a lease-by-lease basis as approved by
Owner. Except with the prior consent, which will not be unreasonably withheld or
delayed, of Owner or in the case of emergency repairs permitted under Section
2.4 hereof, no expense or cost may be incurred or commitment made by Manager in
connection with the maintenance, repair or operation of the commercial portion
of the Premises in excess of ten percent (10%) of each base item and in the
aggregate five percent (5%) over the Annual Budget for operating expenses
("Excess Payment"); no overspending of the individual items or the aggregate
amount of the Annual Budget for capital expenses is permitted by this Section.
The making of any Excess Payment by Manager shall not be a default under this
Agreement; provided, however, the Amount of such Excess Payment shall be an
obligation of Manager and shall not be paid from funds of Owner and Owner shall
be under no obligation to reimburse Manager for such expenditures unless such
Excess Payment is subsequently approved by Owner in its reasonable discretion.
Section 2.2 Independent Contractors. Pursuant to the Annual Budget,
Manager shall investigate, contract with, pay, supervise and discharge any
personnel required for the routine maintenance and operation of the commercial
portion of the Premises on a day-to-day basis, including architects, engineers,
accountants, attorneys and others. Such personnel shall in every instance be
independent contractors or employees of Manager and shall not be employees
2
<PAGE>
of Owner. After any party has been engaged to perform personal or professional
services for Owner, Manager shall give Owner notice thereof and Owner may
require Manager to terminate the contracts of such persons serving the Premises
whom Owner, in its sole discretion, deems unsatisfactory. Except as provided in
Section 5.3 below, all salaries, wages and other compensation of personnel
contracted with by Manager hereunder shall be paid by Manager from funds of
Owner or reimbursed to Manager by Owner pursuant to the terms hereof.
Section 2.3 Service Contracts. Manager shall make, when necessary,
in the name of Owner, contracts for water, electricity, gas, fuel, oil,
telephone, vermin extermination, trash removal, janitorial service, landscaping,
security service and other necessary services, or such of them as Manager shall
deem reasonably advisable, for the commercial portion of the Premises, provided
each such contract shall be for no longer than a one-year term or shall be
cancellable on no more than thirty (30) days notice after one year without
penalty. Manager shall also place orders in the name of Owner for such
equipment, tools, appliances, materials and supplies as are necessary properly
to maintain the commercial portion of the Premises, subject to the limitations
of the current Annual Budget (as it is subject to the provisions of Section
2.1(b) above) approved by Owner.
Section 2.4 Maintenance and Repair of Premises. Manager shall cause
the commercial portion of the Premises to be maintained in accordance with the
standards not less than those set forth in Section 2.9(h) below, including
(without limitation) the performance of ordinary alterations and improvements,
supervision of the installation and removal of tenant improvements, interior and
exterior cleaning, painting and decorating, plumbing, carpentry, and such other
normal maintenance and repair work as may be desirable, subject to limitations
of the current Annual Budget approved by Owner and any other reasonable
limitations imposed in writing by Owner in addition to those contained herein.
For any one item of repair or replacement, the expense or cost incurred shall
not exceed the amount allocated thereto in the current Annual Budget, except as
permitted by Section 2.1(b) above and further except that emergency repairs
immediately necessary to secure the preservation and safety of the Premises or
to avoid the suspension of any service reasonably necessary for the operation of
the Premises or to avoid danger to life or property may be made by Manager
without such consent or authority contained in the current Annual Budget
provided Manager shall first make reasonable attempts to contact Owner.
Notwithstanding such authority as to emergency repairs, it is understood and
agreed that Manager will confer as soon as possible with Owner regarding every
such expenditure. Manager shall assure that any contractor performing work on
the commercial portion of the Premises maintains insurance satisfactory to Owner
and any mortgagee of the commercial portion of the Premises, including (but not
limited to) workmen's compensation insurance, employers' liability insurance and
insurance against liability for injury to persons and property arising out of
all of contractors' operations, any subcontractors' operations, and the use of
owned, non-owned or hired equipment, including automotive equipment in the
pursuit of all such operations.
3
<PAGE>
Section 2.5 Insurance. If requested by Owner, Manager shall
supervise the maintenance of insurance for the Premises, with companies and
through brokers agreed upon by Owner, of such kind and amounts as Owner shall
from time to time be required to carry pursuant to the provisions of applicable
agreements with third parties, and of such other kind and amounts as Owner shall
from time to time require.
Section 2.6 Collection of Moneys. Manager shall prepare and deliver
all rent bills and other invoices to commercial tenants and shall calculate all
rent escalations and percentage rents due. Manager shall collect all rent and
other charges due from tenants, licensees, concessionaires and any others in
consequence of the authorized operation of facilities in the Premises and
otherwise due Owner with respect to the commercial portion of the Premises.
Owner authorizes Manager to request, demand, collect, receive and receipt for
all such rent and other charges. With the prior written consent of Owner,
Manager may institute legal proceedings and engage legal counsel in the name of
Owner for the collection of overdue rents and other charges and for the
dispossession of tenants and other persons from the commercial portion of the
Premises. Owner will be informed as soon as possible respecting any legal action
which may be contemplated. Any expense incurred in connection therewith shall be
paid by Owner. All moneys collected by Manager shall be forthwith deposited in
the Depository Account (defined in Section 5.2 below).
Section 2.7 Manager Disbursements. Except as otherwise directed by
Owner and subject to the limitations of Section 2.1(b), Manager shall, from the
funds on deposit in the Operating Account (defined in Section 5.2 below), cause
to be disbursed regularly and punctually amounts due and payable as operating
expenses of the commercial portion of the Premises authorized to be incurred
under the terms of this Agreement, including (without limitation) payment of
utility bills, telephone bills, custodial bills, trash removal bills, water and
sewer rents, vault charges and leasing commissions, payment (if directed by
Owner) prior to delinquency and prior to the addition thereof of interest or
penalties of all real property taxes and assessments and other taxes levied or
assessed against the commercial portion of the Premises, all rents, insurance
premiums and other impositions applicable to the commercial portion of the
Premises, Manager's fees provided for in Article IV, any reimbursement due to
Manager pursuant to Section 5.3, and if requested by Owner, payment of sums due
on any mortgage loan affecting the commercial portion of the Premises. Manager
may also pay sums due on such mortgage loans if permitted by the terms of the
Joint Venture Agreement. After disbursement as herein specified, any balance
remaining shall be disbursed or transferred as generally or specifically
directed from time to time by Owner. Manager shall have no obligation to pay any
of the aforementioned expenses or costs unless there are sufficient funds in the
Operating Account or the funds are supplied to Manager by Owner. In the event
that at any time there are insufficient funds on hand to meet such operating
expenses, Manager shall promptly notify Owner, which shall supply such funds,
and if Manager shall have advanced its own funds to meet such expenses Owner
shall promptly reimburse Manager therefor. All checks to Manager for
reimbursement of expenses and for Manager's fees and all checks for payment of
leasing commissions shall be cosigned by Owner.
4
<PAGE>
Section 2.8 Discounts. Manager shall at all times be under a duty to
use its best efforts to secure for and credit to Owner any discounts,
commissions or rebates obtainable as a result of any purchase of goods or
services or as a result of other activities undertaken pursuant to this
Agreement unless otherwise directed by Owner.
Section 2.9 Miscellaneous Duties of Manager.
(a) Books and Records and Monthly Reports. Manager shall keep all
books of account and other records required by Owner, keep vouchers, statements,
receipted bills and invoices and all other records in such form as may be
required by Owner, covering all collection, disbursements, and other data in
connection with the commercial portion of the Premises; permit Owner, or any
person designated by any general partner in Owner, at any reasonable time, to
audit the books, records and accounts of Manager relating to the commercial
portion of the Premises, and Manager will exhibit such books, records and
accounts to any person designated by any general partner in owner for that
purpose, which accounts and records relating to the commercial portion of the
Premises, including all correspondence and leases, shall be the property of
Owner and, upon any termination of the appointment of Manager, shall be
surrendered to Owner without charge therefor within ten (10) days after such
termination date. As soon as reasonably practicable, and in any event on or
before the 15th day of each month during the term of this Agreement, Manager
shall render to Owner a detailed written report (hereinafter called the "Monthly
Report") covering the operations for the preceding full calendar month. The
Monthly Reports shall include designation of all receipts and disbursements
during such period (and shall set forth an accurate list of accounts receivable
and accounts payable) and moneys retained in the Operating Account as of the
last day of the preceding calendar month. Such report shall include a copy or
facsimile of all notices received from any mortgagee or land lessor with respect
to payments made to such mortgagee or land lessor in such preceding calendar
month, a brief narrative summary highlighting the past month's operation, a
statement setting forth the variances between actual operating results and the
budgeted results, and a detailed rent roll (the form of which shall be supplied
to Manager by Owner).
(b) Annual Report. Within sixty (60) days after the end of each
fiscal year, Manager shall deliver to Owner a preliminary and unaudited profit
and loss statement, balance sheet, and statement of change in financial position
of Owner. Within one hundred twenty (120) days after the end of each fiscal
year, Manager shall deliver to Owner an audited profit and loss statement, a
balance sheet and a statement of change in financial position of Owner, showing
the results of operations of the commercial portion of the Premises for that
fiscal year, all prepared in accordance with generally accepted accrual basis
accounting principles consistently applied. The audit shall be performed by
Seidman & Seidman or another firm of independent accountants as Owner may
designate. The fees and charges of all accountants shall be an expense of Owner.
Manager shall also furnish Owner, within said one hundred twenty-day period,
with a detailed list of all accounts receivable and accounts payable as of the
end of that fiscal year and with such other information as Owner shall
reasonably request. In addition, within thirty (30) days after
5
<PAGE>
the end of each of the first three (3) quarters of the fiscal year, Manager
shall deliver an unaudited financial statement for the preceding quarter
consisting of a balance sheet and a statement of profit and loss.
(c) Tenant Complaints. Manager shall serve as liaison between Owner
and commercial tenants and maintain business-like relations with commercial
tenants, whose service requests shall be received, logged and considered in
systematic fashion (in accordance with standards used by the managers of
first-class office-retail projects in Washington, D.C.) in order to show the
action taken with respect to each. Complaints of a serious nature (i.e.
involving claims in excess of $1,000) shall, after thorough investigation, be
reported to Owner with appropriate recommendations. Notwithstanding anything to
the contrary set forth in this Agreement, Owner reserves the right to contact
its tenants directly, but Owner agrees to exercise this right in such manner so
as not to interfere with Manager's performance under this Agreement and to make
all such contacts as provided in the Joint Venture Agreement.
(d) Returns Required by Law. Except when same are legally required
to be filed by Owner, Manager shall execute and file punctually, when due, all
forms, reports, and returns required by law relating to the employment of
personnel and the operation of the commercial portion of the Premises, including
all property, franchise and other tax returns. If directed in writing by Owner,
all of such tax returns shall be reviewed by Seidman & Seidman or such other
firm of independent accountants as shall be designated by Owner. Returns shall
be furnished to Owner in sufficient time that they may be reviewed by Owner and
filed without the necessity for extensions of time for filing.
(e) Compliance with Legal Requirements. Manager shall take such
action as may be necessary to comply with any and all orders or requirements
affecting the commercial portion of the Premises by any federal, state, county,
municipal or other authority having jurisdiction thereover, and orders of the
board of fire underwriters or other similar bodies, subject to the same
limitations contained in Section 2.4 hereof in connection with the making of
repairs and alterations. Manager, however, shall not take any such action as
long as: (i) Owner is contesting any such order or requirement, (ii) Owner
requests Manager not to take such action, and (iii) Owner indemnifies Manager
from and against any civil liability incurred by Manager in failing to take such
action; provided, however, that if failure to comply with any such order or
requirement would or might expose Manager to criminal liability, Manager shall,
without approval of Owner, cause the same to be complied with. Manager shall
promptly, and in no event later than the close of the next business day
following its receipt, give written notice to Owner of any such order or notice
of requirements.
(f) Claims for Tax Abatements and Eminent Domain Awards. When
requested by Owner from time to time, Manager shall, without charge or
reimbursement, except for out-of-pocket expenses (including attorneys' fees),
render advice and assistance to Owner in the negotiation and prosecution of all
claims for the abatement of property and other taxes
6
<PAGE>
affecting the commercial portion of the Premises and for awards for taking by
eminent domain affecting the commercial portion of the Premises.
(g) Supervision of Repairs and Alterations. Manager shall supervise
the performance of all matters coming within the terms of this Agreement,
including direct observation, inspection and supervision of all repairs,
decorations, alterations and improvements during the progress thereof and shall
make final inspection of the completed work and approve bills for payment.
Manager shall obtain the necessary receipts, releases, waivers, discharges and
assurances to keep the commercial portion of the Premises free from mechanics'
and materialmen's liens and other claims.
(h) Management of Premises. Manager shall, generally, take all
actions reasonably necessary to protect and preserve the commercial portion of
the Premises and to manage and operate the commercial portion of the Premises in
an efficient first-class manner consistent with similar buildings in the
downtown Washington, D.C. market to maximize net operating income and shall, at
all times, maintain an organization sufficient to enable it to perform all of
its obligations and functions under this Agreement.
(i) Tenant Improvements. Manager shall supervise tenant finishing
work and alterations when new tenants take occupancy in the commercial portion
of the Building and shall supervise and inspect modifications and alterations to
existing tenant space when requested for and paid for by existing tenant.
Manager shall contract for tenant finishing work required under leases executed
by Owner after the Conversion Date as defined in Section 2.1 of the Building
Loan Agreement. Any sums payable by tenants to Manager for supervision of such
work shall be in addition to, and not in lieu of, the fees otherwise due to
Manager under this Agreement; provided, however, that the payment of such a fee
by a tenant to Manager may not be subsidized by another lease concession granted
by Owner to the tenant if the effect of such concession would be to otherwise
reduce Manager's fees hereunder.
ARTICLE III
TERM
Section 3.1 Term. The term of this Agreement shall commence on the
execution of this Agreement (the "Commencement Date"), and shall expire on the
fifteenth (15th) anniversary of the date the first certificate of occupancy
permitting occupancy of the Buildings first is issued, unless this Agreement is
sooner terminated pursuant to Section 3.2 hereof. Notwithstanding the foregoing
sentence, Manager acknowledges that the term of this Agreement may be limited by
law upon the conversion of all or a portion of the Buildings to condominium or
cooperative status and that, in such event, the term of this Agreement (or, if
permitted by applicable law, only the term of this Agreement as it pertains to
the converted portion of the Buildings) shall automatically expire on the latest
date permitted by applicable law at such time (but subject to the expiration
date set forth in the first sentence of this Section). In
7
<PAGE>
the event it is necessary or advisable for Owner (as declarant of the
condominium or cooperative regime or as the controlling unit owner therein) to
terminate this Agreement upon or following the creation of such a regime and in
connection with such creation, Owner shall immediately enter into a new
management agreement with Manager if so permitted by applicable law and as
identical as is possible to this Agreement for the maximum term permissible (but
subject to the expiration date set forth in the first sentence of this Section).
Within ten (10) days after the expiration or earlier termination of this
Agreement, Manager shall deliver to Owner all books, records and materials
relating to the commercial portion of the Premises.
Section 3.2 Termination for Cause. During the term of this
Agreement, this Agreement may be terminated by Owner for cause, as "cause" is
hereafter defined. In the event that Owner believes there is cause for the
termination of this Agreement, Owner shall deliver written notice to Manager
specifying which of the items enumerated below constitutes cause for the
termination of this Agreement. This Agreement shall terminate thirty (30) days
after delivery of such written notice to Manager if Manager fails to cure the
item specified within such period, except that such thirty (30) day period shall
be extended if a cure is not possible within such period but is possible within
a reasonable period and Manager commences such cure and thereafter prosecutes it
diligently to completion. "Cause" for termination by Owner shall include the
continuation of any of the following beyond the aforesaid grace period:
(a) Default shall be made in the performance or observance by
Manager of any covenant, condition or term in this Agreement;
(b) Manager shall fail to exercise the level of managerial skill,
knowledge and judgment required for the operation of a major, first-class office
and (to the extent applicable) retail building;
(c) Manager shall engage in conduct constituting fraud, breach of
its fiduciary obligations, or misappropriation of funds;
(d) Manager shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking
reorganization, re-adjustment, arrangement, composition or similar relief under
the federal bankruptcy laws, or any other similar applicable federal or state
law, or shall consent to or fail reasonably to oppose any such proceeding, or
shall consent to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of a substantial part of its
property, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
corporate action shall be taken by Manager in furtherance of any of the
aforesaid purposes;
(e) A decree or order by a court of competent jurisdiction shall
have been entered adjudging Manager bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment, arrangement,
composition or similar relief for Manager
8
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under the federal bankruptcy laws, or any other similar applicable federal or
state law, and such decree or order shall have continued undischarged or
unstayed for a period of ninety (90) days; or a decree or order of a court
having jurisdiction for the appointment of a receiver or liquidator or trustee
or assignee in bankruptcy or insolvency of Manager or a substantial part of its
property, or the winding up or liquidation of its affairs, shall have been
entered, and such decree or order shall have remained in force, undischarged and
unstayed for a period of ninety (90) days;
(f) Developer shall become a Defaulting Venturer (as defined in the
Joint Venture Agreement) and shall remain a Defaulting Venturer beyond the
expiration of any applicable grace period;
(g) Subject to the provisions of Section 3.1 and if the third-party
elects to terminate this Agreement, Owner shall sell the Premises to a
third-party which is not an "Affiliate" (as defined in the Joint Venture
Agreement) of Owner and any of its partners in an arm's-length transaction;
(h) Crow-Pennsylvania Avenue Limited Partnership ("Crow-PA") is a
joint venturer in Market Square Associates, Market Square Associates is the sole
(or managing) general partner of Owner, and (i) Owner is in default (beyond the
expiration of any applicable notice and/or grace period) under the terms of the
loan documents of even date herewith between Owner and DIHC Finance Corporation
for any reason which is the fault of Crow-PA (as opposed to being the fault of
DIHC Market Square, Inc.) or (ii) there is a default (beyond the expiration of
any applicable notice and/or grace period) under the terms of that certain
Guaranty of completion, of even date herewith, for the benefit of DIHC Finance
Corporation, DIHC Market Square, Inc., and Market Square Associates;
(i) The indirect interest of Crow-PA in Owner shall be less than
five percent (5%). For example (and not by limitation), if the direct interest
of Crow-PA in Market Square Associates is 7.14%, and the direct interest of
Market Square Associates in Owner is 70%, then said indirect interest shall be
deemed to be 5% and any further dilution of Crow-PA's interest in Market Square
Associates shall result in a lesser indirect interest in Owner.
Notwithstanding anything to the contrary set forth in the preamble
of this Section 3.2, no cure period shall be afforded for defaults under Section
3.2(c) (except for breach of fiduciary duty not constituting fraud or
misappropriation of funds) and the only cure period for defaults under Section
3.2(e) shall be the period specified therein.
In the event of any dispute between the partners in the general
partner in Owner or between DIHC Market Square, Inc. and Manager as to whether
or not Owner has "cause" to terminate this Agreement pursuant to the provisions
of this Section 3.2, such dispute shall be determined by arbitration pursuant to
Article VI hereof.
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Section 3.3 Payment to Manager in Event of Termination. In the event
this Agreement is terminated under Section 3.2 hereof, Manager shall be entitled
only to that portion of the management fee earned pursuant to Article IV of this
Agreement through the date of such termination, in full satisfaction of Owner's
obligation to Manager under this Agreement.
ARTICLE IV
COMPENSATION
Section 4.1 Management Fee. (a) During the term of this Agreement,
Owner shall pay Manager monthly in arrears on the last day of each month a
commercial management fee equal to three percent (3%) of the "gross rental
receipts" (as hereinafter defined) actually received by Owner, or by Manager on
behalf of Owner, each month from the commercial operations of the Building. Upon
receipt of the fee, Manager shall promptly pay DIHC Management Corporation
16.67% of such amount as a consulting fee. The term "gross rental receipts" as
used herein shall mean the gross amount of payments to Owner made as rent, fees,
charges or otherwise for the use or occupancy of the commercial, but not the
residential, portions of the Buildings, or any portion thereof, but gross rental
receipts shall not include (i) free rent concessions granted by Owner to
commercial tenants, (ii) bills rendered to commercial tenants for improvements
to the commercial tenant space in the Buildings, (iii) parking revenue except to
the extent such parking revenue exceeds actual applicable expenses relating
thereto (but shall include rent paid by any operator of the garage(s)), (iv)
insurance loss proceeds with respect to the commercial portion of the Buildings
(other than from rent or business interruption insurance), or any award or
payment made by any governmental authority with respect to the commercial
portion of the Buildings in connection with the exercise of any right of eminent
domain, (v) proceeds from the sale, exchange, mortgaging or refinancing of the
commercial portion of the Property, (vi) security deposits delivered by
commercial tenants to Owner prior to the forfeiture of such deposits, (vii) the
overtime utility charges which Owner charges its tenants, or (viii) debt service
payments made by tenants to Owner on loans.
(b) The fee set forth in Section 4.1(a) shall be unchanged for the
first twelve and one-half (12-1/2) years of the term hereof. In the event
Manager desires to increase said fee at that time, Manager shall give Owner
thirty (30) days notice of the increase requested and evidence of the then
current market rates justifying said increase. In the event Owner denies or
fails to approve the requested increase within the thirty (30) day period, then
the increase shall be deemed denied and Manager may resign as managing agent at
any time. In the event Owner approves the requested increase, the increased
fee(s) shall be effective as of the date requested by Manager.
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ARTICLE V
MISCELLANEOUS
Section 5.1 Use and Maintenance of Premises. Manager agrees to use
best efforts not to permit the use of the commercial portion of the Premises for
any purpose which might void any policy of insurance held by Owner or Manager or
render any loss thereunder uncollectible, or which would be in violation of any
law, ordinance, bylaw or governmental or other restrictions. It shall be the
duty of Manager at all times during the term of this Agreement to operate and
maintain the commercial portion of the Premises in a first-class manner
consistent with the expressed plan of Owner and the budgetary constraints set by
Owner. Full compliance by the commercial tenants with the terms and conditions
of their respective leases shall be pursued, and to this end, Manager shall see
that all commercial tenants are informed with respect to rules, regulations and
notices contained therein. Manager shall be expected to perform such other acts
and deeds as are reasonable, necessary and proper in the discharge of its duties
under this Agreement.
Section 5.2 Separation of Owner's Moneys. Owner shall establish and
maintain a bank account at a financial institution in the Baltimore, Maryland or
Washington, D.C. metropolitan areas of Owner's choosing for the deposit of all
revenues arising out of the commercial portion of the Premises (the "Depository
Account"). Manager shall promptly deposit all revenues, as same are collected,
in the Depository Account and only the authorized representatives of Owner shall
be able to withdraw funds from the Depository Account. Manager shall establish
and maintain an additional account at a financial institution in the Baltimore,
Maryland or Washington, D.C. metropolitan areas of Owner's choosing for the
purpose of maintaining those funds necessary to the operation of the commercial
portion of the Premises (the "Operating Account"). Owner shall from time to
time, upon the advice of Manager, deposit into the Operating Account sufficient
funds to cover the cost and expense of the maintenance and operation of the
commercial portion of the Premises. Funds may be withdrawn from the Operating
Account upon the signature of duly authorized representatives of Manager or
Owner. Manager shall not deposit in the Depository Account or Operating Account
any funds belonging to Market Square Associates or any person or entity other
than Owner and shall not commingle funds between Owner, Market Square
Associates, or any other person or entity.
Section 5.3 Expenses of Manager. Owner shall reimburse Manager for
direct expenses of Manager incurred solely on account of the commercial portion
of the Premises for the payment of any proper obligation or necessary expense
connected with the maintenance and operation of the commercial portion of the
Premises, including the wages, salary and other compensation of any approved
full-time on-site property manager(s), all reasonable costs incurred in the
operation of a commercial management office in the Building, including office
rental, personnel positions, supplies, postage, equipment and telephone, and all
travel and entertainment costs reasonably incurred by Manager related to its
management services. As a
11
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consultant, DIHC Management Corporation shall also be entitled to reimbursement
by Owner of its reasonable travel costs incurred in connection with the
Premises. All payments to be made by Manager hereunder shall be made by check
drawn on the Operating Account, except for petty cash items not exceeding Two
Hundred Dollars ($200.00), which may be paid from a fund to be maintained by
Manager for such purposes. Manager shall not be obligated to make any advance to
or for the account of Owner or to pay any sums except out of funds held in the
Operating Account, nor shall Manager be obligated to incur any liability or
obligation for the account of Owner without assurance that the necessary funds
for the discharge thereof will be provided. Any reimbursement to Manager
hereunder shall be in addition to, and not in lieu of, Manager's fees under
Article IV hereof.
Section 5.4 Bond. Manager shall furnish, at the expense of Manager,
a fidelity bond with a commercial surety satisfactory to Owner, in the penal
amount and form approved by Owner, conditioned upon the faithful accounting for
funds of Owner collected or received by Manager.
Section 5.5 Notices. All notices, demands, requests or other similar
communications required or permitted hereunder shall be deemed delivered when
received if sent by hand delivery (or overnight courier) or if deposited in the
United States certified or registered mail, return receipt requested, postage
prepaid, and addressed to the respective parties at the addresses specified
below, or at such other address as they shall each specify in a notice addressed
and mailed as hereinabove set forth:
To Owner: c/o DIHC Market Square, Inc.
200 Galleria Parkway, N.W.
Suite 2000
Atlanta, Georgia 30339
Attn: Mr. Charles W. Strawser, Jr.
with a copy to: DIHC Management Corporation
200 Galleria Parkway, N.W.
Suite 2000
Atlanta, Georgia 30339
Attn: Mr. Charles W. Strawser, Jr.
To Manager: c/o Trammell Crow Company
1001 30th Street, N.W.
Suite 500
Washington, D.C. 20007
Attn: Mr. T. Christopher Roth
12
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with copies to: Mr. J. McDonald Williams
Trammell Crow Company
3500 LTV Tower
2001 Ross Avenue
Dallas, Texas 75201
and to: William E. Sudow, Esq.
Jones, Day, Reavis & Pogue
655 15th Street, N.W.
Washington, D.C. 20005
All notices from Owner relating to an alleged default hereunder
shall contain the following language: "A default by Manager under the Agreement
would constitute an Event of Default under the Joint Venture Agreement of Market
Square Associates by Crow-Pennsylvania Avenue Limited Partnership."
Section 5.6 Entire Agreement. This Agreement constitutes the entire
agreement between Owner and Manager relating in any manner to the subject matter
of this Agreement. No prior agreement or understanding pertaining to the same
shall be valid or of any force or effect, and the covenants and agreements
herein cannot be altered, changed or supplemented except in writing signed by
Owner and Manager.
Section 5.7 Governing Law. This Agreement is made pursuant to, and
all of the rights and obligations of the parties hereto and all of the terms and
conditions herein shall be construed in accordance with and governed by, the
laws of the District of Columbia.
Section 5.8 Severability. If any clause or provision of this
Agreement is illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then the remainder of this Agreement shall not
be affected thereby, and in lieu of each clause a provision of this Agreement
which is illegal, invalid or unenforceable, there shall be added, as part of
this Agreement, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and as may be
legal, valid and enforceable.
Section 5.9 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns.
Section 5.10 Assignment by Manager. The rights and obligations of
Manager hereunder shall not be assignable without the prior written consent of
Owner.
Section 5.11 Subordination. This Agreement and all fees due from
Owner to Manager pursuant hereto shall be subject and subordinate in all
respects to (a) any mortgage or deed of trust upon the commercial portion of the
Premises or any portion thereof and (b) any
13
<PAGE>
collateral assignment of rents due under the leases of space in any improvements
on the commercial portion of the Premises given to any lender to secure a loan
the proceeds of which were used, directly or indirectly, in connection with the
commercial portion of the Premises. This provision shall be self-executing but
Manager shall, upon request, execute such instruments as may reasonably be
requested by Owner or any such mortgagee or lender to evidence such
subordination.
Section 5.12Exculpation. Anything in this Agreement to the contrary
notwithstanding, Manager accepts and agrees that each of the covenants,
undertakings and agreements herein made on the part of Owner, while in the form
purporting to be covenants, undertakings and agreements of Owner, are,
nevertheless, made and intended not as personal covenants, undertakings and
agreements by its partners or the partners therein or for the purpose of binding
its partners personally or the assets of its partners but are made and intended
for the purpose of binding only its partners' interests, or the interests of the
partners therein, in the assets of Owner and that no personal liability or
personal responsibility is assumed by, nor shall at any time be asserted or
enforceable against the partners of Owner or the partners therein or their
respective heirs, legal representatives, successors and assigns on account of
this Agreement or on account of any covenant, undertaking or agreement of Owner
and its partners in this document contained, all such personal liability and
personal responsibility, if any, being expressly waived and released by Manager,
and Manager further agrees not to seek or enforce any judgments (including but
not limited to specific performance, deficiency judgments, and any and all other
judgments) obtained against Owner or against its partners or the partners
therein beyond the interests of the partners in the assets of Owner.
Section 5.13Indemnity. To the extent not covered by Owner's
insurance, Manager shall indemnify Owner and save it harmless from and against
all claims, losses and liabilities arising out of damage to property, or injury
to, or death of persons (including the property and persons of the parties
hereto, and their agents, subcontractors and employees) occasioned by or in
connection with the gross negligence or willful misconduct of Manager or
Manager's employees or subcontractor's and all costs, fees and reasonable
attorneys' expenses in connection therewith.
Section 5.14Waivers. No delay or omission by either party in
exercising any right or power accruing upon the non-compliance or failure of
performance by the other party hereto of any provisions of this Agreement shall
impair any such right or power or be construed to be a waiver thereof. A waiver
by either party of any of the covenants, conditions or agreements hereof to be
performed by the other must be in writing and signed by the party who is waiving
such covenants, conditions or agreements.
14
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ARTICLE VI
ARBITRATION
Section 6.1 Whenever in this Agreement it is provided that a dispute
shall be determined by arbitration, the arbitration shall be conducted as
provided in this Article. The party desiring such arbitration shall give written
notice to that effect to the other, specifying the dispute to be arbitrated.
Within ten (10) days after said notice is given, the other party shall give
written notice to the first party, specifying the name and address of the person
it proposes to act as arbitrator. If the second party fails to notify the first
party of its choice of arbitrator as aforesaid by the time above specified, then
the first party shall select the arbitrator to determine the dispute. If the
first party does not object to the arbitrator proposed by the second party
within ten (10) days after notice is given of such nomination, the arbitrator
proposed by the second party shall determine the dispute. If the first party
rejects the proposed arbitrator during said period and if they cannot agree upon
said appointment, an arbitrator shall be appointed upon their application or
upon the application of either party by the Chief Judge of the District of
Columbia Court of Appeals. The arbitrator shall decide the dispute and tender a
written decision to the parties within thirty (30) days after his or her
appointment. A decision shall be binding and conclusive upon the parties and
judgment thereon may be entered in any court having jurisdiction thereof.
Section 6.2 In designating an arbitrator and in deciding the
dispute, the arbitrator shall act in accordance with the rules then in force of
the American Arbitration Association (or any successor thereto), subject,
however, to such limitations or directions as may be placed upon him or her by
the provisions of this Agreement. Each party shall pay the fees and expenses of
its respective attorneys and both shall share equally the fee and expenses of
the arbitrator as well as any fees payable to the American Arbitration
Association or its successor. No arbitrator shall be a person who is or has been
a director, officer, shareholder, partner, associate, employee, or other
principal of either party. The arbitrator shall consider all testimony and
documentary evidence which may be presented at any hearing as well as relevant
facts and data which he or she may discover by investigation and inquiry outside
of such hearings. Each party shall have the right to be represented by counsel
and to cross examine witnesses.
Section 6.3 An arbitration to determine whether or not Owner has
"cause" to terminate this Agreement under Section 3.2 hereof shall be submitted
to an arbitrator who has had at least ten (10) years experience in the
management of office buildings in the District of Columbia.
Section 6.4 The obligation of the parties to submit a dispute to
arbitration is limited to disputes arising under those Articles of this
Agreement which specifically provide for arbitration.
15
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MANAGER:
CROW-WASHINGTON OFFICE MANAGEMENT
COMPANY, INC.
By: /s/ T.C. Roth (Seal)
----------------------------------
T. Christopher Roth
Vice President
OWNER:
AVENUE ASSOCIATES LIMITED
PARTNERSHIP
By: MARKET SQUARE ASSOCIATES
By: CROW-PENNSYLVANIA AVENUE
LIMITED PARTNERSHIP
By: CROW-WASHINGTON CBD
DEVELOPMENT
CORPORATION
By: /s/ T.C. Roth (Seal)
-------------------------------
T. Christopher Roth
Vice President
By: DIHC MARKET SQUARE, INC.
By: /s/ Herman A. Vonhof (Seal)
-----------------------------------
Herman A. Vonhof
ACKNOWLEDGED AND AGREED:
DIHC MANAGEMENT CORPORATION
By: /s/ C.W. Strawser (Seal)
---------------------------
Charles W. Strawser, Jr.
Senior Vice President
16
<PAGE>
Exhibit 10.113
================================================================================
MANAGEMENT AGREEMENT
By and Between
ONE NINETY ONE PEACHTREE ASSOCIATES
and
C-H MANAGEMENT ASSOCIATES
dated
as of
February 1, 1988
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
ESTABLISHMENT OF MANAGERIAL RESPONSIBILITY
Section 1.1 Appointment of Manager.................................... 2
Section 1.2 Management Office......................................... 2
ARTICLE II
MANAGEMENT SERVICES TO BE PERFORMED BY MANAGER
Section 2.1 Preparation of Annual Budget............................ 2
Section 2.2 Independent Contractors................................. 6
Section 2.3 Service Contracts....................................... 7
Section 2.4 Maintenance and Repair of Premises...................... 8
Section 2.5 Insurance............................................... 9
Section 2.6 Collection of Moneys.................................... 10
Section 2.7 Manager Disbursements................................... 10
Section 2.8 Discounts............................................... 11
Section 2.9 Miscellaneous Duties of Manager......................... 12
ARTICLE III
TERM
Section 3.1 Term.................................................... 17
Section 3.2 Early Termination....................................... 17
Section 3.3 Payment to Manager in Event of Termination.............. 20
ARTICLE IV
COMPENSATION
Section 4.1 Management Fee.......................................... 20
ARTICLE V
MISCELLANEOUS
Section 5.1 Use and Maintenance of Premises.......................... 22
Section 5.2 Separation of the Venture's Moneys....................... 22
Section 5.3 Expenses of Manager...................................... 23
Section 5.4 Bond..................................................... 25
i
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Section 5.5 Notices.................................................. 25
Section 5.6 Entire Agreement......................................... 26
Section 5.7 Governing Law............................................ 27
Section 5.8 Severability............................................. 27
Section 5.9 Binding Effect........................................... 27
Section 5.10 Assignment by Manager.................................... 27
Section 5.11 Subordination............................................ 27
Section 5.12 Exculpation.............................................. 28
Section 5.13 Indemnity................................................ 30
Section 5.14 Waivers.................................................. 30
Section 5.15 Other Activities......................................... 30
Section 5.16 Representatives.......................................... 31
Section 5.17 Employees................................................ 31
ARTICLE VI
ARBITRATION
Section 6.1 Selection of Arbitrators................................. 32
Section 6.2 Rules; Fees and Expenses; Qualifications of Arbitrators.. 32
Section 6.3 Applicability of Article................................. 33
ii
<PAGE>
MANAGEMENT AGREEMENT
THIS AGREEMENT made and entered into as of the lst day of February,
1988, by and among ONE NINETY ONE PEACHTREE ASSOCIATES, a Georgia general
partnership organized pursuant to a Joint Venture Agreement of even date (the
"Venture Agreement"), consisting of C-H Associates, Ltd., a Georgia limited
partnership ("CHV), and DIHC Peachtree Associates, a Georgia general partnership
("DIHC") (CHV and DIHC are sometimes referred to separately as a "Venturer" and
collectively as the "Venturers"), and CH MANAGEMENT ASSOCIATES, a Georgia
general partnership composed of Cousins Real Estate Corporation, a Georgia
corporation, and Gerald D. Hines, an individual residing in Houston, Texas,
doing business as Gerald D. Hines Interests (the "Manager").
W I T N E S S E T H :
WHEREAS, the Venture proposes to acquire fee simple or leasehold
title to certain parcels of real property (and improvements situated thereon and
appurtenances thereto) on Peachtree Street in Atlanta, Georgia (the "Property"),
and to construct thereon a multi-story building containing approximately
1,181,700 net rentable square feet of office and retail/commercial space
together with a related parking garage (the "Building"; the Property and the
Building being herein sometimes collectively referred to as the "Premises");
WHEREAS, the parties acknowledge and agree that Manager is
affiliated with CHV; and
<PAGE>
2
WHEREAS, the Venture has agreed to appoint Manager as the sole and
exclusive manager for the Building and Manager has agreed to serve as such, all
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, Manager and the Venture hereby agree as follows:
ARTICLE I
ESTABLISHMENT OF MANAGERIAL RESPONSIBILITY
Section 1.1 Appointment of Manager. The Venture hereby appoints
Manager, and Manager hereby accepts appointment, as sole and exclusive manager
of the Premises (for the respective periods provided herein) with the
responsibilities and upon the terms and conditions set forth herein.
Section 1.2 Management Office. As soon as practicable after "Shell
Completion" (as that term is defined in the Joint Venture Agreement), the
Venture shall, at its expense, provide Manager with furnished office space
within the Building, suitable in the Venturer's reasonable discretion to enable
Manager to perform its obligations hereunder efficiently and effectively.
ARTICLE II
MANAGEMENT SERVICES TO BE PERFORMED BY MANAGER
Section 2.1 Preparation of Annual Budget. Within 45 days after a
certificate of occupancy permitting occupancy of the Building is obtained and,
thereafter, in preliminary
<PAGE>
3
draft form not later than on September 1 and in final submission form not later
than on October 30 of each calendar year during the term of this Agreement,
Manager shall deliver to the Venture an operating business plan and a budget
("Annual Plan") setting forth in detail, as reasonably requested by the Venture,
on a monthly basis, revenues, expenses and debt service payments respecting the
Premises, anticipated during the Venture's next succeeding fiscal year (or
portion thereof), including without limitation the estimated amount of real
estate taxes, assessments, insurance premiums and maintenance and other expenses
relating to the Premises whether for operations or capital improvements (other
than anticipated initial leasehold improvements for tenants under leases entered
into by or on behalf of Venture) and an annual general operations plan for such
fiscal year. All financial reports and budgets shall be prepared in such form as
reasonably required by the Venture, and shall in any event, be in sufficient
detail as to permit the Managing Partner in the Venture to discharge its
budgeting and reporting obligations to the Venture and the Venturers. The Annual
Plan shall show, among other things, anticipated and proposed capital
expenditures (other than initial leasehold improvements for tenants) for the
ensuing year and the source of funds in respect thereto (including the projected
time and amount for any required advances by the Venture) and shall include a
rent roll for the Building, taking into account, without limitation, the general
condition of the Premises, rate of completion of any contemplated repairs to the
Premises, the then current occupancy level, lease expirations, and physical
condition of the Premises. Each Annual Plan shall also include a schedule of job
descriptions and requirements for any and all independent contractors and
employees of Manager serving the Premises, a reasonable estimate
<PAGE>
4
of wage rates and all other compensation to be paid such contractor or employee
and shall identify any contractor (or proposed contractor) serving the Premises
who is an Affiliate (as such term is defined in the Venture Agreement) of
Manager; provided, however, that the Annual Plan shall not contain expenses or
allocations (i) for home office expense or general corporate or administrative
charges, other than as expressly permitted hereunder, or (ii) any other costs or
expenses for which Manager is not entitled to reimbursement hereunder. Within
thirty (30) days after its receipt of the final submission form of such Annual
Plan, the Venture shall respond in writing to Manager approving the Annual Plan
subject to such changes as the Venture shall require, and such Annual Plan with
such changes by the Venture shall become the approved "Annual Budget" for such
succeeding fiscal year. Manager may proceed in accordance with the Annual Budget
for such succeeding fiscal year only if the same is approved by the Venture as
aforesaid. Except for the first full fiscal year, if for any fiscal year all or
any portion of an Annual Plan is not approved prior to December 31, the portions
of such Annual Plan which have been approved shall constitute the approved
Annual Budget with respect to those items or categories approved, and with
respect to those items or categories not approved, the amounts for such items or
categories which are contained in the Annual Budget for the then current fiscal
year shall carry over and continue to apply in regard to such items or
categories of operating expenses (but not for capital expenditures or initial
tenant finish expenditures) until approval by the Venture of new amounts for
such items or categories is obtained. Pending approval of particular items or
categories in an Annual Plan, Manager may continue all operations (but not
capital expenditures or tenant finish
<PAGE>
5
expenditures) attributable to such unapproved items or categories under the then
effective Annual Budget (as though the amounts for such items or categories
contained in the current Annual Budget had been approved for the next fiscal
year). Manager shall comply, except as hereinafter provided, in all respects
with each ap proved Annual Budget in the performance of its duties hereunder and
shall not, except as hereinafter provided, during the period covered by such
Annual Budget incur any expense in the management, operation or maintenance of
the Property not provided for in such Annual Budget, unless otherwise approved
by Venture from time to time.
The budgets included in the Annual Budget shall distinguish between
(i) costs and expenses of management, maintenance and operations which are not
"capital expenditures" ("non-capital expenses") and (ii) costs and expenses of
management, maintenance and operation which are "capital" in nature (the
"capital expenses"). Without the Venture's consent, Manager shall not incur any
expense for any major line item capital expense which exceeds the amount
budgeted for such capital expense. Without the Venture's consent, Manager shall
not incur any expense for any major line item of non-capital expenses (except
real estate taxes, utilities serving the Property, and insurance premium
amounts) which exceeds the budgeted amount of such major line item by more than
ten percent (10%); provided, however, that Manager may freely pay all real
estate taxes, charges for public utilities serving the Premises, and insurance
premiums (for insurance approved by the Venture) and Manager may incur
obligations to perform tenant construction pursuant to leases approved by the
Venture and may incur expenses to provide additional services to tenants, if the
tenant
<PAGE>
6
is contractually obligated to promptly reimburse the Venture for the cost
thereof. The term "major line item" means one identified as such in an approved
Annual Budget. In the event that Manager shall at any time determine that an
expenditure is required that will not conform to the foregoing guidelines,
Manager shall notify the Venture in writing of such expenditure, and the Venture
shall within five (5) business days after receipt of such notice to reply to
such notice. Unless the Venture shall reply to such notice by approving the
expenditure within said five (5) business day period, the Venture shall be
deemed not to consent to such expenditure. Notwithstanding the foregoing,
Manager may make all expenditures necessary, whether or not within the
guidelines set forth hereinabove or provided for in the Annual Budget, for any
expenditure of an emergency nature as provided in Section 2.4 hereof. At any
time that Manager determines that there is not sufficient income to cover
current operating expenses, it shall promptly notify the Venture. Manager shall
further provide such other financial information respecting actual operations of
the Property as is reasonably requested by the Venture.
As used in this Agreement, the fiscal year of the Venture shall be
the calendar year unless and until the Venture gives Manager written notice of
any change thereto in the manner provided for herein.
Section 2.2 Independent Contractors. Pursuant to the Annual Budget,
Manager shall investigate, contract with, pay, supervise and discharge any
personnel required for the routine maintenance and operation of the Premises on
a day-to-day basis. Such personnel shall in every instance be independent
contractors or employees of Manager or its affiliates and shall
<PAGE>
7
not be employees of the Venture. After any major personnel (e.g. building
superintendent, engineer, architect, attorneys, etc.) have been engaged to
perform personal or professional services, Manager shall give the Venture notice
thereof and the Venture may at any time thereafter require Manager to terminate
the contracts of such persons serving the Premises whom the Venture, in its sole
discretion, deems unsatisfactory (provided that the Venture shall be responsible
for, and shall indemnify Manager against any loss, cost, liability or expense,
including reasonable attorneys fees and reasonable severance pay, incurred by
manager as a result of any such termination if the same is actionable by such
terminated personnel and if Manager notifies the Venture of its objection to
such termination prior thereto). Such employees who handle or who are
responsible for funds belonging to the Venture shall be insured by fidelity
insurance in an amount and with a company approved from time to time by the
Venture as set forth in Section 5.4 hereof. Except as provided in Section 5.3
below, all salaries, wages and other compensation of personnel contracted with
by Manager hereunder shall be expenses of the Venture which shall be paid by
Manager from funds of the Venture or reimbursed to Manager by the Venture
pursuant to the terms hereof. Manager understands and agrees that its own
relationship to the Venture is that of independent contractor and that it will
not represent to anyone that its relationship to the Venture is other than that
of independent contractor.
Section 2.3 Service Contracts. (a) Manager shall make, when
necessary, in the name of the Venture, contracts for water, electricity, gas,
fuel, oil, telephone, vermin extermination, elevator, trash removal, janitorial
service, landscaping, security service and
<PAGE>
8
other necessary services, or such of them as Manager shall deem reasonably
advisable in accordance with the Annual Budget; provided that each such contract
shall be for no longer than a one-year term and shall be cancellable on no more
than thirty (30) days notice without penalty unless otherwise approved by the
Venture. Manager shall also place orders in the name of the Venture for such
equipment, tools, appliances, materials and supplies as are necessary properly
to maintain the Premises, subject to the limitations of the current Annual
Budget approved by the Venture.
(b) Manager shall supervise the services of an operator for the
parking garage forming a part of the Premises, provided that the identity of
such operator, and the terms of the contract for such services, shall be subject
to the approval of the Venture.
Section 2.4 Maintenance and Repair of Premises. Manager shall use
its best efforts to cause the Building, parking garage, appurtenances and
grounds of the Property to be maintained in accordance with standards acceptable
to the Venture, including within such maintenance, without limitation thereof,
supervision of the installation and removal of tenant improvements (as provided
in, and subject to Section 2.9 hereof), interior and exterior cleaning, painting
and decorating, plumbing, carpentry, and such other normal maintenance and
repair work as may be desirable, subject to limitations of the current Annual
Budget approved by the Venture and any other limitations imposed by the venture
in addition to those contained herein. For any category of repair or
replacement, the expense or cost incurred shall not exceed the amount allocated
thereto in the current Annual Budget (subject to the variances allowed by
Section 2.1 hereof), excepting, however, that emergency repairs
<PAGE>
9
immediately necessary to secure the preservation and safety of the Premises or
to avoid the suspension of any service to the Premises or to avoid danger to
life or property may be made by Manager without such consent or authority even
if in excess of the amounts, if any, specified in the current Annual Budget,
provided Manager shall first make reasonable attempts to contact the Venture.
Notwithstanding such authority as to emergency repairs, it is understood and
agreed that Manager will confer as soon as possible with the Venture regarding
every such expenditure. Manager shall assure that any contractor performing work
on the Premises maintains insurance satisfactory to the Venture and any
mortgagee of the Premises, including but not limited to workmen's compensation
insurance, employees' liability insurance and insurance against liability for
injury to persons and property arising out of all of such contractor's
operations, any subcontractors' operations, and the use of owned, non-owned or
hired equipment, including automotive equipment in the pursuit of all such
operations.
Section 2.5 Insurance. Manager shall, if requested by the Venture,
supervise the procurement of or assist the Venture in procuring and maintaining
garage keeper's liability insurance and such other insurance for the Premises,
with companies and through brokers agreed upon by the Venture, of such kind and
amounts as the Venture shall from time to time be required to carry pursuant to
the provisions of applicable agreements with third parties, and of such other
kind and amounts as required in the Venture Agreement of the Venture (the
"Venture Agreement") or as the Manager shall from time to time be directed by
the Venture.
Section 2.6 Collection of Moneys. Manager shall use its best efforts
to collect all rent and other charges due from tenants, licensees,
concessionaires and any others in
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10
consequence of the authorized operation of facilities in the Premises and
otherwise due the Venture with respect to the Premises. The Venture authorizes
Manager to request, demand, collect, receive and receipt for all such rent and
other charges. With the prior written consent of the Venture, Manager may
institute legal proceedings and engage legal counsel (approved by the Venture)
in the name of the Venture, for the collection of overdue rents and other
charges and for the dispossession of tenants and other persons from the
Premises. The Venture will be informed as soon as possible respecting any legal
action which the Manager proposes to initiate for and on behalf of the Venture.
Any expense incurred in connection therewith shall be deemed an operating
expense of the Premises. All moneys collected by the Venture shall be forthwith
deposited in the Depository Account described in Section 5.2 below.
Section 2.7 Manager Disbursements. Except as otherwise directed by
the Venture, Manager shall from the funds on deposit in the operating Account
described in Section 5.2 below, cause to be disbursed the amounts necessary to
pay regularly and punctually amounts due and payable as operating expenses of
the Premises authorized to be incurred under the terms of the Agreement,
including without limitation, payment of sums due on any mortgage loan affecting
the Premises, payment prior to delinquency and prior to the addition thereon of
interest or penalties of all real property taxes and assessments and other taxes
levied or assessed against the Premises, all rents, insurance premiums and other
impositions applicable to the Premises, the fees of the "Leasing Agent" under
that certain Leasing Agreement of even date herewith between the Venture and C-H
Leasing Associates, a
<PAGE>
11
Georgia general partnership and the Manager's fee provided for in Article V
hereof. After disbursement as herein specified, any balance remaining shall be
disbursed or transferred as generally or specifically directed from time to time
by the Venture. Manager shall have no obligation to pay any of the
aforementioned expenses or costs unless there are sufficient funds in the
Operating Account described in Section 5.2 below or the funds shall be supplied
to Manager by the Venture. In the event that at any time there are insufficient
funds on hand to meet such operating expenses, Manager shall promptly notify the
Venture, which shall supply such funds to the extent required to pay amounts
within the then current approved Annual Budget or otherwise agreed to by the
Venture. In no event shall Manager be entitled to advance any funds as a loan to
the Venture for any purpose, and the repayment of any funds so advanced shall
not be an obligation of the Venture. All checks to Manager for reimbursement of
expenses in excess of the amount provided therefor in the approved Annual Budget
shall be co-signed by a duly authorized representative of a Venturer of the
Venture.
Section 2.8 Discounts. Manager shall (unless in its reasonable
judgment such discounts, commissions or rebates are not advisable) use good
faith efforts to secure for and credit to the Venture any discounts, commissions
or rebates obtainable as a result of any purchase of goods or services or as a
result of other activities undertaken pursuant to this Agreement. Should Manager
perform any services to tenants which are not required in their leases and for
which a separate charge is made, then all such separate charges shall be
retained in the Operating Account described in Section 5.2 for the account of
the Venture and, to the extent required, used to pay for the services provided.
<PAGE>
12
Section 2.9 Miscellaneous Duties of Manager.
(a) Books and Records and Monthly Reports. Manager shall keep all
books of account and other records required by the Venture, keep vouchers,
statements, receipted bills and invoices and all other records in such form as
may be approved by the Venture, covering all collection, disbursements, and
other data in connection with the Premises; permit the Venture, or any person
designated by any Venturer, at any reasonable time, to audit the books, records
and accounts of Manager relating to the Premises, and Manager will exhibit such
books, records and accounts to any person designated by any Venturer for that
purpose, which accounts and records relating to the Premises, including all
correspondence and leases, shall be the property of the Venture and, upon any
termination of the appointment of Manager, shall be surrendered to the Venture
without charge therefor. On or before the 15th day of each month during the term
of this Agreement, Manager shall render to the Venture a detailed written report
(hereinafter called the "Monthly Report") covering the operations for the
preceding full calendar month. The Monthly Reports shall include designation of
all receipts and disbursements during such period (and shall set forth an
accurate list of accounts receivable and accounts payable, in such detail as the
Venture may require) and moneys retained in the Operating Account as of the last
day of the preceding calendar month. Such report shall be in form and substance
satisfactory to the Venture, and shall include, without limitation, a copy or
facsimile of all notices received from any mortgagee or land lessor with respect
to payments made to such mortgagee or land lessor in such preceding calendar
month, a brief narrative summary highlighting the past month's operation, a
statement setting forth the
<PAGE>
13
variances between actual operating results and the Annual Budget then in effect,
and a detailed rent roll.
(b) Other Reports. Manager shall prepare and deliver to the Venture
from time to time such other reports, statements and information concerning the
operation, management, performance and condition of the Premises as the Venture
may request.
(c) Annual Report. Within forty-five (45) days after the end of each
fiscal year, Manager shall deliver to the Venture an Income and Expense
Statement, showing the results of operations of the Premises for that fiscal
year, all prepared in accordance with generally accepted accounting principles
consistently applied, and shall cooperate with the Venture's independent
auditors in preparation of their annual audit and preparation of tax returns on
behalf of the Venture. Manager shall also furnish the Venture, within said
forty-five (45) day period, with a detailed list of all accounts receivable and
accounts payable as of the end of that fiscal year and with such other
information as the Venture shall reasonably request, all in such detail as the
Venture may reasonably require.
(d) Tenant Complaints. Manager shall serve as liaison between the
Venture and tenants and maintain businesslike relations with tenants, whose
service requests shall be received, logged and considered in systematic fashion
in order to show the action taken with respect to each. Complaints of a serious
nature shall, after thorough investigation, be reported to the Venture with
appropriate recommendations. Manager shall use all reasonable efforts to secure
full compliance by the tenants of the Premises with the terms and conditions of
their respective leases.
<PAGE>
14
(e) Returns Required by Law. Except when same are legally required
to be filed by the Venture, Manager shall execute and file punctually, when due,
all forms, reports, and returns required by law relating to the employment of
personnel and the operation of the Premises which shall specifically not include
federal and state income tax returns.
(f) Compliance with Legal Requirements. Manager shall use its best
efforts to ensure that the actions taken by Manager for or on behalf of the
Venture comply with the Governmental Documents (as defined in the Venture
Agreement) and with any and all orders or requirements affecting the Premises by
any federal, state, county, municipal or other authority having jurisdiction
thereover, and orders of the Board of Fire Underwriters or other similar bodies,
subject to the same limitations contained in Section 2.4 hereof in connection
with the making of repairs and alterations. Manager shall promptly, and in no
event later than the close of the next business day following its receipt, give
written notice to the Venture of any such order or notice of requirements.
Manager, however, shall not take any such action as long as: (i) the Venture is
contesting any such order or requirement or (ii) the Venture requests Manager in
writing not to take such action; provided that the Venture shall not make any
such request if the failure to take such action would, in Manager's reasonable
judgment, subject Manager to any criminal liability, and with respect to any
other failure to act the Venture shall indemnify Manager against any and all
loss, cost liability, damage or expense (including reasonable attorney's fees)
suffered or incurred by Manager by reason of such failure to act.
<PAGE>
15
(g) Claims for Tax Abatements and Eminent Domain Awards. When
requested by the Venture from time to time, Manager shall, without charge or
reimbursement, except for out-of-pocket expenses, render advice and assistance
to the Venture in the negotiation and prosecution of all claims for the
abatement of property and other taxes affecting the Premises and for awards for
taking by eminent domain affecting the Premises.
(h) Supervision of Repairs and Alterations. Manager shall use
reasonable efforts to supervise the performance of all matters coming within the
terms of this Agreement, including direct observation, inspection and
supervision of all repairs, decorations and alterations during the progress
thereof and shall make final inspection of the completed work and approve bills
for payment; provided, however, Manager may, in its reasonable discretion and
unless otherwise directed by the Venture, withhold payments and contest in good
faith work done on the Premises, provided that such contest is not in violation
of any mortgage encumbering the Premises or the Governmental Documents. Manager
shall use its best efforts to obtain the necessary receipts, releases, waivers,
discharges and assurances to keep the Premises free from mechanics' and
materialmen's liens and other claims.
(i) Management of Premises. Manager shall, generally, take all
actions reasonably necessary to protect and preserve the Premises and to manage
and operate the Premises in an efficient first-class manner and shall, at all
times, maintain an organization sufficient to enable it to perform all of its
obligations and functions under this Agreement.
(j) Tenant Improvements. Upon request by the Venture, Manager shall
supervise and contract for tenant finishing work (other than for the initial
tenant finishing
<PAGE>
16
work), and alterations when new tenants take occupancy in the Building and shall
supervise and inspect modifications and alterations to existing tenant space
when requested for and paid for by an existing tenant. Manager shall be
reimbursed for any additional or extraordinary expenses incurred for such
supervisory services, subject, however, to the approved Annual Budget and the
leasing and marketing plan for the Premises then in effect, and shall be
entitled to collect construction management and supervision fees from tenants in
the Building in accordance with schedules from time to time approved by the
Venture.
(k) Cooperation. Should any claims, demands, suits or other legal
proceedings be made or instituted by any third party against the Venture or any
Venturer (as a partner in the Venture) which arise out of any matter relating to
the Premises or this Agreement or the Manager's performance hereunder, the
Manager shall give the Venture all pertinent information and reasonable
assistance in the defense or disposition thereof. The obligation of Manager set
forth herein shall survive the termination of this Agreement.
ARTICLE III
TERM
Section 3.1 Term. The term of this Agreement shall commence on the
date hereof and shall expire on the earlier to occur of (i) the winding up of
the Venture in accordance with the Venture Agreement, (ii) the sale of the
Premises, or all of the percentage interests in the Venture, by the Venture to
any third party, or (iii) the fifteenth (15th) anniversary of the date of the
commencement of the term, unless this Agreement is sooner
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17
terminated pursuant to Section 3.2 hereof or otherwise. Upon the expiration or
earlier termination of this Agreement, Manager shall: (1) surrender and deliver
to the Venture all rents and income of the Premises including the Depository
Account and Operating Account referred to in Section 5.2 hereof; (2) deliver to
the Venture as received any monies of the Venture collected or received by
manager after termination hereof; (3) deliver to the Venture all books, records,
materials, supplies, keys, contracts and other documents and statements relating
to the Premises; (4) assign such existing contracts relating to the operation
and maintenance of the Premises as the Venture shall require; and (5) generally
cooperate with the Venture in accordance with Section 2.9(k).
Section 3.2 Early Termination. (a) During the term of this
Agreement, this Agreement shall automatically be terminated for cause, as
"cause" is hereafter defined, upon five (5) days' written notice to Manager.
"Cause" for termination by the Venture shall mean the continuance, for more than
thirty (30) days (or, if such curable event cannot be cured in such period of
time, then such additional period of time as is reasonably necessary to cure
same, provided Manager commences such cure within such thirty (30) day period
and thereafter diligently prosecutes to completion such cure) after delivery of
written notice by the Venture (or any Venturer) to Manager of one or more of the
following events specifying in reasonable detail the nature of the default:
(i) Manager shall fail to perform or observe any material covenant,
condition or term in this Agreement;
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18
(ii) In the reasonable judgment of the Venture (or the Venturer
giving the written notice), Manager shall fail to exercise the level of
managerial skill, knowledge, judgment and practice required for the
operation of a major, first-class office with related retail space and
such failure shall have had, or be calculated in the reasonable discretion
of the Venture to have, a material adverse effect on the Premises or the
Venture.
(iii) Manager shall engage in conduct under this Agreement which
constitutes fraud or breach of trust;
(iv) Manager shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall commence a case under the bankruptcy code, or
shall file a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition or similar relief under the federal
bankruptcy laws, or any other similar applicable federal or state law, or
shall consent to or fail reasonably to oppose any such proceeding, or
shall consent to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of a substantial part of its
property, or shall make a general assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts generally as they
become due, or corporate action shall be taken by Manager in furtherance
of any of the aforesaid purposes;
(v) A decree or order by a court of competent jurisdiction shall
have been entered adjudging Manager bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment,
arrangement composition or similar relief
<PAGE>
19
for Manager under the federal bankruptcy laws, or any other similar
applicable federal or state law, and such decree or order shall have
continued undischarged or unstayed for a period of sixty (60) days; or
a decree or order of a court having jurisdiction for the appointment of
a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of Manager or a substantial part of its property, or the
winding up or liquidation of its affairs, shall have been entered, and
such decree or order shall have remained in force, undischarged and
unstayed for a period of sixty (60) days;
In the event of any dispute between DIHC and CHV or between DIHC and
Manager as to whether or not the Venture has "cause" to terminate this Agreement
pursuant to the provisions of this Section 3.2, such dispute shall be determined
by arbitration pursuant to Article VI hereof.
(b) In addition to any and all other termination rights contained
herein, either Manager or the Venture may elect to terminate this Agreement (i)
upon five (5) days notice to the other if all or substantially all of the
Building is destroyed or condemned and the same is not rebuilt; or (ii) upon
twelve months notice to the other if neither a "Hines Affiliate" nor a "Cousins
Affiliate" (as such terms are defined in the Venture Agreement) owns any
interest in CHV.
Section 3.3 Payment to Manager in Event of Termination. In the event
this Agreement is terminated under Section 3.2 hereof, Manager shall be entitled
only to that portion of the management fee earned pursuant to Article IV of this
Agreement through the earlier of the date Manager actually ceases performing its
services hereunder or the effective
<PAGE>
20
date of such termination, together with reimbursement of expenses and reasonable
employee severance pay as herein provided, in full satisfaction of the Venture's
obligation to Manager for fees under this Agreement; provided, however, that
after being notified in writing of an event for which this Agreement may be
terminated for "cause" under clauses (i), (ii) or (iii) of Section 3.2(a), the
management fee and expenses payable to Manager shall be withheld until such time
as such "cause" is cured or this Agreement is terminated. In the event this
Agreement is so terminated, the Venture shall assume the obligations under
contracts entered into by Manager for the benefit or on behalf of the Venture
pursuant to its authority to do so under this Agreement.
ARTICLE IV
COMPENSATION
Section 4.1 Management Fee. (a) Commencing with the date on which
the first tenant has occupied space in the Premises (excluding occupancy for the
purpose of constructing tenant improvements), but in no event earlier than Shell
Completion (as defined in the Venture Agreement), and continuing during the term
of this Agreement, the Venture shall pay Manager monthly in arrears, a
management fee equal to one twelfth (1/12) of an amount equal to the sum of (i)
twenty cents ($0.20) per square foot with respect to all net leasable square
feet in the Building plus (ii) an additional fifty cents ($0.50) per square foot
with respect to all such net leasable square feet in the Building which are
occupied by tenants as of the last day of the preceding calendar month (with the
effect that the total management fee
<PAGE>
21
with respect to occupied space shall be seventy cents ($0.70) per square foot).
Each of the amounts set forth in clauses (i) and (ii) of the preceding sentence
shall be increased effective as of January 1 of each calendar year commencing
with January 1, 1993, as follows: (a) with respect to the first such adjustment,
an amount equal to 4.5% of the applicable per square foot amounts in effect for
the preceding year; and (b) with respect to all other adjustments, an amount
equal to 4.5% of the applicable per square foot amounts in effect for the
preceding year. The per square foot management fee, as so adjusted, shall be
rounded to the nearest one hundredth of a cent. A tenant will be deemed to
occupy space if it is conducting business from its premises or has commenced the
payment of rent (e.g., construction of leasehold improvements and moving of
furniture along shall not constitute occupancy). Upon receipt of each
installment of such management fee, Manager shall promptly pay to DIHC
Management Corporation 20% of such amount as a consulting fee.
(b) Notwithstanding the provisions of Section 4.1(a), in no event
shall the management fee payable with respect to any lease of space in the
Premises to the law firm of King & Spalding exceed the amount charged to the
tenant under such lease which is attributable to and allocated for property
management costs and fees.
(c) In the event Manager fails on more than five occasions during
the Term to provide the monthly report required by Section 2.09(a) to the
Venture within the time therein specified, and has been so notified by the
Venture ("notice" for the purpose of this sentence means any written
communication from a Venturer) the Venture shall not be
<PAGE>
22
thereafter obligated to pay, and the Manager shall not collect any monthly
management fee, until one business day after receipt by the Venture of the
report required by Section 2.09(a).
ARTICLE
MISCELLANEOUS
Section 5.1 Use and Maintenance of Premises. Manager agrees to use
reasonable efforts not to permit the use of the Premises for any purpose which
might void any policy of insurance held by the Venture or Manager or render any
loss thereunder uncollectible, or which would be in violation of any law,
ordinance, by-law or governmental or other restrictions.
Section 5.2 Separation of the Venture's Moneys. The Venture shall
establish and maintain a bank account at an Atlanta, Georgia bank or other
depository approved by the Venture for the deposit of all revenues arising out
of the Premises (the "Depository Account"). Manager shall promptly deposit all
revenues, as same are collected, in the Depository Account and only the
authorized representatives of the Venture shall be able to withdraw funds from
the Depository Account. Manager shall establish and maintain an additional bank
account at an Atlanta, Georgia bank of the Venture's choosing, for the purpose
of maintaining those funds necessary to the operation of the Premises (the
"Operating Account"). The Venture shall from time to time, upon the advice of
Manager, deposit into the Operating Account, sufficient funds to cover the cost
and expense of the maintenance and operation of the Premises, including a
reasonable working capital reserve, consistent with the current approved Annual
Budget, of
<PAGE>
23
approximately one month's operating expenses exclusive of real estate taxes and
non-cash items. Funds may be withdrawn from the Operating Account upon the
signature of duly authorized representatives of Manager or any Venturer of the
Venture.
Section 5.3 Expenses of Manager. The Venture shall reimburse Manager
for direct expenses of Manager incurred in connection with the maintenance and
operation of the Premises and the performance of its other duties under this
Agreement, including the wages, salary and other compensation of any on or off
site property management personnel (but not including any executive
compensation), the costs of any management office approved by the Venture,
reasonable travel and entertainment expenses incurred in connection with the
management of the Premises as approved in the Annual Budget, and a reasonable
allocation of the cost of any liability insurance or fidelity bonds required to
be maintained by Manager hereunder which specifically cover acts of Manager, its
partners, and/or their respective agents or employees, in accordance with the
approved Annual Budget; provided, however, the Venture shall not be obligated to
reimburse Manager for any expenses for office equipment, office supplies or
overhead expenses of Manager incurred in its general offices, for any salaries
of any executives or any supervisory personnel of Manager or for any salaries or
wages allocable to time spent on matters other than the Premises.
Notwithstanding the foregoing, with respect to any person whose salary would
otherwise be reimbursable hereunder such salary shall not cease to be
reimbursable solely because such person becomes an officer or comes to hold an
executive title during the term hereof, so long as such person continues to
provide the supervisory or property management services for which reimbursement
was
<PAGE>
24
previously allowed. In addition to the foregoing, the Venture shall reimburse
Manager for reasonable costs of off-site data processing and accounting services
provided to Manager by affiliates of Manager, which services shall be
compensated for work actually performed with respect to the Project at rates
approved by the Venture in advance or approved in the Annual Budget; provided,
that the cost of such services shall be no greater than the cost to obtain
similar services from unaffiliated third-party providers of such services, and
in no event shall Manager or any affiliate of Manager receive any fee, "mark-up"
or other profit from the performance of such services other than the costs
actually charged for such services. All payments to be made by Manager hereunder
shall be made by check drawn on the Operating Account except petty cash items
not exceeding $1,000.00, which may be paid from a fund to be maintained by
Manager for such purposes. Manager shall not be obligated to make any advance to
or for the account of the Venture or to pay any sums, except out of funds held
in the Operating Account, nor shall Manager be obligated to incur any liability
or obligation for the account of the Venture without assurance that the
necessary funds for the discharge thereof will be provided; and, if Manager
shall advance its own funds to meet authorized expenses of the Venture in
furtherance of its duties hereunder, the Venture shall promptly reimburse
Manager therefor together with interest thereon from the date of such advance at
the rate announced from time to time by Trust Company Bank, Atlanta, Georgia as
its prime rate (regardless of whether such rate is actually changed to any
particular customer or group of customers)
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25
Section 5.4 Bond. Manager shall maintain, at the expense of the
Venture, comprehensive dishonesty, disappearance and destruction insurance with
an insurer satisfactory of the Venture, in such amount and from approved by the
Venturer providing insurance with regard to the faithful accounting for funds of
the Venture collected or received by Manager.
Section 5.5 Notices All notices, demands requests or other similar
communications required or permitted hereunder must be in writing and shall be
deemed and received when personally delivered (which may include delivery by
commercial courier service or upon deposit in the United States mail, certified
or registered mail, return receipt requested, postage prepaid, and addressed to
the respective parties at the addresses specified below, or at such other
address as thay shall each specify in a notice addressed and mailed as
hereinabove set forth;
To the Venture C-H Associates, Ltd
c/o Gerald D. Hines Interests
Two Ravinia Drive Suite 1100
Atlanta, Georgia 30346
Attn: C.L. Davidson, III
DIHC
200 Galleria Parkway
Suite 2000
Atlanta, Georgia 30339
Attn: Charles W. Strawser, Jr.
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26
with copies to: Sutherland, Asbill & Brennan
Atlanta Financial Center
Suite 420, South Tower
3333 Peachtree Road, NE
Atlanta, Georgia 30326
Attn: H. Edward Hales, Esq.
Cousins Real Estate Corporation
2500 Windy Ridge Parkway
Suite 1600
Marietta, Georgia 30067
Attn: Robert P. Hunter, Jr.
To Manager: C-H Management Associates
c/o Gerald D. Hines Interests
Two Ravinia Drive
Suite 1100
Atlanta, Georgia 30346
Attn: C. L. Davidson, III
Cousins Real Estate Corporation
2500 Windy Ridge Parkway
Suite 1600
Marietta, Georgia 30067
Attn: Robert P. Hunter, Jr.
Section 5.6 Entire Agreement. This Agreement constitutes the entire
agreement between the Venture and Manager relating in any manner to the subject
matter of this Agreement. No prior agreement or understanding pertaining to the
same shall be valid or of any force or effect, and the covenants and agreements
herein cannot be altered, changed or supplemented except in writing signed by
the Venture and Manager.
<PAGE>
27
Section 5.7 Governing Law. This Agreement is made pursuant to, and
all of the rights and obligations of the parties hereto and all of the terms and
conditions herein shall be construed in accordance with and governed by, the
laws of the State of Georgia, U.S.A.
Section 5.8 Severability. If any clause or provision of this
Agreement is illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then the remainder of this Agreement shall not
be affected thereby, and in lieu of each clause or provision of this Agreement
which is illegal, invalid or unenforceable, there shall be added, as part of
this Agreement, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and as may be
legal, valid and enforceable.
Section 5.9 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns.
Section 5.10 Assignment by Manager. The rights and obligations of
Manager hereunder shall not be assignable without the prior written consent of
the Venture except that the rights and obligations of Manager may be assigned by
Manager to a "Cousins Affiliate", a "Hines Affiliate" or an "Affiliate" of CHV
(as such terms are defined in the Venture Agreement).
Section 5.11 Subordination. This Agreement and all fees due from the
Venture to Manager pursuant hereto shall be subject and subordinate in all
respects to (i) that certain Deed to Secure Debt, Security Agreement and
Assignment of Leases and Rents of even date herewith from the Venture to DIHC
Finance Corporation ("DIHC Finance") securing, among
<PAGE>
28
other things, the repayment of that certain "A" Note (the ""A" Note") of even
date herewith from the Venture payable to the order of DIHC Finance in the
amount of $145,000,000.00, together with any and all extensions, modifications,
amendments or replacements thereof hereafter made or entered into (the ""A"
Mortgage"), (ii) that certain Deed to Secure Debt, Security Agreement and
Assignment of Leases and Rents of even date herewith from the Venture to DIHC
Finance securing, among other things, the repayment of that certain "B"
Construction Note (the ""B" Note") of even date herewith from the Venture
payable to the order of DIHC Finance in the amount of $145,000,00.00 together
with any and all extensions, modifications, amendments or replacements thereof
hereafter made or entered into (the ""B" Mortgage") (the "A" Mortgage and the
"B" Mortgage are sometimes herein referred to collectively as the "Original
Mortgages"), (iii) any other mortgage or deed to secure debt upon the Premises
or any portion thereof now or hereafter executed by the Venture, together with
any and all extensions, modifications, amendments or replacements thereof, and
(iv) any collateral assignment of rents due under the leases of space in any
improvements on the Premises. This provision shall be self-executing but Manager
shall, upon request, execute such instruments as may reasonably be requested by
the Venture, or any such mortgagee or lender to evidence such subordination.
Section 5.12 Exculpation. Notwithstanding anything in this Agreement
to the contrary, Manager and the Venture accept and agree that each of the
covenants, undertakings and agreements herein made on the part of Manager or the
Venture, while in the form purporting to be covenants, undertakings and
agreements of Manager or the Venture, are,
<PAGE>
29
nevertheless, made and intended not as personal covenants, undertakings and
agreements by Manager's or the Venture's partners (direct or indirect) or for
the purpose of binding their respective partners personally or the assets of
their respective partners but are made and intended for the purpose of binding
only the interests of the partners in Manager or the Venture in the assets of
the Venture and as to Manager, the fees payable to it hereunder, and that no
other personal liability or personal responsibility is assumed by, nor shall at
any time be asserted or enforceable against the partners of Manager or the
Venture (direct or indirect) and their respective heirs, legal representatives,
successors and assigns on account of this Agreement or on account of any
covenant, undertaking or agreement of Manager or the Venture and their
respective partners in this document contained, all such personal liability and
personal responsibility, if any, being expressly waived and released by the
parties and the parties further agree not to seek or enforce any judgments
(including but not limited to specific performance, deficiency judgments, and
any and all other judgments) obtained against Manager or the Venture or against
the partners in Manager or the Venture beyond the interests set forth above.
The parties further acknowledge and agree that no officer, director,
stockholder or agent of any corporate Venturer or corporate partner (direct or
indirect) of Manager or any Venturer shall have any personal liability for any
Venturer's obligations hereunder.
Section 5.13 Indemnity. (a) The Venture shall indemnify the Manager
and save it harmless from and against all third party claims, losses and
liabilities arising out of or in connection with the performance by Manager of
its duties and obligations hereunder, and all
<PAGE>
30
costs, fees and reasonable attorneys' fees in connection therewith unless such
claims, losses or liability result from Manager's fraud, gross negligence or
willful misconduct.
(b) Manager shall defend, indemnify and hold the Venture (and the
Venture's partners) harmless from and against any and all third party claims,
demands, losses, damages or liabilities (including, but not limited to, all
costs and reasonable attorneys' fees in connection therewith) incurred by the
Venture or its partners by reason of the fraud, gross negligence or willful
misconduct of Manager hereunder.
Section 5.14 Waivers. No delay or omission by either party in
exercising any right or power accruing upon the noncompliance or failure or
performance by the other party hereto of any provisions of this Agreement shall
impair any such right or power or be construed to be a waiver thereof. A waiver
by either party of any of the covenants, conditions or agreements hereof to be
performed by the other must be in writing and signed by the party who is waiving
such covenants, conditions or agreements.
Section 5.15 Other Activities. Notwithstanding any other provisions
of this Agreement to the contrary, Manager may engage in or possess an interest
in other business ventures of every nature and description and in any vicinity
whatsoever, including without limitation the ownership, operation, management
and development of real property, and the Venture shall have no rights in or to
such independent ventures or to any profits therefrom. Any of such activities
may be undertaken with or without notice to or participation therein by the
Venture, and the Venture hereby waives any right or claim that it may have
against the Manager with respect to the income or profits therefrom or the
effect of such activity on the
<PAGE>
31
Premises; provided, however, that Manager shall act as a reasonably prudent
manager in not allowing the foregoing activities to unreasonably interfere with
its obligations under this Agreement. Furthermore, nothing contained herein
shall be deemed to require the personal services of Gerald D. Hines or Thomas
Cousins, individually.
In performance of any of its obligations and duties hereunder,
manager shall take such action as it considers appropriate in its good faith
business judgment and actions taken by Manager in its good faith business
judgment shall satisfy the obligation of Manager under this Section.
Section 5.16 Representatives. Manager may act through one or more
representatives it may appoint to oversee and make decisions for Manager. Upon
notice, Manager may at any time and for any reason substitute one or more
persons as its authorized representatives. If a particular representative shall
die, retire, withdraw for any reason or become disabled, Manager shall designate
a replacement representative within the following ten business days. The Manager
initially designates as its authorized representatives Charles L. Davidson and
Vipin L. Patel.
Section 5.17 Employees. Manager has no employees and intends to have
no employees. Accordingly, the Venture agrees that Manager shall perform its
duties hereunder by delegating the same to the partners of Manager and/or their
affiliates.
ARTICLE VI
ARBITRATION
<PAGE>
32
Section 6.1 Selection of Arbitrators. Whenever in this Agreement it
is provided that a dispute shall be determined by arbitration, the arbitration
shall be conducted as provided in this Article. The party desiring such
arbitration shall give written notice to that effect to the other, specifying
the dispute to be arbitrated and the name and address of the person designated
to act as the arbitrator in its behalf. Within ten (10) days after said notice
is given, the other party shall give written notice to the first party,
specifying the name and address of the person designated to act as arbitrator on
its behalf. If the second party fails to notify the first party of the
appointment of its arbitrator as aforesaid by the time above specified, then the
first arbitrator shall determine the dispute. The arbitrators so chosen shall,
within ten (10) days after the second arbitrator is appointed, appoint a third
arbitrator and if they cannot agree upon said appointment, the third arbitrator
shall be appointed by the presiding judge of the Fulton County Superior Court,
or his designee. The three arbitrators shall meet and decide the dispute and
tender a written decision to the parties within 30 days after the appointment of
the third arbitrator. A decision in which two of the three arbitrators concur
shall be binding and conclusive upon the parties and shall not be subject to
appeal, and judgment thereon may be entered in any court having jurisdiction
thereof.
Section 6.2 Rules; Fees and Expenses; Qualifications of Arbitrators.
In designating arbitrators and in deciding the dispute, the arbitrators shall
act in accordance with the commercial arbitration rules then in force of the
American Arbitration Association (or any successor thereto), subject, however,
to such limitations or directions as may be placed upon them by the provisions
of this Agreement. Each party shall pay the fees and expenses of its
<PAGE>
33
respective attorney and arbitrator and both shall share equally the fee and
expenses of the third arbitrator, if any, as well as any fees payable to the
American Arbitration Association or its successor. No arbitrator shall be a
person who is or has been at any time a partner, officer, director or employee
of either party or any Affiliated Entity thereof (as defined in the Venture
Agreement), and each such arbitrator shall have had at least seven (7) years
experience in the management of office buildings in the City of Atlanta,
Georgia. The arbitrators shall consider all testimony and documentary evidence
which may be presented at any hearing as well as relevant facts and data which
they may discover by investigation and inquiry outside of such hearings. Each
party shall have the right to be represented by counsel and to cross examine
witnesses.
Section 6.3 Applicability of Article. The obligation of the parties
to submit a dispute to arbitration is limited to disputes arising under those
provisions of this Agreement which specifically provide for arbitration.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
under seal as of the date first above written.
<PAGE>
34
THE VENTURE: ONE NINETY ONE PEACHTREE ASSOCIATES,
a Georgia general partnership, by its two general
partners
By: C-H Associates, Ltd., a
Georgia limited partnership,
by its two general partners
By: Hines Peachtree Associates I
Limited Partnership,
a Georgia limited partnership,
by its two general partners
By: /s/ Gerald D. Hines (SEAL)
---------------------------
Gerald D. Hines
By: Hines Atlanta Corporation,
a Georgia corporation
By: /s/ Gerald D. Hines
-------------------
Gerald D. Hines,
President
Attest: /s/ David McGinnis
------------------
David McGinnis,
Assistant Secretary
[CORPORATE SEAL]
By: Cousins Real Estate Corporation,
a Georgia corporation
By: /s/ Vipin L. Patel
------------------
Vipin L. Patel,
Executive Vice President
<PAGE>
35
Attest: /s/ Robert P. Hunter
--------------------
Robert P. Hunter, Jr.,
Secretary
[CORPORATE SEAL]
By: DIHC Peachtree Associates,
a Georgia general partnership, by
its two general partners
By: DIHC Peachtree, Inc., a
Georgia corporation
By: /s/ Herman A. Vonhof
--------------------
Herman A. Vonhof,
President
Attest: /s/ Charles W. Strawser
-----------------------
Charles W. Strawser, Jr.,
Vice President
[CORPORATE SEAL]
By: DIHC Atlanta, Inc., a
Georgia corporation
By: /s/ Herman A. Vonhof
--------------------
Herman A. Vonhof,
President
Attest: /s/ Charles W. Strauser
-----------------------
Charles W. Strawser, Jr.,
Vice President
[CORPORATE SEAL]
<PAGE>
36
MANAGER: C-H MANAGEMENT ASSOCIATES, a Georgia
general partnership, by its two general partners
By: Cousins Real Estate Corporation,
a Georgia corporation
By: /s/ Vipin L. Patel
------------------
Vipin L. Patel,
Executive Vice President
Attest: /s/ Robet P. Hunter
-------------------
Robert P. Hunter, Jr.,
Secretary
[CORPORATE SEAL]
By: /s/ Gerald D. Hines (SEAL)
-------------------
Gerald D. Hines, d/b/a
Gerald D. Hines Interests
<PAGE>
Exhibit 10.114
- --------------------------------------------------------------------------------
LEASING AGREEMENT
By and Between
ONE NINETY ONE PEACHTREE ASSOCIATES
and
C-H LEASING ASSOCIATES
dated
as of
February 1, 1988
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I ESTABLISHMENT OF LEASING RESPONSIBILITY....................... 2
Section 1.1 Appointment of Leasing Agent.............................. 2
ARTICLE II LEASING SERVICES TO BE PERFORMED BY LEASING AGENT............. .2
Section 2.1 Locate Tenants............................................ 2
Section 2.2 Consulting................................................ 2
Section 2.3 Executing Leases.......................................... 3
Section 2.4 Advertising............................................... 5
Section 2.5 Reports................................................... 5
Section 2.6 Cooperation............................................... 6
ARTICLE III TERM.......................................................... 6
Section 3.1 Term...................................................... 6
Section 3.2 Early Termination......................................... 7
Section 3.3 Payments on Termination................................... 9
ARTICLE IV COMPENSATION.................................................. 11
Section 4.1 Leasing Fee............................................... 11
Section 4.2 Payment of Leasing Commissions............................ 11
Section 4.3 Definition of "Effective Gross Rental".................... 12
ARTICLE V MISCELLANEOUS................................................. 14
Section 5.1 Expenses of Leasing Agent................................. 14
Section 5.2 Notices................................................... 15
Section 5.3 Entire Agreement.......................................... 16
Section 5.4 Governing Law............................................. 16
Section 5.5 Severability.............................................. 16
Section 5.6 Binding Effect............................................ 16
Section 5.7 Assignment by Leasing Agent............................... 16
Section 5.8 Subordination............................................. 17
Section 5.9 Exculpation............................................... 18
Section 5.10 Indemnity................................................. 19
Section 5.11 Waivers................................................... 19
Section 5.12 Representatives........................................... 20
Section 5.13 Other Activities.......................................... 20
<PAGE>
TABLE OF CONTENTS (cont.)
Section 5.14 Employees................................................. 20
ARTICLE VI ARBITRATION................................................... 21
Section 6.1 Appointment of Arbitrators................................ 21
Section 6.2 Rules; Fees and Expenses; Qualifications of Arbitrators... 21
Section 6.3 Applicability of Article.................................. 22
<PAGE>
LEASING AGREEMENT
THIS AGREEMENT made and entered into as of the 1st day of February,
1988, by and among ONE NINETY ONE PEACHTREE ASSOCIATES (the "Venture"), a
Georgia general partnership consisting of C-H Associates, Ltd., a Georgia
limited partnership ("CHV") and DIHC Peachtree Associates, a Georgia general
partnership ("DIHC") (CHV and DIHC being sometimes referred to separately as a
"Venturer" and collectively as the "Venturers"), and C-H LEASING ASSOCIATES, a
Georgia general partnership (the "Leasing Agent"), consisting of Cousins Real
Estate Corporation, a Georgia corporation and Hines Atlanta Realty, Inc., a
Georgia corporation.
W I T N E S S E T H :
WHEREAS, the Venture proposes to acquire fee simple or leasehold
title to certain parcels of real property (and improvements situated thereon) on
Peachtree Street in Atlanta, Georgia (the "Property"), and to construct thereon
a multi story building containing approximately 1,181,700 square feet of office
and retail/commercial space together with a related parking garage (the
"Building"; the Property and the Building being herein sometimes collectively
referred to as the "Premises"); and
WHEREAS, the parties acknowledge that Leasing Agent is affiliated
with CHV; and
WHEREAS, the Venture has agreed to appoint Leasing Agent as the sole
and exclusive leasing agent for the Building and Leasing Agent has agreed to
serve as such, all subject to the terms and conditions hereinafter set forth.
-1-
<PAGE>
NOW, THEREFORE, Leasing Agent and the Venture hereby agree as
follows:
-2-
<PAGE>
ARTICLE I
ESTABLISHMENT OF LEASING RESPONSIBILITY
Section 1.1 Appointment of Leasing Agent. The Venture hereby
appoints Leasing Agent, and Leasing Agent hereby accepts appointment, as sole
and exclusive leasing agent of the Premises (for the respective periods provided
herein) with the responsibilities and upon the terms and conditions set forth
herein. In order to facilitate Leasing Agent's responsibilities to lease space
in the Building, the Venture shall provide Leasing Agent with a prototype lease,
rental schedule and program and fit up cost schedule. The Venture shall have the
right at any time and from time to time to modify or substitute such lease form
and schedules.
ARTICLE II
LEASING SERVICES TO BE PERFORMED BY LEASING AGENT Section
2.1 Locate Tenants. Commencing on the date hereof, Leasing Agent
shall use its best efforts to locate suitable tenants and negotiate acceptable
leases for the Building, subject to the limitations hereinafter set forth.
Leasing Agent's duties as to its leasing services shall be those customarily
performed by leasing agents for comparable buildings. All leases shall be
subject to the approval of and shall be executed by the Venture, and all
prospective tenants shall be subject to the prior approval of the Venture.
Leasing Agent shall not, for any reason, have the authority to commit to or
otherwise bind the Venture with respect to any lease proposals or to execute
leases on behalf of the Venture.
Section 2.2 Consulting. Leasing Agent shall, upon reasonable
request(s) by the Venture, act as a consultant to the Venture and/or the Manager
appointed pursuant to that
-3-
<PAGE>
certain Construction Management and Development Agreement of even date between
the Venture and C-H Management Associates (the "Construction Manager"), and
shall provide the Venture, as and when deemed reasonably necessary by the
Venture, with the benefit of Leasing Agent's experience as to the planning and
leasing of the tenant space to be leased. Leasing Agent shall, once per year,
subject to amendment as necessary in light of market conditions, as to the
tenant space, prepare for the Venture's approval, (i) a detailed marketing and
leasing plan which shall specify the range of suggested minimum acceptable
rentals for individual spaces, the anticipated concessions for major and minor
tenants, the recommended minimum and maximum acceptable terms (including renewal
options) for individual spaces and estimated "tenant fit-up" costs per square
foot, and (ii) a detailed public relations plan which shall specify the
suggested advertising and public relations activities and actions which the
Venture should undertake. The plans specified in clauses (i) and (ii) above
shall be in sufficient detail to enable the Managing Partner in the Venture to
comply with its obligations to provide the Venturers with the marketing and
leasing plan and the public relations plan specified in the Joint Venture
Agreement of the Venture.
Section 2.3 Executing Leases. In connection with all marketing and
lease negotiation activities, the Leasing Agent shall adhere to the following
procedures:
(i) Upon identification of a lease prospect, the Leasing Agent shall
submit to the prospect a proposal conforming to the guidelines and parameters of
the approved marketing and leasing plan;
(ii) The Leasing Agent shall follow-up with the prospect as
necessary or appropriate and shall negotiate the terms and conditions of the
proposal with the prospect. Any
-4-
<PAGE>
modifications or amendments to the proposal as are warranted from time to time
shall be prepared by the Leasing Agent and shall be submitted to the prospect;
(iii) The Leasing Agent shall confer with the managing general
partner of the Venture to the extent the negotiations described in subparagraph
2.3(ii) warrant, and shall disclose to and discuss with the managing general
partner of the Venture any such negotiations which the Leasing Agent reasonably
expects to result in a modification to the proposal such that the proposal would
no longer conform to the approved marketing and leasing plan;
(iv) Upon substantial completion of the negotiations described in
the preceding provisions of this Section 2.3, the Leasing Agent will submit to
the prospect a proposed lease document on the lease form approved by the
Venture, modified only as necessary to conform with the proposal as of the date
the lease was prepared. A copy of the proposed lease shall be delivered to the
Venture simultaneously with the delivery to the prospect;
(v) After submission of the lease to the prospect, the Leasing Agent
shall follow up with the prospect as necessary or appropriate and shall
negotiate the terms and conditions of the proposed lease with the prospect.
(vi) The Leasing Agent shall confer with the managing general
partner of Venture to the extent the negotiations described in subparagraph
2.3(b) warrant, and shall disclose to and discuss with the managing general
partner of Venture any such negotiations which the Leasing Agent reasonably
expects to result in a modification to the proposed lease such that the proposed
lease would no longer conform to the approved marketing and leasing plan;
-5-
<PAGE>
(vii) Upon conclusion of the negotiations described in the foregoing
paragraphs, if the Leasing Agent has reached an agreement with the prospect,
subject only to the approval by the Venture, the Leasing Agent shall obtain a
duly executed lease from the prospect and shall promptly submit the same to the
Venture for its review and approval. In no event shall the Leasing Agent commit
to or execute any lease on behalf of the Venture. The Venture shall respond (by
acceptance, rejection, counteroffer or other appropriate action) to all proposed
leases, proposed commitments or other communications submitted by Leasing Agent
regarding the leasing of the tenant space within fifteen (15) business days
after receipt by both the Venturer and any lenders having approval rights with
respect thereto. Approval or disapproval of any and all terms and conditions of
any lease (including any work letters or other documents) shall be within the
sole discretion of the Venture. A failure to notify the Leasing Agent of
disapproval within fifteen (15) days after receipt by the Venture of all
information requested by the Venture shall be deemed approval.
Section 2.4 Advertising. Leasing Agent, when requested by the
Venture, shall be responsible for the promotion and advertising of available
tenant space in the Building subject to and in accordance with the public
relations plan referred to in Section 2.2 as approved by the Venture. All
promotional and advertising costs incurred in accordance with such public
relations plan shall be paid by the Venture.
Section 2.5 Reports. At reasonable times and in any event not less
than once each thirty (30) day period, and at such other times as the Venture
may reasonably request, Leasing Agent shall inform the Venture in writing as to
the progress of leasing operations and as to circumstances which might from time
to time require decisions by the Venture regarding such
-6-
<PAGE>
leasing operations. Each of Leasing Agent's periodic reports shall include but
not necessarily be limited to, the identity of each prospect to whom space in
the Building was offered by Leasing Agent during the period covered by such
report, the date of each such offering, and if reasonably requested by the
Venture, a copy of any written submission made to any prospect identified in the
report, the status of negotiations of proposals or leases submitted to prospects
by Leasing Agent and such additional data as shall be reasonably required by the
Venture.
Section 2.6 Cooperation. Should any claims, demands, suits or other
legal proceedings be made or instituted by any third party against the Venture
or any Venturer (as a partner in the Venture) which arise out of any matter
relating to the Premises or this Agreement or the Leasing Agent's performance
hereunder, the Leasing Agent shall give the Venture all pertinent information
and reasonable assistance in the defense or disposition thereof. The obligation
of Leasing Agent set forth herein shall survive the termination of this
Agreement.
ARTICLE III
TERM
Section 3.1 Term. The term of this Agreement shall commence on the
date hereof and shall expire on the earlier to occur of (i) the winding up of
the Venture in accordance with the Venture Agreement (ii) the sale of the
Premises (or all of the percentage interests in the Venture) to a third party or
(iii) the fifteenth (15th) anniversary of the date of this Agreement, unless
this Agreement is sooner terminated pursuant to Section 3.2 hereof or otherwise.
Upon the expiration or earlier termination of this Agreement, Leasing Agent
shall: (1) surrender and deliver to the Venture all deposits, rents and income
of the Premises in the possession of Leasing Agent; (2) deliver to the Venture
as received any monies collected or received by
-7-
<PAGE>
Leasing Agent in connection with the Premises after termination hereof; (3)
deliver to the Venture all books, records, materials, supplies, keys, contracts
and other documents and statements in its possession relating to the Premises
and the leasing thereof; and (4) generally cooperate with the Venture in
accordance with Section 2.7.
Section 3.2 Early Termination. (i) During the term of this
Agreement, this Agreement shall automatically be terminated for cause, as
"cause" is hereafter defined, upon five (5) days' written notice to Leasing
Agent. "Cause" for termination by the Venture shall mean the continuance, for
more than thirty (30) days (or, if such curable event cannot be cured in such
period of time, then such additional period of time as is reasonably necessary
to cure same, provided Leasing Agent commences such cure within such thirty (30)
day period and thereafter diligently prosecutes to completion such cure) after
delivery of written notice by the Venture to Leasing Agent of one or more of the
following events, specifying in reasonable detail the nature of the default:
(a) Leasing Agent shall fail to perform or observe any
material covenant, condition or term in this Agreement;
(b) Leasing Agent shall engage in conduct under this Agreement
which constitutes fraud or breach of trust;
(c) Leasing Agent shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall commence a case under the bankruptcy
code, or shall file a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition or similar relief under the federal
bankruptcy laws, or any other similar applicable federal or state law, or shall
consent to or fail reasonably to oppose any such proceeding, or shall consent to
the
-8-
<PAGE>
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of a substantial part of its property, or shall make a
general assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or corporate action
shall be taken by Leasing Agent in furtherance of any of the aforesaid purposes;
or
(d) A decree or order by a court of competent jurisdiction
shall have been entered adjudging Leasing Agent bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, readjustment,
arrangement, composition or similar relief for Leasing Agent under the federal
bankruptcy laws, or any other similar applicable federal or state law, and such
decree or order shall have continued undischarged or unstayed for a period of
sixty (60) days; or a decree or order of a court having jurisdiction for the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of Leasing Agent or a substantial part of its property, or the
winding up or liquidation of its affairs, shall have been entered, and such
decree or order shall have remained in force, undischarged and unstayed for a
period of sixty (60) days. In the event of any dispute between DIHC and CHV or
between DIHC and Leasing Agent as to whether or not the Venture has "cause" to
terminate this Agreement pursuant to the provisions of this Section 3.2, such
dispute shall be determined by arbitration pursuant to Article VI hereof.
(ii) In addition to any and all other termination rights contained
herein, either Leasing Agent or the Venture may elect to terminate this
Agreement (i) upon five (5) days written notice to the other party, if all or
substantially all of the Building is destroyed or condemned and the same is not
rebuilt, or (ii) upon twelve months notice to the other if CHV
-9-
<PAGE>
(or its "Affiliate" as defined in that certain Joint Venture Agreement of the
Venture, dated of even date herewith (the "Venture Agreement")) shall no longer
be a Venturer in the Venture or if neither a "Hines Affiliate" nor a "Cousins
Affiliate" (as such terms are defined in the Venture Agreement) owns any
interest in CHV (or such Affiliate of CHV who is then a Venturer).
Section 3.3 Payments on Termination. In the event this agreement
expires pursuant to Section 3.1 or is terminated under Section 3.2 hereof,
Leasing Agent shall thereafter continue to be entitled to certain compensation,
but only in those instances as follows:
(i) With respect to any lease entered into prior to the earlier of:
(a) the date Leasing Agent actually ceases the performance of services
hereunder, or (b) the effective date of any termination hereof, Leasing Agent
shall be entitled to the Leasing Fee (as hereinafter defined).
(ii) With respect to any lease entered into with a prospect
previously dealt with by Leasing Agent and within one year after the effective
date of the termination hereof, Leasing Agent shall be entitled to the Leasing
Fee (as hereinafter defined) but only if, prior to such effective termination,
the Leasing Agent (a) either had significant dealings with or submitted a bona
fide proposal to the lessee under such lease and (b) the lessee had been
specifically identified as a bona fide lease prospect in a monthly report
provided to the Venture or in a report provided upon such termination.
(iii) With respect to any lease entered into with a prospect
previously dealt with by Leasing Agent and within two years after the effective
date of the termination hereof, Leasing Agent shall be entitled to the Leasing
Fee (as hereinafter defined), but only if the lessee under the lease and the
Venture had, prior to such effective termination, entered into a letter of
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<PAGE>
intent or other written agreement or commitment (even though not legally binding
on the lessee) by which the lessee stated an agreement, commitment, or intent to
enter into a lease.
(iv) In the event of any renewal or expansion of a lease for which
Leasing Agent has received a Leasing Fee applicable to the initial term thereof,
Leasing Agent shall continue to be entitled to the Leasing Fee (as hereinafter
defined), attributable thereto, except that:
(a) If the Leasing Agent was paid its Leasing Fee (as
hereinafter defined) for the initial term of said lease pursuant to the
provisions of paragraph 2, 3(b), or 4(b) of Schedule A, Leasing Agent shall not
be entitled to receive a Leasing Fee (as hereinafter defined) in connection with
a renewal or expansion of the lease from and after the earlier to occur of (i)
the payment of a comparable fee to a new, unaffiliated third-party broker in
connection with such renewal or expansion, or (ii) the fifteenth anniversary of
the commencement date of said lease; provided, however, if the payment made to
the unaffiliated third-party broker, as described in the preceding clause (i) is
less than the amount which would have otherwise been paid to Leasing Agent, then
the difference shall be paid to Leasing Agent.
(b) If the Leasing Agent was paid its Leasing Fee (as
hereinafter defined) for the initial term of said lease pursuant to the
provisions of Paragraph 3(a) or 4(a) or Schedule A, and if the tenant recognizes
a new unaffiliated third party broker in connection with such renewal or
expansion, such new broker shall be recognized by the Venture and the Leasing
Agent's Leasing Fee (as hereinafter defined) shall be calculated under Paragraph
3(b) or 4(b) of Schedule A attached hereto, as the case may be; provided,
however, if the amount paid to such new broker is less than the amount which
would have otherwise been paid to Leasing Agent,
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then the difference shall be paid to Leasing Agent. For the purposes of this
Section 3.3, "lessee" includes any entity that is the business organization
through which the individuals with whom the Leasing Agent dealt operate the
business for which the leased space was intended by such individuals to be used.
ARTICLE IV
COMPENSATION
Section 4.1 Leasing Fee. Commencing on the date hereof and
continuing until the date this Agreement expires or is terminated as provided
herein, the Venture shall be obligated to pay Leasing Agent (or such affiliate
of Leasing Agent as Leasing Agent may direct) a leasing commission (the "Leasing
Fee") with respect to each tenant lease entered into by the Venture during such
period for space in the Premises in accordance with Schedule A attached hereto
and made a part hereof.
Section 4.2 Payment of Leasing Commissions. All leasing commissions
payable to Leasing Agent (or to persons or entities designated by Leasing Agent)
shall be paid in cash, one-half (50%) when the lease is fully executed (or with
respect to a renewal or expansion option, when the tenant formally exercises
such option) and one-half (50%) when the lease term commences for the specific
space which is covered by the lease (or with respect to a renewal or expansion
option, when the renewal term commences or the lease commences with respect to
the expansion space). In the event the tenant is in default under its lease so
that it never pays any scheduled rent and never occupies its space under its
lease for the space covered by such lease (or by such expansion as the case may
be) (except in the case of the Tenant's failure to pay based solely on a default
by the Venture under the lease), and if the Venture terminates such
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lease or such tenant's right to possession of its space as a result of such
default, Leasing Agent (or its designee) shall refund any previously paid
Leasing Fee relating to such lease in default to the Venture and shall use its
best efforts to cause any third-party broker to refund its commission relating
to such lease in default to the Venture. Leasing Agent shall use best efforts to
include a requirement for such refund in all brokerage agreements with its
affiliates and third parties. In no event shall Leasing Agent or its affiliates
be required to personally refund to the Venture an amount equal to any
commission paid to a third-party broker.
Section 4.3 Definition of "Effective Gross Rental". As used herein
the term "Effective Gross Rental" shall be equal to the gross rental specified
in the lease less (i) increases in any expense stop or base year operating
expenses, (ii) the value of any concessions, rental abatements, lease
assumptions or other inducements (whether set forth in the lease or in any side
letter or collateral agreement to the lease) granted to the tenant in connection
with the lease, (iii) the cost of standard leasehold improvements to be paid by
the landlord in excess of: (a) Fifteen Dollars ($15.00) per square foot of
usable area if the space is to be delivered to the tenant in shell condition
without a finished ceiling or (b) Ten Dollars ($10.00) per square foot of usable
area if a finished ceiling will be provided by landlord, in each case escalated
from February 28, 1993 through the date of lease execution by the Consumer Price
Index-All Urban Consumers-U.S. Average, or such comparable index as mutually
agreed to by the parties, (iv) miscellaneous leasehold improvement or relocation
expenses (or the financing thereof) provided by the landlord and reimbursed by
tenant by way of additional rental or other amortization, (v) late payment
charges, (vi) percentage rentals (on retail leases) over and above base rental,
(vii) payments for parking on a month-to-month basis (other than as the tenant
has contractually
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agreed to pay in its lease), and (vii) rentals credited to the tenant by reason
of lease takeover(s) and/or the landlord takeback(s) or subleasing(s). If the
tenant rental in the lease is stipulated as net rental plus an expense stop or
estimated expense pass through (rather than being stipulated as gross rental),
an amount equal to the greater of (a) $7.50 per square foot of net leasable area
per year or (b) the expense stop or pass through actually stipulated in the
lease will be added to the stipulated base rental rate for purposes of
calculating Effective Gross Rental. In the case of a bona fide "net lease," the
expense stop or pass through shall be imputed as the estimate thereof for the
first year of the Lease. The term "net lease" means a lease with respect to
which the tenant pays all operating expenses incurred in connection with the
operation and ownership of the leased premises including, without limitation,
real estate taxes, utilities and insurance.
ARTICLE V
MISCELLANEOUS
Section 5.1 Expenses of Leasing Agent. The Venture shall build and
furnish a leasing and marketing center at a location or locations, and in
accordance with a leasing and marketing plan approved by the Venture, as more
particularly described in the Joint Venture Agreement of the Venture. To the
extent incurred, the Venture shall reimburse Leasing Agent for all reasonable
direct expenses of Leasing Agent in maintaining and operating such marketing
center in connection with such leasing and marketing plan. Such leasing and
marketing plan will provide for, and such reimbursement shall include, among
other things, employment costs of one full-time secretary and one full-time
marketing assistant, all reasonable entertainment and travel expenses (both
within and outside of Atlanta) stationery, supplies, and telephone costs, and
the employment costs of all other personnel of Leasing Agent except the primary
broker
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from each partner of the Leasing Agent (who, as of the date hereof, are Keene
Reese and Fred H. Henritze) all to the extent reasonably approved by the Venture
and contemplated in the applicable project budget or annual budget approved by
the Venture and in effect from time to time. Such on-site marketing center shall
be maintained through the earlier of Project Completion (as defined in the Joint
Venture Agreement) or January 1, 1995, unless the Venture shall decide in its
reasonable discretion upon an earlier closing or curtailment of the operation of
the marketing center is appropriate. Thereafter, the Venture shall arrange for
minor secretarial assistance, supplies and telephone services to be made
available to Leasing Agent from the project management office to be maintained
in the Premises.
Section 5.2 Notices. All notices, demands, requests or other similar
communications required or permitted hereunder must be in writing, and shall be
deemed delivered and received when personally delivered (which may include
delivery by commercial courier service) or upon deposit in the United States
mail, certified or registered mail, return receipt requested, postage prepaid,
and addressed to the respective parties at the addresses specified below, or at
such other address as they shall each specify in a notice addressed and mailed
as hereinabove set forth:
To the Venture: C-H Leasing Associates
c/o Gerald D. Hines Interests
Two Ravinia Drive
Suite 1100
Atlanta, Georgia 30346
Attn: C. L. Davidson, III
DIHC Peachtree Associates
200 Galleria Parkway
Suite 2800
Atlanta, Georgia 30339
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<PAGE>
Attn: Charles W. Strawser, Jr.
With a copy to: Cousins Real Estate Corporation
2500 Windy Ridge Parkway
Suite 1600
Marietta, Georgia 30067
Attn: Robert P. Hunter, Jr.
To Leasing Agent: C-H Leasing Associates
c/o Gerald D. Hines Interests
Two Ravinia Drive
Suite 1100
Atlanta, Georgia 30346
Attn: C. L. Davidson, III
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With a copy to: Cousins Real Estate Corporation
2500 Windy Ridge Parkway
Suite 1600
Marietta, Georgia 30067
Attn: Robert P. Hunter, Jr.
Section 5.3 Entire Agreement. This Agreement constitutes the entire
agreement between the Venture and Leasing Agent relating in any manner to the
subject matter of this Agreement. No prior agreement or understanding pertaining
to the same shall be valid or of any force or effect, and the covenants and
agreements herein cannot be altered, changed or supplemented except in writing
signed by the Venture and Leasing Agent.
Section 5.4 Governing Law. This Agreement shall be construed in
accordance with and governed by, the laws of the State of Georgia.
Section 5.5 Severability. If any clause or provision of this
Agreement is illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then the remainder of this Agreement shall not
be affected thereby, and in lieu of each clause or provision of this Agreement
which is illegal, invalid or unenforceable, there shall be added, as part of
this Agreement, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and as may be
legal, valid and enforceable.
Section 5.6 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns.
Section 5.7 Assignment by Leasing Agent. The rights and obligations
of Leasing Agent hereunder shall not be assignable without the prior written
consent of the Venture except that the rights and obligations of Leasing Agent
may be assigned by Leasing Agent to a
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"Hines Affiliate", a "Cousins Affiliate" or an "Affiliate" of CHV (as such terms
are defined in the Venture Agreement).
Section 5.8 Subordination. This Agreement and all fees due from the
Venture to Leasing Agent pursuant hereto shall be subject and subordinate in all
respects to (i) that certain Deed to Secure Debt, Security Agreement and
Assignment of Leases and Rents of even date herewith from the Venture to DIHC
Finance Corporation ("DIHC Finance") securing, among other things, the repayment
of that certain "A" Note (the ""A" Note") of even date herewith from the Venture
payable to the order of DIHC Finance in the amount of $145,000,000.00, together
with any and all extensions, modifications, amendments or replacements thereof
hereafter made or entered into (the ""A" Mortgage"), (ii) that certain Deed to
Secure Debt, Security Agreement and Assignment of Leases and Rents of even date
herewith from the Venture to DIHC Finance securing, among other things, the
repayment of that certain "B" Construction Note (the ""B" Note") of even date
herewith from the Venture payable to the order of DIHC Finance in the amount of
$145,000,000 together with any and all extensions, modifications, amendments or
replacements thereof hereafter made or entered into (the ""B" Mortgage") (the
"A" Mortgage and the "B" Mortgage are sometimes herein referred to collectively
as the "Original Mortgages"), (iii) any other mortgage or deed to secure debt
upon the Premises or any portion thereof now or hereafter executed by the
Venture, together with any and all extensions, modifications, amendments or
replacements thereof, and (iv) any collateral assignment of rents due under the
leases of space in any improvements on the Premises. This provision shall be
self-executing but Leasing Agent shall, upon request, execute such
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instruments as may reasonably be requested by the Venture, or any such mortgagee
or lender to evidence such subordination.
Section 5.9 Exculpation. Notwithstanding anything in this Agreement
to the contrary, Leasing Agent and the Venture accept and agree that each of the
covenants, undertakings and agreements herein made on the part of the Venture or
the Leasing Agent, while in the form purporting to be covenants, undertakings
and agreements of the Venture or the Leasing Agent, are, nevertheless, made and
intended not as personal covenants, undertakings and agreements by the Leasing
Agent's or Venture's partners or for the purpose of binding their respective
partners personally or the assets of such partners but are made and intended for
the purpose of binding only the interests of the partners of the Venture in the
assets of the Venture and, as to Leasing Agent, the compensation payable to it
under Article IV hereof; and that no other personal liability or personal
responsibility is assumed by, nor shall at any time be asserted or enforceable
against the partners of the Venture or the Leasing Agent and their respective
heirs, legal representatives, successors and assigns on account of this
Agreement or on account of any covenant, undertaking or agreement of the Leasing
Agent or the Venture and their respective partners in this document contained,
all such personal liability and personal responsibility, if any, being expressly
waived and released, and each party hereto further agrees not to seek or enforce
any judgments (including but not limited to specific performance, deficiency
judgments, and any and all other judgments) obtained against the Leasing Agent
or the Venture, or against their respective partners (direct or indirect) beyond
the interests set forth above.
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<PAGE>
The parties further acknowledge and agree that no officer, director,
stockholder or agent of any corporate Venturer or corporate partner (direct or
indirect) of the Leasing Agent or any Venturer shall have any personal liability
for Leasing Agent's or any Venturer's obligations hereunder.
Section 5.10 Indemnity. (a) The Venture shall indemnify the Leasing
Agent and save it harmless from and against all third party claims, losses and
liabilities arising out of or in connection with the performance by Leasing
Agent of its duties and obligations hereunder and all costs, fees and reasonable
attorneys' expenses in connection therewith unless such claims, losses or
liability result from Leasing Agent's fraud, gross negligence or willful
misconduct.
(b) Leasing Agent shall defend, indemnify and hold the Venture (and
the Venture's partners) harmless from and against any and all third party
claims, demands, losses, damages or liabilities (including, but not limited to,
all costs and reasonable attorneys' fees in connection therewith) incurred by
the Venture or its partners arising out of or by reason of the fraud, gross
negligence or willful misconduct of Leasing Agent hereunder.
Section 5.11 Waivers. No delay or omission by either party in
exercising any right or power accruing upon the non-compliance or failure or
performance by the other party hereto of any provisions of this Agreement shall
impair any such right or power or be construed to be a waiver thereof. A waiver
by either party of any of the covenants, conditions or agreements hereof to be
performed by the other must be in writing and signed by the party who is waiving
such covenants, conditions or agreements.
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Section 5.12 Representatives. Leasing Agent may act through any one
of its representatives it appoints to oversee and make decisions for Leasing
Agent. Upon notice, Leasing Agent may at any time and for any reason substitute
one or more authorized representatives. If a particular representative shall
die, retire, withdraw for any reason or become disabled, Leasing Agent shall
designate a replacement representative within the following ten business days.
The Leasing Agent initially designates as its authorized representatives Charles
L. Davidson, III and Vipin L. Patel.
Section 5.13 Other Activities. Notwithstanding any other provisions
of this Agreement to the contrary, Leasing Agent may engage in or possess an
interest in other business ventures of every nature and description and in any
vicinity whatsoever, including without limitation the leasing, ownership,
operation, management and development of real property, and the Venture shall
have no rights in or to such independent ventures or to any profits therefrom.
Any of such activities may be undertaken with or without notice to or
participation therein by the Venture, and the Venture hereby waives any right or
claim that it may have against the Leasing Agent with respect to the income or
profits therefrom or the effect of such activity on the Premises; provided,
however, that Leasing Agent shall act as a reasonably prudent Leasing Agent in
not allowing the foregoing activities to interfere with its obligations under
this Agreement. Furthermore, nothing contained herein shall be deemed to require
the personal services of Gerald D. Hines or Thomas Cousins, individually.
Section 5.14 Employees. Leasing Agent has no employees and intends
to have no employees. Accordingly, the Venture agrees that Leasing Agent shall
perform its duties hereunder by delegating the same to the partners of Leasing
Agent and/or their affiliates.
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ARTICLE VI
ARBITRATION
Section 6.1 Appointment of Arbitrators. Whenever in this Agreement
it is provided that a dispute shall be determined by arbitration, the
arbitration shall be conducted as provided in this Article. The party desiring
such arbitration shall give written notice to that effect to the other,
specifying the dispute to be arbitrated and the name and address of the person
designated to act as the arbitrator in its behalf. Within ten (10) days after
said notice is given, the other party shall give written notice to the first
party, specifying the name and address of the person designated to act as
arbitrator on its behalf. If the second party fails to notify the first party of
the appointment of its arbitrator as aforesaid by the time above specified, then
the first arbitrator shall determine the dispute. The arbitrators so chosen
shall, within ten (10) days after the second arbitrator is appointed, appoint a
third arbitrator and if they cannot agree upon said appointment, the third
arbitrator shall be appointed by the presiding judge of the Fulton County
Superior Court, or his designee. The three arbitrators shall meet and decide the
dispute and tender a written decision to the parties within 30 days after the
appointment of the third arbitrator. A decision in which two of the three
arbitrators concur shall be binding and conclusive upon the parties and shall
not be subject to appeal, and judgment thereon may be entered in any court
having jurisdiction thereof.
Section 6.2 Rules; Fees and Expenses; Qualifications of Arbitrators.
In designating arbitrators and in deciding the dispute, the arbitrators shall
act in accordance with the commercial arbitration rules then in force of the
American Arbitration Association (or any successor thereto), subject, however,
to such limitations or directions as may be placed upon
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them by the provisions of this Agreement. Each party shall pay the fees and
expenses of its respective attorney and arbitrator and both shall share equally
the fee and expenses of the third arbitrator, if any, as well as any fees
payable to the American Arbitration Association or its successor. No arbitrator
shall be a person who is or has been at any time a partner, officer, director or
employee of either party or any Affiliated Entity thereof (as defined in the
Venture Agreement), and each such arbitrator shall have had at least seven (7)
years experience in the leasing of office buildings in the City of Atlanta,
Georgia. The arbitrators shall consider all testimony and documentary evidence
which may be presented at any hearing as well as relevant facts and data which
they may discover by investigation and inquiry outside of such hearings. Each
party shall have the right to be represented by counsel and to cross examine
witnesses.
Section 6.3 Applicability of Article. The obligation of the parties
to submit a dispute to arbitration is limited to disputes arising under those
provisions of this Agreement which specifically provide for arbitration.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
under seal as of date first above written.
VENTURE: ONE NINETY ONE PEACHTREE ASSOCIATES,
a Georgia general partnership, by its two general partners
By: C-H Associates, Ltd., a Georgia limited partnership,
by all of its general partners
By: Hines Peachtree I Limited Partnership, a Georgia
limited partnership, by its two general partners
By: /s/ Gerald D. Hines (SEAL)
----------------------------------------
Gerald D. Hines
By: Hines Atlanta Corporation, a Georgia
corporation
By: /s/ Gerald D. Hines
------------------------------------------
Gerald D. Hines,
President
Attest: /s/ David McGinnis
--------------------------------------
David McGinnis,
Assistant Secretary
[CORPORATE SEAL]
(Signatures continued on next page)
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<PAGE>
(Signatures continued from previous page)
By: Cousins Real Estate Corporation,
a Georgia corporation
By: /s/ Vipen L. Patel
------------------------------------------
Vipin L. Patel,
Executive Vice President
Attest: /s/ Robert P. Hunter, Jr.
--------------------------------------
Robert P. Hunter, Jr.,
Secretary
[CORPORATE SEAL]
By: DIHC Peachtree Associates,
a Georgia general partnership, by
its two general partners
By: DIHC Peachtree, Inc., a
Georgia corporation
By: /s/ Herman Vonhof
------------------------------------------
Herman A. Vonhof, President
Attest: /s/ Charles W. Strawser, Jr.
--------------------------------------
Charles W. Strawser, Jr.,
Vice President
[CORPORATE SEAL]
(Signatures continued on next page)
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<PAGE>
(Signatures continued from previous page)
By: DIHC Atlanta, Inc., a
Georgia corporation
By: /s/ Herman A. Vonhof
Herman A. Vonhof, President
Attest: /s/ Charles W. Strawser, Jr.
------------------------------------------
Charles W. Strawser, Jr.,
Vice President
[CORPORATE SEAL]
LEASING AGENT: C-H LEASING ASSOCIATES, a Georgia general
partnership, by its two general partners
By: Cousins Real Estate Corporation,
a Georgia corporation
By: /s/ Vipin L. Patel
------------------------------------------
Vipin L. Patel,
Executive Vice President
Attest: /s/ Robert P. Hunter, Jr.
--------------------------------------
Robert P. Hunter, Jr.,
Secretary
[CORPORATE SEAL]
(Signatures continued on next page)
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<PAGE>
(Signatures continued from previous page)
By: Hines Atlanta Realty, Inc.
a Georgia corporation
By: /s/ Gerald D. Hines
----------------------------------------
Gerald D. Hines, President
Attest: /s/ David McGinnis
--------------------------------
David McGinnis,
Assistant Secretary
[CORPORATE SEAL]
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SCHEDULE A
TO
LEASING AGREEMENT
[All references to square feet refer to net leasable space]
1. With respect to any lease entered into with the law firm of King &
Spalding, no commission or leasing fee shall be due or payable to Leasing Agent.
2. With respect to any lease entered into with the law firm of Powell,
Goldstein, Frazer & Murphy, Leasing Agent will receive a one-time Leasing Fee in
an amount equal to $2.00 per square foot of net leasable space covered by the
lease for the initial term and $1.00 per square foot for any renewals or
expansions thereof exercised during the term of the lease.
3. With respect to any lease entered into with any of the following:
Troutman, Sanders, Lockerman & Ashmore (law firm)
Kilpatrick & Cody (law firm)
Alston & Bird (law firm)
The First National Bank of Atlanta (or any affiliate thereof)
Powell, Goldstein, Frazier & Murphy (but only if said firm ceases to
be represented by LaSalle Partners or any other broker)
then (a) if no unaffiliated third-party Broker is owed a commission or fee in
connection therewith, Leasing Agent will receive a one-time Leasing Fee in an
amount equal to $4.00 per square foot of net leasable space covered by the lease
for the initial term thereof and $2.00 per square foot for any renewals or
expansions thereof exercised during the term hereof, or (b) if an unaffiliated
third-party Broker is owed a commission or fee in connection therewith, Leasing
Agent will receive a one-time Leasing Fee in an amount equal to $2.00 per square
foot of net leasable space covered by the lease for the initial term thereof and
$1.00 per square foot for any renewals or expansions thereof exercised during
the term of the lease.
4. With respect to all other leases, then (a) if no unaffiliated
third-party Broker is owed a commission or fee in connection therewith, Leasing
Agent will receive a Leasing Fee in an amount equal to 4% of the total Effective
Gross Rental payable over the initial term of such lease (not to exceed 10
years) and 2% of the total Effective Gross Rental payable with respect to any
renewals or expansions thereof exercised during the term hereof, or (b) if an
unaffiliated third-party Broker is owed a commission or fee in connection with
such lease, Leasing Agent
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will receive a Leasing Fee in an amount equal to 2% of the total Effective Gross
Rental payable over the initial term of such lease (not to exceed 10 years) and
1% of the total Effective Gross Rental payable with respect to any renewals or
expansions thereof exercised during the term of the lease.
5. As used herein the term "renewal" includes the extension of the
original term of the lease, however and whenever the same may occur (even after
the termination or expiration of this Agreement), and "expansion" includes all
additional space leased by a tenant in the Building, whether by expansion
option, right of refusal or otherwise, however and whenever the same may occur
(even after the termination or expiration of this Agreement).
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Exhibit 10.115
================================================================================
OPERATING AGREEMENT
OF
CORNERSTONE MARKET SQUARE LLC
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
FORMATION
SECTION 2.01. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.03. Principal Place of Business . . . . . . . . . . . . . . . . . . 2
SECTION 2.04. Agent for Service of Process. . . . . . . . . . . . . . . . . . 2
SECTION 2.05. Purposes of the Company . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
CAPITAL CONTRIBUTIONS
SECTION 3.01. Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.02. Additional Capital Contributions. . . . . . . . . . . . . . . . 3
SECTION 3.03. Limitation on Liability . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.04. Withdrawal of Capital; Interest . . . . . . . . . . . . . . . . 3
ARTICLE IV
DISTRIBUTIONS
SECTION 4.01. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V
BOOKS AND RECORDS
SECTION 5.01. Books and Records . . . . . . . . . . . . . . . . . . . . . . . 3
<PAGE>
ii
ARTICLE VI
MANAGEMENT OF THE COMPANY
SECTION 6.01. Management. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VII
TRANSFERS OF COMPANY INTERESTS
SECTION 7.01. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VIII
DISSOLUTION AND TERMINATION
SECTION 8.01. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 8.02. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 8.03. Distribution of Property. . . . . . . . . . . . . . . . . . . . 4
ARTICLE IX
MANAGERS AND POWERS OF THE MANAGERS OF THE COMPANY
SECTION 9.01. Managers of the Company . . . . . . . . . . . . . . . . . . . . 5
SECTION 9.02 Powers of the Managers of the Company. . . . . . . . . . . . . . 5
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments and Consents. . . . . . . . . . . . . . . . . . . . 6
SECTION 10.02. Benefits of Agreement. . . . . . . . . . . . . . . . . . . . . 6
SECTION 10.03. Integration. . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 10.04. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 10.05. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 10.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 10.07. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . 6
<PAGE>
THIS OPERATING AGREEMENT (this "Agreement"), dated as of January 20,
1998, of Cornerstone Charlotte Plaza LLC (the "Company"), a Delaware limited
liability company, is adopted and entered into by Cornerstone Properties, L.P.
("Cornerstone"), a Delaware limited partnership, as its sole member (the
"Member"), pursuant to and in accordance with the Limited Liability Company Law
of the State of Delaware, as amended from time to time (the "Act").
The Member agrees as follows:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. DEFINITIONS. Unless the context otherwise requires,
the following terms shall have the following meanings for the purposes of this
Agreement:
"ACT" has the meanings specified in the Preamble.
"AGREEMENT" means this Limited Liability Company Operating Agreement,
as the same may be amended from time to time.
"ASSETS" means, at any time, any real property and other assets owned
or leased by the Company from time to time.
"CAPITAL CONTRIBUTION" means a capital contribution made by the Member
pursuant to Section 3.01 or 3.02.
"COMPANY" means the limited liability company formed pursuant to this
Agreement.
"DISTRIBUTABLE CASH" means cash (in United States Dollars) of the
Company which the Member determines is available for distribution.
"INTEREST" means the ownership interest of the Member in the Company
at any time, including the right of the Member to any and all benefits to which
the Member may be entitled as provided in this Agreement, together with the
obligations of the Member to comply with all the terms and provisions of this
Agreement.
"MEMBER" means Cornerstone and any other member or members at such
time.
"PERSON" means any individual, partnership, corporation, trust,
limited liability company or other entity.
<PAGE>
2
SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. All references herein to Articles,
Sections and Exhibits shall be deemed to be references to Articles and Sections
of, and Exhibits to, this Agreement unless the context shall otherwise require.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation".
ARTICLE II
FORMATION
SECTION 2.01. NAME. The name of the Company shall be as set forth in
the Preamble hereof. All business of the Company shall be conducted under such
name and title to all property, real, personal, or mixed, owned by or leased to
the Company shall be held in such name. Notwithstanding the preceding sentence,
the Member may change the name of the Company or adopt such trade or fictitious
names as it may determine.
SECTION 2.02. TERM. The term of the Company commenced on the date of
filing of the Articles of Organization of the Company in the Office of the
Secretary of State of the State of Delaware in accordance with the Act (the
"EFFECTIVE DATE") and shall continue until terminated as provided in Article
VIII.
SECTION 2.03. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall be at c/o Incorporating Services, Ltd., 15 East
North Street, Dover, Delaware 19901. The Member or Sole Operating Manager may
establish other offices at other locations.
SECTION 2.04. AGENT FOR SERVICE OF PROCESS. The Secretary of State
of the State of Delaware is designated as the agent of the Company upon whom
process against it may be served. The post office address within the State of
Delaware to which the Secretary of State of the State of Delaware shall mail a
copy of any process against the Company served upon him or her is:
Incorporating Services, Ltd., 15 East North Street, Dover, Delaware 19901.
SECTION 2.05. PURPOSES OF THE COMPANY. The Company has been
organized to engage in any lawful act or activity for which a Delaware limited
liability company may be formed.
<PAGE>
3
ARTICLE III
CAPITAL CONTRIBUTIONS
SECTION 3.01. CONTRIBUTION. On or prior to the date hereof the
Member shall contribute to the Company One Hundred Dollars ($100.00).
SECTION 3.02. ADDITIONAL CAPITAL CONTRIBUTIONS. If at any time the
Member shall determine that additional funds or property are necessary or
desirable to meet the obligations or needs of the Company, the Member may make
additional Capital Contributions.
SECTION 3.03. LIMITATION ON LIABILITY. The liability of the Member
shall be limited to its Interest in the Company, and the Member shall not have
any personal liability to contribute money to, or in respect of, the liabilities
or the obligations of the Company.
SECTION 3.04. WITHDRAWAL OF CAPITAL; INTEREST. The Member may not
withdraw capital or receive any distributions, except as specifically provided
herein. No interest shall be paid by the Company on any Capital Contributions,
except as specifically provided herein.
ARTICLE IV
DISTRIBUTIONS
SECTION 4.01. DISTRIBUTIONS. All Distributable Cash of the Company
shall be distributed to the Member or distributions in kind may be made to the
Member.
ARTICLE V
BOOKS AND RECORDS
SECTION 5.01. BOOKS AND RECORDS. The Member shall keep or cause to
be kept complete and accurate books of account and records which shall reflect
all transactions and other matters and include all documents and other materials
with respect to the Company's business that are usually entered into and
maintained by Persons engaged in similar businesses. All Company financial
statements shall be accurate in all material respects, shall fairly present the
financial position of the Company and the results of its operations and
Distributable Cash and transactions in its reserve accounts, and shall be
prepared in accordance with generally accepted accounting principles, subject in
the case of quarterly statements to year-end
<PAGE>
4
adjustments. The books of the Company shall at all times be maintained at the
principal office of the Company or such other location as the Member decides.
ARTICLE VI
MANAGEMENT OF THE COMPANY
SECTION 6.01. MANAGEMENT. The management of the Company shall be
vested in the Member, who shall have full power and authority to manage the
business and affairs of the Company to the extent provided in the Act. The
Member shall have the ability to act on behalf of the Company in connection with
its day-to-day affairs or otherwise and shall have the power to bind the Company
with respect to third parties. All management decisions of the Company shall be
made by the Member.
ARTICLE VII
TRANSFERS OF COMPANY INTERESTS
SECTION 7.01. TRANSFERS. The Member may, directly or indirectly,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of all or any
part of the Member's Interest.
ARTICLE VIII
DISSOLUTION AND TERMINATION
SECTION 8.01. DISSOLUTION. The Company shall be dissolved and its
business wound up upon the decision made at any time by the Member to dissolve
the Company.
SECTION 8.02. LIQUIDATION. Upon dissolution, the Company's business
shall be liquidated in an orderly manner. The Member shall wind up the affairs
of the Company pursuant to this Agreement.
SECTION 8.03. DISTRIBUTION OF PROPERTY. If in the discretion of the
Member it becomes necessary to make a distribution of Company property in kind,
in connection with the liquidation of the Company such property shall be
transferred and conveyed to the Member.
<PAGE>
5
ARTICLE IX
MANAGERS AND POWERS OF THE MANAGERS OF THE COMPANY
SECTION 9.01. MANAGERS OF THE COMPANY. The names and titles of the
managers of the Company shall be:
John S. Moody Chief Operating Manager
Rodney C. Dimock President and Manager
Thomas P. Loftus Secretary and Manager
Kevin P. Mahoney Treasurer and Manager
Scott M. Dalrymple Vice President and Manager
Robert T. Sorrentino Vice President and Manager
Peter S. Smichenko Vice President and Manager
Scott M. Haley Assistant Vice President and Manager
For convenience only, any manager of the Company may carry out his or
her duties as manager of the Company under the title "officer" of the Company,
and any act of a manager conducted under such title shall be deemed the act of
such manager in his or her capacity as a manager of the Company.
SECTION 9.02 POWERS OF THE MANAGERS OF THE COMPANY. (a) Subject to
the terms of this Agreement and to limitations imposed by law, including,
without limiting the foregoing, the Act, and provided the same shall not be
prohibited under this Agreement, the Managers of the Company shall have the
powers and duties without limitation, to:
(i) manage the day-to-day business and affairs of the Company;
(ii) agree upon and execute all leases, contracts, evidences of
indebtedness and other obligations in the name of the Company;
(iii) keep custody and control of all the funds and securities of
the Company;
(iv) keep the minutes of all meetings of the Member in books
provided for that purpose; attend to the giving and serving of all notices;
in the name of the Company, affix the seal of the Company to all contracts
of the Company and attest the affixation of the seal of the Company
thereto; sign with other appointed Managers all certificates for shares of
capital stock of the Company, have charge of the certificate books,
transfer books and stock ledgers, and other such books and papers as the
Member may direct; and
<PAGE>
6
(v) shall have such other powers and duties as designated in
accordance with this Agreement and as from time to time may be assigned to
him by the Member.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. AMENDMENTS AND CONSENTS. This Agreement may only be
modified or amended by the Member.
SECTION 10.02. BENEFITS OF AGREEMENT. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any creditor of the
Company or any Member.
SECTION 10.03. INTEGRATION. This Agreement constitutes the entire
agreement pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements in connection therewith. No covenant, representation
or condition not expressed in this Agreement shall affect, or be effective to
interpret, change or restrict, the express provisions of this Agreement.
SECTION 10.04. HEADINGS. The titles of Articles and Sections of this
Agreement are for convenience only and shall not be interpreted to limit or
amplify the provisions of this Agreement.
SECTION 10.05. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same instrument, which may
be sufficiently evidenced by one counterpart.
SECTION 10.06. SEVERABILITY. Each provision of this Agreement shall
be considered separable and if for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
SECTION 10.07. APPLICABLE LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Delaware.
<PAGE>
7
IN WITNESS WHEREOF, this Agreement has been duly executed by the party
as of the day and year first above written.
CORNERSTONE PROPERTIES
LIMITED PARTNERSHIP
By: CORNERSTONE PROPERTIES INC.
By: /s/ Kevin P. Mahoney
---------------------------
Kevin P. Mahoney
Vice President
By: /s/ Thomas P. Loftus
---------------------------
Thomas P. Loftus
Vice President and Secretary
<PAGE>
Exhibit 10.116
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
by and between
Bryce Mountain, Inc.
"Owner"
and
Faison & Associates, Inc.
"Property Manager"
<PAGE>
REAL ESTATE MANAGEMENT AND LEASING AGREEMENT
Premises: 1199 North Fairfax Street
Alexandria, Virginia
THIS AGREEMENT ("Agreement") is made as of the 1st day of January,
1996 by and between Bryce Mountain, Inc. ("Owner"), and Faison & Associates,
Inc. ("Property Manager"):
WITNESSETH:
WHEREAS, Owner is the owner of the above described premises, and
Owner wishes to avail itself of the ability and experience of Property Manager
in the on-site management of said premises; and
WHEREAS, Property Manager is willing to provide such management
services to said premises on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
ENGAGEMENT AND AUTHORITY OF PROPERTY MANAGER
1.1 Owner hereby engages Property Manger as an independent
contractor in the management, leasing and operation of the above described
property (the "Premises"), and subject to the limitations set forth herein,
hereby authorizes and directs Property Manager to exercise such powers with
respect to the Premises as may be necessary for the performance of Property
Manager's obligations under Article II hereof, and Property Manager accepts such
engagement on the terms and conditions hereinafter set forth. Property Manager
shall have no right or authority, express or implied, to commit or otherwise
obligate Owner in any manner whatsoever except to the extent specifically
provided herein.
ARTICLE II
PROPERTY MANAGER'S AGREEMENTS
2.1 Property Manager shall conduct the ordinary and usual business
affairs of Owner relating to the management, leasing and operation of the
Premises in an efficient and satisfactory manner in accordance with first class
buildings in the Old Town, Alexandria area, and
<PAGE>
3
shall implement, or cause to be implemented, the policies of Owner for the
conduct of such business affairs in accordance with the guidelines provided in
this Agreement. The scope of Property Manager's authority shall be limited to
said guidelines. Property Manager agrees to use its best efforts in the
management, leasing and operation of the Premises in an efficient and
satisfactory manner in accordance with first class buildings in the Old Town,
Alexandria area and said guidelines, and agrees to comply with Owner's written
and oral instructions, and in connection therewith:
(a) To contract, for periods limited to Owner's possession of the
Premises, but not in excess of one year without prior written approval of
Owner, in the name and at the expense of Owner, for gas, electricity,
water, and such other services at commercially reasonable rates as are
necessary or convenient for the proper operation of the Premises. Service
contracts shall be written to include a right of the Owner to terminate
the agreement upon thirty (30) days' written notice, unless otherwise
agreed to by Owner in writing.
(b) To select, employ, pay, supervise, direct and discharge all
employees necessary for the efficient, effective, safe, and proper
operation and maintenance of the Premises, in number and at wages not in
excess of those provided for in the Approved Budget (as defined below) or
as approved by the Owner in writing, and to use reasonable care in the
selection and supervision of such employees, as reviewed and approved by
Owner. Property Manager shall be responsible for complying with all laws
and regulations and collective bargaining agreements, if any, affecting
such employment, including without limitation laws and regulations
governing worker's compensation insurance and compulsory non-occupational
disability insurance. Property Manager is and will continue throughout the
term of this Agreement to be an Equal Opportunity Employer. All persons
employed or utilized in connection with the operation and maintenance of
the Premises shall be employees of Property Manager, or of such
contractors as may be retained by Property Manager pursuant to this
Agreement, and not employees of Owner; but all costs associated with the
operations of the Premises that have been included in the Approved Budget,
or that have otherwise been approved by Owner, shall be reimbursed to
Property Manager by Owner. Unless included in the Approved Budget or
allowed elsewhere in this Agreement, all leasing and marketing will be at
Property Manager's cost.
(c) To keep the Premises in a safe, clean, and sightly condition and
to make (or cause to be made by contractors retained by Property Manager
pursuant to contracts in the name of Owner) all repairs, alterations,
replacements, and installations, do all decorating and landscaping and
purchase all supplies necessary for the proper operation of the Premises
in a first class condition, the fulfillment of Owner's obligations under
any lease or other agreement of which Property Manager has notice, and the
compliance with all known governmental and insurance requirements,
provided that Property Manager shall
<PAGE>
4
not make any non-budgeted purchase or do any non-budgeted work, the cost
of which shall exceed the amount set forth in Exhibit A, paragraph 3,
without obtaining in each instance, the prior approval of Owner, except in
circumstances which Property Manager shall reasonably deem to constitute
an emergency requiring immediate action for the protection of the Premises
or of tenants or other persons or to avoid the suspension of necessary
services. Property Manager shall notify Owner immediately of the necessity
for, the nature of, and the cost of, any such emergency repairs or
compliance. If Owner shall require, Property Manager shall submit a list
of contractors and subcontractors performing tenant work, repairs,
alterations or services at the Premises under Property Manager's direction
to Owner for Owner's approval. Owner may from time to time require that
any or all construction or other contracts have Owner's prior written
approval or otherwise comply with criteria set forth on Exhibit B or
otherwise established by Owner and delivered to Property Manager.
Property Manager shall supervise all tenant improvements within the
Premises as a part of its duties. Owner shall not pay Property Manager any
fees for any such construction services.
It is understood that Property Manager shall not be required to
undertake the making or supervision of any reconstruction of the Premises
or major capital improvements except in the case of an emergency. If
Property Manager supervises the reconstruction of the Premises or major
capital improvement for the Owner, Owner may agree to pay Property Manager
a fee for such services upon the mutual agreement of Owner and Property
Manager. Notwithstanding the foregoing, Property Manager acknowledges that
Owner may, from time to time, enter into separate agreements with third
party consultants (including affiliates and/or subsidiaries of Property
Manager) to manage and supervise construction work at the Premises. Upon
Owner's request, Property Manager shall assist Owner in facilitating the
efforts of such third party consultants and, if substantial time or
resources of Property Manager shall be required in connection therewith,
Property Manager may receive an additional reasonable fee for such
services, based on prior written approval from Owner. The determination as
to whether substantial time or resources of Property Manager are required
shall be made by Owner.
Owner shall receive the benefit of all discounts and rebates
obtainable by Property Manager in its operation of the Premises. Property
Manager agrees to take advantage of such discounts and rebates wherever
available and reasonable.
If Property Manager desires to contract for repair, construction, or
any other service described in this section 2.1 (c) with a party with
respect to which any partner, employee, or shareholder of Property Manager
holds a beneficial interest, such interest shall be disclosed to, and
approved in writing by Owner before such services are procured.
<PAGE>
5
The cost of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such
costs.
Property Manager, or a general contractor working under the
supervision of Property Manager, is authorized to make and perform work at
a tenant's request and at such tenant's sole expense ("Tenant Work") to
the extent such Tenant Work is permitted by the tenant's lease, and
Property Manager may collect from tenants requesting such work or from
general contractors performing Tenant Work, for Property Manager's sole
account, a reasonable charge for supervisory overhead on all such Tenant
Work, other than with respect to initial build-out; provided, however,
that Owner shall have no liability or obligation for any such Tenant Work.
If Property Manager performs the Tenant Work at tenant's request for a
supervisory overhead fee at tenant's expense, Owner shall not also be
responsible to pay supervisory overhead fee to Property Manager. Property
Manager, however, shall not require any train to use Property Manager, its
subsidiary, affiliate or related corporation to perform any Tenant Work.
(d) To handle promptly complaints and requests from tenants in a
first class manner and notify Owner immediately in writing of any major
complaint made by a tenant or any alleged default on the part of Owner.
(e) To notify Owner immediately in writing (together with copies of
supporting documentation) of any notice of violation of any governmental
requirements; any known defect in the Premises; any fire or other damage
to the Premises; and, in the case of any serious fire or other serious
damage to the Premises, to also immediately provide telephone notice
thereof to the insurance carrier, so that an insurance adjuster can view
the damage before repairs are started, and complete customary loss reports
in connection with fire or other damage to the Premises. The Property
Manager shall use its best efforts to comply with all laws regarding the
leasing, use, operation, and maintenance of the Premises.
(f) To notify the general liability insurance carrier for the
Premises and Owner immediately in writing of any personal injury or
property damage occurring to or claimed by any tenant or third party on or
with respect to the Premises and to promptly forward to the carrier, with
copies to Owner, any summons, subpoena, or other like legal document
served upon Property Manager relating to actual or alleged potential
liability of Owner, Property Manager, or the Premises.
(g) To advise Owner of pertinent covenants in leases in which the
tenants to hold Owner harmless with respect to liability from any
accidents and/or to replace broken glass, and to secure from such tenants
and forward to Owner any certificates of insurance, and renewals thereof,
required to be furnished by the terms of such leases.
<PAGE>
6
(h) At the option of Owner, expressed to Property Manager in
writing, to receive and collect rent and all other monies payable to Owner
by all tenants and licensees in the Premises and to deposit the same
within three (3) business days in the bank named in Exhibit A, paragraph 4
(the "Bank"), in an account approved by Owner and in the name of and for
the benefit of Owner (the "Bank Account"), which Bank Account shall be
used exclusively for such funds which shall in no event be commingled with
funds of Property Manager and to disburse such funds from said Bank
Account solely in payment for, or to reimburse Property Manager for
payment of, authorized expenses incurred in connection with the operation
of the Premises in accordance with the then current budgets approved by
Owner pursuant to section 2.5 of this Agreement and otherwise in
accordance with the terms and provisions of this Agreement. Property
Manager or any affiliate thereof shall obtain Owner's written approval on
all payments to Property Manager and all Payments in excess of $25,000
with the exception of utility payments. In the event state law requires
that tenant security deposits be held in a separate account, such account
shall be established by Property Manager in the name of Owner as approved
in writing by Owner. If requested in writing, Owner's designated
representative will be a signatory on all bank accounting maintained by
property Manager. Property Manager acknowledges and agrees that Property
Manager shall act in a fiduciary capacity for the benefit of Owner with
respect to the Bank Account.
(i) Upon the prior written approval of Owner, to institute all
necessary legal actions or proceedings for the collection of rent or other
income from the Premises, or the ousting or dispossessing of tenants or
other persons therefrom, and all other matters requiring legal attention.
Property Manager agrees to use its best efforts to collect rent and other
charges from tenants in any manner and to pursue Owner's legal remedies
for nonpayment of same. Owner reserves the right to designate or approve
counsel and to control litigation of any character affecting or arising
out of the operation of the Premises. Property Manager agrees to fully
cooperate with said counsel.
(j) To maintain fidelity bond/crime insurance naming Owner as loss
payee as its interest may appear with limits of not less than $1 million,
commercial general liability insurance with a combined single limit of not
less than $5 million each occurrence and general aggregate, errors and
omissions coverage with limits of not less than $1 million.
(k) To notify Owner immediately of any fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises and any material
violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances, or like
provisions. Property Manager will not bear responsibility for
noncompliance, unless such noncompliance is due to the gross negligence or
willful misconduct of Property Manager or its employees.
<PAGE>
7
(1) To assist in Owner's ad valorem tax review program and to
cooperate with Owner, when so requested, in efforts to reduce such taxes.
Property Manager shall promptly furnish Owner with copies of all
assessment notices and receipted tax bills.
(m) To promptly comply with all laws, ordinances, orders, rules,
regulations and requirements of all Federal, State and municipal or other
governmental authorities, courts, departments, commissions, boards and
offices, any national or local Board of Fire Underwriters or Insurance
Services Office having jurisdiction, or any other body exercising
functions similar to those of any of the foregoing which may be applicable
to the Premises or any part thereof or to the leasing, use, repair,
operation and management thereof. In the event such compliance is
undertaken in the name and on behalf of Owner, such compliance shall be at
Owner's expense, unless such compliance is solely of an administrative
nature. Property Manager shall give prompt notice to Owner of any known
violation or written notice of alleged violation of such laws, rules,
regulations and requirements of which Property Manager has knowledge and
Property Manager shall not bear responsibility for failure of the Premises
or the operation thereof to comply with such laws, rules, regulations and
requirements unless Property Manager has committed gross negligence or a
willful act or omission in the performance of its obligations under this
Agreement or in the performance of any other duties owed to Owner or third
parties by Property Manager.
(n) Property Manager shall be required to maintain an on-site office
with specified business hours, provided that Owner will provide rent-free
space.
(o) Property Manager shall require all tenants to comply with all of
the provisions of their leases and any rules and regulations applicable to
the Premises, unless otherwise directed in writing by Owner.
(p) Property Manager shall promptly pay all taxes, utilities, and
other bills relating to the operation of the Premises, unless otherwise
limited in writing by Owner.
2.2 Property Manager agrees to prepare and submit to Owner initial
monthly reports relating to the management and operation of the Premises for the
preceding calendar month, on or before the tenth (10th) day of each month with
all additional reports due on or before the twentieth (20th) day of the month,
in form satisfactory to Owner, such form to be subject to change from time to
time, as Owner shall reasonably require. The Property Manager shall also report
to Owner such other information known to Property Manager of which Owner should
be made aware. Property Manager shall remit to Owner the net receipts from the
Premises, including any net income received from the garage operation as
described in Section 2.10, as directed by Owner within ten (10) days after
receipt thereof. Property Manager agrees that Owner shall have the right to
require the transfer to Owner at any time of any funds in the
<PAGE>
8
Bank Account considered by Owner to be in excess of an amount reasonably
required by Property for disbursement purposes in connection with the Premises.
Property Manager agrees to prepare and submit reports to the relating to the
leasing of the Premises in form satisfactory to Owner as requested by Owner.
Property Manager agrees to keep records with respect to the leasing,
management, and operation of the Premises, including records of receipts and
disbursement, all of which shall be deemed the property of Owner, and to retain
those records until the termination of this Agreement at which time Property
Manager shall immediately turn over all such records to Owner. Owner shall have
the right to inspect such records and audit the reports required by this Section
during business hours until such time as all such records have been delivered
over to Owner following the termination of this Agreement in accordance with
Section 5.2 hereof.
2.3 In connection with its management of the Property, Property
Manager shall acquire and utilize such computer software as Owner may require.
Property Manager shall keep such software current and install all upgrades,
enhancements and new versions of the software which may be from time to time
released by the vendor and/or by Owner (collectively, the "Required Software").
Property Manager shall cause all personnel who use the Required Software to
attend and complete basic system training programs offered by the vendor and
licensor of the Required Software. Property Manager shall also be responsible
for obtaining and maintaining any equipment required for proper operation of the
Required Software, including, but not limited to, the communications equipment
required for transmission of data to Owner. Owner may from time to time require
additional or substitute software to be included among the Required Software and
shall provide not less than sixty (60) days' advance notice to Property Manager
of such additions or substitutions. Owner shall not be unreasonable with respect
to the frequency of changes in the Required Software. Property Manager shall use
the Required Software to enter, process, store, and transmit data to Owner, as
Owner may from time to time require and shall comply with any data reporting
standards as Owner may establish. Owner shall be responsible for all costs of
the required software, initial training, and additional equipment that is
required solely by Owner and used by Property Manager solely for the Premises.
2.4 Property Manager shall ensure such control over accounting and
financial transactions as is reasonably required to protect Owner's assets from
loss or diminution due to negligence (when Property Manager is acting outside of
the scope of its employment or in violation of this Agreement), gross negligence
or willful misconduct on the part of Property Manager's associates or employees.
Losses caused by such gross negligence or willful misconduct shall be borne by
Property Manager. Owner shall have the right to review control procedures and
within reason may require changes to the existing procedures.
2.5 Property Manager shall prepare and submit to Owner proposed
operating and capital budgets for the promotion, leasing, operation, repair, and
maintenance of the
<PAGE>
9
Premises. Preliminary versions of the budget ("Initial Budget") will be due as
stipulated by Owner based on a schedule to be provided by Owner. Property
Manager shall prepare an update of the Initial Budget ("Updated Budget") every
three (3) months reflecting any changes that have occurred since the submission
of the Initial Budget and incorporating Owner's comments. All budgets will be
prepared on an accrual basis showing a month by month projection of income and
expense and capital expenditures for the forthcoming calendar year and proposed
leasing guidelines together with a marketing plan for all space that is vacant
or that is scheduled to become vacant during the next year. The Initial Budget
and Updated Budget shall also contain any other reports or data which the Owner
in its reasonable discretion deems to be relevant to the management and/or
leasing of the Premises. Property Manager will also provide Owner with
additional reports, as reasonably requested from time to time by Owner.
After receiving Owner's approval of the Updated Budget ("Approved
Budget"), Property Manager shall implement such budget and shall be authorized
to make the expenditures and incur the obligations provided for in the budget
except as set forth herein. Property Manager shall obtain Owner's specific
approval prior to contracting for any capital expenditures, even if already
included in the Approved Budget. Except for amounts of less than five percent
(5) of any line item or except in the event of an emergency, Property Manager
shall not spend any non-budgeted amount in excess of that specified on Exhibit
A, paragraph 3, without Owner's prior written approval. Property Manager shall
operate the Premises according to the previous year's Approved Budget until
current budget is fully approved. Property Manager shall furnish to Owner prior
to January 31 an unaudited statement of income and disbursements reflecting the
operation of the Premises for the previous calendar year on an accrual basis.
Property Manager is not allowed to reclassify expenses to meet the Approved
Budget. Property Manager must charge all items to the appropriate account within
the Approved Budget.
2.6 Subject to the terms hereof, Property Manager agrees to use it
best efforts to cause the Premises to be rented and kept rented to desirable
tenants, satisfactory to Owner, and in connection therewith:
(a) Subject to the terms hereof, to negotiate leases and renewals of
leases at appropriate times on an exclusive basis, it being understood
that all inquiries to Owner with respect to leasing any portion of the
Premises shall be referred to Property Manager. Property Manager is
responsible for keeping abreast of all time limits and requirements in the
leases (by way of example and not of limitation, when options are arising,
leases are expiring, etc.), and act in a timely manner to give any
required notice thereof in accordance with all tenant leases. All leases
and renewals must be prepared by counsel selected by Owner and reviewed by
Property Manager in accordance with Owner's leasing guidelines and on
Owners approved form of lease agreement and be submitted to the Owner's
designated representative for execution by Owner. Unless agreed to and
directed otherwise, Property Manager agrees it will strictly observe the
specific leasing guidelines
<PAGE>
10
provided by Owner, cooperating with counsel and acting in a timely manner,
and agrees to hold Owner harmless from any damages sustained by Owner
including the cost of defending any litigation arising out of Property
Manager's failure gross negligence or willful misconduct in failing to
observe such guidelines. References of prospective tenants, as well as
their varying use requirements, shall be investigated carefully by
Property Manager, however, all decisions concerning creditworthiness and
suitably of tenant shall be solely that of Owner, and Property Manager
shall not be required to warrant or guarantee any tenant's performance.
(b) With Owner's prior written approval and at Owner's expense, to
advertise the Premises or portions thereof for rent by means of
periodicals, plans, brochures, and other means appropriate to the
Premises. No sign shall be placed on the Premises by the Property Manager
without the Owner's prior written approval.
2.7 Property Manager agrees, for itself and all persons retained or
employed by Property Manager in performing its services, during the term of this
Agreement and thereafter, to use reasonable efforts to hold in confidence and
not to use or disclose to others any confidential or proprietary information of
Owner heretofore or hereafter disclosed to, learned by or prepared by Property
Manager, including but not limited to any data, information, plans, programs,
processes, costs, operations, or tenants which may come within the knowledge of
Property Manager in the performance of, or as a result of, its services, except
where Owner specifically authorizes Property Manager to disclose any of the
foregoing to others or such disclosure reasonably results from the performance
of Property Manager's duties hereunder.
2.8 Property Manager shall indemnify and save harmless Owner from
and against all liability, suits, claims, and demands (including, without
limitation, all costs and attorney's fees and expenses incurred in connection
therewith) by or on behalf of any person, firm, corporation or other entity due
to or arising out of any gross negligence or willful misconduct on the part of
the Property Manager, its employees, contractors or subcontractors in connection
with Property Manager's performance of its obligations under this Agreement.
2.9 Property Manager shall use its best efforts to insure that no
third party files or suffers to be filed, any materialman's or mechanic's lien
against the Premises arising out of material incorporated therein or work
performed therein or thereon upon the request or order of Property Manager.
2.10 If Owner has entered into a separate agreement with a parking
management company ("Parking Manager") or property association to operate the
parking facility of the Premises, Property Manager will coordinate and cooperate
with Parking Manager or property association as directed by Owner, and will
incorporate budgets and monthly statements submitted by Parking Manager into
Property Manager's budgets and monthly statements. If so directed by
<PAGE>
11
Owner, Property Manager shall receive net revenues from Parking Manager for
deposit into the Bank Account described in Section 2.1(g).
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all of the following
charges relating to the Premises: taxes, special assessments, ground rents,
insurance premiums (other than premiums arising out of Section 2.1(b) for which
Property Manager is responsible), and mortgage payments. If Owner does not elect
to make any or all of said payments, Property Manager shall do so out of the
Bank Account, if so directed in writing by Owner.
3.2 Owner shall self-insure or, at its option, require Property
Manager to coordinate the placement of property insurance upon the Premises
including both liability and all risk property insurance and shall look first to
such insurance or self-insurance for indemnity against any loss or damage to the
Premises or to any tenant insurance, except in the case of Property Manager's
negligence (when Property Manager is acting outside of the scope of its
employment or in violation of this Agreement), gross negligence or willful
misconduct, or as otherwise provided herein. To the extent that policies shall
be procured, Owner shall obtain waivers of subrogation in favor of Property
Manager under such policies. Property Manager shall be an insured as real estate
manager on Owner's liability policy.
3.3 With respect to liabilities arising out of the use and operation
of the Premises and arising under this Agreement except for liabilities arising
out of section 2.1(b), Owner shall indemnify and save harmless Property Manager
from and against all claims, losses and liabilities (including, without
limitation, all costs and attorneys fees and expenses incurred in connection
therewith) resulting from damage to property or injury to, or death of, persons,
defamation and false arrest (including, but not limited to, the property and
persons of the parties hereto and their agents, contractors, subcontractors and
employees), occasioned by or arising out of, acts or omissions (other than
criminal acts), of (i) Property Manager (except in the case of Property
Manager's negligence when Property Manager is acting outside of the scope of its
employment or in violation of this Agreement), gross negligence or willful
misconduct, or (ii) Owner or Owner's agents, employees, contractors or
subcontractors.
Nothing contained in this Section 3.3 shall be construed as creating
or evidencing an employment relationship between Owner and any or all persons
employed or utilized by Property Manager pursuant to Section 2.1(b) for the
operation and maintenance of the Premises.
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12
ARTICLE IV
PROPERTY MANAGER'S FEES
AND COMMISSIONS: REIMBURSEMENTS
4.1 As management fees for the services performed pursuant to
Article II, Owner agrees to pay Property Manager on the basis specified in
Exhibit A, paragraph 6. Said fee shall be payable monthly on the tenth (10th)
day of the month and shall be based on receipts from the previous calendar
month. Property Manager shall withdraw said fee from the operating account for
the Premises and shall account for same as provided for in Section 2.2 hereof.
If fees are based on rent or income, it is understood that they shall be
applicable to rent or income actually collected, including parking receipts, and
that there shall be excluded therefrom: direct charges for taxes, insurance,
fuel, electricity, water, labor or any other expense in connection with the
operation and maintenance of the Premises which are paid directly by a tenant to
any taxing authority, utility or service company; fire loss proceeds, capital
improvements, remodeling and tenant change costs (including any overhead factor
payable by tenants); amortization for tenant work, security deposits; however,
tax, utility, service charges and operating expense escalation charges required
to be calculated, billed and collected from individual tenants by Property
Manager will be included in collectively income for the purpose of calculating
management fee. Management fees shall be paid based on actual receipts, not
estimates. Owner shall be entitled to pay Property Manager directly rather than
permitting Property Manager to pay itself out of the Bank Account. To the extent
any amounts are refunded to tenants, gross rent shall be reduced accordingly.
Any rent paid more than thirty (30) days in advance or sales proceeds shall be
excluded from gross rent.
4.2 As leasing commissions, if any, for new leases secured pursuant
to Section 2.6, including renewals, expansions or extensions exercised during
the term of this Agreement, Owner agrees to pay Property Manager at the rate
specified in Exhibit A, paragraph 7. A commission will be paid on direct leases
signed with subtenants for the period following the expiration date of the
original tenant's master lease. If a new lease contains a cancellation option
exercisable by the tenant and the cancellation fee does not include an amount
for the unamortized leasing commission remaining at the cancellation date, a
leasing commission will be paid on the initial term, which is prior to such
termination date, with the commission for the balance of the lease term payable
when and if such Tenant does not terminate the lease on or before such date as
set forth herein. Commissions will be based on base rents and pre-determined
fixed escalations payable to Owner only and will exclude: percentage rent;
variable escalations; operating expense escalations; real estate tax
escalations; any portion of said base rent attributable to parking; and free
rent. In the event a lease provides that the tenant is to pay directly for some
or all of the operating expense and/or real estate taxes associated with its
space, then for purpose of calculating the commissions listed in Exhibit A, the
tenant's annual base rent shall be increased by an amount equivalent to the
estimated annual expenses that will be paid by tenant during the first year of
its lease as determined by Owner. No commission will be due for any portion of a
lease term that
<PAGE>
13
exceeds ten (10) years. Leasing commissions for new leases and expansions shall
be paid fifty percent (50%) within thirty (30) days after lease execution by all
parties and fifty percent (50%) within thirty (30) days after lease commencement
and actual occupancy in the event of a renewal or extension, any commission
payment due shall be paid within thirty (30) days of the execution of the
renewal or extension documentation. When leases are negotiated on behalf of
tenant by outside brokers, Property Manager shall cooperate with such brokers,
Property Manager shall be responsible for paying all commissions to such outside
brokers, and all commissions to such outside broker shall be subject to the
written approval of Owner. The cost of all approved commissions will be borne by
Owner, unless already paid to Property Manager in accordance with the terms
hereof. Property Manager will assist Owner in negotiating the terms of fees to
outside brokers, and will submit recommendations to Owner regarding the
percentage rate for outside brokerage commissions In conjunction with the budget
submissions provided for in Section 2.5.
4.3 To the extent expressly identified in the Approved Budget, Owner
shall be responsible to reimburse Property Manager for the following expenses or
costs incurred by or on behalf of Property Manager in connection with the
management and leasing of the Premises. At Owner's option such expenses can come
out of be paid from the established Bank Account.
(a) Cost of gross salary, wages, bonuses, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Property
Manager, property management clerical support, engineering personnel, and
engineering clerical support as allocated to the Premises.
(b) Necessary general accounting and reporting services, as
allocated to the Premises.
(c) Necessary cost of forms, stationary, ledgers, and other supplies
and equipment used in Property Manager's office, as allocated to the Premises
for property management purposes.
(d) Cost of continuing education for personnel allocated to the
Premises.
(e) Cost of parking for personnel allocated to the Premises.
(f) Necessary cost of telecommunications, couriers, and postage
allocated to the Premises.
All of the enumerated items in section 4.3 must be at commercially
reasonable rates.
<PAGE>
14
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on January 1, 1996 and
will continue in full force and effect for an initial term of one (1) year,
unless terminated earlier in accordance with the terms of this Agreement. Upon
the expiration of the initial one (1) year term and each subsequent renewal
period, unless terminated, as is hereinafter addressed, this Agreement will
automatically renew for one (1) year renewal periods.
5.2 This Agreement may be terminated by Owner or Property Manager at
any time (a) without cause by giving the other party written notice of the
election to terminate no less than thirty (30) days prior to the date for
termination or (b) automatically and without notice if the Premises are sold to
a bonafide third party purchaser, except as provided herein, or the Premises are
acquired through foreclosure of a mortgage or deed in lieu of foreclosure.
This Agreement may also be terminated for cause by the
non-defaulting party, at its option, upon the happening of any of the following
events of default:
(i) If the Property Manager makes a general assignment for the
benefit of creditors; files in the courts a petition in bankruptcy, insolvency,
for a reorganization, or for the appointment of a receiver or trustee of all or
a substantial part of its property; voluntarily takes any advantage of any
bankruptcy or insolvency law; an involuntary petition or any answer is filed
against the other proposing the adjudication as a bankrupt which is not
discharged or denied within sixty (60) days thereafter; or if the Property
Manager is insolvent by reason of being unable to pay debts as they mature or
otherwise is adjudicated bankrupt.
(ii) Upon the occurrence of a breach, default, or non-compliance by
Property Manager of any of the obligations, agreements or covenants to be
performed by Property Manager hereunder contained in this Agreement, and the
failure of Property Manager to cure such breach, default or non-compliance
within five (5) days following receipt of written notice from the Owner for
monetary defaults and fifteen (15) days following receipt of written notice from
Owner specifying such breach, default or non-compliance for non-monetary
defaults; provided that if the non-monetary breach, default or non-compliance is
not curable within said fifteen (15) day period, then upon Property Manager's
failure to commence the curing of such non-monetary breach, default or
non-compliance within said fifteen (15) day period and thereafter diligently and
continuously pursue such cure to completion in no event more than ninety (90)
days. Notwithstanding anything herein to the contrary, Owner may cure any
breach, default or non-compliance and Property Manager shall immediately
reimburse Owner for all costs or expenses in connection therewith.
<PAGE>
15
(iii) Failure of Owner to reimburse Property Manager any sums
stipulated in this Agreement; said termination to become effective upon Property
Manager's having served Owner written notice of the failure and Owner's
continued failure to remedy or correct such noncompliance within thirty (30)
days after receipt of such notice.
(iv) If the Premises are damaged by fire or any other casualty or
are taken through the exercise of the power of eminent domain or sale in lieu
thereof and, in Owner's reasonable opinion, such damage or taking materially
affects the operation of the Premises for their intended purpose and the
Premises cease to be operated for such purpose.
Upon termination of this Agreement for any reason, Property Manager
shall deliver the following to Owner or Owner's duly appointed representative on
or before thirty (30) days following the termination date:
(a) A final accounting, reflecting the balance of income and
expenses for the Premises as of the date of termination;
(b) Any balance or monies due to Owner or tenant security deposits,
or both, held by Property Manager with respect to the Premises, and
(c) All records, contracts, drawings, leases, correspondence,
receipts for deposits, unpaid bills, summary of all leases in existence at
the time of termination, and all other papers or documents which pertain
to the Premises. Such data and information and all such documents shall at
all times be the property of Owner.
5.3 If leasing commissions are or will become payable under Section
4.2 and if this Agreement is terminated by Property Manager or Owner under
Section 5.2, Owner shall recognize Property Manager as the broker in any ongoing
contact with a Prospective Tenant (as hereinafter defined) for a lease, renewal,
extension or expansion with respect to any part of the Premises pending at the
date of termination of this Agreement unless mutually agreed to otherwise by
Owner and Property Manager. "Prospective Tenant" shall be defined as a tenant
with whom active negotiations are currently underway or who has both visited the
Premises with Property Manager (or whose leasing broker has visited the Premises
with Property Manager on Prospective Tenant's behalf) or has received a written
proposal from Property Manager or submitted a written proposal to Property
Manager prior to the date of termination of this Agreement. Property Manager
shall provide a list of Prospective Tenants ("Prospect List") to Owner within
thirty (30) business days of the effective date of termination of this
Agreement. The Prospect List will be subject to the review and approval of
Owner, which approval shall not be unreasonably denied. Unless otherwise agreed
to in writing by all parties, in the event of the consummation of a lease with a
Prospective Tenant appearing on the approved Prospect List within six (6) months
of the termination of this Agreement, Owner shall pay to Property Manager a
leasing commission with
<PAGE>
16
respect thereto pursuant to Section 4.2; provided, however, that Property
Manager shall not begin negotiations for any new lease or renewal after giving
or receiving a notice of termination, without the prior written consent of
Owner. No commissions shall be paid to Property Manager in the event of the
consummation of a lease more than six (6) months after the termination of this
Agreement. In the event that Property Manager has been terminated and a lease is
being negotiated with a Prospective Tenant, Property Manager must continue with
such negotiations or agree to split its commission with Owner's new
representative.
ARTICLE VI
ASSIGNMENT; CHANGE IN CONTROL
6.1 This Agreement shall be unassignable by either party and can be
changed only by a writing signed by the parties hereto, provided, however, that
Owner shall have the right to assign this Agreement in the event a bona fide
sale by Owner of the Premises and such assignment shall not constitute a breach
of this paragraph 6.1, however, in the event of such an assignment, the term of
this Agreement shall expire ninety (90) days after the sale, unless Property
Manager consents to the assignment in writing, in which event the expiration
date of the term of this Agreement shall remain as provided in Article V. No
services to be performed by Property Manager under this Agreement shall be
delegated by Property Manager to any other person or firm without the prior
written consent of Owner, provided that Property Manager may engage independent
subcontractors, at no additional cost to Owner (except as provided in Section
2.1 hereto and at Property Manager's sole risk, without such consent, to provide
incidental services usually performed by independent contractors under good
property management practices customary in the locale of the Premises. Subject
to Owner's direction, Property Manager will cooperate with lawyers or
consultants, pursuant to contracts in the name of the Owner, to perform real
estate tax appeals, property audits and its other standard services required in
connection with the operating of the Premises.
6.2 Notwithstanding the foregoing, Property Manager may, upon thirty
(30) days prior written notice to Owner, assign this Agreement to an affiliate
provided that the affiliate is the successor to all or substantially all of
Property Manager's management and leasing business; provided, however, that
Owner shall retain its right to cancel this Agreement upon thirty (30) days'
written notice, in accordance with the terms of Article V.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's Representative ("Owners Representative") whose name and
address are set forth on Exhibit A, paragraph 1, shall be the duly authorized
representative of Owner for
<PAGE>
17
the purposes of this Agreement. Any statement, notice, recommendation, request,
demand, consent, or approval under this Agreement shall be in writing and shall
be deemed given (a) by Owner when made by Owner's Representative or any officer
of Owner and delivered personally to Property Manager, if an individual, or to
an officer of Property Manager, if a corporation, or when mailed, overnight
couriered, or telefaxed (provided original hard copy of said telefacsimile is
then sent via United States Postal Service or an overnight courier service)
addressed to Property Manager, at the address set forth in Exhibit A, paragraph
2, and (b) by Property Manager when delivered personally to or when mailed,
overnight couriered, or telefaxed (provided original hard copy of said
telefacsimile is then sent via United States Postal Service or an overnight
courier service) addressed to Owner's Representative at the address set forth in
Exhibit A, paragraph 1. Either party may, by written notice, designate a
different address.
7.2 Property Manager shall, at its own expense, qualify to do
business in the local jurisdiction and obtain and maintain such licenses from
the appropriate authorities of said jurisdiction as may be required for the
performance by Property Manager of its services. Property Manager shall comply
with all laws, rules, and regulations of said jurisdiction.
7.3 Each provision of this Agreement is intended to be severable. If
any term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties to this Agreement shall
institute any action or proceeding against the other party relating to this
Agreement, the unsuccessful party in such action or proceeding shall reimburse
the successful party for its disbursements incurred in connection therewith and
for its reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto
or of any breach or default by the other party in the performance by the other
of its obligations hereunder shall be valid unless in writing, and no such
consent or waiver shall be deemed or construed to be a consent or waiver to or
of any other breach or default in the performance by such other party of the
same or any other obligations of such party hereunder. Failure on the part of
either party to complain of any act or failure to act of the other party or to
declare the other party in default, irrespective of how long such failure
continues shall not constitute a waiver by such party of its rights hereunder.
The granting of any consent or approval in any one instance by or on behalf of
Owner shall not be construed to waive or limit the need for such consent in any
other or subsequent instance.
7.6 This Agreement shall be governed and construed in accordance
with the laws of the State of Virginia. The venue of any action or proceeding
brought by either party against the other arising out of this Agreement shall,
to the extent legally permissible, be the State
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18
of Virginia.
7.7 It is understood that the Property Manager is engaged in the
development, management, leasing and sale of real estate similar to the business
of Owner, and may, from time to time, agree to develop, manage, lease and sell
other real estate which may compete with the business of Owner. Owner hereby
consents to the pursuit of such competitive ventures by Property Manager and
acknowledges that such ventures shall not be deemed wrongful or improper;
provided that neither Property Manager nor its affiliates shall solicit any
Tenants in the Premises or attempt to induce such Tenants to relocate out of the
Premises and into a competing property owned, controlled, or managed directly or
indirectly by Property Manager or any affiliate thereof during the term of such
Tenant's lease in the Premises; provided, however, that Property Manager devotes
such time, attention, and personnel to the management, operating, and leasing of
the Premises as is necessary to perform all of its obligations under this
Agreement.
7.8 There shall be no third-party beneficiaries to this Agreement,
other than affiliates of Owner of Property Manager.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
Bryce Mountain, Inc.
Owner
Witness:
[Signature Illegible] By: /s/ V. Cosen
- ------------------------------ ---------------------------------
Name: V. Cosen
Title: Vice President
Faison & Associates, Inc.
Property Manager
Witness: /s/ M. Suzanne Smith By: /s/ Chip Wood
---------------------- ---------------------------------
Commission Expires Name: Chip Wood
September 30, 1998 Title: Managing Director, Asset
Management
<PAGE>
EXHIBIT A
Addresses/Approvals/Fee Schedule
1. Owner: Bryce Mountain, Inc.
c/o DHIC Management Corporation
Attention: Wout Coster
200 Galleria Parkway
Suite 2000
Atlanta, Georgia 30339
2. Property Faison & Associates
Manager: Attention: Chip Wood
1155 21st Street
Suite 200
Washington, DC 20036
3. Property Manager will require Owner's consent for any non-budgeted repair
in excess of $1,000.00.
4. Property Manager shall direct tenants to pay their rents directly to
Owner. Owner will deposit these rents and provide Property Manager with a
statement of deposits. The bank account at Sun Trust Bank is in the name
of the Owner.
5. Any checks written by Property Manager payable to Property Manager in
excess of $2,000.00 need to co-signature of Owner.
6. Property Manager will be paid 3% on the actual rental receipts as defined
under 4.1.
7. Property Manager will be paid a leasing commission in accordance to 4.2 as
follows:
Any new leases without cooperating broker - 3%.
Any new leases with cooperating broker - 5%.
(Property Manager to pay cooperating broker 3%)
Any expansion of an existing office tenant without cooperating
broker - 2%.
Any expansion of an existing retail tenant without cooperating
broker - 3%.
Any expansion of an existing tenant with a cooperating
broker - 4%.
Any extension of an existing office tenant without cooperating
broker - 2%.
Any extension of an existing retail tenant without cooperating
broker - 3%.
Any extension of an existing tenant with a cooperating
broker - 4%.
<PAGE>
EXHIBIT B
General Requirements for Contractors/Subcontractors
1. Possess commercially reasonable insurance, including, without limitation,
worker's compensation insurance and errors and omissions insurance.
2. Possess all necessary licenses, permits, governmental approvals, etc.
3. Possess at least three (3) years experience in the relevant field of
expertise.
4. Provide evidence, if requested, of each of the foregoing.
5. Provide, if requested, payment and/or performance bond(s).
6. Provide, if requested, an affidavit regarding its financial status,
business experience and other relevant information.
7. Provide information necessary for Property Manager to obtain a credit
report.
<PAGE>
Exhibit 10.117
REDEMPTION AND ACQUISITION AGREEMENT
THIS REDEMPTION AND ACQUISITION AGREEMENT (this "Agreement") made as
of October 27, 1997 by and among MARKET SQUARE DEVELOPMENT INVESTORS (the
"Company"), a District of Columbia general partnership having an office at 200
Galleria Parkway N.W., Suite 2000, Atlanta, Georgia 30339, DUTCH INSTITUTIONAL
HOLDING COMPANY, INC. ("DIHC"), a Delaware corporation, having an office at 200
Galleria Parkway N.W., Suite 2000, Atlanta, Georgia 30339, and DIHC MARKET
SQUARE, INC. ("DIHC-MS"), a Georgia corporation, having an office at 200
Galleria Parkway, N.W., Suite 2000, Atlanta, Georgia 30339, and CORNERSTONE
PROPERTIES INC. ("C-Stone"), a Nevada corporation, having an office at 126 East
56th Street, New York, New York 10022.
W I T N E S S E T H:
WHEREAS, as of the date of this Agreement, M.I. West Pennsylvania
Limited Partnership ("M.I. West") and DIHC-MS are the sole partners in the
Company, which in turn is one of the venturers in Market Square Associates
("MSA"), a District of Columbia general partnership, which in turn is one of the
venturers in Avenue Associates Limited Partnership ("AALP"), a District of
Columbia limited partnership which owns the land and improvements located at 701
and 801 Pennsylvania Avenue located in the District of Columbia (the
"Property");
WHEREAS, DIHC is the parent corporation of DIHC-MS and DIHC is a
wholly-owned subsidiary of Stichting Pensioenfonds voor de Gezondheid
Geestelijke en Maatschappelijke Belangen ("PGGM");
WHEREAS, the Company, DIHC and M.I. West entered into that certain
Redemption Agreement dated as of August 15, 1997 (the "M.I. Redemption
Agreement"), pursuant to which, at or prior to the Redemption Date (as
hereinafter defined), a new partner is to be admitted to the Company (the "New
Partner"), and the Company is to redeem from M.I. West all of M.I. West's right,
title and interest in and to the Company (the "M.I. Redemption");
WHEREAS, DIHC and C-Stone entered into that certain Stock Purchase
Agreement dated as of August 18, 1997 between DIHC, as Seller, and C-Stone, as
Purchaser (the "Stock Purchase Agreement"), and PGGM and C-Stone entered into
that certain Loan Purchase Agreement dated as of August 18, 1997 between PGGM,
as Seller, and C-Stone, as Purchaser (the "Loan Purchase Agreement");
1
<PAGE>
WHEREAS, pursuant to the Loan Purchase Agreement, immediately prior
to the execution and delivery of this Agreement, C-Stone acquired all of the
holder's right, title and interest in and to that certain loan originally from
DIHC Finance Corporation to AALP in the original principal amount of
$188,491,750, which loan has been assigned to PGGM and is secured by (among
other things) that certain Deed of Trust and Security Agreement dated as of July
15, 1987 recorded as Instrument No. 38127, among the Land Records of the
District of Columbia, as amended (the "AALP Mortgage"); and pursuant to the
Stock Purchase Agreement, immediately prior to the execution and delivery of
this Agreement, C-Stone acquired all of the holder's beneficial right, title and
interest in and to that certain loan from DIHC Finance Corporation to the
Company in the original principal amount of up to $41,900,000, which loan is
evidenced by that certain Promissory Note and Loan Agreement from the Company to
DIHC Finance Corporation dated as of August 15, 1997 (the "MSDI Loan");
WHEREAS, the Company desires to admit C-Stone, and C-Stone desires
to be admitted, as the New Partner in accordance with the M.I. Redemption
Agreement;
WHEREAS, the Company further desires to redeem from DIHC-MS, and
DIHC-MS desires to transfer to the Company, all of the right, title and interest
of DIHC-MS in and to the Company, other than the Retained Interest (as
hereinafter defined), subject to the terms of this Agreement; and
WHEREAS, C-Stone further desires to purchase from DIHC-MS, and
DIHC-MS desires to sell to C-Stone the Retained Interest of DIHC-MS in the
Company, subject to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
II. Definitions. For purposes of this Agreement, unless the context
otherwise requires the following terms shall have the following meanings:
B. "Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or under common control with, such specified Person.
D. "Interest" means all right, title and interest of DIHC-MS in and
to the Company, other than the Retained Interest, subject and pursuant to the
Venture Agreement.
F. "Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or
2
<PAGE>
group that would be deemed to be a person under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.
H. "Redemption Date" means the date upon which the M.I. Redemption
is closed, and upon such date and immediately following the M.I. Redemption, the
Company shall redeem the Interest from DIHC-MS in accordance with the terms of
this Agreement.
J. "Redemption Instrument" means the instrument of redemption and
assumption pursuant to which the Company redeems the Interest of DIHC-MS in the
Company, in the form of Exhibit "A" annexed hereto.
L. "Restated Venture Agreement" means the Second Amended and
Restated Joint Venture Agreement of the Company to be mutually agreed upon and
entered into by and between C-Stone and DIHC-MS on the Redemption Date in
accordance with Section 5 hereof.
N. "Retained Interest" means a Percentage Interest (as defined in
the Venture Agreement) equal to one percent (1%) of the total interests in the
Company, including one percent (1%) of all distributions to the venturers of the
Company and one percent (1%) of the income of the Company, which shall be
retained and owned by DIHC-MS until the Sale Date.
P. "Sale Date" means a date upon which the closing of C-Stone's
purchase of the Retained Interest shall take place, as designated in a notice by
C-Stone to DIHC-MS at least sixty (60) days prior to such date, which shall be a
date at any time within two (2) years after the Redemption Date; provided that
in the event the Closing Date shall not have occurred within two (2) years after
the Redemption Date for any reason whatsoever other than the willful misconduct
or gross negligence of DIHC-MS, its employees, agents or representatives (the
"Outside Date"), DIHC-MS shall have the right to (a) terminate the remaining
terms of this Agreement applicable to the transfer of the Retained Interest,
upon notice given not later than three (3) business days after the Outside Date
unless, as of the Outside Date, the closing of the transaction contemplated
hereby is prevented or barred by reason of force majeure, court order or
governmental action, or (b) enforce this Agreement by an action for specific
performance and/or damages.
R. "Sale Instrument" means the instrument of sale and assumption
pursuant to which C-Stone shall purchase the Retained Interest of DIHC-MS in the
Company, in the form of Exhibit "B" annexed hereto.
T. "Venture Agreement" means the Amended and Restated Joint Venture
Agreement of the Company dated January 27, 1989 between DIHC-MS and M.I. West.
3
<PAGE>
V. "Herein", "hereof" or "hereunder" or any similar term used in
this Agreement refers to this entire Agreement rather than only to the
particular provision in which the term is used.
X. References to Articles, Sections or other provisions are
references to articles, sections or other provisions hereof.
Z. The singular includes the plural and vice versa, and a reference
to any one gender, masculine, feminine or neuter, includes the other two.
BB. "Best knowledge of DIHC" or "best knowledge of DIHC-MS" means
the best knowledge of Robert T. Sorrentino, Michael F. Perkins and Craig W.
Johnston.
DD. Terms which are capitalized in this Agreement but are not
separately defined in this Agreement shall have the same meanings in this
Agreement as in the Stock Purchase Agreement.
IV. Admission of New Partner. On or immediately prior to the Redemption
Date and subject to Section 11.5 below, C-Stone will make a capital contribution
(the "Contribution") to the Company in an amount equal to Redemption Price (as
defined in the M.I. Redemption Agreement), plus any required interest thereon
pursuant to the M.I. Redemption Agreement, to be paid by the Company to
consummate the M.I. Redemption. The Contribution shall be paid to the Company by
electronic transfer of federal funds pursuant to wire instructions to be
provided to C-Stone by the Company. Upon payment of the Contribution, DIHC-MS
shall admit C-Stone as the New Partner to the Company subject to the terms of
the M.I. Redemption Agreement.
VI. M.I. Redemption. Upon admission of C-Stone as the New Partner, DIHC
shall cause the M.I. Redemption to be closed in accordance with the terms of the
M.I. Redemption Agreement.
VIII. Loan to Company. Immediately following the M.I. Redemption, C-Stone
shall loan an amount equal to the DIHC Redemption Price determined in accordance
with Section 6 below to the Company either by advancing additional funds under
the MSDI Loan, if the same can be advanced thereunder without exceeding the
maximum principal balance thereof, or making a new recourse loan to the Company
in such amount, such a new loan to be evidenced by a Promissory Note and Loan
Agreement to be executed by the Company in favor of C-Stone in the form of
Exhibit "C" annexed hereto. The proceeds of any such loan shall be paid to the
Company by electronic transfer of federal funds pursuant to wire instructions to
be provided to C-Stone by the Company.
X. DIHC Redemption. On the Redemption Date and immediately following the
M.I. Redemption and the funding of the loan referred to in Section 4 above,
DIHC-MS shall
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transfer all of its right, title and interest in and to the Interest to the
Company, and the Company shall redeem the Interest from DIHC-MS for the DIHC
Redemption Price (as defined in Section 6 below) and upon the other terms,
covenants and conditions contained herein (the "DIHC Redemption"). The closing
of the DIHC Redemption shall take place at the offices of Richards & O'Neil,
LLP, 885 Third Avenue, New York, New York or as otherwise agreed to by the
parties. Notwithstanding the foregoing, the closing of the DIHC Redemption may
be effected by mail pursuant to an escrow agreement reasonably satisfactory to
the parties hereto. Immediately following the completion of the M.I. Redemption
and the DIHC Redemption, C-Stone and DIHC-MS shall execute and deliver the
Restated Venture Agreement, pursuant to which C-Stone shall replace DIHC-MS as
the Managing Venturer (as defined in the Venture Agreement) of the Company.
XII. DIHC Redemption Price. The redemption price (the "DIHC Redemption
Price") to be paid to DIHC-MS for the Interest shall be an amount equal to
$2,867,000.00, plus an amount equal to $434.00 times the number of days between
the date of this Agreement and the Redemption Date, and such additional
adjustments (the "Post-Redemption Adjustments") to be made between the parties
within ninety (90) days after the Redemption Date on account of working capital
prorations under the Venture Agreement, which Post-Redemption Adjustments the
parties agree will be determined by Coopers & Lybrand L.L.P. The DIHC Redemption
Price shall be paid to DIHC-MS or its designee on the Redemption Date by
electronic transfer of federal funds pursuant to wire instructions to be
provided to the Company by DIHC-MS. In the event that the Post- Redemption
Adjustments result in (a) a credit to DIHC-MS, the Company agrees to promptly
wire the amount of such credit to DIHC-MS or its designee in accordance with the
wire instructions to be provided to the Company by DIHC-MS, or (b) a credit to
the Company, DIHC-MS agrees to promptly wire the amount of such credit to the
Company or its designee in accordance with the wire instructions to be provided
to DIHC-MS by the Company. The provisions of this Section 6 shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereunder.
XIV. Purchase and Sale of Retained Interest. On the Sale Date, C-Stone
shall purchase and acquire all of the right, title and interest of DIHC-MS in
and to the Retained Interest in the Company, and DIHC-MS shall sell and convey
the Retained Interest to C-Stone for the Purchase Price (hereinafter defined)
and upon the other terms, covenants and conditions contained herein (the
"Closing"). The Closing shall take place on the Sale Date at in the offices of
King & Spalding, 1185 Avenue of the Americas, New York, New York, or as
otherwise agreed to by the parties. Notwithstanding the foregoing, the Closing
may be effected by mail pursuant to an escrow agreement reasonably satisfactory
to the parties hereto.
XVI. Purchase Price. The Purchase Price (the "Purchase Price") to be paid
by C-Stone for the Retained Interest shall be an amount equal to $50,000.00. The
Purchase Price shall be paid to DIHC-MS or its designee on the Sale Date by
payment of $18,000.00 in cash by electronic transfer of federal funds pursuant
to wire instructions to be provided to C-Stone
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by DIHC-MS, and by transfer to DIHC of 2,000 validly issued, fully paid and
nonassessable shares of common stock of C-Stone with no par value (adjusted as
necessary to fully reflect the effect of any stock split, reverse stock split,
or stock dividend with respect to such common shares occurring after the date of
the Stock Purchase Agreement and prior to the date of Closing) having an agreed
value of $16.00 per share and not subject to adjustment notwithstanding any
changes in the stock price between the date of the Stock and Loan Purchase
Agreements and the Closing ("C-Stone Common Shares"), which shares shall be
subject to that certain Registration Rights and Voting Agreement of even date
herewith entered into between DIHC and Cornerstone pursuant to the Stock
Purchase Agreement.
XVIII.Representations, Warranties and Covenants of DIHC and DIHC-MS. DIHC
and DIHC-MS each hereby make the following representations, warranties and
covenants as of the date hereof (on the condition that all such representations,
covenants and warranties relate to the time period from and after the initial
acquisition of the Interest by DIHC-MS until the Redemption Date, and, with
respect to the Retained Interest, until the Sale Date):
B. DIHC-MS is a corporation duly organized and in good standing
under the laws of the State of Georgia, and, to the extent necessary, is in good
standing and qualified in the District of Columbia.
D. DIHC-MS has full corporate power and authority to execute and
deliver this Agreement, to transfer the Interest to the Company and the Retained
Interest to C-Stone and to comply with each of the provisions hereof. The
execution and delivery of this Agreement has been duly authorized and approved
by all necessary corporate action and no further consents or approvals are
required from any governmental authority or Person for DIHC-MS to enter into and
perform its obligations under this Agreement; provided, however, DIHC and
DIHC-MS make no representation as to whether any consent or approval from any of
the other venturers in MSA or AALP is required for DIHC-MS to enter into and
perform its obligations under this Agreement.
F. To the best knowledge of DIHC and DIHC-MS, except as otherwise
specifically disclosed herein, DIHC-MS is not currently in default, and the
execution, delivery and performance of its obligations under this Agreement will
not constitute a default by DIHC-MS, with respect to any of its obligations
under the Venture Agreement; provided, however, DIHC and DIHC-MS make no
representation as to whether any consent or approval from any of the other
venturers in MSA or AALP is required for DIHC-MS to enter into and perform its
obligations under this Agreement.
H. DIHC-MS owns the Interest and the Retained Interest free and
clear of all mortgages, pledges, liens, charges, claims, title retention or
other security arrangements or obligations to other Persons, options and
encumbrances of every kind, and DIHC-MS has not heretofore sold, assigned,
pledged, encumbered or in any way transferred or granted any rights
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with respect to the Interest or the Retained Interest other than the AALP
Mortgage and the MSDI Loan; provided, however, DIHC and DIHC-MS make no
representation as to whether any consent or approval from any of the other
venturers in MSA or AALP is required for DIHC-MS to enter into and perform its
obligations under this Agreement.
J. Except as provided in this Section 9.5, DIHC and DIHC-MS will
defend title to the Interest from and against all lawful claims and demands
whatsoever, at law or in equity, of all Persons; provided, however, DIHC and
DIHC-MS make no representation as to whether any consent or approval from any of
the other venturers in MSA or AALP is required for DIHC-MS to enter into and
perform its obligations under this Agreement, and, provided further, however,
DIHC and DIHC-MS shall have no obligation to defend the transfer of title to the
Interest to the Company or the transfer of title to the Retained Interest to
C-Stone from any claim or demand whatsoever, at law or in equity, under the
Underlying Venture Documents (as hereinafter defined) by any venturer in MSA or
AALP (any such claim or demand by any venturer in MSA or AALP under the
Underlying Venture Documents is hereinafter referred to as a "Venturer Claim").
Notwithstanding the foregoing, in the event of any Venturer Claim, DIHC and
DIHC-MS agree, at the sole cost and expense of C-Stone, to fully cooperate with
the Company, C-Stone and their Affiliates in the defense of any such Venturer
Claim, including, but not limited to, making available all files relating to the
interest of DIHC-MS in the Venture and agreeing to testify in any action or
proceeding relating to any Venturer Claim.
L. DIHC-MS has timely filed or obtained extensions for all federal
and foreign income tax returns and state, county, and local income, franchise,
property, sales, use, unemployment, and other tax returns in each state and
jurisdiction where such returns are required to be filed on or prior to the date
hereof, the Redemption Date or the Sale Date, as applicable, taking into account
any extensions of the filing deadlines which have been validly granted to
DIHC-MS, and such returns are and will be true and correct in all material
respects. DIHC-MS has paid in full or will pay in full before delinquency all
federal, foreign, state, county, and local income, franchise, property, sales,
use, and all other taxes and assessments (including penalties and interest in
respect thereof, if any) that have become or will become due with respect to any
period ended on or prior to the date hereof, the Redemption Date or the Sale
Date, as applicable, whether shown as due on such returns or not, or is
contesting in good faith or will contest in good faith such taxes and
assessments, in which event DIHC-MS has disclosed or will disclose the details
of such contests in writing to the Company and C-Stone.
N. To the best knowledge of DIHC-MS, there are no pending, and
DIHC-MS has not received any notice of any, federal, foreign, state, or local
tax disputes in which DIHC-MS is alleged to be liable for additional taxes.
P. To the best knowledge of DIHC and DIHC-MS, no claim or
investigation is pending or threatened by any state, local, or other
jurisdiction alleging that
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either DIHC or DIHC-MS has a duty to file tax returns and pay taxes or is
otherwise subject to the taxing authority of any jurisdiction in which either
DIHC or DIHC-MS has not filed tax returns, nor has DIHC nor DIHC-MS received any
notice or questionnaire from any such jurisdiction which suggests or asserts
that either DIHC or DIHC-MS may have a duty to file such returns and pay such
taxes, or otherwise is subject to the taxing authority of such jurisdiction.
R. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein in the manner herein
provided will violate any agreement or instrument to which DIHC or DIHC-MS is a
party or by which DIHC or DIHC-MS is bound; provided, however, DIHC and DIHC-MS
make no representation as to whether any consent or approval from any of the
other venturers in the Company, MSA or AALP is required for DIHC-MS to enter
into and perform its obligations under this Agreement.
T. To the best knowledge of DIHC and DIHC-MS, there is no action,
suit or proceeding pending or threatened against or affecting the Interest or
the Retained Interest in any court or before or by any federal, state, county or
municipal department, commission, board, bureau or agency or other governmental
instrumentality, except for that certain lawsuit by Western Avenue Associates
Limited Partnership filed in United States District Court for the District of
Columbia under case number 1:97CV02452 (the "Western Litigation").
V. DIHC-MS is not a "foreign person" as defined in Section 1445 of
the Internal Revenue Code (as amended, the "Code").
X. To the best knowledge of DIHC and DIHC-MS, there are no written
documents, agreements, correspondence or other instruments initiated or prepared
by DIHC or DIHC-MS relating to or dealing with transferability of an interest in
the Company or any venturer therein except for the agreements set forth in
Schedule A annexed hereto (collectively, the "Underlying Venture Agreements").
Z. Neither DIHC nor DIHC-MS is insolvent or will be rendered
insolvent by the consummation of the transactions contemplated hereunder.
BB. The Company is a general partnership organized and in good
standing under the laws of the District of Columbia and DIHC-MS and M.I. West
are its sole general partners as of the date hereof, and upon completion of the
M.I. Redemption contemplated herein and the admission of C-Stone as provided in
Section 2 above, the sole general partners of the Company shall be DIHC-MS and
C-Stone.
DD. The Company has full partnership power and authority to execute
and deliver this Agreement, to accept the transfer of the Interest from DIHC-MS,
and to comply with each of the provisions hereof. The execution and delivery of
this Agreement has been
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duly authorized and approved by the Company by DIHC-MS as its Managing Venturer
and no further consent or approvals are required from any governmental authority
or Person for the Company to enter into and perform its obligations under this
Agreement; provided, however, DIHC and DIHC-MS make no representation as to
whether any consent or approval from any of the other venturers in the Company,
MSA or AALP is required to enter into and perform its obligations under this
Agreement.
FF. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein in the manner herein
provided will violate any agreement or instrument to which the Company is a
party or by which the Company is bound, including, without limitation, the
Underlying Venture Agreements; provided, however, DIHC and DIHC-MS make no
representation as to whether any consent or approval from any of the other
venturers in the Company, MSA or AALP is required to enter into and perform its
obligations under this Agreement.
HH. The Company is not insolvent and will not be rendered insolvent
by the consummation of the transactions contemplated hereunder.
XX. Representations, Warranties and Covenants of C-Stone. C-Stone makes
the following representations, warranties and covenants:
B. C-Stone is a Nevada corporation duly organized and in good
standing under the laws of Nevada, and, to the extent necessary, in the District
of Columbia.
D. C-Stone has full power and authority to execute and deliver this
Agreement and to comply with each of the provisions hereof. The execution and
delivery of this Agreement has been duly authorized and approved by C-Stone and
no further consents or approvals are required from any governmental authority or
Person for C-Stone to enter into and perform its obligations under this
Agreement.
F. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein in the manner herein
provided will violate any agreement or instrument to which the C-Stone is a
party or by which C-Stone is bound.
H. C-Stone is not insolvent and will not be rendered insolvent by
the consummation of the transactions contemplated hereunder.
XXII. Additional Agreements.
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B. Conduct of Business of the Company Prior to Redemption: Competing
Transactions. DIHC and DIHC-MS covenant and agree that, between the date hereof
and the Redemption Date:
2. DIHC and DIHC-MS (a) shall cause the Company, MSA, AALP and
the Property to be operated in the ordinary and usual course of business
and consistent with the Company's prior practice; (b) shall not, directly
or indirectly through any officer, trust manager, employee, agent,
investment banker, financial advisor, attorney, accountant, broker or
other representative, initiate, solicit or effect the sale or listing for
sale of any direct or indirect interest in the Company, MSA, AALP or the
Property without the prior written consent of C-Stone, which shall not be
unreasonably withheld; (c) shall use their commercially reasonable efforts
to preserve the good will and advantageous relationships of the Company
with tenants, customers, suppliers, independent contractors and other
Persons material to the operation of the Property; (d) shall perform their
material obligations under any contracts or agreements affecting the
Property; and (e) shall not wilfully or knowingly take or permit any
action or omission which would cause any of their representations or
warranties contained herein to become inaccurate in any material respect
or any of the covenants made by them to be breached in any material
respects;
4. DIHC and DIHC-MS will not cause or permit any default to
occur by the Company, MSA or AALP under any indebtedness of the Company,
MSA or AALP, or any indebtedness secured by the Property, or cause or
permit any increase in the outstanding principal balance thereof (other
than the MSDI Loan), or cause or permit the Company, MSA or AALP to incur
any additional indebtedness or make any loans, advances or capital
contributions in or to any other Person, without the prior written consent
of C-Stone, which shall not be unreasonably withheld.
6. DIHC and DIHC-MS shall cause the Company, MSA and AALP to
continue to maintain all of its insurance policies with respect to the
Property in full force and effect.
8. DIHC-MS shall not effect any change in its capital
structure or initiate, solicit or effect any merger, consolidation, share
exchange, business combination, or similar transaction with any Person or
sell, or grant any option or right in respect of, any shares of its common
stock, any of its other voting securities or any of its securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, except that, with the
prior written consent of C-Stone, which consent shall not be unreasonably
withheld, DIHC-MS may undertake internal restructuring transactions.
10. DIHC-MS shall not, and shall not permit the Company, MSA
or AALP to, amend the articles or certificate of incorporation, charter,
bylaws,
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partnership agreement, or other comparable charter or organizational
documents of the Company, MSA or AALP, except to the extent necessary to
carry out internal restructuring transactions referred to in Subsection
11.1.4 above that are consented to by C-Stone in accordance herewith.
12. DIHC and DIHC-MS will not cause or permit any default to
occur by the Company, MSA or AALP under any of the contracts or agreements
affecting the Property, and shall cause the Company, MSA and AALP to
perform their obligations under such contracts and agreements, and shall
not permit the Company, MSA or AALP to modify, amend or terminate any such
contracts or agreements without the prior written consent of C-Stone,
which shall not be unreasonably withheld.
14. Without the prior written consent of C-Stone (which shall
not be unreasonably withheld), DIHC and DIHC-MS shall not permit the
Company, MSA or AALP to (i) enter into any new contract or agreement
regarding the Company, MSA, AALP or the Property or grant concessions
regarding any existing contract or agreement affecting the Company, MSA,
AALP or the Property, or (ii) enter into any lease for space in the
Property, or modify, amend, renew or terminate (except in connection with
a tenant default) any existing lease for space in the Property.
16. Notwithstanding the provisions of this Section 11.1, the
parties acknowledge and agree that, with respect to the Company, MSA and
AALP, neither DIHC nor DIHC-MS own (directly or indirectly) all of the
equity interest in such entities and therefore do not unilaterally control
all actions and decisions of such entities, except that as of the date
hereof and up until the Redemption Date DIHC-MS is and shall remain the
Managing Venturer of the Company pursuant to the Venture Agreement.
Accordingly, the parties agree that, with respect to the Company, MSA and
AALP, DIHC and DIHC-MS shall be deemed to have complied with the foregoing
covenants in the event that DIHC or DIHC- MS performs such covenants
consistent with their rights under, and subject to any limitations on
their authority or fiduciary duties under, the joint venture or
partnership agreements for such entities or applicable law.
D. Commercially Reasonable Efforts; Notification. Subject to the
terms and conditions of this Agreement, the parties shall (a) use all
commercially reasonable efforts to cooperate with one another in (i) determining
which filings are required to be made prior to the Redemption Date or the Sale
Date with, and which consents, approvals, permits or authorizations are required
to be obtained prior to the Redemption Date or the Sale Date from, governmental
or regulatory authorities of the United States, the several states and foreign
jurisdictions and any third parties in connection with the transactions
contemplated by this Agreement, and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits and authorizations; (b) use
all commercially reasonable efforts to obtain in writing any consents required
from third parties to effectuate the transactions contemplated by
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this Agreement, such consents to be in form reasonably satisfactory to the
parties hereto; and (c) use all commercially reasonable efforts to take, or
cause to be taken, all other action and do or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. Prior to the Redemption Date and
the Sale Date, as applicable, the parties hereto shall deliver to the others
information supplementing or amending the representations and warranties set
forth in Articles 9 and 10 of this Agreement to set forth the information
relating to any event or circumstance arising after the date of this Agreement,
in order to make such representations and warranties complete and accurate as of
the date of such supplement or amendment.
F. Transfer and Gains Taxes. The parties hereto shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any transfer or gain, sales, use,
recording, intangible, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees and any similar taxes which
become payable in connection with the transactions contemplated hereby,
excluding state and federal income taxes (together with any related interest,
penalties or additions to such taxes, "Transfer and Gains Taxes"). Any Transfer
and Gains Taxes due and payable in connection with the transactions contemplated
by this Agreement shall be shared equally between DIHC-MS and C-Stone.
H. Access to Information.
2. From the date hereof until the Redemption Date, upon
reasonable notice, each party and their respective officers, directors,
employees, agents, accountants and counsel shall: (i) afford the officers,
employees and authorized agents, accountants, counsel, financing sources
and representatives of the other party reasonable access, during normal
business hours, to the properties, offices, other facilities, books and
records of such party and to those officers, directors, employees, agents,
accountants and counsel of such party who have any knowledge relating to
such party or its properties, and (ii) furnish to the officers, employees
and authorized agents, accountants, counsel, financing sources and
representatives of the other party such additional financial and operating
data and other information regarding it and its properties as the other
party may from time to time reasonably request.
4. In order to facilitate the resolution of any claims made
against or incurred by DIHC or DIHC-MS prior to the Redemption Date, for a
period of seven (7) years after the Redemption Date, C-Stone or the
Company shall (i) retain the books and records of DIHC and DIHC-MS which
are transferred to C-Stone or the Company pursuant to this Agreement, if
any, relating to periods prior to the Redemption Date in a manner
reasonably consistent with the prior practices of DIHC and DIHC-MS, and
(ii) upon reasonable notice, afford the officers, employees and authorized
agents and representatives of DIHC and DIHC-MS reasonable access
(including the right to make,
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at their expense, photocopies), during normal business hours, to such
books and records.
6. In order to facilitate the resolution of any claims made by
or against or incurred by C-Stone or the Company after the Redemption Date
or for any other reasonable purpose, for a period of seven (7) years
following the Redemption Date, DIHC and DIHC-MS, as applicable, shall (i)
retain all books and records of DIHC and DIHC-MS which are not transferred
to C-Stone or the Company pursuant to this Agreement and which relate to
the Company, MSA, AALP or the Property for the period prior to the
Redemption Date (including, without limitation, employee files relating to
the employees of DIHC and DIHC-MS which do not become employees of
C-Stone), and (ii) upon reasonable notice, afford the officers, employees
and authorized agents and representatives of C-Stone and the Company
reasonable access (including the right to make photocopies at their
expense), during normal business hours, to such books and records.
8. Notwithstanding the provisions of this Section 11.4, the
parties acknowledge and agree that, with respect to the Company, MSA and
AALP, neither DIHC nor DIHC-MS own (directly or indirectly) all of the
equity interest in such entities and therefore do not unilaterally control
all actions and decisions of such entities, except that as of the date
hereof and up until the Redemption Date DIHC-MS is and shall remain the
Managing Venturer of the Company pursuant to the Venture Agreement.
Accordingly, the parties agree that, with respect to the Company, MSA and
AALP, DIHC and DIHC-MS shall be deemed to have complied with the foregoing
covenants regarding access to and retention of records in the event that
DIHC or DIHC-MS performs such covenants consistent with their rights
under, and subject to any limitations on their authority or fiduciary
duties under, the joint venture or partnership agreements for such
entities or applicable law.
J. Performance under MI Redemption Agreement. Upon the making by
C-Stone of the Contribution as specified in Section 2 above, DIHC and DIHC-MS
shall cause the Company to redeem the interest of M.I. West in the Company
pursuant to the M.I. Redemption Agreement, the Percentage Interest of C-Stone in
the Company shall be increased to equal the former Percentage Interest of M.I.
West. C-Stone covenants to make the Contribution as and when requested by DIHC
and DIHC-MS upon no less than ten (10) days' prior written notice and within the
permissible time periods for a "Closing" under the M.I. Redemption Agreement,
and DIHC and DIHC-MS covenant and agree that, upon the making by C-Stone of the
Contribution, DIHC shall perform its obligations under the M.I. Redemption
Agreement as provided therein in a timely manner, and shall cause the redemption
of the interest of M.I. West in the Company and the resultant increase in the
Percentage Interest of C-Stone in the Company. C-Stone agrees to indemnify DIHC
and its Affiliates as of the date hereof for all obligations and liabilities of
DIHC under Section 10 of the M.I. Redemption Agreement in respect of capital
calls by the Company, and agrees to fund all
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capital calls required to be made on behalf of M.I. West pursuant to Section 10
of the M.I. Redemption Agreement. Any such capital calls funded by C-Stone on
behalf of M.I. West and any other payments made by C-Stone pursuant to the
indemnity in this Section 11.5 shall be treated as a loan to the Company, and
either treated as an advance under the MSDI Loan, if the same can be advanced
thereunder without exceeding the maximum principal balance thereof, or as a new
recourse loan to the Company to be evidenced by a Promissory Note and Loan
Agreement from the Company in favor of C-Stone substantially in the form of
Exhibit "C" annexed hereto. In the event the Closing under the M.I. Redemption
Agreement is not closed solely due to a wilful default by DIHC, DIHC shall
reimburse C-Stone for any such loan made by C-Stone, and this Agreement shall
thereupon be terminated and of no further force or effect.
L. Western Litigation. The parties acknowledge that Western Avenue
Associates Limited Partnership, one of the partners in AALP, has filed the
Western Litigation against, among others, the Company, DIHC and DIHC-MS. The
Company, DIHC and DIHC-MS hereby covenant and agree, for the period between the
date hereof and the completion of the DIHC Redemption, to keep C-Stone fully
informed of the progress of all matters occurring in connection with the Western
Litigation.
XXIV. Conditions to Obligations.
B. Conditions to Obligations of DIHC and DIHC-MS. The obligations of
DIHC and DIHC-MS to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Redemption Date or the
Sale Date, as applicable, of each of the following conditions unless waived by
DIHC and DIHC-MS:
2. The representations and warranties of C-Stone contained in
this Agreement shall have been true and correct when made and shall be
true and correct in all material respects as of the Redemption Date or the
Sale Date, as applicable, with the same force and effect as if made as of
the Redemption Date or the Sale Date, other than such representations and
warranties as are made as of another date; the covenants and agreements
contained in this Agreement to be complied with by C-Stone on or before
the Redemption Date or the Sale Date, as applicable, shall have been
complied with in all material respects, and DIHC and DIHC-MS shall have
received a certificate from C-Stone to such effect signed by an
appropriate officer of C-Stone. This condition shall be deemed satisfied
unless breaches of C-Stone's representations, warranties and covenants in
this Agreement are, in the aggregate, reasonably expected to have or have
had a Purchaser Material Adverse Effect or adversely affect any of the
Seller's collateral under the Purchase Money Mortgages in any material
respect.
4. Other than the claims made in the Western Litigation as of
the date hereof, no Action shall have been commenced by or before any
Governmental Authority against any party to this Agreement, seeking to
restrain or materially and
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adversely alter the transactions contemplated by this Agreement which, in
the reasonable, good faith determination of DIHC and DIHC-MS, is likely to
render it impossible or unlawful to consummate such transactions;
provided, however, that the provisions of this Section 12.1.2 shall not
apply if DIHC or DIHC-MS has directly or indirectly solicited or
encouraged any such Action.
6. Since the date of this Agreement, there shall not have been
any change, circumstance or event in the business or prospects of C-Stone
which has had or would reasonably be expected to have a Purchaser Material
Adverse Effect or adversely affect any of the Seller's collateral under
the Purchase Money Mortgages in any material respect and DIHC shall have
received a certificate of the chief executive officer or chief financial
officer of C-Stone certifying to such effect.
8. All consents and waivers (including, without limitation,
waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained, other than such consents and waivers
from third parties, which, if not obtained, would not result individually
or in the aggregate, in a Seller Material Adverse Effect or a Purchaser
Material Adverse Effect.
10. DIHC and DIHC-MS shall have received a copy of (i) the
Certificate of Incorporation of C-Stone certified by the Secretary of
State of Nevada as of a date not earlier than fifteen (15) business days
prior to the Redemption Date or Sale Date, as applicable, and accompanied
by a certificate of the Secretary or Assistant Secretary of C-Stone, dated
as of the Redemption Date or Sale Date, as applicable, stating that no
amendments have been made to such Certificate of Incorporation since such
date; and (ii) by Bylaws of C-Stone, certified by the Secretary or
Assistant Secretary of C-Stone.
12. The execution of this Agreement or consummation of the
M.I. Redemption and the DIHC Redemption will not, in the reasonable
opinion of counsel to DIHC and DIHC-MS, result in a termination of the
Company pursuant to Section 708 of the Internal Revenue Code of 1986, as
amended ("IRC"). In the event counsel for DIHC and DIHC-MS reasonably
determine that such a termination is likely to occur, DIHC, DIHC-MS and
C-Stone agree to cooperate in good faith with each other and with M.I.
West to restructure the transactions contemplated hereunder in such a
mutually agreeable manner as will most closely accomplish the purpose and
intent of the transactions contemplated hereunder without resulting in
such a termination of the Company.
D. Conditions to Obligations of C-Stone. The obligations of C-Stone
to consummate the transactions contemplated by this Agreement shall be subject
to the
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fulfillment, at or prior to the Redemption Date or the Sale Date, as applicable,
of each of the following conditions unless waived by C-Stone:
2. The representations and warranties of DIHC and DIHC-MS
contained in this Agreement shall have been true and correct when made and
shall be true and correct in all material respects as of the Redemption
Date or the Sale Date, as applicable, with the same force and effect as if
made as of the Redemption Date or the Sale Date, other than such
representations and warranties as are made as of another date; the
covenants and agreements contained in this Agreement to be complied with
by DIHC or DIHC-MS on or before the Redemption Date or the Sale Date, as
applicable, shall have been complied with in all material respects, and
C-Stone shall have received certificates from DIHC and DIHC-MS to such
effect signed by appropriate officers thereof. This condition shall be
deemed satisfied unless breaches of the representations, warranties and
covenants of DIHC and DIHC-MS in this Agreement are, in the aggregate,
reasonably expected to have or have had a Seller Material Adverse Effect.
4. Other than the claims made in the Western Litigation as of
the date hereof, no Action shall have been commenced by or before any
Governmental Authority against any party to this Agreement, seeking to
restrain or materially and adversely alter the transactions contemplated
by this Agreement which C-Stone believes, in its sole discretion, is
likely to render it impossible or unlawful to consummate such transactions
or which could have a Seller Material Adverse Effect; provided, however,
that the provisions of this Section 12.2.2 shall not apply if C-Stone has
solicited or encouraged any such Action.
6. Since the date of this Agreement, there shall not have been
any change, circumstance or event in the Property or the business or
prospects of the Company which has had or would reasonably be expected to
have a Seller Material Adverse Effect and C-Stone shall have received a
certificate of an appropriate officer of DIHC or DIHC-MS certifying to
such effect.
8. All consents and waivers (including, without limitation,
waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained, other than such consents and waivers
from third parties, which, if not obtained, would not result individually
or in the aggregate, in a Seller Material Adverse Effect or a Purchaser
Material Adverse Effect.
10. C-Stone shall have received a copy of the Venture
Agreement of the Company accompanied by a certificate of DIHC-MS dated as
of the Redemption Date stating that no amendments have been made to such
Venture Agreement since the date thereof.
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12. C-Stone shall have received a rent roll with respect to
the Property (prepared by the Property manager) certified as to knowledge
of DIHC-MS to be true and correct in all material respects by an
appropriate officer of DIHC-MS including a description of all Space Leases
in effect as of the Redemption Date, the rentals payable by each tenant
thereunder (including, without limitation, reimbursements for common area
expenses), the original and current balance of each security deposit
delivered under each Space Lease, and all delinquencies and defaults under
each Space Lease.
XXVI. Documents Upon DIHC Redemption.
B. In addition to the documents and instruments contemplated
elsewhere in this Agreement, upon the DIHC Redemption, and as a condition
thereof, DIHC and DIHC-MS, as applicable, shall deliver:
2. A duly executed and acknowledged counterpart of the
Redemption Instrument.
4. A duly executed and acknowledged counterpart of the
Restated Venture Agreement.
6. A duly executed and acknowledged Certification
substantially in the form attached hereto as Exhibit "D", certifying that
the representations and warranties of DIHC and DIHC-MS set forth in
Article 9 hereof are true and correct in all material respects as of the
Redemption Date.
8. A duly executed and acknowledged Certification of
Non-Foreign Status of DIHC-MS as described in Treasury Regulation Section
1.1445-2(b).
10. A Secretary's Certificate of DIHC-MS regarding its
Corporate Resolution to enter into the DIHC Redemption.
12. A Certificate of Incumbency of DIHC-MS.
14. A Certificate of Good Standing (or its equivalent) for
DIHC-MS.
16. A Certificate of Good Standing (or its equivalent) for the
Company.
D. In addition to the payments, documents and instruments
contemplated elsewhere in this Agreement, upon the DIHC Redemption, and as a
condition thereof, the Company and C-Stone, as applicable, shall:
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2. Pay the DIHC Redemption Price in accordance with and
subject to the terms of Section 6 of this Agreement.
4. A duly executed and acknowledged counterpart of the
Restated Venture Agreement.
6. Deliver a duly executed and acknowledged Certification
substantially in the form attached hereto as Exhibit "E", certifying that
the representations and warranties of C-Stone set forth in Article 10
hereof are true and correct in all material respects as of the Redemption
Date.
8. Deliver a Secretary's Certificate of C-Stone regarding its
Corporate Resolution to enter into the DIHC Redemption.
10. Deliver a Certificate of Incumbency of C-Stone.
12. Deliver a duly executed and acknowledged counterpart of
the Redemption Instrument.
14. Deliver a Certificate of Good Standing (or its equivalent)
for C-Stone.
XXVIII. Documents Upon Closing.
B. In addition to the documents and instruments contemplated
elsewhere in this Agreement, upon the Closing of C-Stone's purchase of the
Retained Interest, and as a condition thereof, DIHC and DIHC-MS, as applicable,
shall deliver:
2. A duly executed and acknowledged counterpart of the Sale
Instrument.
4. A duly executed and acknowledged Certification
substantially in the form attached hereto as Exhibit "D", certifying that
the representations and warranties of DIHC and DIHC-MS set forth in
Article 9 hereof are true and correct in all material respects as of the
Sale Date.
6. A duly executed and acknowledged Certification of
Non-Foreign Status of DIHC-MS as described in Treasury Regulation Section
1.1445-2(b).
8. A Secretary's Certificate of DIHC-MS regarding its
corporation resolution to consummate the sale of the Retained Interest.
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10. A Certificate of Incumbency of DIHC-MS.
12. A Certificate of Good Standing (or its equivalent) for
DIHC-MS.
D. In addition to the payments, documents and instruments
contemplated elsewhere in this Agreement, upon the Closing of C-Stone's purchase
of the Retained Interest, and as a condition thereof, the Company or C-Stone, as
the case may be, shall:
2. Pay the cash portion of the Purchase Price to DIHC-MS or
its designee and deliver stock certificates evidencing the C-Stone Common
Shares to be issued to DIHC in accordance with and subject to the terms of
Section 8 of this Agreement.
4. Deliver a duly executed and acknowledged Certification
substantially in the form attached hereto as Exhibit "E", certifying that
the representations and warranties of C-Stone set forth in Article 10
hereof are true and correct in all material respects as of the Sale Date.
6. Deliver a Secretary's Certificate of C-Stone regarding its
Corporate Resolution to consummate the purchase of Retained Interest.
8. Deliver a Certificate of Incumbency of C-Stone.
10. Deliver a duly executed and acknowledged counterpart of
the Sale Instrument.
12. Deliver a Certificate of Good Standing (or its equivalent)
for C-Stone.
14. Deliver a Certificate of Good Standing (or its equivalent)
for the Company.
XXX. Closing Costs. Except as set forth in Section 11.3, all costs
incurred by either party in connection with the closing of the transactions
hereunder, whether or not specifically mentioned herein (including, but not
limited to, legal fees and expenses in connection with the preparation,
negotiation and closing of the transactions contemplated herein or any other
transaction between the parties or their Affiliates) shall be paid for by the
party which incurred such cost or expense. The provisions of this Article 15
shall survive the consummation of the transactions contemplated herein.
XXXII. Indemnification.
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B. Survival of Representations and Warranties. The representations
and warranties of DIHC, DIHC-MS and C-Stone contained in this Agreement shall
survive the consummation of the transactions contemplated in this Agreement
until March 31, 1999. Neither the period of survival nor the liability of either
party hereto with respect to such party's representations and warranties shall
be reduced by any investigation made at any time by or on behalf of the party
seeking indemnification. If written notice of a claim has been given prior to
the expiration of the applicable representations and warranties by the party
seeking indemnification to the other party, then the relevant representations
and warranties shall survive as to such claim until the claim has been finally
resolved.
D. Indemnification.
2. C-Stone and its Affiliates (including, without limitation,
the Company from and after the Redemption Date), officers, directors,
employees, agents, successors and assigns (each a "C-Stone Indemnified
Party") shall be indemnified and held harmless by DIHC and DIHC-MS for any
and all Loss (as hereinafter defined) arising out of or resulting from the
breach of any representation or warranty made by DIHC or DIHC-MS contained
in this Agreement or the breach of any covenant or agreement by DIHC or
DIHC-MS contained in this Agreement.
4. DIHC, DIHC-MS and their respective Affiliates, officers,
directors, employees, agents, successors and assigns (each a "DIHC
Indemnified Party"; a C-Stone Indemnified Party or a DIHC Indemnified
Party sometimes herein referred to as an "Indemnified Party") shall be
indemnified and held harmless by C-Stone for any and all Loss arising out
of or resulting from the breach of any representation or warranty made by
C-Stone contained in this Agreement or the breach of any covenant or
agreement by C-Stone contained in this Agreement.
6. As used herein the term "Loss" or "Losses" means and
Liabilities, losses, damages, claims, costs and expenses, interests,
awards, judgments and penalties (including, without limitation, attorneys'
and consultants' fees and expenses) actually suffered or incurred by any
Indemnified Party (including, without limitation, any Action brought or
otherwise initiated by any Indemnified Party). In the event of any Loss
incurred by DIHC or any Affiliate thereof, for purposes of determining the
amount DIHC is entitled to recover hereunder on account of such Loss (but
not for purposes of determining the threshold amount of Losses or the cap
on liability under Section 16.3), DIHC's Loss shall be "grossed up" to an
amount equal to the quotient of (i) the amount of such Loss divided by
(ii) a fraction the numerator of which is the aggregate number of issued
and outstanding shares of C-Stone Common Shares and Purchaser Preferred
Shares (as defined in the Stock Purchase Agreement) owned by Persons other
than DIHC and PGGM as of the date on which any payment is made by C-Stone
on account of such Loss, and the denominator of which is the
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aggregate amount of issued and outstanding C-Stone Common Shares and
Purchaser Preferred Shares as of such date.
8. To the extent that either party's undertakings set forth in
this Section 16.2 may be unenforceable, the party which is liable for the
undertaking shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all
Losses incurred by the Indemnified Party.
10. An Indemnified Party shall give the party from which it is
seeking indemnification hereunder (the "Indemnitor") notice of any matter
which an Indemnified Party has determined has given or could give rise to
a right of indemnification under this Agreement, within thirty (30) days
of such determination, stating the amount of the Loss, if known, and
method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of
indemnification is claimed or arises. The obligations and liabilities of
the Indemnitor under this Article 16 with respect to Losses arising from
claims of any third party which are subject to the indemnification
provided for in this Article 16 ("Third Party Claims") shall be governed
by and contingent upon the following additional terms and conditions: if
an Indemnified Party shall receive notice of any Third Party Claim, the
Indemnified Party shall give the Indemnitor notice of such Third Party
Claim within thirty (30) days of the receipt by the Indemnified Party of
such notice; provided, however, that the failure to provide such notice
shall not release the Indemnitor from any of its obligations under this
Article 16 except to the extent the Indemnitor is materially prejudiced by
such failure and shall not relieve the Indemnitor from any other
obligation or liability that it may have to any Indemnified Party
otherwise than under this Article 16. If the Indemnitor acknowledges in
writing its obligation to indemnify the Indemnified Party hereunder
against any Losses that may result from such Third Party Claim, then the
Indemnitor shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the Indemnified Party within
five (5) days of the receipt of such notice from the Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable
judgment of the Indemnified Party for the same counsel to represent both
the Indemnified Party and the Indemnitor, then the Indemnified Party shall
be entitled to retain its own counsel, in each jurisdiction for which the
Indemnified Party determines counsel is required, at the expense of the
Indemnitor. In the event the Indemnitor exercises the right to undertake
any such defense against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Indemnitor in such defense and
make available to the Indemnitor, at the Indemnitor's expense, all
witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under the Indemnified Party's control relating
thereto as is reasonably required by the Indemnitor. Similarly, in the
event the Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party
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Claim, the Indemnitor shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Indemnitor's
expense, all such witnesses, records, materials and information in the
Indemnitor's possession or under the Indemnitor's control relating thereto
as is reasonably required by the Indemnified Party. No such Third Party
Claim may be settled by the Indemnitor without the written consent of the
Indemnified Party, which will not be unreasonably withheld or delayed.
F. Limitations on Recovery. With respect to any claim for the breach
of representations and warranties hereunder, no claim may be made by an
Indemnified Party against an Indemnitor for indemnification hereunder with
respect to any individual item of Loss unless the aggregate of all Losses for
which the Indemnified Party is seeking recovery from an Indemnitor under this
Article 16 for breaches of representations or warranties plus any Losses for
which such Indemnified Party or any Affiliate thereof is seeking indemnity under
Article VII of the Stock Purchase Agreement and Article VII of the Loan Purchase
Agreement for breaches of representations or warranties shall exceed Ten Million
and No/100 Dollars ($10,000,000.00), except in the event the Indemnified Party
is seeking indemnity as a result of a wilful and intentional breach by the
Indemnitor of any of its material representations or warranties set forth in
this Agreement, in which such case the foregoing limitations shall not be
applied and the Indemnified Party shall be entitled to recover its Losses to the
full extent thereof. In the event the Indemnified Party is entitled to seek
recovery for breaches of representations or warranties hereunder, the indemnity
shall be for the full extent of all the Losses to the Indemnified Party
resulting from such breach exceeding and excluding the first $10,000,000.00
under this Agreement and the Stock Purchase Agreement and the Loan Purchase
Agreement aggregated. Notwithstanding the foregoing, the aggregate liability for
Losses for breaches or representations and warranties of any Indemnitor (and its
Affiliates) under this Article 16 and Article VII of the Stock Purchase
Agreement and Article VII of the Loan Purchase Agreement shall be limited to an
aggregate amount of One Hundred Million and No/100 Dollars ($100,000,000.00),
except in the event the Indemnified Party is seeking indemnity hereunder as a
result of the wilful and intentional breach by the Indemnitor of any of its
material representations or warranties set forth in this Agreement in which
event the foregoing limitation on liability shall not be applicable and the
Indemnified Party shall be entitled to recover its Losses to the full extent
thereof.
Payments made by an Indemnitor hereunder shall be limited to
the amount of the Losses that remain after deducting therefrom any insurance
proceeds and any indemnity, contribution or other payment actually received by
the Indemnified Party from any Person with respect thereto.
H. Western Litigation. Notwithstanding the foregoing, the provisions
of this Article 16 shall not apply to any claims made by a C-Stone or DIHC
Indemnified Party with respect to the Western Litigation. Any such claim shall
be governed by and subject to that certain Indemnity Agreement of even date
herewith between DIHC and C-Stone.
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XXXIV. Termination.
B. Termination. This Agreement may be terminated at any time prior
to the completion of the DIHC Redemption:
2. by mutual written consent duly authorized by the respective
Boards of Directors of DIHC and C-Stone;
4. by C-Stone, upon a material breach of any representation,
warranty, covenant or agreement on the part of DIHC or DIHC-MS set forth
in this Agreement if such breach is reasonably expected to, or has, a
Seller Material Adverse Effect or a Purchaser Material Adverse Effect, or
if any material representation or warranty of DIHC or DIHC-MS shall have
become untrue in any material respect such that the conditions set forth
in Section 12.2 would be incapable of being satisfied prior to the
Redemption Date;
6. by DIHC and DIHC-MS, upon a material breach of any
representation, warranty, covenant or agreement on the part of C-Stone set
forth in this Agreement if such breach is reasonably expected to, or has,
a Purchaser Material Adverse Effect, or if any material representation or
warranty of C-Stone shall have become untrue in any material respect such
that the conditions set forth in Section 12.1 would be incapable of being
satisfied prior to the Redemption Date;
8. by C-Stone, if any judgment, injunction, order, decree or
action by any Governmental Authority preventing the consummation of the
transactions contemplated hereby or requiring actions as a condition
precedent to the consummation of such transactions which would result in a
Purchaser Material Adverse Effect or Seller Material Adverse Effect shall
have become final and nonappealable;
10. by DIHC and DIHC-MS, if any judgment, injunction, order,
decree or action by any Governmental Authority preventing the consummation
of the transactions contemplated hereby or requiring actions as a
condition precedent to the consummation of such transactions which would
result in a Purchaser Material Adverse Effect (or the impairment in any
material respect of any of the Seller's collateral under the Purchase
Money Mortgages) shall have become final and nonappealable; or
12. by C-Stone, if the M.I. Redemption Agreement is terminated
prior to the completion of the M.I. Redemption for any reason, other than
a default by C-Stone of its obligations under this Agreement.
D. Effect of Termination. In the event of termination of this
Agreement as provided in Section 17.1, this Agreement shall forthwith become
void and have no effect
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(except for the provisions hereof which expressly survive termination of this
Agreement, together with the definitions set forth herein which are operative
with respect to such provisions and the operative provisions hereof such as
"Notices" and "Governing Law" and the like, which shall survive termination
subject to any limitations on or survival described therein), without any
liability or obligation on the part of the parties except to the extent that
such termination results from a wilful and intentional breach by a party of any
of its material representations, warranties, covenants or agreements set forth
in this Agreement. In the event of a wilful, intentional breach by a party of
any of its material representations, warranties, covenants or agreements, the
non-defaulting party(ies) shall have the right to seek specific performance of
this Agreement and shall have the right to pursue any and all other rights or
remedies available at law, in equity or under this Agreement (including, without
limitation, to seek indemnification under Article 16) without regard to the
limitations set forth in Section 16.3.
XXXVI. Transfer of Rights. C-Stone shall have the right to transfer its
rights under this Agreement to become the New Partner and/or to purchase the
Retained Interest to any of its Affiliates without the consent of DIHC-MS, so
that instead of C-Stone becoming the New Partner or purchasing the Retained
Interest, such Affiliate may become the New Partner, or purchase the Retained
Interest from DIHC-MS for an amount equal to the Redemption Price, and otherwise
upon the terms and conditions set forth herein; provided, however,
notwithstanding any transfer of C-Stone's rights under this Agreement to any
Affiliate, C-Stone shall remain liable with respect to all representations,
warranties, covenants, indemnities, obligations and liabilities provided by
C-Stone to DIHC-MS pursuant to the terms hereof; and provided further, however,
any such transfer of rights to an Affiliate shall only be effective in the event
the Affiliate expressly assumes the liability of C-Stone with respect to the
obligations transferred to it pursuant to the terms hereof and the Affiliate and
C-Stone shall be jointly and severally liable therefor. Any other transfer may
be denied by DIHC-MS for any reason.
XXXVIII. Capital Calls and Indemnity. C-Stone hereby agrees that, if the
Company receives a notice after the date hereof to make a capital contribution
to MSA pursuant to the Joint Venture Agreement for MSA, DIHC-MS shall have no
obligation to fund its proportionate share of any such capital contribution and
DIHC-MS shall be relieved and released from any such obligation, unless the
closing of the DIHC Redemption or C-Stone's purchase of the Retained Interest
contemplated hereunder does not close solely due to a wilful default by DIHC.
C-Stone agrees to cause to be made any such capital contribution required from
DIHC-MS subsequent to the date hereof. C-Stone further agrees to indemnify and
hold harmless DIHC-MS and its Affiliates from any cost, claim, liability, damage
or expense (including, but not limited to, any reasonable attorneys' fees and
disbursements) relating to the failure of C-Stone to timely make any such
capital contribution or any other matter relating to the Company, MSA, AALP
and/or the Property arising from and after the closing of the DIHC Redemption
and not caused by the wilful acts or gross negligence of DIHC or DIHC-MS. Any
such capital calls funded by C-Stone on behalf of DIHC-MS and any other
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payments made by C-Stone pursuant to the indemnity in this Section 19 shall be
treated as a loan to the Company, and either treated as an advance under the
MSDI Loan, if the same can be advanced thereunder without exceeding the maximum
principal balance thereof, or as a new recourse loan to the Company to be
evidenced by a Promissory Note and Loan Agreement from the Company in favor of
C-Stone substantially in the form of Exhibit "C" annexed hereto. In the event
this Agreement is terminated solely due to a wilful default by DIHC-MS, DIHC-MS
shall reimburse C-Stone for any such loan made by C-Stone and any other payments
made by C-Stone pursuant to the indemnity under this Section 19. Except as
expressly set forth above, C-Stone hereby waives any claims it may have against
DIHC or DIHC-MS, if any, for failure on the part of DIHC or DIHC-MS or any
Affiliate thereof to fund or make captial contributions to the Company.
XL. Notices. All notices, demands, or requests ("Notices") required or
desired to be given hereunder shall be given in writing and sent in the manner
provided under the Venture Agreement except that:
B. Notices to DIHC and DIHC-MS (and to the Company prior to the
closing of the DIHC Redemption) shall be sent to the address for DIHC set forth
above, Attention: Mr. Robert T. Sorrentino, with a copy sent in like manner to
Richards & O'Neil, LLP, 885 Third Avenue, New York, New York 10022, Attention:
Robert M. Safron, Esq.; and
D. Notices to C-Stone (and to the Company after the date of the
closing of the DIHC Redemption) shall be sent to the address for C-Stone set
forth above, Attention Mr. John S. Moody, with a copy sent in like manner to
King & Spalding, 191 Peachtree Street, N.E., Atlanta, Georgia 30303, Attention:
William B. Fryer, Esq.
XLII. Broker. Each party represents and warrants to the other that there
is no broker in connection with this transaction and hereby agrees to indemnify,
save harmless and defend the other from and against all claims, losses,
liabilities and expenses, including reasonable attorneys' fees, arising out of
any claim made by a broker, finder or other intermediary who claims to have been
engaged by such party in connection with the transaction which is the subject of
this Agreement. The provisions of this Article 21 shall survive the Closing
Date.
XLIV. Miscellaneous.
B. Subject to the limitations on assignment set forth herein, the
provisions of this Agreement shall inure to the benefit of and bind the heirs,
executors, administrators, successors and assigns of the respective parties.
D. This Agreement shall be governed by, and construed in accordance
with, the laws of the District of Columbia.
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F. The parties shall each execute, acknowledge and deliver to the
others such instruments and take such action, in addition to the instruments and
actions provided for herein, as the others may reasonably request in order to
effectuate the express purposes or provisions of this Agreement or the
transactions contemplated hereunder.
H. Each party hereby represents that, except as set forth in this
Agreement or in the other instruments and documents executed and delivered
pursuant to this Agreement, no party has made any representations or warranties
to any other party with respect to the Interest, the Retained Interest or the
Company.
J. The invalidity or unenforceability of any one or more provisions
of this Agreement shall in no way affect any other provisions of this Agreement.
L. To the extent there are any warranties, representations,
agreements, obligations, guaranties or benefits (collectively, the "Benefits")
which inure to the benefit of the Company from any Person or governmental
authority, effective as of the Redemption Date, DIHC-MS shall assign to the
Company (without any representation, warranty or recourse whatsoever) all of the
right, title and interest of DIHC-MS, if any, in the Benefits, except to the
extent any of the Benefits relates to the Retained Interest, and as of the Sale
Date, DIHC-MS shall assign to C-Stone (without any representation, warranty or
recourse whatsoever) all of the right, title and interest of DIHC-MS, if any, in
the Benefits relating to the Retained Interest.
N. Upon the closing of the DIHC Redemption, DIHC-MS shall be deemed
to have waived any rights and/or privileges that it has or may have under
Articles VII and VIII of the Venture Agreement. The Company represents and
warrants that it has not received any notices from the other venturer in MSA
exercising any rights under such Articles. Upon the closing of the DIHC
Redemption, DIHC-MS shall be deemed to have further waived any rights it may
have under the Venture Agreement with respect to Major Decisions (as defined in
the Venture Agreement) or otherwise relating to the management or decision
making process under the Venture Agreement.
P. This Agreement may not be modified or amended except by a written
agreement signed by the parties hereto.
R. This Agreement, together with the Schedules and Exhibits attached
hereto and the Stock and Loan Purchase Agreements, sets forth the entire
agreement between the parties hereto with respect to the subject matter hereof
and all prior understandings or communications (written or oral) between the
parties with respect thereto are merged in this Agreement.
T. Except as otherwise provided herein, nothing in this Agreement is
intended, nor shall anything herein be construed, to confer any rights, legal or
equitable, in any Person other than the parties hereto and their respective
successors and permitted assigns.
V. This Agreement may be signed in counterparts by the parties and
shall be binding and effective upon the parties even if so signed and delivered.
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X. Except as otherwise provided in this Agreement, the provisions of
this Agreement shall survive the consummation of the transactions contemplated
hereunder.
Z. Closing the Books. The parties agree that profits and losses of
the Company shall be allocated based upon the closing of the books method
described in IRC ss.706(d)(2).
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IN WITNESS WHEREOF, parties hereto have hereunto set their hands and seals
the day and year above written.
Company:
MARKET SQUARE DEVELOPMENT INVESTORS,
a District of Columbia general partnership
By: DIHC MARKET SQUARE, INC., a Georgia
corporation, as authorized general partner
By:/s/ Robert T. Sorrentino
-----------------------------------
Name: Robert T. Sorrentino
Title: Vice President
DIHC:
DUTCH INSTITUTIONAL HOLDING COMPANY,
INC., a Delaware corporation
By:/s/ Robert T. Sorrentino
-----------------------------------
Name: Robert T. Sorrentino
Title: Vice President
DIHC-MS:
DIHC MARKET SQUARE, INC., a Georgia
corporation
By:/s/ Robert T. Sorrentino
-----------------------------------
Name: Robert T. Sorrentino
Title: Vice President
1
<PAGE>
C-Stone:
CORNERSTONE PROPERTIES INC., a Nevada
corporation
By:/s/ John S. Moody
-----------------------------------
Name: John S. Moody
Title: President
By:/s/ Rodney C. Dirreck
-----------------------------------
Name: Rodney C. Dirreck
Title: Executive Vice President
2
<PAGE>
Schedule A
AVENUE ASSOCIATES LIMITED PARTNERSHIP
Third Amended and Restated Agreement of Limited Partnership for Avenue
Associates Limited Partnership, dated July 15, 1987, Market Square Associates,
as general partner, Market Square Associates, as Class A limited partner, and
Western Associates Limited Partnership, as Class B limited partner.
MARKET SQUARE ASSOCIATES
(a) Joint Venture Agreement for Market Square Associates, dated May 21, 1987, by
and among Crow-Pennsylvania Avenue Limited Partnership and DIHC Market Square,
Inc.
(b) Addendum to Joint Venture Agreement For Market Square Associates, dated May
21, 1987, by and among Crow-Pennsylvania Avenue Limited Partnership and DIHC
Market Square, Inc.
(c) Amendment to Joint Venture Agreement For Market Square Associates, dated
July 15, 1987, by and among Crow-Pennsylvania Avenue Limited Partnership and
DIHC Market Square, Inc.
(d) First Amendment to Joint Venture Agreement For Market Square Associates,
dated January 27, 1989, by and among Crow-Pennsylvania Avenue Limited
Partnership and DIHC Market Square, Inc.
(e) Second Amendment to Joint Venture Agreement For Market Square Associates,
dated April 17, 1991, by and among Crow-Pennsylvania Avenue Limited Partnership
and Mar quare Development Investors.
(f) Third Amendment to Joint Venture Agreement For Market Square Associates,
dated January 4, 1994, by and among Crow-Pennsylvania Avenue Limited Partnership
and Market Square Development Investors.
<PAGE>
EXHIBIT "A"
INSTRUMENT OF REDEMPTION AND ASSUMPTION
DIHC MARKET SQUARE, INC., a Georgia corporation, having an address at 200
Galleria Parkway, N.W., Suite 2000, Atlanta, Georgia 30339 (the "DIHC-MS"), in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and legal sufficiency of which is hereby
acknowledged, hereby transfers to MARKET SQUARE DEVELOPMENT INVESTORS, a
District of Columbia general partnership having an office at 126 East, 56th
Street, New York, New York 10022 (the "Company"), all of the right, title and
interest of DIHC-MS as a partner in the Company, and all of the rights of
DIHC-MS to the assets and profits thereto and distributions therefrom, to have
and to hold the same unto the Company from and after the date hereof (the
"Redeemed Interest"), provided that DIHC-MS shall retain one percent (1%) of the
total interest in the Company.
All capitalized terms used herein and not otherwise defined shall have the
meaning given to them in that certain Redemption and Acquisition Agreement dated
as of October _, 1997 between Inc. (the "Redemption Agreement").
The Company and DIHC-MS each hereby covenant and agree to file all
necessary certificates and/or amendments to the Partnership Agreement in the
District of Columbia or other governmental subdivisions in which the Company has
done or is doing business to reflect the redemption of the Redeemed Interest,
and to execute and deliver the Restated Venture Agreement in accordance with the
terms of the Redemption Agreement.
The transfer of the Redeemed Interest is without representation by or
recourse against DIHC-MS except as set forth in the Redemption Agreement.
This Instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, successors and assigns.
This Instrument shall be governed by, and construed in accordance with,
the laws of the District of Columbia.
A-1
<PAGE>
IN WITNESS WHEREOF, DIHC-MS and the Company have caused this Instrument to
be executed and delivered by its duly authorized officers as of the day of
January, 1998.
DIHC MARKET SQUARE, INC., a Georgia
corporation
By:
-----------------------------------
Name: __________________________
Title: _________________________
MARKET SQUARE DEVELOPMENT INVESTORS,
a District of Columbia general partnership
By: CORNERSTONE PROPERTIES INC., a
Nevada corporation, as managing general
partner
By:
--------------------------
Name: ____________________
Title: ___________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of January, 1998, before me personally came _________, to
me known who, being by me duly sworn, did depose and say that he resides at
___________________ ____________, that he is the ________ President of DIHC
MARKET SQUARE, INC., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
_________________________________
Notary Public
A-2
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of January, 1998, before me personally came _____________,
to me known who, being by me duly sworn, did depose and say that he resides at
_______________ ___________________, that he is the _______ President of
CORNERSTONE PROPERTIES INC., the corporation described in and which executed the
foregoing instrument, acting in its capacity as the managing general partner of
MARKET SQUARE DEVELOPMENT INVESTORS, the general partnership described in and
which executed the foregoing instrument; and that he executed the foregoing
instrument by order of the Board of Directors of said corporation, as and for
the act and deed of said general partnership.
_________________________________
Notary Public
A-3
<PAGE>
EXHIBIT "B"
INSTRUMENT OF SALE AND ASSUMPTION
DIHC MARKET SQUARE, INC., a Georgia corporation, having an address at 200
Galleria Parkway, N.W., Suite 2000, Atlanta, Georgia 30339 (the "DIHC-MS"), in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and legal sufficiency of which is hereby
acknowledged, hereby bargains, sells, transfers and sets over to CORNERSTONE
PROPERTIES INC., a Nevada corporation having an office at 126 East 56th Street,
New York, New York 10022 ("C-Stone"), all of the right, title and interest of
DIHC-MS as a partner in MARKET SQUARE DEVELOPMENT INVESTORS, a District of
Columbia general partnership (the "Company"), and all of the rights of DIHC-MS
to the assets and profits thereto and distributions therefrom, to have and to
hold the same unto C-Stone from and after the date hereof (the "Transferred
Interest").
All capitalized terms used herein and not otherwise defined shall have the
meaning given to them in that certain Redemption and Acquisition Agreement dated
as of October__, 1997 between the Company, Dutch Institutional Holding Company,
Inc.. DIHC-MS, and Cornerstone Properties Inc. (the "Redemption Agreement").
C-Stone and DIHC-MS each hereby covenant and agree to file all necessary
certificates and/or amendments to the Partnership Agreement in the District of
Columbia or other governmental subdivisions in which the Company has done or is
doing business to reflect the sale and transfer of the Transferred Interest.
The transfer of the Transferred Interest is made without representation by
or recourse against DIHC-MS except as set forth in the Redemption Agreement.
This Instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, successors and assigns.
This Instrument shall be governed by, and construed in accordance with,
the laws of the District of Columbia.
B-1
<PAGE>
IN WITNESS WHEREOF, DIHC-MS and C-Stone have caused this Instrument to be
executed and delivered by its duly authorized officers as of the ___ day of.
_____________, ____
DIHC MARKET SQUARE, INC., a Georgia
corporation
By:
---------------------------------
Name: ___________________________
Title: __________________________
CORNERSTONE PROPERTIES INC., a
Nevada corporation, as managing general
partner
By:
---------------------------------
Name: ___________________________
Title: __________________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of _______, ___, before me personally came _____________,
to me known who, being by me duly Sworn, did depose and say that he resides at
______________ ______________________, that he is the President of DIHC MARKET
SQUARE, INC., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
__________________________________
Notary Public
B-2
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the _____ day of _________, ___, before me personally came to
_____________, to me known who, being by me duly sworn, did depose and say that
he resides at _____________ ________________, that he is the _______ President
of CORNERSTONE PROPERTIES INC., the corporation described in and which executed
the foregoing instrument; and that he executed the foregoing instrument by order
of the Board of Directors of said corporation.
__________________________________
Notary Public
B-3
<PAGE>
EXHIBIT "C"
PROMISSORY NOTE AND LOAN AGREEMENT
Principal Sum: $_____________ Date: January ___, 1998
New York, New York
FOR VALUE RECEIVED, MARKET SQUARE DEVELOPMENT INVESTORS ("Maker"), a
District of Columbia limited partnership, promises to pay to CORNERSTONE
PROPERTIES INC. ("Payee"), a Nevada corporation having an office at 126 East
56th Street, New York, New York 10022, or to order, or at such other place as
may be designated in writing by the holder hereof, the principal sum of
______________________________ AND NO/100 DOLLARS ($________________) with
interest thereon, or on the amount thereof from time to time outstanding, to be
computed as hereinafter provided, until the said principal sum shall be fully
paid, to be due and payable as hereinafter provided. The said principal sum, or
the amount thereof outstanding, with accrued and unpaid interest thereon, shall
be due and payable on the Maturity Date (as hereinafter defined).
1. Interest. Interest shall accrue from the date hereof to and through the
date on which all principal and interest hereunder is paid in full, shall be
computed on the basis of actual days elapsed in a 365-day year, and shall be
calculated on the outstanding principal balance hereunder at an annual rate of
interest equal to eleven percent (11%) percent per annum (the "Interest Rate").
2. Installments.
a. No installments of interest or principal shall be payable under
this Note for the period commencing on the date hereof and ending on August 1,
1999 (the "Deferral End Date"). During such period, all interest on this Note
shall accrue and, to the extent permitted by law, such accrued and unpaid
interest shall bear interest at the Interest Rate, compounded monthly.
C-1
<PAGE>
b. Installments of principal and interest at the Interest Rate (the
"Installment Payments"), in the amount necessary to amortize in equal monthly
payments the sum of (a) the then-outstanding principal sum hereof and (b) the
amount of all interest accrued and deferred pursuant to the preceding sentence
as of the Deferral End Date, and the interest accrued thereon as of Deferral End
Date, less any sums paid on account of such accrued and deferred interest and on
account of principal as hereinafter provided, together with interest on such
sum, over a period of twenty (20) years (the "Amortization Period"), shall be
due and payable commencing on September 1, 1999 and continuing on the first day
of each and every calendar month thereafter ensuing until September 1, 2002 (the
"Maturity Date"), at which time the entire outstanding principal sum hereof, all
accrued interest and all other sums due and payable hereunder shall be fully
paid. Payee shall calculate the amount of such installments and give notice
thereof to Maker. Payee's calculation of the amount of such installments shall
be definitive absent manifest error.
c. Maker agrees that in the event that Maker has any net cash flow
from any source, such net cash flow shall be applied first on account of any
interest accrued and deferred hereunder; second, on account of any Installment
Payments then due hereunder; and third, on account of the outstanding principal
amount of this Note prior to being used for any other purpose.
d. Payee expressly acknowledges that (i) in no event shall the
obligations of Maker under this Note or the Security Documents (as hereinafter
defined) be enforced against DIHC Market Square, Inc. ("DIHC-MS"), any interest
of DIHC-MS in Maker, or any shareholder, officer, director or agent of DIHC-MS
(collectively, the "Exculpated Parties") and (ii) Payee shall not seek any
judgment against the Exculpated Parties in respect of this Note, the Security
Documents or otherwise relating to the indebtedness evidenced hereby.
C-2
<PAGE>
3. Default Interest Rate. In the event Maker fails to pay any installment
of principal or interest within ten (10) days after its due date, the unpaid
amount shall accrue interest at the rate (the "Default Rate") equal to the
lesser of (a) five percent (5%) in excess of the "prime rate" announced from
time to time by Bankers Trust Company at its offices in the City of New York or
(b) the maximum interest rate permitted by law to be charged to Maker until
paid.
4. Security. Upon the request of Payee, Maker shall deliver (a) to Payee a
pledge of Maker's partnership interest under the joint venture agreement for
Market Square Associates, a District of Columbia general partnership ("MSA"), as
security for Maker's obligations under this Note pursuant to a pledge and
security agreement satisfactory to Payee, and (b) such other security documents
as Payee may reasonably request to secure Maker's obligations hereunder,
including, but not limited to, UCC-1 Financing Statements (collectively, the
"Security Documents").
5. Event of Default. The occurrence of any one of the following events
shall constitute an "Event of Default" hereunder:
a. Maker fails to pay any installment of principal or interest, or
any other sum due hereunder, when and as the same shall become due and payable,
and such failure is not cured within fifteen (I 5) days after written notice
thereof from Payee to Maker;
b. Maker, or any endorser makes any assignment for the benefit of
creditors; or a receiver, liquidator or trustee of Maker, or of substantially
all property of Maker or such endorser, is appointed; or any voluntary or
involuntary petition for the bankruptcy, reorganization or arrangement of, or
for the composition, extension, arrangement or adjustment of any of the
obligations of, Maker or such endorser, pursuant to the Federal Bankruptcy Code,
or any similar statute, is filed and not dismissed within 60 days; or Maker or
such endorser shall have been adjudicated a bankrupt or insolvent; or any
voluntary or involuntary petition by or against Maker or such endorser, as
debtor
C-3
<PAGE>
seeking an order for relief pursuant to the Federal Bankruptcy Code, or any
similar statute, is pending or filed and not dismissed within 60 days; or a
court enters an order for relief for Maker or such endorser, as debtor; or Maker
or any such endorser, is insolvent by reason of its inability to pay its debts
as they become due; or a writ of attachment is issued against any of the
property of Maker or such endorser, and not dismissed within 60 days-, or if
possession is taken to assume control of all or any substantial part of such
part of such property or of the business of Maker or such endorser by any
government or governmental agency; and/or
c. Any warranty, representation or statement of Maker in this Note
or any of the Security Documents or any other instrument or document now or
hereafter evidencing, securing or otherwise relating to the indebtedness
evidenced by this Note proves untrue or misleading in any material respect; or
Maker fails to keep, observe, and perform any other covenant, agreement,
obligation or condition contained herein, the Security Documents or in any other
instrument or document now or hereafter evidencing or securing the indebtedness
evidenced by this Note or any part thereof, and such untruth, misleading matter,
failure or default is not cured within thirty (30) days after written notice
thereof from Payee to Maker or such additional period as may be reasonably
needed as long as Payee commences the cure of same within the thirty (30) day
period and thereafter diligently prosecutes the cure to completion.
6. Rights of Payee upon Default. Upon and after the occurrence of an Event
of Default, it is expressly agreed that the principal sum of this Note (and all
accrued interest thereon and other sums payable hereunder) shall become
immediately due and payable at the option of Payee.
7. Prepayment. This Note may be prepaid in whole or in part without fee or
penalty (but with accrued interest on the amount so prepaid) at any time upon
not less than ten (10) days' prior written notice by Maker to Payee.
C-4
<PAGE>
8. Applicable Law. This Note has been negotiated, executed, made and
delivered in the City, Country and State of New York. Maker agrees that this
Note shall be governed, construed and interpreted in accordance with the laws of
the State of New York.
9. Waiver.
a. Maker and any endorsers, sureties and guarantors hereof or hereon
hereby waive presentment for payment, demand, protest, notice of non-payment or
dishonor and of protest, and agree to remain bound until the principal sum of
this Note or the amount thereof outstanding and interest and all other sums
payable hereunder are paid in full notwithstanding any extensions of time for
payment which may be granted, even though the period of extension may be
indefinite, and notwithstanding any inaction by, or failure to assert any legal
right available to, Payee.
b. It is further expressly agreed that any waiver by Payee, other
than a waiver in writing signed by Payee, of any term or provision hereof, of
the Security Documents or of any right, remedy or option under this Note or the
Security Documents shall not be controlling, nor shall it prevent or estop Payee
from thereafter enforcing such term, provision, right, remedy or option, and the
failure or refusal of Payee to insist in any one or more instances upon the
strict performance of any of the terms or provisions of this Note, or the
Security Documents shall not be construed as a waiver or relinquishment for the
future of any such term or provision, but the same shall continue in full force
and effect, it being understood and agreed that Payee's rights, remedies and
options under this Note and the Security Documents are and shall be cumulative
and are in addition to all other rights, remedies and options of Payee at law or
in equity or under any other agreement.
c. No modification or waiver by Payee of any right or remedy under
this Note shall be effective unless made in writing. No delay by Payee in
exercising any right or remedy hereunder, or otherwise afforded by law, shall
operate as a waiver thereof or preclude the exercise thereof upon
C-5
<PAGE>
the occurrence of an Event of Default. No failure by Payee to insist upon the
strict performance by Maker of each and every covenant and agreement of Maker
under this Note shall constitute a waiver of any such covenant or agreement, and
no waiver by Payee of any Event of Default shall constitute a waiver of or
consent to any subsequent Event of Default. No failure of Payee to exercise its
option to accelerate the maturity of the indebtedness evidenced hereby, nor any
forbearance by Payee before or after the exercise of such option shall be
construed as a waiver of an option, power, right or remedy of Payee hereunder.
10. Successors. The term "Payee" shall mean the then holder of this Note
from time to time and its successors and permitted assigns.
11. Costs of Collection. Maker shall pay all costs of collection when
incurred, including, without limitation, the reasonable attorneys' fees and
disbursements of the Payee's counsel and court costs, which costs may be added
to the indebtedness evidenced hereby and must be paid promptly on demand,
together with interest thereon at the Default Rate.
12. Interest Not to Exceed Maximum Allowed by Law. If from any
circumstances whatsoever, the fulfillment of any provision of this Note or of
any other instrument evidencing or securing the indebtedness evidenced hereby,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law with regard to obligations of like character
and amount, then ipso facto, the obligation to be fulfilled shall be reduced to
the limit of such validity so that in no event shall any exaction be possible
under this Note or under any other instrument evidencing or securing the
indebtedness evidenced hereby that is in excess of the current limit of such
validity, but such obligation shall be fulfilled to the limit of such validity.
In the event of any such reduction of said obligation, the unpaid principal
balance of this Note together with all accrued interest thereon and any other
sums
C-6
<PAGE>
advanced hereunder or under any instruments securing the indebtedness evidenced
hereby shall at the option of Payee become immediately due and payable.
13. Assignment. Payee's right, title and interest in and to this Note are
freely assignable by Payee to Cornerstone Properties Inc. ("CPP"), or any
affiliate or subsidiary of CPP without the consent or approval of any person or
entity, and any such assignment hereof by Payee shall operate to vest in such
assignee all rights, titles, interests and powers herein conferred upon Payee.
Notwithstanding the foregoing, Maker acknowledges that Payee may, at any time
and from time to time, sell this Note or any interest herein, pledge or assign
this Note or any interest herein as security in connection with any financing
arrangement and enter into any participation or similar cooperative arrangements
with respect hereto.
14. Time of the Essence. Time is of the essence with respect to each and
every covenant, agreement and obligation of Maker under this Note.
15. Successors and Assigns. Each and every covenant, warranty and
agreement of Maker herein, if Maker be more than one, shall be jointly and
severally binding upon and enforceable against Maker, and each of them except as
otherwise provided in this Note. As used herein the terms "Maker" and "Payee"
shall include the Maker and the named Payee and their respective heirs,
executors, administrators, legal representatives, successors, successors in
title and permitted assigns.
16. Severability. If any provision, paragraph, sentence, clause, phrase or
word of this Note, or the application thereof in any circumstance, is held
invalid or unenforceable, the validity and enforceability of the remainder of
this Note, and of the application of any such provision, paragraph, sentence,
clause, phrase or word in any other circumstance, shall not be affected thereby,
it being intended that all rights, powers and privileges of Payee hereunder
shall be enforceable to the fullest extent permitted by law.
C-7
<PAGE>
17. Notices. Any and all notices, elections or demands permitted or
required to be made under this Note (collectively, "Notices") shall be in
writing and shall be delivered personally, or sent by registered or certified
mail, to the other party at the address set forth above, or at such other
address as may be supplied in writing in accordance with the terms of this
paragraph. The date of personal delivery, the third (3rd) business day following
the date of mailing or the first (1st) business day following a transmission by
overnight courier, as the case may be, shall be the date of the Notice.
18. Captions. Titles or captions of articles and paragraphs contained in
this Note are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Note or the intent of
any provision hereof.
19. Number and Gender. Whenever required by the context, the singular
number shall include the plural and the gender of any pronoun shall include the
other genders.
IN WITNESS WHEREOF, Maker has executed this Note as of the ___ day of
January, 1998.
MARKET SQUARE DEVELOPMENT
INVESTORS, a District of Columbia general
partnership
By: CORNERSTONE PROPERTIES INC., a
Nevada corporation, as authorized general
partner
By:
-------------------------------
Name: _________________________
Title: ________________________
By: DIHC MARKET SQUARE, INC., a
Georgia corporation, general partner
By:
-------------------------------
Name: _________________________
Title: ________________________
C-8
<PAGE>
EXHIBIT "D"
CERTIFICATION
The undersigned hereby certifies that all of the representations and
warranties made by it pursuant to Article 9 of that certain Redemption and
Acquisition Agreement dated as of October __, 1997 between Market Square
Development Investors, Dutch Institutional Holding Company, Inc., DIHC Market
Square, Inc., and Cornerstone Properties Inc. are true and correct in all
material respects as of this day, except as set forth on Schedule I annexed
hereto.
Dated: as of the ____ day of _________, ____
DIHC MARKET SQUARE, INC., a Georgia
corporation
By:
-------------------------------
Name: _________________________
Title: ________________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, ____, before me personally came
_____________, to me known who, being by me duly sworn, did depose and say that
he resides at ________________ ______________________________, that he is the
________ President of DIHC MARKET SQUARE, INC., the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
______________________________
Notary Public
D-1
<PAGE>
EXHIBIT "E"
CERTIFICATION
The undersigned hereby certifies that all of the representations and
warranties made by it pursuant to Article 10 of that certain Redemption and
Acquisition Agreement dated as of October __, 1997 between Market Square
Development Investors, Dutch Institutional Holding Company, Inc., DIHC Market
Square, Inc., and Cornerstone Properties Inc. are true and correct in all
material respects as of this day, except as set forth on Schedule I annexed
hereto.
Dated: as of the ____ day of _________, ____
CORNERSTONE PROPERTIES, INC., a Nevada
corporation
By:
-------------------------------
Name: _________________________
Title: ________________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, ____, before me personally came
_____________, to me known who, being by me duly sworn, did depose and say that
he resides at ________________ ______________________________, that he is the
________ President of CORNERSTONE PROPERTIES, INC., the corporation described in
and which executed the foregoing instrument; and that he signed his name thereto
by order of the Board of Directors of said corporation.
_______________________________________
Notary Public
E-1
<PAGE>
Exhibit 10.118
AGREEMENT OF LIMITED PARTNERSHIP
OF
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP
December 23, 1997
IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION, THE PARTNERSHIP INTERESTS
BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. ACCORDINGLY, NO
PARTNERSHIP INTEREST MAY BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE, AND
UNLESS THE OTHER TRANSFER RESTRICTIONS CONTAINED HEREIN HAVE BEEN SATISFIED.
INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1 - DEFINED TERMS
ARTICLE 2 - ORGANIZATIONAL MATTERS
Section 2.1 Formation...................................................14
Section 2.2 Name........................................................14
Section 2.3 Registered Office and Agent; Principal Office...............14
Section 2.4 Power of Attorney...........................................15
Section 2.5 Term........................................................16
ARTICLE 3 - PURPOSE
Section 3.1 Purpose and Business........................................16
Section 3.2 Powers......................................................17
ARTICLE 4 - CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners.......................17
Section 4.2 Issuances of Additional Partnership Interests...............18
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares.........20
Section 4.4 Conversion or Redemption of Preferred Shares................20
Section 4.5 No Preemptive Rights........................................21
Section 4.6 Other Contribution Provisions...............................21
Section 4.7 No Interest on Capital......................................21
ARTICLE 5 - DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions...........21
Section 5.2 Amounts Withheld............................................22
Section 5.3 Distributions upon Liquidation..............................22
Section 5.4 Revisions to Reflect Issuance of Additional Partnership
Interests...................................................22
ARTICLE 6 - ALLOCATIONS
Section 6.1 Allocations for Capital Account Purposes....................23
Section 6.2 Revisions to Allocations to Reflect Issuance of Additional
Partnership Interests.......................................24
ARTICLE 7 - MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management..................................................24
Section 7.2 Certificate of Limited Partnership..........................29
Section 7.3 Restrictions on General Partner Authority...................29
Section 7.4 Reimbursement of the General Partner and the Company;
DRIP's and Repurchase Programs..............................30
Section 7.5 Outside Activities of the General Partner...................31
<PAGE>
ii
Page
----
Section 7.6 Contracts with Affiliates...................................31
Section 7.7 Indemnification.............................................32
Section 7.8 Liability of the General Partner............................34
Section 7.9 Other Matters Concerning the General Partner................35
Section 7.10 Title to Partnership Assets.................................35
Section 7.11 Reliance by Third Parties...................................36
ARTICLE 8 - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability.....................................36
Section 8.2 Management of Business......................................37
Section 8.3 Outside Activities of Limited Partners......................37
Section 8.4 Return of Capital...........................................37
Section 8.5 Rights of Limited Partners Relating to the Partnership......38
Section 8.6 Redemption Right............................................39
ARTICLE 9 - BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting......................................40
Section 9.2 Fiscal Year.................................................41
Section 9.3 Reports.....................................................41
ARTICLE 10 - TAX MATTERS
Section 10.1 Preparation of Tax Returns..................................41
Section 10.2 Tax Elections...............................................41
Section 10.3 Tax Matters Partner.........................................42
Section 10.4 Organizational Expenses.....................................43
Section 10.5 Withholding.................................................43
ARTICLE 11 - TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer....................................................44
Section 11.2 Transfer of the Company's General Partner Interest
and Limited Partner Interest; Extraordinary Transactions....45
Section 11.3 Limited Partners' Rights to Transfer........................47
Section 11.4 Substituted Limited Partners................................48
Section 11.5 Assignees...................................................49
Section 11.6 General Provisions..........................................49
ARTICLE 12 - ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner......................50
Section 12.2 Admission of Additional Limited Partners....................50
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership.................................................51
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iii
Page
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ARTICLE 13 - DISSOLUTION, LIQUIDATION TERMINATION
Section 13.1 Dissolution.................................................51
Section 13.2 Winding Up..................................................52
Section 13.3 Compliance with Timing Requirements of Regulations..........54
Section 13.4 Rights of Limited Partners..................................55
Section 13.5 Notice of Dissolution.......................................55
Section 13.6 Termination of Partnership and Cancellation of
Certificate of Limited Partnership..........................55
Section 13.7 Reasonable Time for Winding-Up..............................55
Section 13.8 Waiver of Partition.........................................56
ARTICLE 14 - AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments..................................................56
Section 14.2 Meetings of the Partners....................................58
ARTICLE 15 - PROVISIONS
Section 15.1 Addresses and Notice........................................59
Section 15.2 Titles and Captions.........................................59
Section 15.3 Pronouns and Plurals........................................59
Section 15.4 Further Action..............................................59
Section 15.5 Binding Effect..............................................59
Section 15.6 Creditors; Other Third Parties..............................59
Section 15.7 Waiver......................................................60
Section 15.8 Counterparts................................................60
Section 15.9 Applicable Law..............................................60
Section 15.10 Invalidity of Provisions....................................60
Section 15.11 Entire Agreement............................................60
Section 15.12 No Rights as Shareholders...................................61
<PAGE>
iv
EXHIBITS
Exhibit A - Partners Contributions and Partnership Interests
Exhibit B - Capital Account Maintenance
Exhibit C - Special Allocation Rules
Exhibit D - Notice of Redemption
Exhibit E - Recourse Debt Level Schedule
Exhibit F - Partnership Unit Designation for Class A Partnership Preferred Units
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP OF CORNERSTONE PROPERTIES LIMITED
PARTNERSHIP (this "Agreement"), dated as of December 23, 1997, is entered into
by and among Cornerstone Properties Inc., a Nevada corporation (the "Company"),
and the Persons (as defined below) whose names are set forth on Exhibit A (as it
may be amended from time to time).
WITNESSETH:
WHEREAS, the Company and the Persons whose names are set forth on Exhibit
A, desire to form a limited partnership under the laws of the State of Delaware;
and
WHEREAS, the Company and the Persons whose names are set forth on Exhibit
A, will make certain capital contributions to this partnership;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto form Cornerstone Properties Limited
Partnership, a Delaware limited partnership (the "Partnership"), and do hereby
agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Sections 4.2 and 12.2 and who is shown as such on
the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each Partnership taxable year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and (ii) decreased by the items described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The
foregoing definition
<PAGE>
2
of Adjusted Capital Account is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership taxable year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Exhibit B.
"Adjustment Date" has the meaning set forth in Section 4.2.C.
"Affiliate" means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii) and (iii) above. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreed Value" means (i) in the case of any Contributed Property as of the
time of its contribution to the Partnership, the 704(c) Value of such property,
reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time such property
is distributed as determined under Section 752 of the Code and the Regulations
thereunder. The aggregate Agreed Value of the Contributed Property contributed
or deemed contributed by each Partner as of the date hereof is as set forth in
Exhibit A.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
<PAGE>
3
(a) the Partnership's Net Income or Net Loss (as the case may be,
with Net Loss shown as a negative number) for such period;
(b) Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such amounts
are no longer necessary);
(d) the excess of proceeds from the sale, exchange, disposition, or
refinancing of Partnership property for such period over the gain
recognized from the sale, exchange, disposition, or refinancing of
Partnership property during such period (excluding Terminating Capital
Transactions); and
(e) all other cash received by the Partnership for such period that
was not included in determining Net Income or Net Loss for such period
(including any cash items of income or gain specially allocated pursuant
to Section 1.A. through Section 1.G. of Exhibit C);
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during such
period;
(b) capital expenditures made by the Partnership during such period;
(c) investments made by the Partnership during such period in any
entity (including loans made thereto) to the extent that such investments
are not otherwise described in clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in determining
Net Income or Net Loss for such period (including any cash items of loss
or deduction specially allocated pursuant to Section 1.A. through 1.G. of
Exhibit C);
(e) any amount included in determining Net Income or Net Loss for
such period that was not received or disbursed by the Partnership during
such period;
(f) the amount of any increase in reserves during such period which
the General Partner determines to be necessary or appropriate in its sole
and absolute discretion; and
<PAGE>
4
(g) the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B.
"Capital Contribution" means, with respect to any Partner, any cash, cash
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Sections
4.1, 4.2, or 4.3.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts
following the contribution of or adjustment with respect to such Property; and
(ii) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Exhibit B, and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash per Partnership Unit equal to the
Value on the Valuation Date of the REIT Shares Amount.
"Certificate of Incorporation" means the Certificate of Incorporation or
other organizational document governing the General Partner, as amended or
restated from time to time.
<PAGE>
5
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership relating to the Partnership filed in the office of the Delaware
Secretary of State, as amended from time to time in accordance with the terms
hereof and the Act.
"Class A Partnership Common Unit" means any Partnership Common Unit that
is not specifically designated by the General Partner as being another specified
class or series of Partnership Common Units.
"Class A Partnership Preferred Units" means the class of Partnership
Preferred Units representing Limited Partnership Interests with distribution
rights, rights upon liquidation, winding up and dissolution and any such rights
as described in the Partnership Unit Designation attached hereto as Exhibit F.
"Class A Preferred Shares" means shares designated as 7% Cumulative
Convertible Preferred Stock without par value of the Company issued pursuant to
the Certificate of Designations filed in the office of the Secretary of the
State of Nevada on August 3, 1995.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Common Shares" means shares of common stock, with no par value per share,
of the Company.
"Company" has the meaning set forth in the first Paragraph hereof.
"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with Section 14.2.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Act (but excluding cash), contributed or deemed
contributed to the Partnership. Once the Carrying Value of a Contributed
Property is adjusted pursuant to Exhibit B, such property shall no longer
constitute a Contributed Property for purposes of Exhibit B, but shall be deemed
an Adjusted Property for such purposes.
"Control" means the ownership of more than fifty percent (50%) of the
outstanding voting capital stock of the Company and the ability effectively to
control the business decisions of the Company.
"Conversion Factor" means 1.0 (one (1) REIT Share for one (1) Partnership
Unit), provided that in the event that the Company subsequent to the date hereof
(i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a distribution to all holders
<PAGE>
6
of its outstanding REIT Shares in REIT Shares; (ii) subdivides its outstanding
REIT Shares; or (iii) combines its outstanding REIT Shares into a smaller number
of REIT Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number of
REIT Shares issued and outstanding on the record date for such dividend,
distribution, subdivision or combination (assuming for such purpose that such
dividend, distribution, subdivision or combination has occurred as of such
time), and the denominator of which shall be the actual number of REIT Shares
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Conversion Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event
(provided, however, if a Notice of Redemption is given prior to such a record
date and the Specified Redemption Date is after such a record date, then the
adjustment to the Conversion Factor shall, with respect to such redeeming
Partner, be retroactive to the date of such Notice of Redemption). It is
intended that adjustments to the Conversion Factor are to be made in order to
avoid unintended dilution or antidilution as a result of transactions in which
REIT Shares are issued, redeemed or exchanged without a corresponding issuance,
redemption or exchange of Partnership Units.
"Debt" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (ii) all amounts owed by such Person to another
Person in respect of reimbursement obligations under letters of credit, surety
bonds and other similar instruments guaranteeing payment or other performance of
obligations by such Person, (iii) all indebtedness for borrowed money or for the
deferred purchase price of property or services secured by any lien on any
property owned by such Person, to the extent attributable to such Person's
interest in such property, even though such Person has not assumed or become
liable for the payment thereof, and (iv) obligations of such Person incurred in
connection with entering into a lease which, in accordance with generally
accepted accounting principles, should be capitalized.
"Deemed Value of Partnership Interest" means, as of any date with respect
to any class or series of Partnership Interests, the total number of shares of
beneficial interest (or other comparable equity interests) of the Company
corresponding to such class or series of Partnership Interests issued and
outstanding as of the close of business on such date (excluding any treasury
shares) multiplied by the Value of a share of such beneficial interest (or other
comparable equity interest) on such date. For purposes of calculating Deemed
Value of Partnership Interest with respect to any class or series of Partnership
Preferred Units, "Value" shall mean the stated liquidation preference or value
of the corresponding class or series of Preferred Shares, unless otherwise
provided in the Partnership Unit Designation of such class or series of
Partnership Preferred Units
"Depreciation" means, for each taxable year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis
<PAGE>
7
for federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Carrying Value as the federal income tax depreciation, amortization, or other
cost recovery deduction for such year bears to such beginning adjusted tax
basis; provided, however, that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Carrying Value
using any reasonable method selected by the General Partner.
"Effective Date" means the date of this Agreement.
"Extraordinary Transaction" shall mean, with respect to the Company, the
occurrence of one of more of the following events: (i) a merger (including a
triangular merger), consolidation or other combination with or into another
Person; (ii) the direct or indirect sale, lease, exchange or other transfer of
all or substantially all of its assets in one transaction or a series of
transactions; (iii) any reclassification, recapitalization or change of its
outstanding equity interests (other than a change in par value, or from par
value to no par value, or as a result of a split, dividend or similar
subdivision); (iv) any change of Control; or (v) the adoption of any plan of
liquidation or dissolution of the Company (whether or not in compliance with the
provisions of this Agreement).
"General Partner" means the Company, in its capacity as the general
partner of the Partnership, or its successors as general partner of the
Partnership.
"General Partner Interest" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Partnership Units.
"Immediate Family" means, with respect to any natural Person, such natural
Person's estate or heirs or current spouse, parents, parents-in-law, children,
nephews, nieces, siblings and grandchildren (in each case whether by adoption or
not) and any trust or estate, all of the beneficiaries of which consist of such
Person or such Person's spouse, parents, parents-in-law, children, nephews,
nieces, siblings or grandchildren.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating such Partner incompetent to manage his or her Person or estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
a bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
<PAGE>
8
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof; (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within one hundred twenty (120) days
of such appointment; or (h) an appointment referred to in clause (g) which has
been stayed is not vacated within one hundred twenty (120) days after the
expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason
of (A) such Person's status as the General Partner, or as a director, trustee or
officer of the Partnership or the General Partner, or (B) such Person's
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or takes assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.
"IRS" means Internal Revenue Service.
"Limited Partner" means any Person (including the Company) named as a
Limited Partner in Exhibit A, as such Exhibit may be amended from time to time,
or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner of the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of Partnership Units.
<PAGE>
9
"Limited Partner Recourse Debt Percentage" means with respect to certain
of the Limited Partners the percentage listed with respect to such Limited
Partners on the recourse debt level schedule attached hereto as Exhibit E.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
Section 1.B of Exhibit B. Any items of income, gain, loss or deduction that are
specially allocated pursuant to Sections 1.A. through 1.G. of Exhibit C shall
not be taken into account in computing Net Income.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
Section 1.B. of Exhibit B. Any items of income, gain, loss or deduction that are
specially allocated pursuant to Sections 1.A. through 1.G. of Exhibit C shall
not be taken into account in computing Net Loss.
"New Securities" has the meaning set forth in Section 4.2.B.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
form of Exhibit D.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
<PAGE>
10
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, as it may be amended and/or restated, and any
successor thereto.
"Partnership Common Unit" means a Class A Partnership Common Unit or any
other fractional, undivided share of the Partnership Interests of all Partners
issued pursuant to Sections 4.1 or 4.2 which has the same attributes as a Class
A Partnership Common Unit.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of
Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulation
Section 1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner for the distribution of Available Cash pursuant to Section 5.1, which
record date shall be the same as the record date established by the Company for
a distribution to its shareholders of some of all of its portion of such
distribution.
"Partnership Preferred Unit" means a Class A Partnership Preferred Unit
and any other fractional, undivided share of the Partnership Interests that the
General Partner has authorized pursuant to Section 4.1 or Section 4.2, other
than Partnership Common Units.
"Partnership Unit" or "Unit" means a Class A Partnership Common Unit, a
Class A Partnership Preferred Unit or any other class or series of fractional,
undivided share of the Partnership Interests of all Partners issued pursuant to
Sections 4.1 or 4.2. The number of Partnership Units outstanding and the
Percentage Interest in the Partnership represented by such Units are set forth
in Exhibit A, as such Exhibit may be amended from time to time. The ownership of
Partnership Units shall be evidenced by such form of certificate for units as
the
<PAGE>
11
General Partner adopts from time to time unless the General Partner determines
that the Partnership Units shall be uncertificated securities.
"Partnership Unit Designation" shall have the meaning set forth in Section
4.2.
"Partnership Year" means the fiscal year of the Partnership, which shall
be the calendar year.
"Percentage Interest" means, as to a Partner holding a class or series of
Partnership Interests, its interest in such class or series, determined by
dividing the number of Partnership Units of such class or series owned by such
Partner by the total number of Partnership Units of such class or series then
outstanding as specified in Exhibit A, as such Exhibit may be amended from time
to time.
"Percentage Interest in Partnership" means, as to a Partner holding a
class or series of Partnership Interests, its Percentage Interest in such class
or series multiplied by the aggregate Percentage Interest in Partnership
allocable to such class or series of Partnership Interests. At any time the
Partnership shall have more than one series or class of Partnership Interests
outstanding, the aggregate Percentage Interest in Partnership attributable to
each class or series of Partnership Interests as set forth in Exhibit A shall be
adjusted on the date of each acceptance of additional Capital Contributions in
exchange for Partnership Units and shall be equal to a fraction, the numerator
of which is equal to Deemed Value of the Partnership Interests of such class or
series plus, the amount of cash, if any, plus the Agreed Value of Contributed
Property, if any, contributed with respect to such class on such date and the
denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests for all outstanding classes or series (computed as of the
Business Day immediately preceding the date on which the additional Capital
Contributions are made (an "Adjustment Date")) plus (ii) the aggregate amount of
cash, if any, plus Agreed Value of Contributed Properties, if any, contributed
on such date.
"Person" means a natural person, partnership (whether general or limited),
trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or representative capacity.
"Preferred Shares" means a share of capital stock of the Company now or
hereafter authorized or reclassified that has rights different from the Common
Shares.
"Recapture Income" means any gain recognized by the Partnership upon the
disposition of any property or asset of the Partnership (computed without regard
to any adjustments required by Section 743 of the Code) which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
<PAGE>
12
"Recourse Debt Amount" has the meaning set forth in Section 6.1.B.(3).
"Redeeming Partner" has the meaning set forth in Section 8.6.
"Redemption Right" shall have the meaning set forth in Section 8.6.
"Regulations" means the Income Tax Regulations promulgated under the Code,
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
"REIT Share" means a share of beneficial interest (or other comparable
equity interest) of the Company. REIT Shares may be issued in one or more
classes or series in accordance with the terms of the Certificate of
Incorporation of the Company. If there is more than one class or series of REIT
Shares, the term "REIT Shares" shall, as the context requires, be deemed to
refer to the class or series of REIT Shares that correspond to the class or
series of Partnership Interests for which reference to REIT Shares is made. When
used with reference to Partnership Common Units, the term "REIT Shares" refers
to Common Shares, when used with reference to Class A Partnership Preferred
Units, the term "REIT Shares" refers to Class A Preferred Shares and when used
with reference to any other class or series of Partnership Preferred Units, the
term "REIT Shares" refers to the corresponding class or series of Preferred
Shares.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor in effect on the date of receipt by
the General Partner of a Notice of Redemption, provided that in the event the
Company issues to all holders of REIT Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase REIT Shares, or any other securities or property (collectively,
"Rights"), and the Rights have not expired at the Specified Redemption Date,
then the REIT Shares Amount shall also include the Rights that were issuable to
a holder of REIT Shares on the applicable record date relating to the issuance
of such Rights, with such modifications as are appropriate pursuant to the terms
of the Rights.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"Rights" shall have the meaning set forth in the definition of "REIT
Shares Amount".
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13
"704(c) Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution, as determined
by the General Partner using such reasonable method of valuation as it may
adopt. Subject to Exhibit B, the General Partner shall, in its sole and absolute
discretion, use such method as it deems reasonable and appropriate to allocate
the aggregate of the 704(c) Values of Contributed Properties contributed in a
single or integrated transaction among the separate properties on a basis
proportional to their respective fair market values.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the Company of a Notice of Redemption; provided that if the Company
combines its outstanding REIT Shares, no Specified Redemption Date shall occur
after the record date of such combination of REIT Shares and prior to the
effective date of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, joint venture or other entity of which a
majority of (i) the voting power of the voting equity securities or (ii) the
outstanding equity interests, is owned, directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B) as of such date; over
(ii) the Carrying Value of such property (prior to any adjustment to be made
pursuant to Exhibit B) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B) as
of such date; over (ii) the fair market value of such property (as determined
under Exhibit B) as of such date.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading on any securities exchange or the
Nasdaq National Market System, the closing price on such
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14
day, or if no such sale takes place on such day, the average of the closing bid
and asked prices on such day; (ii) if the REIT Shares are not listed or admitted
to trading on any securities exchange or the Nasdaq National Market System, the
last reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the General Partner; or (iii) if the
REIT Shares are not listed or admitted to trading on any securities exchange or
the Nasdaq National Market System and no such last reported sale price or
closing bid and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reliable quotation source
designated by the General Partner, or if there shall be no bid and asked prices
on such day, the average of the high bid and low asked prices, as so reported,
on the most recent day (not more than ten (10) days prior to the date in
question) for which prices have been so reported provided that if there are no
bid and asked prices reported during the ten (10) days prior to the date in
question, the Value of the REIT Shares shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the REIT Shares Amount includes Rights, then the Value of such Rights
shall be determined by the General Partner acting in good faith on the basis of
such quotations and other information as it considers, in its reasonable
judgment, appropriate, provided that the Value of any rights issued pursuant to
a "Shareholder Rights Plan" shall be deemed to have no value unless a
"triggering event" shall have occurred (i.e., if the Rights issued pursuant
thereto are no longer "attached" to the REIT Shares and are able to trade
independently).
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Formation
The Partnership is hereby organized as a limited partnership pursuant to
the provisions of the Act and the terms and conditions set forth in this
Agreement. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
Section 2.2 Name
The name of the Partnership is Cornerstone Properties Limited Partnership.
The Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may
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15
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State of
Delaware and the name and address of the registered agent for service of process
on the Partnership in the State of Delaware is Incorporating Services, Ltd., 15
East North Street, Dover, Delaware 19901. The principal office of the
Partnership shall be Tower 56, 126 East 56th Street, New York, New York 10022,
or such other place as the General Partner may from time to time designate by
notice to the Limited Partners. The Partnership may maintain offices at such
other place or places within or outside the State of Delaware as the General
Partner deems advisable.
Section 2.4 Power of Attorney
A. General. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate of Limited Partnership and all amendments or
restatements thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or continue the
existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have
limited liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may or plans to conduct
business or own property; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in accordance
with its terms; (c) all conveyances and other instruments or
documents that the General Partner or the Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation
of the Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of cancellation; (d)
all instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described
in, Article 11, 12 or 13 or the Capital Contribution of any Partner;
and (e) all certificates, documents and other instruments relating
to the determination of the rights, preferences and privileges of
Partnership Interests; and
(2) execute, swear to, seal, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments appropriate
or necessary, in the sole
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16
and absolute discretion of the General Partner or any Liquidator, to
make, evidence, give, confirm or ratify and vote, consent, approval,
agreement or other action which is made or given by the Partners
hereunder or is consistent with the terms of this agreement or
appropriate or necessary, in the sole discretion of the General
Partner or any Liquidator, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
or as may be otherwise expressly provided for in this Agreement.
B. Irrevocable Nature. The foregoing power of attorney is hereby declared
to be irrevocable and a power coupled with an interest, in recognition of the
fact that each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall survive
and not be affected by the subsequent Incapacity of any Limited Partner or
Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or any Liquidator, acting in good faith pursuant to such
power of attorney, and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver to
the General Partner or the Liquidator, within fifteen (15) days after receipt of
the General Partner's or Liquidator's request therefor, such further
designation, powers of attorney and other instruments as the General Partner or
the Liquidator, as the case may be, deems necessary to effectuate this Agreement
and the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership shall commence on the date hereof and shall
continue until December 31, 2096, unless the Partnership is dissolved sooner
pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized
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17
pursuant to the Act; provided, however, that such business shall be limited to
and conducted in such a manner as to permit the Company at all times to be
classified as a REIT, unless the Company ceases to qualify as a REIT for reasons
other than the conduct of the business of the Partnership; (ii) to enter into
any partnership, joint venture, limited liability company or other similar
arrangement to engage in any of the foregoing or to own interests in any entity
engaged, directly or indirectly, in any of the foregoing; and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, and without limiting the Company's right, in its sole discretion, to
cease qualifying as a REIT, the Partners acknowledge the Company's current
status as a REIT inures to the benefit of all of the Partners and not solely the
General Partner or its Affiliates. The General Partner shall also be empowered
(but shall not be obligated) to do any and all acts and things necessary or
prudent to ensure that the Partnership will not be taxable as an "association"
under Section 7704 of the Code, including but not limited to imposing
restrictions on transfers and restrictions on redemptions.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, including, without limitation, full
power and authority, directly or through its ownership interest in other
entities, to enter into, perform and carry out contracts of any kind, borrow
money and issue evidences of indebtedness whether or not secured by mortgage,
deed of trust, pledge or other lien, acquire, own, manage, improve and develop
real property, and lease, sell, transfer and dispose of real property; provided,
however, that the Partnership shall not take, or refrain from taking, any action
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
A. Initial Capital Contributions. At the time of the execution of this
Agreement, the Partners shall make the Capital Contributions set forth in
Exhibit A. Each Partner shall own the number and type of Partnership Units set
forth for such Partner in Exhibit A and shall have a Percentage Interest in the
Partnership as set forth in Exhibit A, which Percentage Interest shall be
adjusted from time to time by the General Partner to the extent necessary to
reflect
<PAGE>
18
accurately redemptions, additional Capital Contributions, the issuance of
additional Partnership Units (pursuant to any merger or otherwise), or similar
events having an effect on any Partner's Percentage Interest.
B. General Partnership Interest. A number of Partnership Common Units held
by the Company equal to one percent (1%) of all outstanding Partnership Units
shall be deemed to be the General Partner Partnership Units and shall be the
General Partnership Interest. All other Partnership Units held by the Company
shall be deemed to be Limited Partnership Interests and shall be held by the
Company in its capacity as a Limited Partner in the Partnership.
C. Capital Contributions by Merger. To the extent the Partnership acquires
any property by the merger of any other Person into the Partnership, Persons who
receive Partnership Interests in exchange for their interests in the Person
merging into the Partnership shall become Partners and shall be deemed to have
made Capital Contributions as provided in the applicable merger agreement and as
set forth in Exhibit A, as amended to reflect such deemed Capital Contributions.
D. No Obligation to Make Additional Capital Contributions. Except as
provided in Sections 4.2, 10.5 or elsewhere in this Agreement, the Partners
shall have no obligation to make any additional Capital Contributions or loans
to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
A. General. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to the Partners (including the General
Partner and its Affiliates) or other Persons (including, without limitation, in
connection with the contribution of property to the Partnership) additional
Partnership Units or other Partnership Interests in one or more classes, or one
or more series of any of such classes, with such designations, preferences and
relative, participating, optional or other special rights, powers and duties,
including rights, powers and duties senior to the Class A Partnership Common
Units, all as shall be determined by the General Partner in its sole and
absolute discretion without the approval of any Limited Partner but subject to
Delaware law and as shall be set forth in a written document thereafter attached
to and made an exhibit to this Agreement (each, a "Partnership Unit
Designation"), including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; (iii) the rights of
each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; and (iv) the conversion, redemption or exchange
rights applicable to each such class or series of Partnership Units; provided
that no such additional Partnership Units or other Partnership Interests shall
be issued to the Company as General Partner or Limited Partner, unless either
(a)(1) the additional Partnership Interests are issued in connection with the
grant, award or issuance of REIT Shares or other equity interests by the
Company, which REIT shares or other equity interests have designations,
preferences and other rights such that the
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19
economic interests attributable to such REIT shares or other equity interests
are substantially similar to the designations, preferences and other rights of
the additional Partnership Interests issued to the General Partner in accordance
with this Section 4.2.A, and (2) the Company shall make a Capital Contribution
to the Partnership in an amount equal to the proceeds raised in connection with
such issuance, (b) the additional Partnership Interests are issued to all
Partners holding Partnership Interests in the same class or series in proportion
to their respective Percentage Interests in such class or series, (c) the
additional Partnership Units are issued pursuant to Section 4.4, or (d) the
additional Partnership Units are issued upon the conversion, redemption or
exchange of Debt of the Partnership or the Company, Partnership Units or other
securities issued by the Partnership. In addition, the Company may acquire Units
from other Partners pursuant to this Agreement. In the event that the
Partnership issues Partnership Interests pursuant to this Section 4.2.A, the
General Partner shall make such revisions to this Agreement (without any
requirement of receiving approval of the Limited Partners) including but not
limited to the revisions described in Section 5.4, Section 6.1 and Section 8.6,
as it deems necessary to reflect the issuance of such additional Partnership
Interests and the special rights, powers and duties associated therewith. From
and after the Effective Date, subject to this Section 4.2.A, the Partnership
shall have two classes of Partnership Units entitled Class A Partnership
Preferred Units and Class A Partnership Common Units outstanding. Unless
specifically set forth otherwise by the General Partner in a Partnership Unit
Designation, any Partnership Interest issued after the Effective Date shall have
the same rights, powers and duties as the Class A Partnership Common Units
issued on the Effective Date.
B. Restrictions on the Company. From and after the date hereof, the
Company shall not issue any additional REIT Shares (other than REIT Shares
issued pursuant to Section 8.6 or in connection with the conversion or exchange
of securities of the Company solely in conversion or exchange for other
securities of the Company), or rights, options, warrants or convertible or
exchangeable securities or Debt containing the right to subscribe for or
purchase REIT Shares (collectively, "New Securities") other than to all holders
of REIT Shares unless (i) the General Partner shall cause the Partnership to
issue to the Company, Partnership Interests or rights, options, warrants or
convertible or exchangeable securities or Debt of the Partnership having
designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the New Securities; and (ii) the Company
contributes to the Partnership the proceeds from the issuance of such New
Securities and from the exercise of rights contained in such New Securities.
Without limiting the foregoing, the Company is expressly authorized to issue New
Securities for no tangible value or for less than fair market value, and the
General Partner is expressly authorized to cause the Partnership to issue to the
Company corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such issuance is in the interests of the Company
and the Partnership (for example, and not by way of limitation, the issuance of
REIT Shares and corresponding Units pursuant to an employee stock purchase plan
providing for employee grants or purchases of REIT Shares or employee stock
options that have an exercise price that is less than the fair market value of
the REIT Shares, either at the time of issuance or at the
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20
time of exercise); and (y) the Company contributes all proceeds, if any, from
such issuance and exercise to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
In connection with any issuance of New Securities pursuant to Section 4.2,
the Company shall contribute to the Partnership any proceeds (or a portion
thereof) raised in connection with such issuance; provided that if the proceeds
actually received by the Company are less than the gross proceeds of such
issuance as a result of any underwriter's discount or other expenses paid or
incurred in connection with such issuance, then the Company shall be deemed to
have made a Capital Contribution to the Partnership in the amount equal to the
sum of the net proceeds of such issuance plus the amount of such underwriter's
discount and other expenses paid by the Company (which discount and expense
shall be treated as an expense for the benefit of the Partnership for purposes
of Section 7.4). In the case of employee acquisitions of New Securities at a
discount from fair market value or for no value in connection with a grant of
New Securities, the amount of such discount representing compensation to the
employee, as determined by the General Partner, shall be treated as an expense
of the issuance of such New Securities.
Section 4.4 Conversion or Redemption of Preferred Shares
A. Conversion of Preferred Shares. If, at any time, any of the Preferred
Shares are converted into Common Shares, in whole or in part, then a number of
Partnership Preferred Units held by the Company equal to (i) the number of
Preferred Shares so converted divided by (ii) the Conversion Factor for
Partnership Preferred Units then in effect shall automatically be converted into
a number of Partnership Common Units equal to (i) the number of Common Shares
issued upon such conversion, divided by (ii) the Conversion Factor for
Partnership Common Units then in effect, and the Percentage Interests of the
General Partner and the Limited Partners shall be adjusted to reflect such
conversion.
B. Redemption of Preferred Shares. If, at any time, any Preferred Shares
are redeemed (whether by exercise of a put or call, automatically or by means of
another arrangement) by the General Partner for cash, the Partnership shall,
immediately prior to such redemption of Preferred Shares, redeem a number of
Partnership Preferred Units held by the General Partner equal to the number of
the Preferred Shares subject to such redemption divided by the Conversion Factor
for Partnership Preferred Units then in effect, upon the same terms as such
Preferred Shares are redeemed and for the price per Partnership Preferred Unit
equal to the price per Preferred Share so redeemed multiplied by the Conversion
Factor for Partnership Preferred Units then in effect.
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21
Section 4.5 No Preemptive Rights
Except to the extent expressly granted by the General Partner (on behalf
of the Partnership) pursuant to another agreement, no Person shall have any
preemptive, preferential or other similar right with respect to (i) additional
Capital Contributions or loans to the Partnership or (ii) issuance or sale of
any Partnership Units or other Partnership Interests.
Section 4.6 Other Contribution Provisions
In the event that any Partner is admitted to the Partnership and is given
a Capital Account in exchange for services rendered to the Partnership, such
transaction shall be treated by the Partnership and the affected Partner as if
the Partnership has compensated such Partner in cash for the fair market value
of such services, and the Partner had contributed such cash to the capital of
the Partnership.
Section 4.7 No Interest on Capital
No Partner shall be entitled to interest on its Capital Contributions or
its Capital Account.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
The General Partner shall distribute at least quarterly an amount equal to
one hundred percent (100%) of Available Cash generated by the Partnership during
such quarter or shorter period to the Partners who are Partners on the
Partnership Record Date with respect to such quarter or shorter period in the
following order:
(1) first, at the time and in the manner set forth in the applicable
Partnership Unit Designation, to each holder of Partnership Interests of a class
or series that is entitled to a preference in distribution, in accordance with
the rights of such class or series of Partnership Interests (and, within such
class or series, pro rata in proportion to the respective Partnership Interests
on such Partnership Record Date); and
(2) second, to the extent there is Available Cash after payment of any
preference in distribution under the foregoing clause (1), to the holders of
Partnership Interests that are not entitled to any preference in distribution,
pro rata to each class or series in accordance with the terms of such class or
series (and within each class or series pro-rata in proportion to their
respective Percentage Interests on such Partnership Record Date).
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22
Unless otherwise specifically agreed to by the General Partner,
distributions payable with respect to any Partnership Units that were not
outstanding during the entire quarterly or shorter period in respect of which
distribution is made shall be prorated based on the portion of the period that
such Units were outstanding. Notwithstanding anything to the contrary contained
herein, in no event shall a Partner receive a distribution of Available Cash
with respect to a Partnership Unit if such Partner is entitled to receive a
distribution out of such Available Cash with respect to a REIT Share for which
such Partnership Unit has been exchanged or redeemed.
The General Partner shall take such reasonable efforts, as determined by
it in its sole and absolute discretion and consistent with the Company's
qualification as a REIT, to distribute Available Cash (a) to the Limited
Partners so as to preclude any such distribution or portion thereof from being
treated as part of a sale of property to the Partnership by a Limited Partner
under Section 707 of the Code or the Regulations thereunder; provided that the
General Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of any distribution to a Limited
Partner being so treated and (b) to the Company in amounts sufficient to enable
the Company to pay shareholder dividends that will (1) satisfy the requirements
for qualifying or reelecting as a REIT under the Code and Regulations and (2)
avoid any federal income or excise tax liability for the Company. Unless
otherwise expressly provided for herein or in an agreement at the time a new
class or series of Partnership Interests is created in accordance with Article
4, no Partnership Interest shall be entitled to a distribution in preference to
any other Partnership Interest.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any state
or local tax law and Section 10.5 with respect to any allocation, payment or
distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 5.1 for all
purposes under this Agreement.
Section 5.3 Distributions upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2.
Section 5.4 Revisions to Reflect Issuance of Additional Partnership
Interests
In the event that the Partnership issues additional Partnership Interests
to the Company or any Additional Limited Partner pursuant to Article 4, the
General Partner shall, subject to Section 14.1.C, make such revisions to this
Article 5 as it deems necessary to reflect the issuance of such additional
Partnership Interests and any special rights, duties or powers with respect
thereto.
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ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations for Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. After giving effect to the special allocations set forth in
Section I of Exhibit C, Net Income shall be allocated (i) first, to the General
Partner until the cumulative Net Income allocated pursuant to this clause (i) of
Section 6.1.A equals the aggregate Net Loss previously allocated to the General
Partner pursuant to clause (6) of Section 6.1.B; (ii) second, to the Limited
Partners listed on the recourse debt level schedule attached hereto as Exhibit E
in proportion to their share of the Net Loss previously allocated pursuant to
clause (5) of Section 6.1.B until the cumulative Net Income allocated to them
pursuant to this clause (ii) in Section 6.1.A equals the aggregate amount of
such previous Net Loss allocations; (iii) third, to the General Partner to the
extent that Net Loss previously allocated to the General Partner pursuant to
clause (4) of Section 6.1.B exceeds Net Income previously allocated to the
General Partners pursuant to this clause (iii) of Section 6.1.A, (iv) fourth, to
the holders of any class or series of Partnership Interests that are entitled to
a preference upon liquidation, in the order of the priorities of each such class
or series (and, within such class or series, in proportion to their share of the
Net Loss previously allocated pursuant to clause (3) of Section 6.1.B.), until
the cumulative Net Income allocated to such holders pursuant to this clause (iv)
in Section 6.1.A. equals the aggregate amount of previous Net Loss allocated
pursuant to clause (3) of Section 6.1.B.; (v) fifth, to the holders of any class
or series of Partnership Interests that are entitled to any preference in
periodic distributions of Available Cash under Section 5.1 in accordance with
the rights of any such class or series until each such Partnership Interest has
been allocated, on a cumulative basis pursuant to this clause (v) of Section
6.1.A., Net Income equal to the amount of distributions received in respect of
such preference (and within such class or series, pro rata in proportion to the
respective Percentage Interests in such class or series as of the last day of
the period for which such allocation is being made); and (vi) thereafter, Net
Income shall be allocated to the classes and series of Partnership Interests
that are not entitled to any preference in periodic distributions of Available
Cash under Section 5.1, pro rata to each such class or series in accordance with
the terms of such class or series (and within each such class or series pro rata
in proportion to the respective Percentage Interests of each Partner in such
class or series as of the last day for which such allocation is being made).
B. Net Loss. After giving effect to the special allocations set forth in
Section I of Exhibit C, Net Loss shall be allocated to the Partners in the
following order:
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(1) First, to the Partners, in proportion to their share of the Net
Income previously allocated pursuant to clause (vi) of Section
6.1.A. until the cumulative Net Loss allocated to them pursuant to
this clause (1) equals the aggregate amount of such previous Net
Income allocations;
(2) Second, with respect to classes or series of Partnership Interests
that are not entitled to any preferences upon liquidation, pro rata
to each such class or series in accordance with the terms of such
class or series (and within such class or series, pro rata in
proportion to their respective Percentage Interests as of the last
day of the period for which such allocation is being made);
provided, that Net Loss shall not be allocated to any Partner
pursuant to this clause (2) of Section 6.1.B. to the extent that
such allocation would cause such Partner to have an Adjusted Capital
Account Deficit (or to increase an existing Adjusted Capital Account
Deficit) at the end of such period;
(3) Third, to the holders of any class or series of Partnership
Interests that are entitled to a preference upon liquidation, in
reverse order of the priorities of each such class of series (and
within such class or series, pro rata in proportion to their
respective Percentage Interests as of the last day of the period for
which such allocation is being made); provided that Net Loss shall
not be allocated to any Partner pursuant to this clause (3) of
Section 6.1.B. to the extent that such allocation would cause such
Partner to have an Adjusted Capital Account Deficit (or to increase
an existing Adjusted Capital Account Deficit) at the end of such
period;
(4) Fourth, to the General Partner until the General Partner's Adjusted
Capital Account Deficit is equal to the excess, if any, of the
aggregate recourse liabilities of the Partnership over the aggregate
amount of recourse partnership debt set forth on the recourse debt
level schedule attached hereto as Exhibit E, as appropriately
amended from time to time (the "Recourse Debt Amount");
(5) Fifth, to the Limited Partners listed on the recourse debt level
schedule attached hereto as Exhibit E, in proportion to each such
Limited Partner's Limited Partner Recourse Debt Percentage, until
the sum of such Limited Partners' Adjusted Capital Account Deficits
equals the Recourse Debt Amount; and
(6) Sixth, 100% to the General Partner.
C. Terminating Capital Transactions. Upon the occurrence of a Terminating
Capital Transaction or otherwise upon the commencement of a liquidation of the
Partnership, after giving effect to the special allocations set forth in Section
I of Exhibit C, Net Income or Net Loss shall be allocated among the Partners in
accordance with Section 6.1.A. or 6.1.B., as the case may be;
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25
provided, however, that holders of any class or series of Partnership Interests
that are entitled to a preference upon liquidation shall be specially allocated
Net Income or Net Loss (or, if necessary, items of income, gain, loss or
deduction) until their Adjusted Capital Accounts equal the amounts of their
liquidation preference, in accordance with the terms of such class or series, to
be distributed under clause (4) of Section 13.2.A. (before giving effect to such
distribution).
D. Recapture Income. Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall, to the extent
possible, after taking into account other required allocations of gain pursuant
to Section 6.1.C. and Exhibit C, be characterized as Recapture Income in the
same proportions and to the same extent as such Partners have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
Section 6.2 Revisions to Allocations to Reflect Issuance of Additional
Partnership Interests
In the event that the Partnership issues additional Partnership Interests
to the General Partner, or any Additional Limited Partner pursuant to Article 4,
the General Partner shall, subject to Section 14.1.C, make such revisions to
this Article 6 as it determines are necessary to reflect the terms of the
issuance of such additional Partnership Interests, including making preferential
allocations to certain classes or series of Partnership Interests.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Powers of the General Partner. Except as otherwise expressly provided
in this Agreement, all management powers over the business and affairs of the
Partnership are and shall be exclusively vested in the General Partner, and no
Limited Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The General
Partner may not be removed by the Limited Partners with or without good cause.
In addition to the powers now or hereafter granted a general partner of a
limited partnership under the Act or other applicable law or which are granted
to the General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3, shall have full power and authority to do all
things deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 and to effectuate
the purposes set forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and
borrowing money to
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26
permit the Partnership to make distributions to its Partners in such
amounts as will permit the Company (so long as the Company qualifies
as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to Section
4981 of the Code) and to make distributions to its shareholders in
amounts sufficient to permit the Company to maintain or reelect REIT
status), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidence of
indebtedness (including the securing of the same by deed, mortgage,
deed of trust or other lien or encumbrance on the Partnership's
assets) and the incurring of any obligations it deems necessary for
the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership, the
registration of any class or series of securities of the Partnership
under the Securities Exchange Act of 1934, as amended, and the
listing of any debt securities of the Partnership on any exchange;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in
connection with any assets at any time held by the Partnership) or
the merger or other combination of the Partnership with or into
another entity (all of the foregoing subject to any prior approval
only to the extent required by Section 7.3);
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms
of this Agreement and on any terms it sees fit, including, without
limitation, the financing of the conduct of the operations of the
Company, the Partnership or any of the Partnership's Subsidiaries,
the lending of funds to other Persons (including, without
limitation, Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership and its Subsidiaries and any other
Person in which it has an equity investment, and the making of
capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair, alteration,
demolition or improvement of any real property or improvements owned
by the Partnership or any Subsidiary of the Partnership or any other
Person in which the Partnership has made a direct or indirect equity
investment;
(6) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner considers
useful or necessary to the conduct of the Partnership's operations
or the implementation of the General
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27
Partner's powers under this Agreement, including contracting with
contractors, developers, consultants, accountants, legal counsel,
other professional advisors and other agents and the payment of
their expenses and compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other Partnership assets in
accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other assets
of the Partnership and, in connection therewith, the opening,
maintaining and closing of bank and brokerage accounts and the
drawing of checks or other orders for the payment of moneys;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the Partnership, the
selection and dismissal of employees of the Partnership (including,
without limitation, employees having titles such as "president,"
"vice president," "secretary" and "treasurer" of the Partnership),
and agents, outside attorneys, accountants, consultants and
contractors of the Partnership, and the determination of their
compensation and other terms of employment or hiring;
(11) the maintenance of such insurance for the benefit of the
Partnership, the Partners and directors and officers thereof as it
deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures, limited liability companies or other
relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions
of funds or property to, or making of loans to, its Subsidiaries and
any other Person in which it has an equity investment from time to
time, or the incurrence of indebtedness on behalf of such Persons or
the guarantee of the obligations of such Persons); provided,
however, that as long as the General Partner has determined to
continue to qualify as a REIT, the General Partner may not engage in
any such formation, acquisition or contribution that would cause the
General Partner to fail to qualify as a REIT;
(13) the control of any matters affecting the rights and obligations of
the Partnership, including the settlement, compromise, submission to
arbitration or any other form of dispute resolution, or abandonment
of,
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28
any claim, cause of action, liability, debt or damages, due or owing
to or from the Partnership, the commencement or defense of suits,
legal proceedings, administrative proceedings, arbitration or other
forms of dispute resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution, the
incurring of legal expense, and the indemnification of any Person
against liabilities and contingencies to the extent permitted by
law;
(14) the undertaking of any action in connection with the Partnership's
direct or indirect investment in its Subsidiaries or any other
Person (including, without limitation, the contribution or loan of
funds by the Partnership to such Persons);
(15) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of
valuation as the General Partner may adopt;
(16) the enforcement of any rights against any Partner pursuant to
representations, warranties, covenants and indemnities relating to
such Partner's contribution of property or assets to the
Partnership;
(17) the exercise, directly or indirectly, through any attorney-in-fact
acting under a general or limited power of attorney, of any right,
including the right to vote, appurtenant to any asset or investment
held by the Partnership;
(18) the exercise of any of the powers of the General Partner enumerated
in this Agreement on behalf of or in connection with any Subsidiary
of the Partnership or any other Person in which the Partnership has
a direct or indirect interest, or jointly with any such Subsidiary
or other Person;
(19) the exercise of any of the powers of the General Partner enumerated
in this Agreement on behalf of any Person in which the Partnership
does not have an interest pursuant to contractual or other
arrangements with such Person;
(20) the making, execution and delivery of any and all deeds, leases,
notes, mortgages, deed of trust, security agreements, conveyances,
contracts, guarantees, warranties, indemnities, waivers, releases or
legal instruments or agreements in writing necessary or appropriate,
in the judgment of the General Partner, for the accomplishment of
any of the powers of the General Partner enumerated in this
Agreement;
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29
(21) the issuance of additional Partnership Units in connection with
Capital Contributions by Additional Limited Partners and additional
Capital Contributions by Partners pursuant to Article 4;
(22) the opening of bank accounts on behalf of, and in the name of, the
Partnership and its Subsidiaries;
(23) the distribution of cash to acquire Partnership Units held by a
Limited Partner in connection with a Limited Partner's exercise of
its Redemption Right under Section 8.6; and
(24) an election to dissolve the Partnership pursuant to Section 13.1.
B. No Approval by Limited Partners. Each of the Limited Partners agrees
that the General Partner is authorized to execute, deliver and perform the
above-mentioned agreements and transactions on behalf of the Partnership without
any further act, approval or vote of the Partners, notwithstanding any other
provision of this Agreement (except as provided in Section 7.3), the Act or any
applicable law, rule or regulation, to the fullest extent permitted under the
Act or other applicable law, rule or regulation. The execution, delivery or
performance by the General Partner or the Partnership of any agreement
authorized or permitted under this Agreement shall not constitute a breach by
the General Partner of any duty that the General Partner may owe the Partnership
or the Limited Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. Working Capital and Other Reserves. At all times from and after the
date hereof, the General Partner may cause the Partnership to establish and
maintain at any and all times working capital accounts and other cash or similar
balances in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time, including upon
the liquidation of the Partnership pursuant to Section 13.2.
D. Insurance. At all times from and after the date hereof, the General
Partner may cause the Partnership to obtain and maintain (i) casualty, liability
and other insurance on the properties of the Partnership, (ii) liability
insurance for the Indemnitee hereunder, (iii) liability insurance for the
directors and officers of the Company, and (iv) such other insurance as the
General Partner, in its sole and absolute discretion, determines to be
necessary.
E. No Obligation to Consider Tax Consequences of Limited Partners. In
exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner of any action taken (or not taken) by it. The General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances, as a result of any tax liability incurred (or tax benefit not
derived) by such Limited Partner as a result of an action (or inaction) by the
General Partner taken pursuant to its authority under this Agreement and in
accordance with the terms of Section 7.3, which
<PAGE>
30
action (or inaction) is not in violation of any other provision of this
Agreement. The Limited Partners expressly acknowledge that the General Partner
is acting on behalf of the Partnership, the Company and the Company's
stockholders collectively. In the event of a conflict between the interests of
the stockholders of the Company on one hand and the Limited Partners on the
other, the General Partner shall endeavor in good faith to resolve the conflict
in a manner not adverse to either the stockholders of the Company or the Limited
Partners.
Section 7.2 Certificate of Limited Partnership
The General Partner shall file, simultaneously herewith, the Certificate
of Limited Partnership with the Secretary of State of the State of Delaware as
required by the Act. The General Partner shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and any other state,
or the District of Columbia, in which the Partnership may elect to do business
or own property. To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate of Limited Partnership
and do all of the things to maintain the Partnership as a limited partnership
(or a partnership in which the limited partners have limited liability) under
the laws of the State of Delaware and each other state, or the District of
Columbia, in which the Partnership may elect to do business or own property.
Subject to the terms of Section 8.5.A(4), the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate
of Limited Partnership or any amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner Authority
The General Partner may not take any action in contravention of an express
prohibition or limitation of this Agreement without the written Consent of
Limited Partners holding a majority of the Percentage Interests of the Limited
Partners (including Limited Partner Interests held by the Company), or such
other percentage of the Limited Partners as may be specifically provided for
under a provision of this Agreement.
Section 7.4 Reimbursement of the General Partner and the Company; DRIP's
and Repurchase Programs
A. No Compensation. Except as provided in this Section 7.4 and elsewhere
in this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
B. Partnership Expenses. The Partnership shall be responsible for and
shall pay all expenses relating to the Partnership's organization, the ownership
of its assets and its
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31
operations. The General Partner shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, (i) expenses
relating to the ownership of interests in and operation of the Partnership, (ii)
expenses related to the operations of the Company and the management and
administration of any Subsidiaries of the Company or the Partnership or
Affiliates of the Partnership, (iii) compensation of the Company's officers and
employees including, without limitation, payments under the General Partner's
Stock Incentive Plans that provides for stock units, or other phantom stock,
pursuant to which employees of the General Partner will receive payments based
upon dividends on or the value of REIT Shares, (iv) director fees and expenses
and (v) all costs and expenses of being a public company, including costs of
filings with the SEC, reports and other distributions to its stockholders);
provided that the amount of any such reimbursement shall be reduced by any
interest earned by the General Partner with respect to bank accounts or other
instruments or accounts held by it on behalf of the Partnership. The Partners
acknowledge that all such expenses of the General Partner are deemed to be for
the benefit of the Partnership. Reimbursements hereunder shall be in addition to
any reimbursement made as a result of indemnification pursuant to Section 7.7
and shall be treated as "guaranteed payments" within the meaning of Section
707(c) of the Code. To the extent practicable, partnership expenses shall be
billed directly to and paid by the Partnership.
C. Issuance of Partnership Interests or Debt. The Partnership also shall
be responsible for and shall pay all expenses relating to any issuance of
additional Partnership Interests, Debt of the Partnership or the Company or
rights, options, warrants or convertible or exchangeable securities pursuant to
Article 4 (including, without limitation, all costs, expenses, damages and other
payments resulting from or arising in connection with litigation relating to any
of the foregoing), and the General Partner shall be properly reimbursed to the
extent it incurs any such expenses on behalf of the Partnership.
D. Purchases of REIT Shares by the Company. In the event that the Company
shall elect to purchase from its shareholders REIT Shares in connection with a
share repurchase or similar program or for the purpose of delivering such REIT
Shares to satisfy an obligation under any dividend reinvestment or stock
purchase program adopted by the Company, any employee stock purchase plan
adopted by the Company, or any similar obligation or arrangement undertaken by
the Company in the future or for the purpose of retiring such REIT Shares, the
purchase price paid by the Company for such REIT Shares and any other expenses
incurred by the Company in connection with such purchase shall be considered
expenses of the Partnership and shall be advanced to the Company or reimbursed
to the Company, subject to the condition that: (i) if such REIT Shares
subsequently are sold by the Company, the Company shall pay to the Partnership
any proceeds received by the Company for such REIT Shares (which sales proceeds
shall include the amount of dividends reinvested under any dividend reinvestment
or similar program provided that a transfer of REIT Shares for Units pursuant to
Section 8.6 would not be considered a sale for such purposes); and (ii) if such
REIT Shares are not retransferred by the Company within thirty (30) days after
the purchase
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32
thereof, or the Company otherwise determines not to retransfer such REIT Shares,
the Company, as General Partner, shall cause the Partnership to redeem a number
of Partnership Units held by the Company, as a Limited Partner, equal to the
product obtained by dividing the number of such REIT Shares by the Conversion
Factor (in which case such advancement or reimbursement of expenses shall be
treated as having been made as a distribution in redemption of such number of
Units held by the Company).
Section 7.5 Outside Activities of the General Partner
The General Partner shall not directly or indirectly enter into or conduct
any business other than in connection with the ownership, acquisition and
disposition of Partnership Interests and the management of the business of the
Partnership, and such activities as are incidental thereto. The General Partner
and any Affiliates of the General Partner may acquire Limited Partner Interests
and shall be entitled to exercise all rights of a Limited Partner relating to
such Limited Partner Interests.
Section 7.6 Contracts with Affiliates
A. Contribution. The Partnership may lend or contribute funds or other
assets to its Subsidiaries or other Persons in which it has an equity investment
and such Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Asset Transfers. Except as provided in Section 7.5, the Partnership may
transfer assets to joint ventures, other partnerships, corporations or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes are advisable.
C. Standards. Except as expressly permitted by this Agreement, neither the
General Partner nor any of its Affiliates shall sell, transfer, convey any
property to, purchase any property from, or enter into another transaction with,
the Partnership, the Company or the Company's Subsidiaries, directly or
indirectly, except pursuant to transactions that are determined by the General
Partner in good faith to be fair and reasonable.
D. Stock Option Plans. The General Partner, in its sole and absolute
discretion and without the approval of the Limited Partners, may propose and
adopt, on behalf of the Partnership, employee benefit plans, stock option plans,
and similar plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership or the Company
or any Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any
Subsidiaries of the Partnership.
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33
E. Conflict Avoidance Agreement. The General Partner is expressly
authorized to enter into, in the name and on behalf of the Partnership, a right
of first opportunity arrangement and other conflict avoidance agreements with
various Affiliates of the Partnership and the General Partner, on such terms as
the General Partner, in its sole and absolute discretion, believes are
advisable.
Section 7.7 Indemnification
A. General. To the fullest extent permitted by Delaware law, the
Partnership shall indemnify each Indemnitee from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including, without
limitation, attorneys fees and other legal fees and expenses), judgements,
fines, settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property, or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by conviction of an Indemnitee or upon a plea of nolo contendere or
its equivalent by an Indemnitee, or an entry of an order of probation against an
Indemnitee prior to judgment, creates a rebuttable presumption that such
Indemnitee acted in a manner contrary to that specified in this Section 7.7.A.
Any indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.7. It is the intent of the Partners that any
amounts paid by the Partnership to the General Partner pursuant to this Section
7.7 shall be treated as "guaranteed payments" within the meaning of Section
707(c) of the Code.
B. Advancement of Expenses. Reasonable expenses incurred by an Indemnitee
who is a party to a proceeding shall be paid or reimbursed by the Partnership in
advance of the final disposition of the proceeding upon receipt by the
Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification by
the Partnership as authorized in Section 7.7.A. has been met, and (ii) a
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34
written undertaking by or on behalf of the Indemnitee to repay the amount if it
shall be ultimately determined that the standard of conduct has not been met.
C. No Limitation of Rights. The indemnification provided by this Section
7.7 shall be in addition to any other rights to which an Indemnitee or any other
Person may be entitled under any agreement, pursuant to any vote of the
Partners, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity unless otherwise provided in
a written agreement pursuant to which such Indemnitee is indemnified.
D. Insurance. The Partnership may, but shall not be obligated to, purchase
and maintain insurance, on behalf of the Indemnitees and other such Person as
the General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. Benefit Plan Fiduciary. For purposes of this Section 7.7, (i) the
Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves services
by, it to the plan or participants or beneficiaries of the plan; (ii) excise
taxes assessed on any Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of Section
7.7; and (iii) actions taken or omitted by the Indemnitee with respect to an
employee benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which is not opposed to the best
interests of the Partnership.
F. No Personal Liability of Partners. In no event may an Indemnitee
subject any of the Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.
G. Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 solely because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.
H. Benefit. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, notification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.7, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or
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35
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.8 Liability of the General Partner
A. General. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner and its officers and directors shall not be
liable for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in judgment
or of any act or omission if the General Partner acted in good faith.
B. No Obligation to Consider Separate Interests of Limited Partners. The
Limited Partners expressly acknowledge that, as stated in Section 7.1.E, the
General Partner is acting on behalf of the Partnership and the shareholders of
the Company collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners (except as otherwise
provided herein) in deciding whether to cause the Partnership to take (or
decline to take) any actions, and that the General Partner shall not be liable
for monetary damages or otherwise for losses sustained, liabilities incurred, or
benefits not derived by Limited Partners in connection with such decisions,
provided that the General Partner has acted in good faith.
C. Actions by Agent. Subject to its obligations and duties as General
Partner set forth in Section 7.1.A, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by the General Partner in good faith.
D. Effect of Amendment. Any amendment, modification or repeal of this
Section 7.8 or any provisions hereof shall be prospective only and shall not in
any way affect the limitations of the General Partner's and its officers' and
directors' liability to the Partnership and the Limited Partners under this
Section 7.8 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
A. Reliance on Documents. The General Partner may rely and shall be
protected in acting, or refraining from acting, upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, or other paper or document believed by it in good faith
to be genuine and to have been signed or presented by the proper party or
parties.
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36
B. Reliance on Professional Consultants. The General Partner may consult
with legal counsel, accountants, appraisers, management consultants, investment
bankers, architects, engineers, environmental consultants and other consultants
and advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which such General
Partner reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
C. Actions Through Agents. The General Partner shall have the right, in
respect of any of its powers or obligations hereunder, to act through any of its
duly authorized officers and duly appointed attorneys-in-fact. Each such
attorney-in-fact shall, to the extent provided by the General Partner in the
power of attorney, have full power and authority to do and perform all and every
act and duty which is permitted or required to be done by the General Partner
hereunder.
D. Action to Maintain REIT Status or Avoid Taxation of Company.
Notwithstanding any other provisions of this Agreement or the Act, any action of
the General Partner on behalf of the Partnership or any decision of the General
Partner to refrain from acting on behalf of the Partnership, undertaken in the
good faith belief that such action or omission is necessary or advisable in
order (i) to protect the ability of the Company to continue to qualify as a
REIT; or (ii) to avoid the Company incurring any taxes under Section 857 or
Section 4981 of the Code (including, without limitation, the granting of a loan
or advance from the Partnership to the Company); or (iii) to prevent
classification of the Partnership as a taxable "association" under Section 7704
of the Code, is expressly authorized under this Agreement and is deemed approved
by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be held by the General Partner or such Affiliate for the use and benefit
of the Partnership in accordance with the provisions of this Agreement;
provided, however, that the General Partner shall use its best efforts to cause
beneficial and record title to such assets to be vested in the Partnership as
soon as reasonably practicable if failure to so vest such title would have a
material adverse effect on the Partnership. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
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Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement except
is expressly provided in this Agreement, including Section 10.5, or under the
Act.
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Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such)
shall take part in the operation, management or control (within the meaning of
the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations and the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into pursuant to Section 7.6.E and any
other agreements entered into by a Limited Partner or its Affiliates with the
Partnership or any of its Subsidiaries, any Limited Partner (other than the
Company) and any officer, director, employee, agent, trustee, Affiliate or
shareholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities that are in direct
competition with the Partnership or that are enhanced by the activities of the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. None of the Limited Partners (other than the Company) nor any other
Person shall have any rights by virtue of this Agreement or the Partnership
relationship established hereby in any business ventures of any other Person and
such Person shall have no obligation pursuant to this Agreement to offer any
interest in any such business ventures to the Partnership, any Limited Partner
or say such other Person, even if such opportunity is of a character which, if
presented to the Partnership, any Limited Partner or such other Person, could be
taken by such Person.
Section 8.4 Return of Capital
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C, any Partnership Unit Designation or as
otherwise expressly provided in this Agreement, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee, either as to the
return of Capital Contributions or as to profits, losses or distributions.
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Section 8.5 Rights of Limited Partners Relating to the Partnership
A. General. In addition to the other rights provided by this Agreement or
by the Act, and except as limited by Section 8.5.C, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand (including
a statement of the purpose of such demand) and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the Company
pursuant to the Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this Agreement,
the Certificate of Limited Partnership and all amendments thereto
have been executed; and
(5) to obtain true and full information regarding the amount of cash and
a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a
Partner.
B. Notice of Conversion Factor and REIT Shares Amount. The Partnership
shall notify each Limited Partner, upon request, of the then current Conversion
Factor and the REIT Shares Amount per Partnership Unit and, with reasonable
detail, how the same was determined.
C. Confidentiality. Notwithstanding any other provision of this Section
8.5, the General Partner may keep confidential from the Limited Partners, for
such period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
reasonably believes to be in the nature of trade secrets or other information,
the disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or could damage the Partnership or its
business; or (ii) the Partnership is required by law or by agreements with an
unaffiliated third party to keep confidential.
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Section 8.6 Redemption Right
A. General. Subject to Sections 8.6.B and 8.6.C, at any time on or after
the day following the first (1st) anniversary of date of issuance of a
Partnership Unit to a Limited Partner pursuant to Article 4, or on or after such
date prior to the expiration of such one-year period as the General Partner, in
its sole and absolute discretion, designates with respect to any Units then
outstanding, each Limited Partner (other than the Company) shall have the right
(the "Redemption Right") to require the Partnership to redeem on a Specified
Redemption Date all or a portion of the Partnership Units held by such Limited
Partner at a redemption price per Unit equal to and in the form of the Cash
Amount to be paid by the Partnership. The Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with a copy to
the Company) by the Limited Partner who is exercising the redemption right (the
"Redeeming Partner"); provided, however, that the Partnership shall not be
obligated to satisfy such Redemption Right if the Company elects to purchase the
Partnership Units subject to the Notice of Redemption pursuant to Section 8.6.B.
A Limited Partner may not exercise the Redemption Right for less than one
thousand (1,000) Partnership Units or, if such Limited Partner holds less than
one thousand (1,000) Partnership Units, all of the Partnership Units held by
such Partner. The Redeeming Partner shall have no right, with respect to any
Partnership Units so redeemed, to receive any distributions paid on or after the
Specified Redemption Date. The Assignee of any Limited Partner may exercise the
rights of such Limited Partner pursuant to this Section 8.6, and such Limited
Partner shall be deemed to have assigned such rights to such Assignee and shall
be bound by the exercise of such rights by such Assignee. In connection with any
exercise of such rights by an Assignee on behalf of a Limited Partner, the Cash
Amount shall be paid by the Partnership directly to such Assignee and not to
such Limited Partner.
B. Company Assumption of Right. Notwithstanding the provisions of Section
8.6.A, a Limited Partner that exercises the Redemption Right shall be deemed to
have offered to sell the Partnership Units described in the Notice of Redemption
to the Company, and the Company may, in its sole and absolute discretion, elect
to purchase directly and acquire such Partnership Units by paying to the
Redeeming Partner either the Cash Amount or the REIT Shares Amount, as elected
by the Company (in its sole and absolute discretion), on the Specified
Redemption Date, whereupon the Company shall acquire the Partnership Units
offered for redemption by the Redeeming Partner and shall be treated for all
purposes of this Agreement as the owner of such Partnership Units. If the
Company shall elect to exercise its right to purchase Partnership Units under
this Section 8.6.B with respect to a Notice of Redemption, it shall so notify
the Redeeming Partner within five (5) Business Days after the receipt by it of
such Notice of Redemption. Unless the Company (in its sole and absolute
discretion) shall exercise its right to purchase Partnership Units from the
Redeeming Partner pursuant to this Section 8.6.B, the Company shall not have any
obligation to the Redeeming Partner of the Partnership with respect to the
Redeeming Partner's exercise of the Redemption Right. In the event the Company
shall exercise its right to purchase Partnership Units with respect to the
exercise of a Redemption Right in the manner described in the first sentence of
this Section
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8.6.B, the Partnership shall have no obligation to pay any amount to the
Redeeming Partner with respect to such Redeeming Partner's exercise of such
Redemption Right, and each of the Redeeming Partner, the Partnership, and the
Company shall treat the transaction between the Company and the Redeeming
Partner, for federal income tax purposes, as a sale of the Redeeming Partner's
Partnership Units to the Company. Each Redeeming Partner agrees to execute such
documents as the Company may reasonably require in connection with the issuance
of REIT Shares upon exercise of the Redemption Right.
C. Exceptions to Exercise of Redemption Right. Notwithstanding the
provisions of Section 8.6.A and Section 8.6.B, a Partner shall not be entitled
to exercise the Redemption Right pursuant to Section 8.6.A if the delivery of
REIT Shares to such Partner on the Specified Redemption Date by the Company
pursuant to Section 8.6.B (regardless of whether or not the Company would in
fact exercise its rights under Section 8.6.B) would be prohibited under the
Certificate of Incorporation of the Company.
D. No Liens on Partnership Units Delivered for Redemption. Each Limited
Partner covenants and agrees with the Company that all Partnership Units
delivered for redemption shall be delivered to the Company free and clear of all
liens, and, notwithstanding anything contained herein to the contrary, the
Company shall not be under any obligation to acquire Partnership Units which are
or may be subject to any liens. Each Limited Partners further agrees that, in
the event any state or local property transfer tax is payable as a result of the
transfer of its Partnership Units to the Company, such Limited Partners shall
assume and pay such transfer tax.
E. Additional Partnership Interests. In the event that the Partnership
issues additional Partnership Interests pursuant to Section 4.2.A, the General
Partner shall make such revisions to this Section 8.6 as it determines are
necessary to reflect the issuance of such additional Partnership Interests.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 9.3.
Any records maintained by or on behalf of the Partnership in the regular course
of its business may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, micrographics or any other information storage device,
provided that the
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records so maintained are convertible into clearly legible written form within a
reasonable period of time. The books of the Partnership shall be maintained, for
financial and tax reporting purposes, on an accrual basis in accordance with
generally accepted accounting principles, or such other basis as the General
Partner determines to be necessary or appropriate.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. Annual Reports. As soon as practicable, but in no event later than the
date on which the Company mails its annual report to its shareholders, the
General Partner shall cause to be mailed to each Limited Partner as of the close
of the Partnership Year, an annual report containing financial statements of the
Partnership, or of the Company if such statements are prepared solely on a
consolidated basis with the Company, for such Partnership Year, presented in
accordance with generally accepted accounting principles, such statements to be
audited by a nationally recognized firm of independent public accountants
selected by the General Partner.
B. Quarterly Reports. If and to the extent that the Company mails
quarterly reports to its shareholders, as soon as practicable, but in no event
later that the date on which such reports are mailed, the General Partner shall
cause to be mailed to each Limited Partner as of the last day of the calendar
quarter, a report containing unaudited financial statements of the Partnership,
or of the Company, if such statements are prepared solely on a consolidated
basis with the Company, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to be
appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
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Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code, including, without limitation, the election under Section
754 of the Code. The General Partner shall have the right to seek to revoke any
tax election it makes (including, without limitation, the election under Section
754 of the Code) upon the General Partner's determination, in its sole and
absolute discretion, that such revocation is in the best interests of the
Partners.
Section 10.3 Tax Matters Partner
A. General. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notices from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and any Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. Powers. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for
income tax purposes (such administrative proceedings being referred
to as a "tax audit" and such judicial proceedings being referred to
as "judicial review"), and in the settlement agreement the tax
matters partner may expressly state that such agreement shall bind
all Partners, except that such settlement agreement shall not bind
any Partner (i) who (within the time prescribed pursuant to the Code
and Regulations) filed a statement with the IRS providing that the
tax matters partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner; or (ii) who is a
"notice partner" (as defined in Section 6231(a)(8) of the Code) or a
member of a "notice group" (as defined in Section 6223(b)(2) of the
Code);
(2) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account
by a Partner for tax purposes (a "final adjustment") is mailed to
the tax matters partner, to seek judicial review of such final
adjustment, including the filing of a petition for readjustment with
the Tax Court or the filing of a complaint for refund with the
United States Claims Court or the District Court of the United
States for the district in which the Partnership's principal place
of business is located;
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44
(3) to intervene in any action brought by any other Partner for judicial
review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS and,
if any part of such request is not allowed by the IRS, to file an
appropriate pleading (petition or complaint) for judicial review
with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be
taken account of by a Partner for tax purposes, or an item affected
by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 shall be fully applicable to the tax matters
partner in its capacity as such.
C. Reimbursement. The tax matters partner shall receive no compensation
for its services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging professional consultants to
assist the tax matters partner in discharging its duties hereunder, so long as
the compensation paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to withhold from,
or pay on behalf of or with respect to, such Limited Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, 1446 or 3406 of the Code.
Furthermore, each Limited Partner agrees to provide the Partnership with correct
and complete information, and duly authorized certifications or forms (e.g., IRS
Forms W-8 or W-9), relating to
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45
withholding tax compliance or reporting, as the General Partner may request from
time to time. Any amount paid on behalf of or with respect to a Limited Partner
pursuant to this Section 10.5 shall constitute a recourse loan by the
Partnership to such Limited Partner, which loan shall be repaid by such Limited
Partner within fifteen (15) days after notice from the General Partner that such
payment must be made unless (i) the Partnership withholds such payment from a
distribution which would otherwise be made to the Limited Partner; or (ii) the
General Partner determines, in its sole and absolute discretion, that such
payment may be satisfied out of the available funds of the Partnership which
would, but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as
having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner. Without limitations in such event the General
Partner shall have the right to receive distributions that would otherwise be
distributable to such defaulting Limited Partner until such time as such loan,
together with all interest thereon, has been paid in full, and any such
distributions so received by the General Partner shall be treated as having been
distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amounts payable by a Limited Partner hereunder shall bear interest at the lesser
of (A) the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in The Wall Street Journal, or
its successor, or, if the same is not longer published, another comparable
publication selected by the General Partner in its sole and absolute discretion,
plus four (4) percentage points, or (B) the maximum lawful rate of interest on
such obligation, such interest to accrue from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each Limited
Partner shall take such actions as the Partnership or the General Partner shall
request in order to perfect or enforce the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. Definition. The term "transfer," when used in this Article 11 with
respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner purports to assign all or any part of its General
Partner Interest to another Person or by which
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a Limited Partner purports to assign all or any part of its Limited Partner
Interest to another Person and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by
operation of law or otherwise. The term "transfer" when used in this Article 11
does not include any redemption of Partnership Interests by the Partnership from
a Limited Partner or any acquisition of Partnership Units from a Limited Partner
by the Company pursuant to Section 8.6. No part of the interest of a Limited
Partner shall be subject to the claims of any creditor, any spouse for alimony
or support, or to legal process, and may not be voluntarily or involuntarily
alienated or encumbered except as may be specifically provided for in this
Agreement or consented to by the General Partner.
B. General. No Partnership Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of the Company's General Partner Interest and
Limited Partner Interest; Extraordinary Transactions
A. General. The Company may not transfer any of its General Partner
Interest or withdraw as General Partner, or transfer any of its Limited Partner
Interest, or engage in an Extraordinary Transaction, except, in any such case,
(i) if such Extraordinary Transaction is, or such transfer or withdrawal is
pursuant to an Extraordinary Transaction that is, permitted under Section 11.2.B
or (ii) if Partners holding at least three-fourths of the then outstanding
Partnership Common Units (other than Partnership Common Units held by the
Company or its Affiliates) consent to such transfer or withdrawal or
Extraordinary Transaction, or (iii) if such transfer is to an entity that is
wholly-owned by the Company and is a Qualified REIT Subsidiary under Section
856(i) of the Code.
B. Extraordinary Transactions. The General Partner is permitted to engage
in the following Extraordinary Transactions without the approval or vote of the
Limited Partners except as provided in Section 11.2.C:
(i) an Extraordinary Transaction in connection with which all
Limited Partners either will receive, or will have the right
to elect to receive for each Partnership Unit an amount of
cash, securities, or other property equal to the product of
the Conversion Factor and the greatest amount of cash,
securities or other property paid to a holder of one REIT
Share in consideration of one REIT Share pursuant to the terms
of the Extraordinary Transaction, provided that, if, in
connection with the Extraordinary Transaction, a purchase,
tender or exchange offer shall have been made to and accepted
by the holders of more than fifty percent (50%) of the
outstanding REIT Shares, each holder of Partnership Units
shall receive, or shall have the right to elect to receive,
the greatest amount of cash, securities, or other property
which such holder would have received had it exercised its
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Redemption Right (as set forth in Section 8.6) and received
REIT Shares in exchange for its Partnership Units immediately
prior to the expiration of such purchase, tender or exchange
offer and had thereupon accepted such purchase, tender or
exchange offer and then such Extraordinary Transaction shall
have been consummated; and
(ii) a merger, or other combination of assets, with another entity
if: (w) immediately after such Extraordinary Transaction,
substantially all of the assets directly or indirectly owned
by the surviving entity, other than Partnership Units held by
such General Partner, are owned directly or indirectly by the
Partnership or another limited partnership or limited
liability company which is the survivor of a merger,
consolidation or combination of assets with the Partnership
(in each case, the "Surviving Partnership"); (x) the Limited
Partners own a percentage interest of the Surviving
Partnership based an the relative fair market value of the net
assets of the Partnership (as determined pursuant to Section
11.2.E) and the other net assets of the Surviving Partnership
(as determined pursuant to Section 11.2.E) immediately prior
to the consummation of such transaction; (y) the rights
preferences and privileges of the Limited Partners in the
Surviving Partnership are at least as favorable as those in
effect immediately prior to the consummation of such
transaction and as those applicable to any other limited
partners or non-managing members of the Surviving Partnership;
and (z) such rights of the Limited Partners include the right
to exchange their interests in the Surviving Partnership for
at least one of: (a) the consideration available to such
Limited Partners pursuant to Section 11.2.B(i) or (b) if the
ultimate controlling person of the Surviving Partnership has
publicly traded common equity securities, such common equity
securities, with an exchange ratio based on the relative fair
market value of such securities (as determined pursuant to
Section 11.2.E) and the REIT Shares.
C. Partnership Vote. The General Partner shall not consummate any
Extraordinary Transaction in connection with which it conducted a vote of its
stockholders (a "Stockholder Vote") unless the General Partner also conducts a
vote of the Partners of the Partnership (the "Partnership Vote") in which (i)
the General Partner provides the Partners with advance notice equal in time to
the advance notice given in the case of the Stockholder Vote, (ii) in connection
with such advance notice the General Partner provides the Partners with written
materials describing the proposed Extraordinary Transaction as well as the tax
effect of the consummation thereof on the Limited Partners, (iii) in such vote
of the Partners, the General Partner votes all Partnership Interests (General
and Limited) held by it in proportion to the manner in which all outstanding
Shares of capital stock of the General Partner were voted at the Stockholder
Meeting (such votes to be "For," "Against," "Abstain" and "Not Present"), and
(iv) the total votes of the General and Limited Partners voted "For," "Against,"
"Abstain"
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and "Not Present" would be sufficient, if such vote were a vote by the Company
of its stockholders, to approve the Extraordinary Transaction. For purposes of
the Partnership Vote, each holder of a Partnership Interest shall be entitled to
a number of votes equal to the total votes such holder would have been entitled
to at the Stockholder Meeting had such holder presented its Partnership Interest
for redemption and such Partnership Interest had been acquired by the Company
for the REIT Shares Amount of REIT Shares prior to the record date therefor.
D. Structure to Avoid Recognizing Gain. Without in any way limiting the
exculpation from liability set forth in Section 7.1.D and 7.8.B, in connection
with any transaction permitted by Section 11.2.B or Section 11.2.C, the General
Partner shall use its commercially reasonable efforts to structure such
Extraordinary Transaction to avoid causing the Limited Partners to recognize
gain for federal income tax purposes, by virtue of the occurrence of or their
participation in such Extraordinary Transaction.
E. Fair Market Value. In connection with any transaction permitted by
Section 11.2.B or 11.2.C, the relative fair market values shall be reasonably
determined by the General Partner as of the time of such transaction and, to the
extent applicable, shall be no less favorable to the Limited Partners than the
relative values reflected in the terms of such transaction.
Section 11.3 Limited Partners' Rights to Transfer
A. General. Subject to the provisions of Sections 11.3.C, 11.3.D, 11.3.E,
and 11.4, a Limited Partner (other then the Company) may transfer, with or
without the consent of the General Partner, all or any portion of its
Partnership Interest, or any of such Limited Partner's economic rights as a
Limited Partner provided that prior written notice of such proposed transfer is
delivered to the General Partner.
B. Incapacity. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all of the rights of a Limited
Partner, but not more rights than these enjoyed by other Limited Partners, for
the purpose of settling or managing the estate and such power as the
Incapacitated Limited Partner possessed to transfer all or any part of his or
its interest in the Partnership. The Incapacity of a Limited Partner, in and of
itself, shall not dissolve or terminate the Partnership.
C. No Transfers Violating Securities Laws. The General Partner may
prohibit any transfer by a Limited Partner of its Partnership Units unless it
receives a written opinion of counsel (which opinion and counsel shall be
reasonably satisfactory to the Partnership) to such Limited Partner that such
transfer would not require filing of a registration statement under the
Securities Act of 1933 or would not otherwise violate any federal or state
securities laws or
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regulations applicable to the Partnership or the Partnership Units or, at the
option of the Partnership, an opinion of counsel to the Partnership to the same
effect.
D. No Transfer Affecting Tax Status of Partnership or the Company. No
transfer by a Limited Partner of its Partnership Units may be made to any Person
if (i) in the opinion of counsel for the Partnership, it would result in the
Partnership being treated as an association taxable as a corporation for federal
income tax purposes or would result in a termination of the Partnership for
federal income tax purposes, (ii) in the opinion of counsel for the Partnership,
it would adversely affect the ability of the Company to continue to qualify as a
REIT or would subject the Company to any additional taxes under Section 857 or
Section 4981 of the Code; (iii) such transfer is effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" with the meaning of Section 7704 of the Code; (iv) such
transfer would cause the Partnership to become, with respect to any employee
benefit plan subject to Title I of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(c) of the Code); (v) such transfer would, in the opinion of counsel for the
Partnership, cause any portion of the assets of the Partnership to constitute
assets of any employee benefit plan pursuant to Department of Labor Regulations
Section 2510.2-101; or (vi) such transfer would subject the Partnership to be
regulated under the Investment Company Act of 1940, the Investment Advisors Act
of 1940 or the Employee Retirement Income Security Act of 1974, each as amended.
E. No Transfers to Holders of Nonrecourse Liabilities. No transfer of any
Partnership Units may be made to a lender to the Partnership or any Person who
is related (within the meaning of Section 1.752-4(b) of the Regulations) to any
lender to the Partnership whose loan constitutes a Nonrecourse Liability,
without the consent of the General Partner, in its sole and absolute discretion.
Section 11.4 Substituted Limited Partners
A. Consent of General Partner. No Limited Partner shall have the right to
substitute a transferee as a Limited Partner in its place. The General Partner
shall, however, have the right to consent to the admission of a transferee of
the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted
Limited Partner, which consent may be given or withheld by the General Partner
at its sole and absolute discretion. The General Partner's failure or refusal to
permit a transferee of any such interests to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
B. Rights of Substituted Limited Partner. A transferee who has been
admitted as a Substituted Limited Partner in accordance with this Article 11
shall have all the rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement. The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this Agreement (including, without limitation, the
provisions of
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50
Section 2.4) and such other documents or instruments as may be required to
affect the admission.
C. Amendment of Exhibit A. Upon the admission of a Substituted Limited
Partner, the General Partner shall amend Exhibit A to reflect the name, address,
number of Partnership Units, and Percentage Interest of such Substituted Limited
Partner and to eliminate or adjust, if necessary, the name, address and interest
of the predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee as a Substituted Limited
Partner, as described in Section 11.4, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be deemed to have had
assigned to it, and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Loss, Recapture Income, and any
other items, gain, loss deduction and credit of the Partnership attributable to
the Partnership Units assigned to such transferee, but shall not be deemed to be
a holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all other Partnership Units
held by Limited Partners are voted). In the event any such transferee desires to
make a further assignment of any such Partnership Units, such transferee shall
be subject to all of the provisions of this Article 11 to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
Section 11.6 General Provisions
A. Withdrawal of Limited Partner. No Limited Partner may withdraw from the
Partnership other than as a result of a permitted transfer of all of such
Limited Partner's Partnership Units in accordance with this Article 11 or
pursuant to redemption of all of its Partnership Units under Section 8.6.
B. Termination of Status as Limited Partner. Any Limited Partner who shall
transfer all of its Partnership Units in a transfer permitted pursuant to this
Article 11 shall cease to be a Limited Partner upon the admission of all
Assignees of such Partnership Units as Substitute Limited Partners. Similarly,
any Limited Partner who shall transfer all of its Partnership Units pursuant to
a redemption of all of its Partnership Units under Section 8.6 shall cease to be
a Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article 11 may only be
made on the first day of a fiscal quarter of the Partnership, unless the General
Partner otherwise agrees.
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51
D. Allocations. If any Partnership Interest is transferred or assigned
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article 11 or redeemed or transferred pursuant to Section
8.6 on any day other than the first day of a Partnership Year, then Net Income,
Net Loss, each item thereof and all other items attributable to such interest
for such Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method or another permissible
method selected by the General Partner. Solely for purposes of making such
allocations, each of such items for the calendar month in which the transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which a redemption occurs shall be allocated to
the Redeeming Partner; provided, however, that the General Partner may adopt
such other conventions relating to allocations in connection with transfers,
assignments or redemptions as it determines are necessary or appropriate. All
distributions of Available Cash attributable to such Partnership Unit with
respect to which the Partnership Record Date is before the date of such
transfer, assignment, or redemption shall be made to the transferor Partner or
the Redeeming Partner, as the case may be, and in the case of a transfer or
assignment other than a redemption, all distributions of Available Cash
thereafter attributable to such Partnership Unit shall be made to the transferee
Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to Section
11.2 hereof who is proposed to be admitted as a successor General Partner shall
be admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D.
Section 12.2 Admission of Additional Limited Partners
A. General. After the admission to the Partnership of the initial Limited
Partner on the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement or who exercises an option to
receive Partnership Units shall be admitted to the Partnership as an Additional
Limited Partner only upon furnishing to the General Partner (i)
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52
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in Section 2.4 and (ii) such other documents or instruments
as may be required in the discretion of the General Partner in order to effect
such Person's admission as an Additional Limited Partner.
B. Consent of General Partner. Notwithstanding anything to the contrary in
this Section 12.2, no Person shall be admitted as an Additional Limited Partner
without the consent of the General Partner, which consent may be given or
withheld in the General Partner's sole and absolute discretion. The admission of
any Person as an Additional Limited Partner shall become effective on the date
upon which the name of such Person is recorded on the books and records of the
Partnership, following the consent of the General Partner to such admission.
C. Allocation to Additional Limited Partners. If any Additional Limited
Partner is admitted to the Partnership on any day other than the first day of a
Partnership Year, then Net Income, Net Loss, each item thereof and all other
items allocable among Partners and Assignees for such Partnership Year shall be
allocated among such Additional Limited Partner and all other Partners and
Assignees by taking into account their varying interests during the Partnership
Year in accordance with Section 706(d) of the Code, using the "interim closing
of the books" method or another permissible method selected by the General
Partner. Solely for purposes of making such allocations, each such item for the
calendar month in which an admission of any Additional Limited Partner occurs
shall be allocated among all of the Partners and Assignees, including such
Additional Limited Partner; provided, however, that the General Partner may
adopt such other conventions relating to allocations to Additional Limited
Partners as it determines are necessary or appropriate. All distributions of
Available Cash with respect to which the Partnership Record Date is before the
date of such admission shall be made solely to Partners and Assignees, other
than the Additional Limited Partner, and all distributions of Available Cash
thereafter shall be made to all of the Partners and Assignees, including such
Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
required by law, shall prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose exercise the power of attorney
granted pursuant to Section 2.4.
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53
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, only upon the first to occur of any of the
following ("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.5;
(ii) an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within ninety (90) days after such
event of withdrawal, a majority in interest of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
(iii) until and including December 31, 2047, an election to dissolve the
Partnership made by the General Partner with the consent of the Limited Partners
who hold at least two-thirds (2/3) of the outstanding Partnership Common Units
held by the Limited Partners (including Partnership Common Units held by the
General Partner);
(iv) an election to dissolve the Partnership made by the General Partner,
in its sole and absolute discretion, after December 31, 2047;
(v) entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
(vi) the sale of all, or substantially all of the assets and properties of
the Partnership; or
(vii) a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or insolvent,
or a final and non-appealable and order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in each case under any
federal or state bankruptcy or insolvency law as now or hereafter in effect,
unless prior to the entry of such order or judgment all of the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substitute General Partner.
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54
Section 13.2 Winding Up
A. General. Upon the occurrence of a Liquidating Event, the Partnership
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner, or, in the event there is no remaining General
Partner, any Person elected by a majority in interest of the Limited Partners
(the General Partner or such other Person being referred to herein as the
"Liquidator"), shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner,
include shares of common stock in the Company) shall be applied and distributed
in the following order:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners;
(4) Fourth, to the holders of Partnership Interests that are entitled to
any preference in distribution upon liquidation in accordance with
the rights of any such class of Partnership Interests (and within
such class to each holder thereof pro rata based on the proportion
of the total number of outstanding units of such class represented
by such holder's units of such class); and
(5) The balance, if any, to the General Partner and Limited Partners in
accordance with their positive Capital Account balances, after
giving effect to all contributions, distributions, and allocations
for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Deferred Liquidation. Notwithstanding the provisions of Section 13.2.A
which require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the
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55
Partnership (including to those Partners as creditors) and/or distribute to the
Partners, in lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2.A, undivided interests in such Partnership assets as
the Liquidator deems not suitable for liquidation. Any such distributions in
kind shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Partners, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.
C. Reserves. In the discretion of the Liquidator, a pro rata portion of
the distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership, and
paying any contingent or unforeseen liabilities or obligations of
the Partnership or the General Partner arising out of or in
connection with the Partnership. The assets of any such trust shall
be distributed to the General Partner and Limited Partners from time
to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the General
Partner and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed
to the General Partner and Limited Partners in the manner and order
of priority set forth in Section 13.2.A as soon as practicable.
Section 13.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If the General Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all Fiscal
Years or portions thereof, including the year during which such liquidation
occurs), the General Partner shall contribute to the capital of the Partnership
the amount necessary to restore such deficit balance to zero in
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56
compliance with Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3). If any
Limited Partner has a deficit balance in its Capital Account (after giving
effect to all contributions, distributions and allocations for all Fiscal Years
or portions thereof, including the year during which such liquidation occurs)
and has been allocated a Limited Partner Recourse Debt Percentage, each such
Limited Partner shall be obligated to contribute cash to the capital of the
Partnership in an amount equal to the lesser of (i) the amount required to
increase its Capital Account as of such date to zero or (ii) such Limited
Partner's Limited Partner Recourse Debt Percentage multiplied by the Recourse
Debt Amount. Any such contribution required of a Partner hereunder shall be made
on or before the later of (i) the end of the Partnership Year in which the
interest of such Partner is liquidated or (ii) the ninetieth (90th) day
following the date of such liquidation. Notwithstanding any provision hereof to
the contrary, all amounts so contributed by a Limited Partner to the capital of
the Partnership shall, upon the liquidation of the Partnership under Article 13,
be paid only to any then creditors of the Partnership, including Partners that
are Partnership creditors (in the order provided in Section 13.2), and shall not
be distributed to the other Partners then having positive balances in their
respective Capital Accounts.
After the death of a Limited Partner, the executor of the estate of such
Limited Partner may elect to reduce (or eliminate) the deficit Capital Account
restoration obligation of such Limited Partner pursuant to this Section 13.3.
Such elections may be made by such executor by delivering to the General Partner
within two hundred seventy (270) days of the death of such Limited Partner a
written notice setting forth the maximum deficit balance in his Capital Account
that such executor agrees to restore under Section 13.3, if any. If such
executor does not make a timely election pursuant to this Section 13.3 (whether
or not the balance in his Capital Account is negative at such time), then such
Limited Partner's estate (and the beneficiaries thereof who receive distribution
of Partnership Interests therefrom) shall be deemed to have a deficit Capital
Account restoration obligation as set forth pursuant to the terms of Section
13.3. Any Limited Partner which is itself a partnership may likewise elect,
after the date of its respective partner's death, to reduce (or eliminate) its
deficit Capital Account restoration obligation pursuant to Section 13.3 by
delivering a similar written notice to the General Partner within the time
period specified herein. Any such partnership that does not make any such timely
election shall similarly be deemed to have a deficit Capital Account restoration
obligation as set forth pursuant to the terms of Section 13.3.
Section 13.4 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.5 Notice of Dissolution
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57
In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.
Section 13.6 Termination of Partnership and Cancellation of Certificate of
Limited Partnership
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2, the Partnership shall be terminated, a certificate of
cancellation shall be filed, and all qualifications of the Partnership as a
foreign limited partnership in jurisdictions other than the State of Delaware
shall be canceled and such other actions may be necessary to terminate the
Partnership shall be taken.
Section 13.7 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2, in order to minimize any losses otherwise attendant
upon such winding-up, and the provisions of this Agreement shall remain in
effect between the Partners during the period of liquidation.
Section 13.8 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. General. Amendments to this Agreement may be proposed only by the
General Partner. Following such proposal, the General Partner shall submit any
proposed amendment to the Limited Partners. The General Partner shall seek the
written vote of the Partners on the proposed amendment or shall call a meeting
to vote thereon and to transact any other business that it may deem appropriate.
For purposes of obtaining a written vote, the General Partner may require a
response within a reasonable specified time, but not less than fifteen (15)
days, and failure to respond in such time period shall constitute a vote which
is consistent with the General Partner's recommendation with respect to the
proposal. Except as provided in Section 7.3, 14.1.B, 14.1.C or 14.1.D, a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and it receives the Consent of Partners
holding a majority of the then outstanding Partnership Common Units (including
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58
Partnership Common Units held by the Company); provided that an action shall
become effective at such time as the requisite consents are received even if
prior to such specified time.
B. Amendments Not Requiring Limited Partner Approval. Notwithstanding
Section 14.1.A and without limitation to the rights of the General Partner
pursuant to Sections 7.3, 14.1.C or 14.1.D, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligation of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or withdrawal
or Partners in accordance with this Agreement;
(3) to set forth and reflect in the Agreement the designations, rights,
powers, duties, and preferences of the holders of any additional
Partnership Interests issued pursuant to Section 4.2.A;
(4) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect,
or to cure any ambiguity, correct or supplement any provisions in
this Agreement not inconsistent with law or with other provisions,
or make other changes with respect to matters arising under this
Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines contained in
any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken in the next regular communication to the
Limited Partners.
C. Amendments Requiring Limited Partner Approval. Notwithstanding Section
14.1.A and Section 14.1.B, this Agreement shall not be amended without the
Consent of each Partner adversely affected if such amendment would (i) convert a
Limited Partner's interest in the Partnership into a General Partner Interest;
(ii) modify the limited liability of a Limited Partner in a manner adverse to
such Limited Partner; (iii) alter rights of the Partner (other than as a result
of the issuance of Partnership Interests) to receive distributions pursuant to
Article 5 or Article 13 or the allocations specified in Article 6 (except as
permitted pursuant to Section 4.2 and Section 14.1.B(3)); (iv) alter or modify
the Redemption Right Cash Amount or REIT Shares Amount as set forth in Section
8.6 and 11.2.B, and the related definitions, in a
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59
manner adverse to such Partner; (v) cause the termination of the Partnership
prior to the time set forth in Section 2.5 or 13.1; or (vi) amend this Section
14.1.C.
D. Other Amendments Requiring Limited Partner Approval. Notwithstanding
Section 14.1.A or Section 14.1.B, the General Partner shall not (except in
connection with amendments made to reflect the issuance of additional
Partnership Interests and the relative rights, powers and duties incident
thereto) amend Sections 4.2.A, 7.5, 7.6, 11.2, or 14.2 without the Consent of
Partners holding a majority of the then outstanding Partnership Common Units,
excluding Partnership Common Units held by the Company.
E. Amendment of Exhibit A. Notwithstanding anything in this Article 14 or
elsewhere in this Agreement to the contrary, any amendment and restatement of
Exhibit A by the General Partner to reflect events or changes otherwise
authorized or permitted by this Agreement shall not be deemed an amendment of
this Agreement and may be done at any time and from time to time, as necessary
by the General Partner without the Consent of the Limited Partners.
Section 14.2 Meetings of the Partners
A. General. Meetings of the Partners may be called only by the General
Partner. The request shall state the nature of the business to be transacted.
Notice of any such meeting shall be given to all Partners not less than seven
(7) days nor more than thirty (30) days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or
Consent of the Partners is permitted or required under this Agreement, such vote
or Consent may be given at a meeting of the Partners or may be given in
accordance with the procedure prescribed in Section 14.1.A. Except as otherwise
expressly provided in this Agreement, the Consent of holders of a majority of
the then outstanding Partnership Common Units (including Partnership Common
Units held by the Company) shall control.
B. Actions Without Meeting. Any action required or permitted to be taken
at a meeting of the Partners may be taken without a meeting if a written consent
setting forth the action so taken is signed by Partners holding a majority of
the then outstanding Partnership Common Units (or such other percentage as is
expressly required by this Agreement). Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a vote of
the Partners holding a majority of the then outstanding Partnership Common Units
(or such other percentage as is expressly required by this Agreement). Such
consent shall be filed with the General Partner. An action so taken shall be
deemed to have been taken at a meeting held on the effective date so certified.
C. Proxy. Each Limited Partner may authorize any Person or Persons to act
for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of
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twelve (12) months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Limited Partner executing
it, such revocation to be effective upon the Partnership's receipt of written
notice of such revocation from the Limited Partner executing such proxy.
D. Conduct. Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate. Without limitation, meetings of Partners may be conducted in
the same manner as meetings of the shareholders of the Company and may be held
at the same time, and as part of, meetings of the shareholders of the Company.
ARTICLE 15
PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A or such other address of which
the Partner shall notify the General Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
<PAGE>
61
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors; Other Third Parties
Other then as expressly set forth herein with respect to the Indemnities,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor or other third party having dealings with the
Partnership.
Section 15.7 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all of the patties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 15.9 Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
Section 15.10 Invalidity of Provisions
If any provision of this Agreement shall to any extent be held void or
unenforceable (as to duration, scope, activity, subject or otherwise) by a court
of competent jurisdiction, such provision shall be deemed to be modified so as
to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable. In such event, the
remainder of this Agreement (or the application of such provision to persons or
circumstances other than those in respect of which it is deemed to be void or
unenforceable) shall not be affected thereby. Each other provision of this
Agreement, unless specifically conditioned upon the voided aspect of such
provision, shall remain valid and enforceable to the fullest extent permitted by
law, and any other provisions of this Agreement that are specifically
conditioned on the voided aspect of such invalid provision shall also be deemed
to be modified
<PAGE>
62
so as to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable to the fullest extent
permitted by law.
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
Section 15.12 No Rights as Shareholders
Nothing contained in this Agreement shall be construed as conferring upon
the holders of the Partnership Units any rights whatsoever as shareholders of
the Company, including without limitation, any right to receive dividends or
other distributions made to shareholders of the Company or to vote or to consent
or receive notice as shareholders in respect to any meeting of the shareholders
for the election of directors of the Company or any other matter
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER
CORNERSTONE PROPERTIES INC.
By: /s/ John S. Moody
---------------------------------
John S. Moody
President and
Chief Executive Officer
By: /s/ Thomas P. Loftus
---------------------------------
Thomas P. Loftus
Vice President and Secretary
<PAGE>
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to become one of the named Limited Partners of
Cornerstone Properties Limited Partnership, hereby becomes a party to the
Agreement of Limited Partnership of Cornerstone Properties Limited Partnership
by and among Cornerstone Properties Inc. and such Limited Partners, dated as of
December 23, 1997. The Undersigned agrees that this signature page may be
attached to any counterpart of said Agreement of Limited Partnership.
Signature line for Limited Partner: CORNERSTONE PROPERTIES INC.
By /s/ John S. Moody
------------------------------
John S. Moody
President and
Chief Executive Officer
By /s/ Thomas P. Loftus
------------------------------
Thomas P. Loftus
Vice President and Secretary
Address of Limited Partner: c/o Cornerstone Properties Inc.
Tower 56
126 East 56th Street
New York, New York 10022
<PAGE>
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to become one of the named Limited Partners of
Cornerstone Properties Limited Partnership, hereby becomes a party to the
Agreement of Limited Partnership of Cornerstone Properties Limited Partnership
by and among Cornerstone Properties Inc. and such Limited Partners, dated as of
December 23, 1997. The Undersigned agrees that this signature page may be
attached to any counterpart of said Agreement of Limited Partnership.
Signature line for Limited Partner: CORPRO REAL ESTATE
MANAGEMENT, INC.
By /s/ John S. Moody
------------------------------
John S. Moody
President and
Chief Executive Officer
By /s/ Thomas P. Loftus
------------------------------
Thomas P. Loftus
Vice President and Secretary
Address of Limited Partner: c/o Cornerstone Properties Inc.
Tower 56
126 East 56th Street
New York, New York 10022
<PAGE>
Exhibit A
Partners Contributions and Partnership Interests
<PAGE>
Exhibit B
Capital Account Maintenance
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section l.B hereof and allocated to such Partner pursuant to Section 6.1.A of
this Agreement and Exhibit C, and decreased by (x) the amount of cash or Agreed
Value of all actual and deemed distributions of cash or property made to such
Partner pursuant to this Agreement; and (y) all items of Partnership deduction
and loss computed in accordance with Section 1.B hereof and allocated to such
Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction at loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain,
loss and deduction shall be made without regard to any election
under Section 754 of the Code which may be made by the Partnership,
provided that the amounts of any adjustments to the adjusted bases
of the assets of the Partnership made pursuant to Section 734 of the
Code as a result of the distribution of property by the Partnership
to a Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts) shall
be reflected in the Capital Accounts of the Partners in the manner
and subject to the limitations prescribed in Regulations Section
1.704-1(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction shall be
made without regard to the fact that items described in Sections
705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable gross
income or are neither currently deductible nor capitalized for
federal income tax purposes.
B-1
<PAGE>
(3) Any income, gain or loss attributable to the taxable disposition of
any Partnership property shall be determined as if the adjusted
basis of such property as of such date of disposition were equal in
amount to the Partnership's Carrying Value with respect to such
property as of such date.
(4) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such fiscal
year.
(5) In the event the Carrying Value of any Partnership Asset is adjusted
pursuant to Section 1.D hereof, the amount of any such adjustment
shall be taken into account as gain or loss from the disposition of
such asset.
C. A transferee (including an Assignee) of a Partnership Unit shall
succeed to a pro rata portion of the Capital Account of the transferor.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2)
hereof, the Carrying Value of all Partnership assets shall be
adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D(2)
hereof, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property and
allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest
in the Partnership by any new or existing Partner in exchange
for more than a de minimus Capital Contribution; (b)
immediately prior to the distribution by the Partnership to a
Partner of more than a de minimus amount of property as
consideration for an interest in the Partnership; and (c)
immediately prior to the liquidation of the Partnership within
the meaning of Regulations Section l.704-1(b)(2)(ii)(g)
provided, however, that adjustments pursuant to clauses (a)
and (b) above shall be made only if the General Partner
determines that such adjustments are necessary or appropriate
to reflect the relative economic interests of the Partners in
the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e),
the Carrying Value of Partnership assets distributed in kind
shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership
property, as of the time any such asset is distributed.
B-2
<PAGE>
(4) In determining Unrealized Gain or Unrealized Loss for purposes
of this Exhibit B, the aggregate cash amount and fair market
value of all Partnership assets (including cash or cash
equivalents) shall be determined by the General Partner using
such reasonable method of valuation as it may adopt, or in the
case of a liquidating distribution pursuant to Article 13 of
the Agreement, shall be determined and allocated by the
Liquidator using such reasonable methods of valuation as it
may adopt. The General Partner, or the Liquidator, as the case
may be, shall allocate such aggregate value among the assets
of the Partnership (in such manner as it determines in its
sole and absolute discretion to arrive at a fair market value
for individual properties).
E. The provisions of this Agreement (including this Exhibit B and other
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify either (i) the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed, or (ii)
the manner in which items are allocated among the Partners for federal income
tax purposes in order to comply with such Regulations or to comply with Section
704(c) of the Code, then the General Partner may make such modification without
regard to Article 14 of the Agreement, provided that it is not likely to have a
material effect on the amounts distributable to any Person pursuant to Article
13 of the Agreement upon the dissolution of the Partnership. The General Partner
also shall (i) make any adjustments that arc necessary or appropriate to
maintain equality between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q);
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b). In addition, the General Partner may adopt and employ such methods
and procedures for (i) the maintenance of book and tax capital accounts; (ii)
the determination and allocation of adjustments under Sections 704(c), 734 and
743 of the Code; (iii) the determination of Net Income, Net Loss, taxable loss
and items thereof under this Agreement and pursuant to the Code; (iv) the
adoption of reasonable conventions and methods for the valuation of assets and
the determination of tax basis; (v) the allocation of asset value and tax basis;
and (vi) conventions for the determination of cost recovery, depreciation and
amortization deductions, as it determines in its sole discretion are necessary
or appropriate to execute the provisions of this Agreement, to comply with
federal and state tax laws, and are in the best interest of the Partners.
B-3
<PAGE>
2. No Interest
No interest shall be paid by the Partnership on Capital Contributions or
on balances in Partners' Capital Accounts.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of such Partner's
Capital Contribution or Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of this Agreement.
B-4
<PAGE>
Exhibit C
Special Allocation Rules
1. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this Exhibit C,
the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1
of the Agreement or any other provisions of this Exhibit C, if there is a net
decrease in Partnership Minimum Gain during any Partnership taxable year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This Section
1.A is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
Solely for purposes of this Section 1.A, each Partner's Adjusted Capital Account
Deficit shall be determined prior to any other allocations pursuant to Section
6.1 of Partner Minimum Gain during such Partnership taxable year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision of
Section 6.1 of this Agreement or any other provisions of this Exhibit C (except
Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership taxable year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.702-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 1.B is intended to comply
with the minimum gain chargeback requirement in such Section of the Regulations
and shall be interpreted consistently therewith. Solely for purposes of this
Section 1.B., each Partner's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to Section 6.1 of the
Agreement or this Exhibit with respect to such Partnership taxable year, other
than allocations pursuant to Section 1.A hereof.
C-1
<PAGE>
C. Qualified Income Offset. In the event any Partner unexpectedly receives
any adjustments, allocations or distributions described in Regulations Sections
1.704- 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
and after giving effect to the allocations required under Sections 1.A and 1.B
hereof such Partner has an Adjusted Capital Account Deficit, items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for the Partnership taxable
year) shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
taxable year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio to the
numerically closest ratio for such Partnership taxable year which would satisfy
such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any Partnership taxable year shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Curative Allocations. The allocations set forth in Section 1.A through
1.F hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations under Section 704(b) of the Code. The Regulatory
Allocations may not be consistent with the manner in which the Partners intend
to divide Partnership distributions. Accordingly, the General Partner is hereby
authorized to divide other allocations of income, gain, deduction and loss among
the Partners so as to prevent the Regulatory Allocations from distorting the
manner in which Partnership distributions will be divided among the Partners. In
general, the Partners anticipate that, if necessary, this will be accomplished
by specially allocating other items of income, gain, loss and deduction among
the Partners so that the net amount of the Regulatory Allocations and such
special allocations to each person is zero. However, the General Partner will
have discretion to accomplish this result in any reasonable manner; provided,
however, that
C-2
<PAGE>
no allocation pursuant to this Section 1.G shall cause the Partnership to fail
to comply with the requirements of Regulations Sections 1.704-1(b)(2)(ii)(d),
- -2(e) or -2(i).
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income gain,
loss or deduction is allocated pursuant to Section 6.1 of the Agreement and
Section 1 hereof.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners, consistent with
the principles of Section 704(c) of the Code and the
Regulations thereunder, to take into account the variation
between the 704(c) Value of such property and its adjusted
basis at the time of contribution; and
(b) any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners in
the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1 of the Agreement and
Section 1 hereof.
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code
and the Regulations thereunder to take into account the
Unrealized Gain or Unrealized Loss attributable to such
property and the allocations thereof pursuant to Exhibit B;
and
(2) second, in the event each property was originally a
Contributed Property, be allocated among the Partners in a
manner consistent with Section 2.B(1) hereof; and
(b) any item of Residual Gain or Residual Loss attributable to an
Adjusted Property shall be allocated among the Partners in the
same manner its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1. of the Agreement and
Section 1 hereof.
C-3
<PAGE>
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their
correlative item of "book" gain or loss is allocated pursuant
to Section 6.1 of the Agreement and Section 1 hereof.
C. To the extent that the Treasury Regulations promulgated pursuant to
Section 704(c) of the Code permit the Partnership to utilize alternative methods
to eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
C-4
<PAGE>
Exhibit D
Notice of Redemption
The undersigned Limited Partner hereby irrevocably (i) redeems _________
Limited Partnership Units in Cornerstone Properties Limited Partnership in
accordance with the terms of the Agreement of Limited Partnership of Cornerstone
Properties Limited Partnership and the Redemption Right referred to therein;
(ii) surrenders such Limited Partnership Units and all right, title and interest
therein; and (iii) directs that the Cash Amount or REIT Shares Amount (as
determined by the General Partner) deliverable upon exercise of the Redemption
Right be delivered to the address specified below, and if REIT Shares are to be
delivered, such REIT Shares be registered or placed in the name(s) and at the
address(es) specified below. The undersigned hereby, represents, warrants, and
certifies that the undersigned (a) has marketable and unencumbered title to such
Limited Partnership Units, free and clear of the rights or interests of any
other person or entity; (b) has the full right, power and authority to redeem
and surrender such Limited Partnership Units as provided herein; and (c) has
obtained the consent or approval of all person or entities, if any, having the
right to consent or approve such redemption and surrender.
Dated:________________________
Name of Limited Partner:___________________________________
Please Print
____________________________________
(Signature of Limited Partner)
____________________________________
(Street Address)
____________________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
____________________________________
D-1
<PAGE>
If REIT Shares are to be issued, issue to:
Name:__________________________________
Please insert social security or identifying number:__________
D-2
<PAGE>
EXHIBIT E
Recourse Debt Level Schedule
Recourse Debt Recourse Debt
Name of Limited Partner Percentage Amount
- ----------------------- ----------------------- ----------------------
NONE
Total_________________
E-1
<PAGE>
EXHIBIT F
PARTNERSHIP UNIT DESIGNATION OF CLASS A PARTNERSHIP PREFERRED
UNITS
1. Designation and Number. The designation for the class of
Partnership Preferred Units authorized by this Partnership Units Designation
shall be Class A 7% Cumulative Convertible Partnership Preferred Units (the
"Class A Partnership Preferred Units"). The number of Class A Partnership
Preferred Units shall be 3,030,303.
2. Rank. For the purposes of this Partnership Unit Designation, any
class or classes of Partnership Units in the Partnership shall be deemed to
rank:
(a) prior to the Class A Partnership Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both, if
the holders of Partnership Units of such class or classes shall be
entitled by the terms thereof to the receipt of distributions or of
amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of the Class A
Partnership Preferred Units;
(b) on a parity with the Class A Partnership Preferred Units, either
as to distributions or upon liquidation, dissolution or winding up, or
both, whether or not the distribution payment dates, or redemption or
liquidation prices per share thereof, be different from those of the Class
A Partnership Preferred Units, if the holders of Partnership Units of such
class or classes shall be entitled by the terms thereof to the receipt of
distributions or of amounts distributed upon liquidation, dissolution or
winding up, as the case may be, in proportion to their respective
distribution rates or liquidation prices, without preference or priority
of one over the other as between the holders of such Partnership Units and
the holders of Class A Partnership Preferred Units (the term "Parity
Partnership Preferred Unit" being used to refer to any Partnership Unit on
a parity with the Class A Partnership Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both, as
the context may require); and
(c) junior to Class A Partnership Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both, if
such class shall be Class A Partnership Common Units or if the holders of
the Class A Partnership Preferred Units shall be entitled to the receipt
of distributions or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the
holders of Partnership Units of such class or classes.
3. Distributions. Pursuant to Section 5.1 of the Partnership
Agreement, holders of Class A Partnership Preferred Units will be entitled to
receive, out of Available Cash, cash distributions at the rate of 7% per annum
on the $16.50 liquidation preference.
F-2
<PAGE>
Distributions on the Class A Partnership Preferred Units will be payable
annually on August 4 (the "distribution payment date"). Distributions on Class A
Partnership Preferred Units will be cumulative from August 4, 1997.
Distributions will be payable, in arrears, to holders of record of Class A
Partnership Preferred Units as they appear on the books of the Partnership 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 General Partner. The amount of
distributions payable for the initial distribution period or any period shorter
or longer than a full distribution period shall be calculated on the basis of a
360-day year of twelve 30-day months. No distributions may be declared or paid
or set apart for payment on any Parity Partnership Preferred Units with regard
to the payment of distributions unless there shall also be or have been declared
and paid or set apart for payment on the Class A Partnership Preferred Units
like distributions for all distribution payment periods of the Class A
Partnership Preferred Units ending on or before the distribution payment date of
such Parity Partnership Preferred Units, ratably in proportion to the respective
amounts of distributions (x) accumulated and unpaid or payable on such Class A
Partnership Preferred Units on the one hand, and (y) accumulated and unpaid
through the distribution payment period or periods of the Class A Partnership
Preferred Units next preceding such distribution payment date, on the other
hand.
Except as set forth in the preceding sentence, unless full
cumulative distributions on the Class A Partnership Preferred Units have been
paid, no distributions may be paid or declared and set aside for payment or
other distribution made upon the Class A Partnership Common Units or on any
other Partnership Units ranking junior to or on a parity with the Class A
Partnership Preferred Units as to distributions, nor any Class A Partnership
Common Units or any other Partnership Units of the Partnership ranking junior to
or on a parity with the Class A Partnership Preferred Units as to distributions
may be redeemed, purchased or otherwise acquired for any consideration (or any
payment be made to or available for a sinking fund for the redemption of any
Units or other Partnership Interests); provided, however, that any moneys
therefore deposited in any sinking fund with respect to any Partnership
Preferred Unit of the Partnership in compliance with the provisions of such
sinking fund may thereafter be applied to the purchase or redemption of such
Partnership Preferred Unit in accordance with the terms of such sinking fund,
regardless of whether at the time of such application full cumulative
distributions upon Class A Partnership Preferred Units outstanding to the last
distribution payment date shall have been paid or declared and set apart for
payment) by the Partnership; provided that any such junior Partnership Units or
Parity Partnership Preferred Units or Partnership Common Units may be converted
into or exchanged for Partnership Units of the Partnership ranking junior to the
Class A Partnership Preferred Units as to distributions, and, provided, further,
that any such Partnership Units or Parity Partnership Preferred Units or
Partnership Common Units may be issued by the Partnership to the Company in
connection with a purchase of the corresponding junior stock or Parity Preferred
Stock or the Common Shares by the Company pursuant to Article 8 of the Articles
of Incorporation to preserve the Company's status as a real estate trust.
4. Allocations.
F-3
<PAGE>
Allocations of the Partnership's items of income, gain, loss and
deduction shall be allocated among the holders of Class A Partnership Preferred
Units in accordance with Article VI of the Partnership Agreement.
5. Liquidation Preference. The Class A Partnership Preferred Units
shall rank, as to liquidation, dissolution or winding up of the Partnership,
prior to Class A Partnership Common Units and any other class of Partnership
Units of the Partnership ranking junior to Class A Partnership Preferred Units
as to rights upon liquidation, dissolution or winding up of the Partnership, so
that in the event of any liquidation, dissolution or winding up of the
Partnership, whether voluntary or involuntary, the holders of the Class A
Partnership Preferred Units shall be entitled to receive out of the assets of
the Partnership available for distribution to holders of Partnership Units,
whether from capital, surplus or earnings, before any distribution is made to
holders of Class A Partnership Common Units or any other such junior Partnership
Units, an amount equal to $16.50 per unit (the "Liquidation Preference" of a
Class A Partnership Preferred Units) plus an amount equal to all distributions
(whether or not earned or declared) accrued and accumulated and unpaid on the
Class A Partnership Preferred Units to the date of final distribution. The
holders of the Class A Partnership Preferred Units will not be entitled to
receive the Liquidation Preference until the liquidation preference of any other
class of Partnership Units of the Partnership ranking senior to the Class A
Partnership Preferred Units 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 distributions, the holders of Class A
Partnership Preferred Units will not be entitled to any further participation in
any distribution of assets by the Partnership. If, upon any liquidation,
dissolution or winding up of the Partnership, the assets of the Partnership, or
proceeds thereof, distributable among the holders of Parity Partnership
Preferred Units 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 units if all amounts payable thereon were paid in full. For
the purposes hereof, neither a consolidation or merger of the Partnership with
or into any other partnership, limited liability company, corporation or any
other entity, nor a merger of any other partnership, limited liability company,
corporation or any other entity with or into the Partnership, nor a sale or
transfer of all or any part of the Partnership assets for cash or securities
shall be considered a liquidation, dissolution or winding up of the Partnership.
6. Conversion. If, at any time, any of the Class A Preferred Shares
are converted into Common Shares, in whole or in part, then a number of Class A
Partnership Preferred Units equal to (i) the number of Class A Preferred Shares
so converted divided by (ii) the Conversion Factor for Class A Preferred Units
then in effect shall automatically be converted into a number of Class A
Partnership Common Units equal to (i) the number of Common Shares issued upon
such conversion, divided by (ii) the Conversion Factor for Partnership Common
Units then in effect, and the Percentage Interests of the General Partner and
the Limited Partners shall be adjusted to reflect such conversion.
F-4
<PAGE>
7. Value. For purposes of the definition of Deemed Value of
Partnership Interest, the Value on any date of the Class A Partnership Preferred
Units shall be the greater of (i) the Value of a Common Share of the Company on
such date, or (ii) the Liquidation Preference of such Class A Partnership
Preferred Unit.
8. Voting Rights. The holders of Class A Partnership Preferred Units
shall have no voting rights whatsoever, except for (i) any voting rights to
which they may be entitled under the laws of the State of Delaware, (ii) any
voting rights the holders of Class A Preferred Shares are entitled under the
laws of the State of Nevada, if applicable, and (iii) as follows:
So long as any Class A Partnership Preferred Units remain
outstanding, the consent of the holders of at least two-thirds of
the Class A Partnership Preferred Units outstanding at the time and
all other classes or series of Partnership Preferred Units upon
which like voting rights 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 any class or series of
Partnership Units ranking prior (as that term is defined in
paragraph 2(a) hereof) to the Class A Partnership Preferred Units;
or
(ii) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of this
Agreement, (including this Partnership Unit Designation or any
provision hereof) that would materially and adversely affect any
power, preference, or special right of the Class A Partnership
Preferred Units or of the holders thereof;
provided, however, that any increase in the number of Class A
Partnership Common Units or Class A Partnership Preferred Units or
any increase or decrease in the number of any class or series of
Partnership Preferred Units or the creation and issuance of other
classes or series of Partnership Common Units or Partnership
Preferred Units, in each case ranking on a parity with or junior to
the Class A Partnership Preferred Units 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.
F-5
<PAGE>
Exhibit 10.119
EXECUTION COPY
AMENDED AND RESTATED REVOLVING CREDIT AND GUARANTY AGREEMENT
among
CORNERSTONE PROPERTIES INC.,
a Nevada corporation
and
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
as Borrowers,
THE SUBSIDIARIES OF THE BORROWERS
SIGNATORY HERETO,
as Guarantors,
THE LENDERS SIGNATORY HERETO,
as Lenders,
BANKERS TRUST COMPANY,
as Administrative Agent for the Lenders
and
THE CHASE MANHATTAN BANK
as Syndication Agent for the Lenders
----------------------------
dated as of January 20, 1998
----------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS .................................
1.1. Defined Terms
1.2. Other Definitional Provisions
1.3. Accounting Terms and Determinations
ARTICLE II AMOUNT AND TERMS OF LOANS .........................................
2.1. Commitments and Loans
2.2. Notes
2.3. Interest
2.4. Borrowing and Conversion Procedures
2.5. Special Provisions Governing Eurodollar Rate Loans
2.6. Letters of Credit
2.7. Prepayments; Reduction of Aggregate Commitment
2.8. Interest on Delinquent Payments
2.9. Additional Costs
2.10. Use of Proceeds
2.11. Payment on Non-Business Days
2.12. Funding Losses
2.13. Change in Legality
ARTICLE III FEES AND PAYMENTS ................................................
3.1. Fees
3.2. Payments
3.3. Taxes
ARTICLE IV GUARANTY ..........................................................
4.1. Guaranty of Payment
4.2. Obligations Unconditional
4.3. Modifications
4.4. Waiver of Rights
4.5. Reinstatement
4.6. Remedies
4.7. Limitation of Guaranty
ARTICLE V REPRESENTATIONS AND WARRANTIES .....................................
5.1. Organization and Good Standing
5.2. Due Authorization
5.3. No Conflicts
5.4. Consents
5.5. Enforceable Obligations
5.6. No Default
5.7. Ownership
5.9. Indebtedness
5.9. Litigation
5.10. Taxes
5.11. Compliance with Law
5.12. Subsidiaries
5.13. Use of Proceeds; Margin Stock
5.14. Government Regulation
5.15. Hazardous Materials; Asbestos
5.19. Federal Tax Matters
ARTICLE VI CONDITIONS PRECEDENT ..............................................
6.1. Conditions to Making of Loans
<PAGE>
-ii-
ARTICLE VII AFFIRMATIVE COVENANTS ............................................
7.1. Financial Statements and Other Information
7.2. Notice of Certain Events
7.3. Maintain Existence
7.4 Qualified Income Covenant; Borrower Common Stock.
7.5. Taxes and Claims
7.6. Insurance
7.7. Books and Records; Fiscal Year
7.8. Maintain Properties and Rights
7.9. Inspection by Administrative Agent and Lenders; Appraisals
7.10. Pay Indebtedness and Perform Obligations
7.11. Compliance With Laws
7.12. Environmental Compliance
7.13. Further Assurances
7.14. Impositions and Discharge of Liens
7.15. Leases and Rents
7.17. Development of Projects
ARTICLE VIII NEGATIVE COVENANTS ..............................................
8.1. Liens
8.2. Limitation on Investments
8.3. Restricted Payments
8.4 Working Capital
8.5. Equity Value
8.6. Consolidated Total Liabilities
8.7. Interest Coverage Ratio
8.10. Unleveraged Properties
8.11. Indebtedness
8.13. Certain Capital Transactions and Fundamental Changes
8.14. Certain Amendments
8.15. Transactions with Affiliates
8.16. Management Agreements
8.17. Inconsistent Agreements
8.18. Maintenance of Corporate Existence
8.19. Property Mix
ARTICLE IX DEFAULTS AND REMEDIES .............................................
9.1. Events of Default
9.2. Suits for Enforcement
9.3. Rights and Remedies Cumulative
9.4. Rights and Remedies Not Waived
9.5. Waiver of Stay
9.6. Additional Advances and Disbursements
ARTICLE X MISCELLANEOUS ......................................................
10.1. Administration and Collection Costs
10.2. Modification and Waiver
10.3. GOVERNING LAW
10.4. Notices
10.5. Accounting Terms
10.6. Indemnity
10.7. WAIVER OF JURY TRIAL AND SETOFF
10.8. Captions
10.9. Lien; Setoff by Lenders
10.10. Jurisdiction; Service of Process
10.11. Benefit of Agreement
<PAGE>
-iii-
10.12. Counterparts
10.13. Interest
10.14. Attorneys' Fees
10.15. Severability
10.16. Confidentiality
10.17. Loss, Theft, Etc. of Notes
10.18. Replacement of Lender
10.20. Entire Agreement
ARTICLE XI AGENCY ............................................................
11.1. Appointment and Actions
11.2. Independent Credit Decisions
11.3. Indemnification of Administrative Agent
11.4. Resignation and Succession
ARTICLE XII SALES AND TRANSFERS ..............................................
12.1. Sales and Transfers
EXHIBITS, SCHEDULES AND DISCLOSURE SCHEDULES
EXHIBIT DESCRIPTION
================================================================================
A Lenders and Commitment Amounts
B Form of Note
C Form of Loan Request
D Fan of Continuation Request
B Form of Assignment and Acceptance
F Fan of Rent Roll
G Form of Letter of Credit Request
H Form of Compliance Certificate
SCHEDULES DESCRIPTION
1.1(a) Lists of Authorized Officers
1.1(b) Existing Properties
DISCLOSURE
SCHEDULES DESCRIPTION
5.7 Preexisting Liens
5.8 Preexisting Indebtedness
5.12 Subsidiaries
5.20 Certain ERISA matters
5.21 Certain environmental matters
7.17 Certain non--guarantor Subsidiaries
<PAGE>
This REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of January
20, 1998, is by and among: (i) CORNERSTONE PROPERTIES INC., a corporation duly
organized and validly existing under the laws of Nevada ("Cornerstone"); (ii)
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership
("Cornerstone LP,") together with Cornerstone, the "Borrowers," and each a
"Borrower"); (iii) each of the direct and indirect Subsidiaries of the Borrowers
that is a signatory hereto identified under the caption "GUARANTORS" on the
signature pages hereto (collectively, the "Guarantors," and each a "Guarantor");
(iv) each of the financial institutions that is a signatory hereto identified
under the caption "LENDERS" on the signature pages hereto or that, pursuant to
Section 12.1 hereof, shall become a "Lender" hereunder (individually, a "Lender"
and, collectively, the "Lenders"); (v) BANKERS TRUST COMPANY, as Administrative
Agent for the Lenders hereunder (in such capacity, the "Administrative Agent");
and (vi) THE CHASE MANHATTAN BANK, as Syndication Agent for the Lenders
hereunder (in such capacity, the "Syndication Agent," and together with the
Administrative Agent, the "Agents").
WHEREAS, pursuant to that certain Revolving Credit and Guaranty
Agreement, dated as of October 27, 1997, among Cornerstone, the guarantors
signatory thereto (the "Existing Guarantors"), the lenders signatory thereto
(the "Existing Lenders"), Bankers Trust Company, as Administrative Agent, and
The Chase Manhattan Bank, as Syndication Agent (the "Existing Credit
Agreement"), the Existing Lenders have agreed to make revolving loans to
Cornerstone in an aggregate principal amount not to exceed $350,000,000; and
WHEREAS, the parties hereto wish to amend and restate the Existing
Credit Agreement to, inter alia, add Cornerstone LP as a Borrower under this
Agreement, substitute the Guarantors for the Existing Guarantors as guarantors
under this Agreement, and substitute the Lenders for the Existing Lenders as
Lenders under this Agreement.
NOW, THEREFORE, the parties hereto hereby agree that, effective as
of the date hereof, the Existing Credit Agreement shall be and hereby is amended
in its entirety as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
SECTION 1.1. Defined Terms.
As used in this Agreement, the terms defined in the declaration and
recitals hereto shall have the respective meanings ascribed thereto in said
declaration and recitals, and the following terms shall have the following
respective meanings:
"ABR Loan" shall mean a loan which shall bear interest at the Alternate
Base Rate.
"Adjusted EBITDA" shall mean, for the Loan Parties and their Subsidiaries
for any period, (i) EBITDA plus/minus (ii) the Operating Income Adjustment.
<PAGE>
"Adjusted Eurodollar Rate" shall mean, for any Interest Rate Determination
Date with respect to a Loan, the rate per annum obtained by dividing (i) the
arithmetic average (rounded upward to the nearest 1/16 of one percent) of the
offered quotation, if any, to first class banks in the London interbank market
by each of the Reference Lenders for U.S. dollar deposits of amounts in same day
funds comparable to the principal amount of the Loan of that Reference Lender
for which the Adjusted Eurodollar Rate is then being determined with maturities
comparable to the Interest Period for which such Adjusted Eurodollar Rate shall
apply as of 10:00 A.M. (New York time) on such Interest Rate Determination Date
by (ii) a percentage equal to 100% minus the Eurodollar Reserve Percentage;
provided, however, that if any Reference Lender fails to provide the
Administrative Agent with its afore-mentioned quotation then the Adjusted
Eurodollar Rate shall be determined based on the quotation(s) provided to the
Administrative Agent by the other Reference Lenders.
"Affiliate" shall mean any Person that, directly or indirectly, controls
or is controlled by or is under common control with any other Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Interests, by contract or otherwise.
Notwithstanding the foregoing, (i) no individual shall be an Affiliate of a
Borrower solely by reason of his or her being a director, officer or employee of
the Loan Parties or any of their Subsidiaries and (ii) none of the Subsidiaries
of either Borrower shall be Affiliates of either Borrower.
"Aggregate Commitment" shall mean (i) $350,000,000 minus (ii) the
aggregate amount of all optional reductions by the Loan Parties under Section
2.7(c) in permanent reduction of the Aggregate Commitment.
"Agreement" shall mean this Credit Agreement, as the same may be amended
and supplemented from time to time.
"Alternate Base Rate" shall mean, as of any date of determination, the
annual rate of interest announced by Bankers Trust Company from time to time as
its "prime rate" in effect at its principal office in New York, New York at 5:00
p.m., New York City time (the "Prime Rate"), for such date. Such rate of
interest shall be computed on the basis of a 365-day or 366-day year, as the
case may be, for the actual number of days elapsed and shall change when and as
the Prime Rate is changed, and any such change in the Alternate Base Rate shall
become effective at the opening of business on the day on which such change is
adopted.
"Applicable Lending Office" shall mean, for each Lender, the office of
such Lender (or of an Affiliate of such Lender) to which notices are to be sent
unless a different "Lending Office" is
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<PAGE>
designated on Exhibit A hereto or such other office of such Lender (or of an
affiliate of such Lender) as such Lender from time to time by written notice may
specify to the Administrative Agent and the Loan Parties as the office by which
its Loans are to be made and maintained.
"Applicable Margin" shall mean:
(i) for any date of calculation during any period during which Cornerstone has
not received a Minimum Long Term Debt Rating or during which such rating has
been withdrawn by the applicable rating agency, the number of basis points
("bps") per annum opposite the Loan Parties' Leverage Ratio (calculated as of
the end of the immediately preceding fiscal quarter) set forth in the grid below
under the caption "Applicable Eurodollar Margin" or "Applicable Unused Line Fee
Margin," as the case may be:
Applicable Applicable
Leverage Ratio Eurodollar Margin Unused Line Fee Margin
- -------------- ----------------- ----------------------
< .3 110 bps 15 bps
-
> .3 but < .45 125 bps 15 bps
-
> .45 140 bps 20 bps;
and
(ii) for any date of calculation during any period after which Cornerstone has
received a Minimum Long Term Debt Rating and during which the Borrower maintains
such rating, the number of basis points ("bps") per annum opposite Cornerstone's
Minimum Long Term Debt Rating set forth in the grid below under the caption
"Applicable Eurodollar Margin" or "Applicable Unused Line Fee Margin," as the
case may be; provided, however, if Cornerstone has received a Minimum Long Term
Debt Rating from both S&P and Moody's and has been split-rated, the number of
basis points per annum opposite the higher of the two ratings will be used,
unless the discrepancy is more than one level, in which case the number of basis
points per annum opposite the rating corresponding to the average of the two
ratings will be used; provided, further, that if a Minimum Long Term Debt Rating
shall be changed (other than as a result of a change in the rating system of
Moody's or S&P), such change shall be effective as of the date on which it is
first announced by the applicable rating agency:
Minimum Long Term Applicable Applicable
Debt Rating Eurodollar Margin Unused Line Fee Margin
> A-/A3 75 bps 12.5 bps
-
> BBB+/Baa1 90 bps 12.5 bps
-
but < A-/A3
-3-
<PAGE>
> BBB/Baa2 100 bps 15.0 bps
-
but < BBB+/Baa1
> BBB-/Baa3 110 bps 15.0 bps
-
but < BBB/Baa2
"Appraisal" shall mean a written appraisal of property requested by the
Administrative Agent pursuant to Section 7.9(b) (i) in form, content and
methodology satisfactory to the Administrative Agent and in compliance with all
applicable legal and regulatory requirements, and (ii) prepared by an
independent appraiser selected by the Administrative Agent who meets all
regulatory requirements applicable to the Administrative Agent and the Lenders
and, in the case of an Appraisal of a Property, has at least 10 years experience
with real estate of the same type and in the same geographic area as the
Property to be appraised.
"Assignee" or "Assignees" shall have the meaning set forth in Section 12.1
hereof.
"Assignment" or "Assignments" shall have the meaning set forth in Section
12.1 hereof.
"Authorized Officers" shall mean, with respect to any Loan Party, one or
more of the individuals named on Schedule 1.1(a) hereto under the name of such
Loan Party and any other individual hereafter designated as such from time to
time by such Loan Party in a writing delivered to the Administrative Agent. Each
Authorized Officer is deemed to be a Person who is charged with the
administration of the transactions contemplated by this Agreement and the other
Facility Documents and to be authorized to act on behalf of the applicable Loan
Party hereunder and under the other Facility Documents.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Board" shall mean the Board of Governors of the Federal Reserve System,
or any Person that hereafter shall succeed to its duties with respect to the
regulation of margin credits or the establishment of reserve requirements for
commercial banks.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York, are authorized or required
to close.
"Capital Expenditures" means, for any Person for any period, the aggregate
(without duplication) of all expenditures (whether payable in cash or other
property or accrued as a liability (but without duplication) during such period
that, in conformity with GAAP, are required to be included in or reflected by
the Borrowers' or any of their respective Subsidiaries' fixed asset accounts as
reflected in any of their respective balance sheets; provided, however, Capital
Expenditures shall include the sum of all
-4-
<PAGE>
expenditures by the Borrowers and their Subsidiaries (including the portion of
expenditures allocable to its Subsidiaries holding interests in joint ventures
in respect of such interests) for tenant improvements, leasing commissions, and
Property level capital expenditures (e.g. roof replacement, parking lot repairs,
etc., but not capital expenditures in connection with expansions or revenue
enhancement capital expenditures).
"Capital Expenditure Deduction" means, as of any date of determination,
the greater of (i) an amount per annum equal to $1.25 multiplied by the number
of rentable square feet of the Properties; and (ii) the sum of (a) an amount
equal to $0.05 multiplied by the number of rentable square feet of the
Properties, and (b) the product of (x) the average expenditure per rentable
square foot for space leased at the Properties over the immediately preceding
four fiscal years of Cornerstone for tenant improvements and leasing commissions
and (y) the aggregate number of rentable square feet of the Properties scheduled
to become vacant over the next succeeding four fiscal quarters of the Borrowers
as a result of expiration or termination of leases.
"Capital Interest" shall mean, with respect to (i) any corporation, common
stock, preferred stock, and any and all shares or other equivalents (however
designated) of any other corporate stock, of such corporation and (ii) any
partnership, partnership interests (whether general, special or limited) in such
partnership.
"Capital Lease Obligations" shall mean, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, and all rules and
regulations promulgated pursuant thereto, as the same may be amended or
supplemented from time to time.
"Combined Adjusted NOI" shall mean, with respect to the applicable time
period, as to any Properties, a dollar amount equal to the sum of (i) NOI
plus/minus (ii) the Operating Income Adjustment for such Properties.
"Commitment" shall mean, with respect to any Lender, the amount designated
for such Lender on Exhibit A hereto.
"Consolidated Fixed Charges" shall mean, as at any date of determination
for any period, the sum of each of the following, without duplication, for the
Loan Parties and their Subsidiaries, on a consolidated basis: (i) Interest
Expense for such period, (ii) scheduled principal amortization (excluding
balloon principal payments due at maturity) arising during such period on
Indebtedness, and (iii) all dividends authorized or paid during such
-5-
<PAGE>
period on any issue of Cornerstone Preferred Stock (annualized in the case of
the 7% cumulative convertible preferred stock of Cornerstone, no par value,
issued and outstanding on the Initial Funding Date and any other Cornerstone
Preferred Stock providing for the payment of dividends less frequently than
quarterly).
"Consolidated Total Liabilities" shall mean, as at any date of
determination, the sum of each of the following, without duplication, for the
Loan Parties and their Subsidiaries, on a consolidated basis: (i) all
indebtedness for borrowed money, (ii) any obligation owed for all or any part of
the deferred purchase price of assets or services which would be shown to be a
liability (or on the liability side of the balance sheet) in accordance with
GAAP, (iii) all Contingent Obligations, (iv) the maximum amount of all letters
of credit issued or acceptance facilities established for the account of the
Loan Parties or any of their Subsidiaries, and, without duplication, all drafts
drawn thereunder (other than letters of credit (A) supporting other indebtedness
of the Loan Parties or any such Subsidiary or any Affiliate of a Borrower, or
(B) offset by a like amount of cash or cash equivalents held in escrow to secure
such letters of credit and draws thereunder), (v) all Capital Lease Obligations,
(vi) all indebtedness (A) of another Person secured by any Lien on any property
or asset owned or held by the Loan Parties or any of their Subsidiaries
regardless of whether the indebtedness secured thereby shall have been assumed
by the Loan Parties or such Subsidiary or is nonrecourse to the credit of the
Loan Parties or such Subsidiary, and (B) of any consolidated Affiliate of a
Borrower whether or not such indebtedness has been assumed by such Borrower,
(vii) indebtedness created or arising under any conditional sale or title
retention agreement with respect to any property acquired by the Loan Parties or
any of their Subsidiaries, and (viii) withdrawal liability or insufficiency
under ERISA or under any qualified plan or related trust; but including within
the foregoing, trade payables and accrued expenses arising or incurred in the
ordinary course of business.
"Contingent Obligation" shall mean, for any Person, any material
commitment, undertaking, guaranty or other material obligation constituting a
contingent liability under GAAP, and shall include obligations under interest
rate swap agreements and currency agreements.
"Continuation Request" shall mean a request for the continuation of
Eurodollar Rate Loans for one or more Interest Periods, in substantially the
form of Exhibit D hereto, executed by an Authorized Officer on behalf of the
Borrower.
"Cornerstone Common Stock" shall mean the common stock of Cornerstone, par
value $.01 per share.
"Cornerstone Preferred Stock" shall mean, collectively, (i) the 7%
cumulative convertible preferred stock of Cornerstone, no par value, and (ii)
the shares of any other series or class of preferred stock issued by Cornerstone
from and after the Initial Funding Date.
-6-
<PAGE>
"Cornerstone Proxy Statement" shall mean the Proxy Statement of
Cornerstone, dated September 23, 1997, in connection with the Notice of Special
Meeting of Stockholders to Cornerstone, dated September 23, 1997.
"Current Assets" shall mean, for any Person as at any date of
determination, total assets of such Person which may be properly classified as
current assets in conformity with GAAP.
"Current Liabilities" shall mean, for any Person as at any date of
determination, total liabilities of such Person which may be properly classified
as current liabilities in conformity with GAAP.
"Default" shall mean any of the events specified in Section 9.1 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Default Rate" shall mean (i) for each ABR Loan, an annual rate equal to
the sum of (A) 4.0% plus (B) the Alternate Base Rate, and (ii) for each
Eurodollar Rate Loan, (x) during the period to and including the last day of the
Interest Period for such Loan, the sum of (A) 4.0% plus (B) the Adjusted
Eurodollar Rate plus (C) the Applicable Margin, and (y) commencing the first day
after the end of such Interest Period for such Loan, the sum of (A) 4.0% plus
(B) the Alternate Base Rate.
"DIHC" shall mean Dutch Institutional Holding Company, Inc., a Delaware
corporation.
"DIHC Purchase Money Notes" shall mean the promissory notes issued under
that certain Note and Collateral Agency Agreement, dated as of November 1, 1997,
among Cornerstone, certain of its Subsidiaries party thereto, the lenders party
thereto, and PGGM, as Administrative Agent, as the same may be amended or
modified from time to time.
"Dividends" shall have the meaning ascribed to such term in the definition
of "Restricted Payments" herein.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" shall mean, for any Person for any period, the sum of the amounts
of such Person for such period of (i) Net Income, (ii) Interest Expense, (iii)
provisions for taxes based on income, (iv) total depreciation expense, (v) total
amortization expense, (vi) any extraordinary losses, and (vii) minority
interests in Unconsolidated Affiliates, less (viii) any extraordinary gains, all
of the foregoing as determined on a consolidated basis for the Borrower and its
Subsidiaries in conformity with GAAP, (ix) the applicable share of Net Income of
such Person's Unconsolidated Affiliates, and (x) such Person's Ratable Share of
EBITDA of such Person's Unconsolidated Affiliates.
-7-
<PAGE>
"Effective Date" shall mean the date on which fully executed counterparts
of this Agreement shall have been unconditionally delivered to and received by
the Administrative Agent.
"Effective Date Equity Value" shall mean $957,000,000.
"Eligible Assignee" shall mean (i)(a) a commercial bank organized or
licensed to conduct a banking business under the laws of the United States of
America or any state thereof; (b) a savings and loan association or savings bank
organized under the laws of the United States of America or any state thereof;
(c) a commercial bank organized under the laws of any other country or any
political subdivision thereof, provided, however, that (x) such bank is
organized under the laws of a country that is a member of the Organization for
Economic Cooperation and Development (the "OECD") or a political subdivision of
such a country, and (y) such bank is acting through a branch or agency located
in the country in which it is organized or another country which is also a
member of the OECD or the Cayman Islands; and (d) any other entity (other than
an individual, a bank or a savings and loan association) which is an "accredited
investor" as defined in clause (1), (2), (3), or (7) of Section 230.501 of
Regulation D under the Securities Act and which extends credit or buys loans as
one of its principal businesses including, but not limited to, insurance
companies, investment banks, mutual funds, and lease financing companies, in
each case (under clauses (a) through (d) above) that is acceptable to the
Administrative Agent (which acceptance shall not be unreasonably withheld,
conditioned or delayed); and (ii) any Lender and any Affiliate of a Lender;
provided, further, that each Eligible Assignee under clauses (i)(a) through
(i)(c) above (x) shall have Tier 1 capital (as defined in the regulations of its
primary Federal banking regulator) of not less than $100,000,000, and (y) shall
have total assets in excess of $5,000,000,000.
"Eligible Joint Venture" means a joint venture or partnership in which (i)
Cornerstone LP and its Subsidiaries collectively have an ownership interest of
fifty percent (50%) or greater, (ii) the Borrowers, directly or through their
Subsidiaries, unilaterally control the management of such joint venture or
partnership, whether as the general partner or managing member of such joint
venture or partnership, or otherwise, (iii) the Borrowers, directly or through
their Subsidiaries, as general partner, managing member, or otherwise, has the
unilateral ability in its sole discretion to grant Liens on the assets of such
joint venture or partnership, and (iv) there are no restrictions on the ability
of such joint venture or partnership to declare distributions or dividends, as
the case may be. As used in this definition, the term "control" shall mean the
authority to unilaterally make major management decisions of day to day
operations of such joint venture or partnership.
"Employee Benefit Plan" shall mean any "employee benefit plan" as defined
in Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by a Borrower or any of its ERISA Affiliates.
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"Equity Proceeds" shall mean the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith
(including, without limitation, legal fees, brokerage commissions, and taxes
payable as a result of or in connection with such transaction)) from the
issuance of any equity securities of the Borrower or any of its Subsidiaries,
including (a) additional issuances of Cornerstone Common Stock, and (b) the
issuance of any interests or units in Cornerstone LP.
"Equity Value" shall mean, as of any date of determination, Total Property
Asset Value minus Consolidated Total Liabilities.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which, together with a Borrower or Borrowers, is treated as a
single employer under Sections 414(b), (c), (m) or (o) of the Code.
"ERISA Event" shall mean (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation), (ii) the failure to meet the minimum
funding standard of Section 412 of the Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Code) or the
failure to make by its due date a required installment under Section 412(m) of
the Code with respect to any Pension Plan or the failure to make any required
contribution to a Multiemployer Plan, (iii) the provision by the administrator
of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of
intent to terminate such plan in a distress termination described in Section
4041(c) of ERISA, (iv) the withdrawal by a Borrower or any of its ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Section
4063 or 4064 of ERISA, (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan, (vi) the imposition of liability
on a Borrower or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069
of ERISA or by reason of the application of Section 4212(c) of ERISA, (vii) the
withdrawal by a Borrower or any of its ERISA Affiliates in a complete or partial
withdrawal (within the meaning of Section 4203 and 4205 of ERISA) from any
Multiemployer Plan if there is any potential liability therefor, or the receipt
by a Borrower or any of its ERISA Affiliates of notice from any Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA, or that it intends to terminate or has terminated under Section 4041A
or 4042 of ERISA, (viii) the occurrence of an act or omission which could give
rise to the imposition on a Borrower or any of its ERISA Affiliates of fines,
penalties, taxes
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or related charges under Chapter 43 of the Code or under Section 409 or 502(c),
(i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan, (ix) the
assertion of a material claim (other than routine claims for benefits) against
any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof,
or against a Borrower or any of its ERISA Affiliates in connection with any such
Employee Benefit Plan, (x) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Benefit Plan intended
to be qualified under Section 401(a) of the Code) to qualify under Section
401(a) of the Code, or the failure of any trust forming part of any Pension Plan
to qualify for exemption from taxation under Section 501(a) of the Code, or (xi)
the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Code or
pursuant to ERISA with respect to any Pension Plan.
"Eurodollar Business Day" shall mean a Business Day on which dealings in
Dollar deposits are carried out in the London interbank market.
"Eurodollar Rate Loan" shall mean any Loan other than an ABR Loan.
"Eurodollar Reserve Percentage" shall mean, for any Interest Period for
which Loans are outstanding, the average maximum rate at which reserves
(including, without limitation, any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D by member banks of the Federal Reserve System in New York City with
deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as
such term is used in Regulation D). Without limiting the effect of the
foregoing, the Eurodollar Reserve Percentage shall include any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change with respect to (i) any category of liabilities, including deposits by
reference to which the Adjusted Eurodollar Rate is to be determined as provided
in the definition of "Adjusted Eurodollar Rate" in this Section 1.1, or (ii) any
category of extensions of credit or other assets, including Loans.
"Event of Default" shall mean any of the events or conditions specified as
such in Section 9.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Existing Lenders" shall mean the banks and other financial institutions
signatory to the Existing Agreement as "Lenders."
"Existing Properties" shall mean, collectively, the real properties listed
on Schedule 1.1(b) hereto.
"Facility" shall mean the undertaking and agreement of the Lenders to make
Loans to the Loan Parties in an amount equal to the Aggregate Commitment upon
the terms and conditions set forth herein.
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"Facility Availability" shall mean, as of any date of determination, an
amount equal to (i) the Aggregate Commitment, minus (ii) the aggregate
outstanding principal amount of the Loans, minus (iii) Letter of Credit
Obligations.
"Facility Documents" shall mean and include the following: (i) this
Agreement, (ii) the executed Notes, (iii) such additional documents,
instruments, agreements and certificates as may be required by the terms of any
other Facility Document, as the Administrative Agent may require or as any
Lender may reasonably require, (iv) all other documents, instruments and
agreements hereafter entered into by any Loan Party or Parties with the
Administrative Agent or the Administrative Agent and the Lenders which, by its
terms, states that it is a "Facility Document" for the purposes of this
Agreement, and (v) all amendments and supplements to, and all documents and
instruments entered into in substitution for, any of the foregoing.
"Federal Funds Rate" shall mean, for any day, a rate per annum (expressed
as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%)
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; provided, however, that (i) if the
day for which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average of the quotations for such day on such
transactions received by the Administrative Agent. The Federal Funds Rate shall
be reset on a daily basis in accordance with the above procedures.
"Funding Date" shall mean the date of the funding of a Loan.
"Funds Available for Distribution" shall mean, as to any period, an amount
equal to the sum of (i) Funds From Operations of the Loan Parties and their
Subsidiaries for such period, minus (ii) historically recurring Capital
Expenditures incurred by the Loan Parties and their Subsidiaries during such
period, minus (iii) Restricted Payments to holders of Cornerstone Preferred
Stock.
"Funds From Operations" shall mean, as to any period, an amount equal to
the sum of (i) Net Income (loss) from operations of the Loan Parties and their
Subsidiaries for such period, excluding gains (or losses) from debt
restructuring and sales of property, plus (ii) depreciation and amortization,
plus (iii) payments of principal received by the Borrowers under that certain
amended and restated promissory note, dated as of January 1, 1986, issued by
Hines Colorado Limited, a Colorado limited partnership, as maker to the
Borrower, as payee, and after adjustments for Unconsolidated Affiliates,
determined in each case on a consolidated basis in accordance with GAAP.
Adjustments for Unconsolidated Affiliates
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will be calculated to reflect funds from operations on the same basis.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time, but subject to the provisions
of Section 1.2 hereof.
"Governmental Authority" shall mean (i) any nation or government, (ii) any
state or other political subdivision thereof, (iii) any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, (iv) any court or arbitrator having
jurisdiction over any Loan Party or any of their Subsidiaries, any of their
respective Subsidiaries or any of their respective Properties, and (v) any
corporation or other entity owned or controlled (through ownership of Capital
Interests or otherwise) by any of the foregoing.
"guaranty" shall mean, as to any Person, any obligation of such Person
directly or indirectly guaranteeing any Indebtedness of any other Person or in
any manner providing for the payment of any Indebtedness of any other Person or
otherwise protecting the holder of such Indebtedness against loss (whether by
virtue of operation of partnership law or the terms of partnership agreements,
by agreement to keep-well, to purchase assets, goods, securities or services, or
to take-or-pay or otherwise); provided, however, that the term "guaranty" shall
not include endorsements for collection or deposit in the ordinary course of
business. The terms "guarantee" and "guaranteed" used as verbs shall have
correlative meanings.
"Guaranty" shall have the meaning ascribed to such term in Section 4.1
hereof.
"Guaranteed Obligations" shall mean:
(i) the payment, as and when due, or by stated maturity, acceleration, or
otherwise, of the Notes and all other amounts due and payable under the
other Facility Documents to the Agents and the Lenders at such times and
in the manner provided for in the Facility Documents, and
(ii) the payment of all other obligations of the Borrowers that can be
performed by the payment of monies, either to the Agents and the Lenders
directly or by reimbursement of advances by them, including, without
limitation, the payment of income and other taxes by the Borrowers.
"Guarantors" shall mean, collectively, (i) the Guarantors as of the date
hereof, and (ii) all Persons who become Guarantors subsequent to the date hereof
pursuant to Section 7.18 hereof.
"Hazardous Materials" shall mean all materials or substances now or
hereafter subject to any Legal Requirements, including, without limitation:
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(i) all substances which are designated pursuant to Section 311(b) (2) (A)
of the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss._1251 et
seq.,
(ii) any element, compound, mixture, solution, or substance which is
designated pursuant to Section 102 of the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss._9601 et seq.,
(iii) any hazardous waste having the characteristics which are identified
under or listed pursuant to Section 3001 of the Resource Conservation and
Recovery Act, 42 U.S.C. ss._6901 et seq.,
(iv) any toxic pollutant listed under Section 307(a) of FWPCA,
(v) any hazardous air pollutant which is listed under Section 112 of the
Clean Air Act, 42 U.S.C. ss._7401 et seq.,
(vi) any imminently hazardous chemical substance or mixture with respect
to which action has been taken pursuant to Section 7 of the Toxic Substances
Control Act, 15 U.S.C. ss._ 2601 et seq.,
(vii) "hazardous materials" within the meaning of
the Hazardous Materials Transportation Act, 49 U.S.C. ss._
1802 et seq.,
(viii) petroleum or petroleum by-products,
(ix) asbestos and any materials containing
asbestos,
(x) any radioactive material or substance,
(xi) all toxic wastes, hazardous wastes and hazardous substances as
defined by, used in, controlled by, or subject to all implementing regulations
adopted and publications promulgated pursuant to the foregoing statutes, and
(xii) any other hazardous or toxic substance or pollutant identified as
such in or regulated under any other applicable federal, state or local Legal
Requirements.
"Improvements" shall mean all buildings, structures, fixtures, tenant
improvements and other improvements of every kind and description now or
hereafter located in or on or attached to any Land, including all building
materials, water, sanitary and storm sewers, drainage, electricity, steam, gas,
telephone and other utility facilities, parking areas, roads, driveways, walks
and other
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site improvements; and all additions and betterments thereto and all
renewals, substitutions and replacements thereof.
"Indebtedness" shall mean, for any Person, without
duplication:
(i) obligations created, issued or incurred by such Person for borrowed
money (whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person);
(ii) obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, which purchase price is (a) due more
than six months from the date of incurrence or (b) evidenced by a note or
similar instrument;
(iii) indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective Indebtedness so secured has been assumed
by such Person;
(iv) obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for
account of such Person;
(v) Capital Lease Obligations of such Person;
(vi) indebtedness of others guaranteed by such Person (including, without
limitation, indebtedness of a partnership for which such Person, if a general
partner, would be liable as a matter of law or contract);
(vii) any mandatory payment due with respect to Redeemable Stock prior to
the then applicable Maturity Date, and
(viii) all obligations of such Person incurred in connection with the
acquisition or carrying of fixed assets by such Person.
"Initial Funding Date" means the date on which the conditions precedent to
making of Loans set forth in Section 6.1 hereto shall have been satisfied or
waived in writing by the Administrative Agent on behalf of the Required Lenders.
"Interest Expense" shall mean, for the Loan Parties and their Subsidiaries
for any period, the aggregate amount (determined in accordance with GAAP on a
consolidated basis) of interest (or, in the case of Capital Lease Obligations,
the interest component of such obligations), including, but not limited to,
interest on the
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Obligations and any Indebtedness the payment of which is secured by Liens on any
Property, deducted in determining Net Income for such period, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and amounts
payable or receivable under interest rate hedge agreements.
"Interest Period" shall mean, with respect to a Eurodollar Rate Loan, a
period of borrowing commencing on and including the date of advance,
continuation or conversion and ending one month, two months, three months, six
months or, subject to the consent of all Lenders, twelve months thereafter, as
set forth in the Loan Request or Continuation Request, during which such Loan
bears interest at a particular rate based upon the Adjusted Eurodollar Rate.
Notwithstanding the foregoing:
(i) no Interest Period may end on a date
subsequent to the Maturity Date;
(ii) each Interest Period that commences on the last Eurodollar Business
Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Eurodollar Business Day of the appropriate subsequent calendar month;
(iii) each Interest Period that would otherwise end on a day that is not a
Eurodollar Business Day shall end on the next succeeding Eurodollar Business Day
(or, if such next succeeding Eurodollar Business Day falls in the next
succeeding calendar month, on the next preceding Eurodollar Business Day); and
(iv) notwithstanding clause (i) above, no Interest Period for a Loan shall
have a duration of less than a calendar month and, if the Interest Period would
otherwise be a shorter period, such Loan shall not be available hereunder for
such period; and
(v) no more than six Interest Periods may be outstanding at any one time
for Loans.
"Interest Rate Determination Date" shall mean each date for calculating
the Adjusted Eurodollar Rate for purposes of determining the interest rate in
respect of an Interest Period. The Interest Rate Determination Date shall be the
second Eurodollar Business Day prior to the first day of the related Interest
Period for any Eurodollar Rate Loan.
"Investment" in any Person shall mean any loan, advance, or extension of
credit to or for the account of, any guaranty, endorsement (other than for
collection in the ordinary course of business) or other direct or indirect
contingent liability in connection with the obligations, Capital Interests or
dividends or other distributions of, any ownership, purchase or acquisition of
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any Capital Interests, business, assets, obligations or securities of, or any
other interest in or capital contribution to, such Person.
"Issuing Bank" shall have the meaning ascribed to such term in Section
2.6(a) hereof.
"Joint Venture Property" shall mean a Property title to which is owned by
a joint venture in which a Borrower or one or more Guarantors directly or
indirectly holds a Capital Interest.
"Land" shall mean, in the aggregate, all unimproved real property owned
by the Loan Parties and their Subsidiaries, together with all of the tenements,
hereditaments, easements, rights-of-way, rights, privileges and appurtenances
thereunto belonging or in any way pertaining thereto, all reversions,
remainders, dower and right of dower, courtesy and right of courtesy, and all
of the estate, right, title, interest, claim and demand whatsoever of the Loan
Parties and their Subsidiaries therein and in the streets, alleys, vaults and
ways adjacent thereto, all rights to the use of common drive entries, all
rights pursuant to any reciprocal easement agreement or trackage agreement, all
strips and gores within or adjoining such property, the air space and right to
use the air space above such property, all transferable development rights
arising therefrom or transferred thereto, and the drainage, mineral, water, oil
and gas rights with respect to such property, either at law or in equity, in
possession or expectancy, now or hereafter acquired.
"Leases" shall mean all leases, tenancies and other agreements for the use
and/or occupancy of a Property or any part thereof.
"Legal Requirements" shall mean all applicable federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees, injunctions, requirements of common law (as
evidenced by judicial precedent) and binding governmental interpretations of
Legal Requirements, whether now or hereafter enacted and in force, and all
permits, licenses and authorizations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments (either
of record or known to a Borrower), in force at any time, that are legally
binding with respect to any Loan Party or any Subsidiary thereof or any Property
or any part thereof.
"Letter of Credit Obligations" shall mean, without duplication, (i) all
reimbursement and other obligations of the Loan Parties in respect of Letters of
Credit, (ii) all amounts paid by the Administrative Agent to the Issuing Bank in
respect of Letters of Credit and (iii) all amounts paid by the Lenders to the
Administrative Agent and/or the Issuing Bank in respect of Letters of Credit.
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"Letters of Credit" shall mean the letters of credit made in connection
with the Loans issued by the Issuing Bank for the account of the Loan Parties in
an aggregate face amount not to exceed $10,000,000 outstanding at any one time,
as they may be drawn on, advanced, replaced or modified from time to time.
"Leverage Ratio" shall mean, as of any date of determination, the ratio
(expressed as a percentage) of Consolidated Total Liabilities to Total Property
Asset Value.
"Lien" shall mean any interest in property securing an obligation owed to
a Person, whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest arising from a mortgage,
mortgage deed, deed of trust, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term
"Lien" includes reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other similar title
exceptions and encumbrances, including but not limited to mechanics',
materialmen's, warehousemen's, carriers' and other similar encumbrances,
affecting property. For the purposes of this Agreement, a Person shall be deemed
to be the owner of any property such Person has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"Loan" shall mean a loan made pursuant to Section 2.1 hereof.
"Loan Party" or "Loan Parties" shall mean and include (i) each of the
Borrowers, (ii) each of the Guarantors, and (iii) any other Person that
guarantees, or provides security for the repayment of, the Loans or other
amounts due under the Facility Documents.
"Loan Request" shall mean a request for the funding of Loans on the
Effective Date, in substantially the form of Exhibit C hereto, executed by an
Authorized Officer on behalf of a Borrower.
"Loans" shall mean, collectively, the Loans from time to time outstanding
and unpaid.
"Material Adverse Effect" shall mean a material adverse effect on, and
"Material Adverse Change" shall mean a material adverse change in:
(i) the financial condition, business, Properties, operations, performance
or current capital structure of the Borrowers and their Subsidiaries taken as a
whole, in each case after giving effect to any related transactions,
(ii) the ability of any Loan Party to perform its respective obligations
under any of the Facility Documents to which it is a party, or
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(iii) the ability of the Administrative Agent and the Lenders to enforce
their rights and remedies under any of the Facility Documents;
provided, however, that neither (a) performance by any Guarantor of its
obligations in connection with the DIHC Purchase Money Notes nor (b) a default
under any secured Indebtedness which is recourse only to a particular asset or
assets (subject to customary exclusions) shall in and of itself constitute a
"Material Adverse Change" or a "Material Adverse Effect" unless (X) such default
results in the occurrence of an Event of Default under Section 9.1(b) of this
Agreement, or (Y) such default otherwise results in the occurrence of the effect
set forth in subclause (i) of this definition.
"Maturity" shall mean, with respect to any Loan and the related Note, (i)
the Maturity Date or (ii) any other date on which such Loan and the related Note
shall be or become due and payable, in whole or in part, in accordance with the
terms of this Agreement, whether by required prepayment, optional prepayment for
which notice has been given, declaration, acceleration or otherwise.
"Maturity Date" shall mean, with respect to any Loan and the related Note,
October 27, 2000.
"Minimum Long Term Debt Rating" shall mean a senior unsecured long-term
indebtedness rating of either (i) Baa3 or better as determined by Moody's, or
(ii) BBB- or better as determined by S&P; provided, however, that if the ratings
system of Moody's or S&P shall change, or if either such rating agency shall
cease to be in the business of rating corporate debt obligations, Cornerstone
and the Lenders shall negotiate in good faith to amend this definition to
reflect such changed rating system or the unavailability of ratings from such
rating agency.
"Moody's" shall mean Moody's Investors Service, Inc. or any
successor thereto acceptable to the Administrative Agent.
"Multiemployer Plan" shall mean a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which any of the Loan Parties or any of their ERISA
Affiliates is contributing, or ever has contributed, or to which any of the Loan
Parties or any of their ERISA Affiliates has, or ever has had, an obligation to
contribute.
"Net Casualty Proceeds" shall mean (i) the amount of any insurance
proceeds or condemnation awards paid to a Loan Party (or, in the case of a Loan
Party holding an interest in a joint venture which owns a Joint Venture
Property, the amount of such awards or proceeds received by such Loan Party's
without regard to the percentage of such Loan Party's beneficial interest in
such joint venture) as a result of any damage to, destruction of, taking or
condemnation of, or other casualty to, a Property, minus (ii) in the case of
Properties which are not Unleveraged Properties, amounts paid to any Persons
holding mortgages or other Liens on such Property in accordance with the terms
and requirements of such
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mortgages or other Liens, minus (iii) in the case of all Properties, the amount
incurred by the Loan Parties to repair, restore or replace such damaged,
destroyed or condemned Property, if the Loan Parties are required or otherwise
so choose to repair, restore or replace such Property, minus (iv) amounts
contractually required to be paid to tenants of such Property as a direct result
of such damage to, destruction of, taking or condemnation of, or other casualty
to, the Property.
"Net Income" shall mean, with respect to the Loan Parties and their
Subsidiaries for any period, net earnings (or loss) for the period in question
taken as a single accounting period, determined on a consolidated basis in
accordance with GAAP.
"New Property" shall mean any real property title to which is acquired
subsequent to the Effective Date by one or more Borrowers or by any joint
venture in which one or more Borrowers holds a Capital Interest.
"NOI" shall mean, with respect to the applicable time period, the amount
equal to (a) the Loan Parties' Ratable Share of the sum of all revenues and
income reported by the Loan Parties from the operation of the relevant Property
in accordance with GAAP minus (b) the Loan Parties' Ratable Share of the sum of
all reasonable and customary expenses incurred by the Loan Parties in the
operation of such Property determined in accordance with GAAP, including, but
not limited to, utility expenses, property taxes, insurance premiums, and
management fees (but excluding interest, depreciation, amortization and income
taxes).
"Note(s)" shall mean the promissory notes of the Borrowers referred to in
Section 2.2 hereof and shall include any replacements therefor issued pursuant
to Section 10.17 and 12.1 hereof or otherwise.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Officer's Certificate" shall mean a certificate delivered to the
Administrative Agent by a Loan Party which is signed by an Authorized Officer on
behalf of the Loan Party.
"Operating Income Adjustment" shall mean as of any date of determination,
the amount representing an adjustment to NOI, determined by the Administrative
Agent in accordance with the terms of this Agreement, to account for the Capital
Expenditure Deduction, minority interests, and straight-line rents.
"Pension Plan" shall mean any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Code or Section 302
of ERISA.
"Permitted Encumbrances" shall mean any of the following:
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(i) Liens for taxes, assessments or other governmental charges not yet due or
which are being contested in good faith and by appropriate proceedings by a
Borrower if adequate reserves with respect thereto are maintained on the books
of the Loan Parties in accordance with GAAP; (ii) Liens of carriers, laborers,
warehousemen, mechanics, landlords, materialmen, repairmen or other like Liens
(including maritime liens) arising by operation of the law in the ordinary
course of business and consistent with industry practices and Liens on deposits
made to obtain the release of such Liens if (a) the underlying obligations are
not overdue for a period of more than sixty (60) days or (b) such Liens are
being contested in good faith and by appropriate proceedings by the Loan Parties
or a Subsidiary and adequate reserves with respect thereto are maintained on the
books of the Loan Parties or such Subsidiary, as the case may be, in accordance
with GAAP; (iii) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred or imposed, as applicable,
in the ordinary course of business and consistent with industry practices which,
in the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto (as such
property is used by the Loan Parties) or interfere with the ordinary conduct of
the business of the Loan Parties or any of their Subsidiaries; provided,
however, that any such Liens which arise after the Effective Date are not
incurred in connection with any borrowing of money or any commitment to loan any
money or to extend any credit;
(iv) encumbrances, easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects listed on any title policy for any
Existing Property on the date such Property was acquired by the Loan Party or
the joint venture, as the case may be, excluding any deeds of trust or mortgage
obligations referred to in such title policy; or
(v) pledges or deposits to secure obligations under workers' compensation laws
or similar legislation or to secure public or statutory obligations.
"Person" shall mean any individual, corporation, company, limited
liability company, voluntary association, partnership, joint venture, trust,
unincorporated association or Governmental Authority.
"Pro Rata Share" shall mean, for each Lender at any time, the percentage
obtained by dividing (i) such Lender's Commitment at such time by (ii) the
Aggregate Commitment at such time, as such
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percentage may be adjusted by Assignments permitted pursuant to
Section 12.1 hereof.
"Property Obligations" shall mean (i) all Indebtedness (including
Contingent Obligations) or other liabilities of the Loan Parties payment of
which is secured by Liens on any of the Properties, (ii) all ground leases as to
which a Loan Party, or a joint venture in which a Loan Party holds an interest,
is a party thereto, (iii) all property management agreements as to which a Loan
Party is a party, and (iv) all joint venture or partnership agreements to which
a Loan Party is a party.
"Properties" shall mean, collectively, the Existing Properties and the New
Properties, and "Property" shall mean, individually, any Existing Property or
New Property.
"Ratable Share" shall mean, for any Person, with respect to such Person's
Affiliates, the percentage economic ownership interest of such Person in such
Affiliate; provided, however, that in the event that such Person is the general
partner of such Affiliate, such Person's Ratable Share with respect to such
Affiliate's liabilities shall be the percentage of the general partner interests
owned by such Person in such Unconsolidated Affiliate with respect to any
Indebtedness for which recourse may be made against any general partner of such
Unconsolidated Affiliate.
"Redeemable Stock" shall mean any Capital Interest in a Person that is
subject to redemption otherwise than at the sole option of such Person.
"Reference Lenders" shall mean Bankers Trust Company, The Chase Manhattan
Bank, and such other Lenders as may from time to time be designated, with the
consent of such Lenders, by the Administrative Agent with the approval of
Cornerstone (which approval shall not be unreasonably withheld or delayed).
"Regulatory Change" shall mean, with respect to any Lender,
(i) any change after the date of this Agreement in, or in the applicable
requirements of, Federal, state or foreign law or regulations (including,
without limitation, Regulation D), or
(ii) the adoption or making after such date of any interpretation,
directive or request
(other than those applying solely to banks formally determined by the applicable
regulator to be in a financially troubled condition), including such Lender, of
or under any Federal, state or foreign law or regulations (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
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"REIT" shall mean a "real estate investment trust," as such term is
defined in Section 856 of the Code.
"Release" shall have the meaning contained in 42 U.S.C. ss.
9601(22).
"Rent Roll" means, for any Property, a rent roll in the form annexed
hereto as Exhibit F, with such changes or additions as the Administrative Agent
may reasonably request or approve.
"Rents" shall mean all rents, issues, profits, royalties, receipts,
revenues, accounts receivable, security deposits and other deposits (subject to
the prior right of tenants making such deposits) and income, including fixed,
additional and percentage rents, occupancy charges, operating expense
reimbursements, reimbursements for increases in taxes, sums paid by tenants to
the Loan Parties to reimburse the Loan Parties for amounts originally paid or to
be paid by the Loan Parties or the Loan Parties' agents or affiliates for which
such tenants were liable, as, for example, tenant improvements costs in excess
of any work letter, lease takeover costs, moving expenses and tax and operating
expense pass-throughs for which a tenant is solely liable, parking income,
recoveries for common area maintenance expense, tax, insurance, utility and
service charges and contributions, proceeds of sale of electricity, gas,
heating, air-conditioning and other utilities and services, deficiency rents and
liquidated damages, and other benefits.
"Replacement Lender" shall mean a financial institution (other than a
Lender) selected by the Loan Parties and approved by the Administrative Agent to
become an Assignee (such approval not to be unreasonably withheld).
"Required Lenders" shall mean, subject to Section 10.2(b) hereof, (i) on
or before the Initial Funding Date, or at any time no Loans are outstanding,
Lenders having no less than 66-2/3% of the aggregate amount of the Commitments
and (ii) at all other times, Lenders holding no less than 66-2/3% of the
aggregate unpaid principal amount of the Loans.
"Restricted Investment" shall mean any Investment by a Person, to the
extent it does not constitute (i) an Investment in a Capital Interest in a
Subsidiary of such Person, or (ii) an Investment in Subsidiary Debt of a
Subsidiary of such Person.
"Restricted Payment" shall mean with respect to any Person (the
"Referenced Person") any of the following when paid (or when the proceeds of
which are paid) to any Person other than the Referenced Person by or on behalf
of the Referenced Person or any Subsidiary thereof:
(i) the payment of any dividend on or any other distribution in respect of
any Capital Interests in the
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Referenced Person or any Subsidiary thereof (other than any Wholly-Owned
Subsidiary)("Dividends"),
(ii) any payment, defeasance, redemption, repurchase or other acquisition
or retirement for value prior to scheduled maturity of any Indebtedness of the
Referenced Person or any Subsidiary thereof ranked pari passu or subordinate in
right of payment to the Indebtedness under the Facility Documents,
(iii) the redemption, repurchase, retirement or other acquisition of any
Capital Interest in the Referenced Person or any Subsidiary thereof or of any
warrants, rights or options to purchase or acquire any Capital Interest in the
Referenced Person or any Subsidiary thereof,
(iv)__any expenditure or the incurrence of any liability to make any
expenditure for any Restricted Investment,
(v)__the payment of any principal of, interest on, or any amounts due in
respect of, any Indebtedness of the Referenced Person and its Subsidiaries not
permitted by the terms of this Agreement,
(vi)__the payment of any principal of, interest on, or any other amounts
due in respect of, any Subordinated Debt of the Referenced Person or any
Subsidiary thereof,
(vii)_any payment of a claim, not reduced to final judgment after
exhaustion of available appellate remedies, for the rescission of the purchase
or sale of, or for material damages arising from the purchase or sale of, any
Subordinated Debt of or Capital Interests in, the Referenced Person, and
(viii) any payment or contribution to the consolidated tax liabilities of
the Person or Persons that own the Capital Interests in the Referenced Person
that is in excess of the amount of the applicable taxes that would be payable by
the Referenced Person if it were not taxed as part of a consolidated group, as
adjusted from time to time for any loss carry-forwards or credits or deductions
available to the ultimate recipient of such payment or contribution.
"S&P" shall mean Standard & Poor's Rating Group or any successor thereto
reasonably acceptable to the Administrative Agent and the Borrower.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Solvent" shall mean, as to any Person as of the applicable date of
determination, that such Person has capital sufficient to carry on its business
and transactions and all business and transactions to which it is about to
engage, is able to pay its debts as they mature, and owns property having a
value, both at fair valuation and at the then fair salable value, greater than
the amount required to pay its then existing debts (including contingencies).
"State" shall mean and include, unless otherwise limited, any State of the
United States, the District of Columbia and the Commonwealth of Puerto Rico.
"Subordinated Debt" shall mean all Indebtedness of a Person for borrowed
money that, by its terms or other agreement, is subordinate in right of payment
to any other Indebtedness of such Person; provided, however, that Indebtedness
of the Loan Parties shall constitute Subordinated Debt only if subordinated to
the Notes and other Indebtedness under the Facility Documents on terms
reasonably satisfactory to the Required Lenders, in their discretion.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the Capital
Interests or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time Capital Interests or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"Subsidiary Debt" shall mean Indebtedness of a Subsidiary of the Borrower
owed to the Borrower.
"Taking" shall mean the taking or appropriation (including by deed in lieu
of condemnation) of any Property, or any part thereof or interest therein, for
public or quasi-public use under the power of eminent domain, by reason of any
public improvement or condemnation proceeding, or in any other manner or any
damage or injury or diminution in value through condemnation, inverse
condemnation or other exercise of the power of eminent domain.
"Total Property Asset Value" shall mean, as of any date of determination,
the amount equal to (i) the Combined Adjusted NOI for the two fiscal quarters
immediately preceding such date, annualized, for all Properties divided by nine
percent (9.0%), plus (ii) without duplication, the aggregate amount of cash and
cash equivalents of the Loan Parties.
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"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial
Code as then in effect in that jurisdiction. References to terms defined in the
UCC shall mean such terms in the UCC as in effect in such jurisdiction.
"Unconsolidated Affiliate" shall mean, in respect of any Person, any other
Person in whom such Person holds an Investment, which Investment is accounted
for in the financial statements of such Person on an equity basis of accounting.
"Unleveraged Properties" shall mean, collectively, (i) all Properties
owned by the Loan Parties or by Eligible Joint Ventures free and clear of any
Liens, other than Permitted Encumbrances, and (ii) the property identified as
"191 Peachtree Street" on pages 61 through 63 of the Cornerstone Proxy
Statement.
"Unleveraged Properties Asset Value" shall mean, as of any date of
determination, the amount equal to the Combined Adjusted NOI for the two fiscal
quarters immediately preceding such date, annualized, for all Unleveraged
Properties, divided by nine percent (9.0%).
"Unsecured Interest Expense" shall mean, for the Loan Parties and their
Subsidiaries for any period, the greater of (i) the aggregate amount (determined
in accordance with GAAP on a consolidated basis) of interest on or in respect of
unsecured Indebtedness of the Loan Parties and their Subsidiaries deducted in
determining Net Income for such period, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and amounts payable or receivable
under interest rate hedge agreements and (ii) the amount equal to 7.2% per annum
times the aggregate outstanding principal amount of unsecured Indebtedness of
the Loan Parties and their Subsidiaries.
"Voting Interests" shall mean securities, as defined in Section 2(1) of
the Securities Act, of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to (i) vote for the
election of the corporate directors (or Persons performing similar functions) or
(ii) in the case of a partnership, to manage or direct the business or assets
thereof. References in this Agreement to percentages of Voting Interests, unless
otherwise noted, refer to percentages of votes to which such Voting Interests
are entitled in the election of corporate directors (or Persons performing
similar functions) rather than to the number of shares.
"Wholly-Owned Property" shall mean a Property title to which is owned
solely by one or more Loan Parties.
"Wholly-Owned Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the Capital Interests
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or
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more Wholly-Owned Subsidiaries of such Person or by such Person and one or more
Wholly-Owned Subsidiaries of such Person.
"Working Capital" shall mean, as at the date of determination, an amount
equal to (i) Current Assets of the Loan Parties, plus (ii) the Facility
Availability, minus (iii) Current Liabilities of the Loan Parties, minus (iv)
cash or cash equivalents of the Loan Parties held in escrow to secure letters of
credit issued or acceptance facilities established for the account of the Loan
Parties and draws thereunder, minus (v) Contingent Obligations of the Loan
Parties (A) for which the amount is estimable and as to which payment is likely
to occur, if at all, within twelve (12) months of such date of determination,
and (B) which do not appear on the audited or unaudited financial statements of
the Loan Parties, in each case determined on a consolidated basis according to
GAAP.
SECTION 1.2. Other Definitional Provisions. (a) All terms defined in
this Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa.
(b) The words "hereof", "hereby", "herein", and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provisions of this Agreement; the
term "hereafter" shall mean after, and the term "heretofore" shall mean before,
the date of this Agreement; and Article, Section, schedule, exhibit, annex and
like references are to this Agreement unless otherwise specified.
(c) Any defined term that relates to a document shall include within
its definition any amendments, modifications, renewals, restatements,
extensions, supplements, or substitutions that heretofore may have been or
hereafter may be executed in accordance with the terms thereof and hereof.
(d) References in this Agreement to particular sections of the Code
or any other legislation shall be deemed to refer also to any successor sections
thereto or other redesignations for codification purposes.
(e) All terms defined in the UCC and not otherwise defined or
modified herein shall have the respective meanings ascribed to such terms in the
UCC.
(f) When used with respect to Loans, the words "continue",
"continued" and "continuation" and words of similar import shall refer to the
continuation, at the end of the applicable Interest Period, of a Loan for an
additional Interest Period.
SECTION 1.3. Accounting Terms and Determinations. (a) Except as
otherwise expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lenders hereunder shall be
prepared, in accordance with GAAP.
(b) The Loan Parties shall deliver to the Lenders at the same time
as the delivery of any annual financial statements under Section 7.1(b) hereof
(i) a description in reasonable detail of any material variation between the
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application of GAAP employed in the preparation of such statements and the
application of accounting principles employed in the preparation of the next
preceding annual financial statements and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
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ARTICLE II
AMOUNT AND TERMS OF LOANS
SECTION 2.1. Commitments and Loans. (a) Commitment. Subject to the
terms and conditions of this Agreement and in reliance upon the representations
and warranties of the Loan Parties herein set forth, each Lender hereby
severally agrees, subject to the limitations set forth below with respect to the
maximum amount of Loans permitted to be outstanding from time to time, to lend
to the Borrowers from time to time during the period from the Effective Date to
but excluding the Maturity Date an aggregate amount not exceeding such Lender's
Commitment. The original amount of each Lender's Commitment is set forth
opposite its name on Exhibit A; provided, however, that the Commitments of the
Lenders shall be adjusted to give effect to any Assignments of the Commitments
pursuant to Section 12.1.
(b) Term of Commitment; Expiration of Obligations. The obligations
of each Lender to the Borrowers under this Agreement shall terminate
automatically on the Maturity Date.
(c) Survival, Release and Reinstatement of Obligations. (i) The
occurrence of the Maturity Date with respect to the Loan and related Note of any
Lender shall not release, terminate or limit the rights or remedies of the
Agents or any Lender or any obligations of the Loan Parties or any other Person
under this Agreement or any other Facility Document or arising out of acts,
events or circumstances taken, occurring or existing prior thereto, and such
rights and remedies and such obligations shall survive until the Loan Parties
have fully paid and performed all their obligations hereunder and thereunder in
full.
(ii) Upon payment of all amounts owed by the Loan Parties to the Agents
and the Lenders under the Facility Documents, the obligations of the Loan
Parties to the Agents and the Lenders, except as otherwise provided herein or in
any other Facility Document, shall be deemed terminated; provided, however, that
all the provisions of this Agreement and the other Facility Documents shall
continue to be effective or shall be reinstated, as the case may be, if any
payment hereunder or in connection with any of the Facility Documents at any
time is rescinded or otherwise must be returned to or for the benefit of a Loan
Party (or to the issuer of any letter of credit, surety bond or other instrument
issued to the Administrative Agent for the account of a Loan Party) as a result
of the bankruptcy, insolvency, reorganization, the imposition of any creditors'
rights statute, or other similar event or proceeding with respect to any Loan
Party, all as if such payment had not been made.
SECTION 2.2. Notes. (a)__The Loan of each Lender shall be evidenced
by a single Note of the Borrowers, in substantially the form of Exhibit B
hereto, payable to the order of such Lender and representing the obligations of
the Borrowers to pay an amount equal to the lesser of (A) the Commitment of such
Lender and (B) the aggregate principal amount of the Loan from time to time
outstanding from such Lender, together with interest thereon. Each Lender is
hereby authorized to and shall endorse the date and amount of its Loan, the
Interest Periods during which any portion of such Loan is a Loan and each
payment or prepayment of principal thereof on the schedule (including additional
pages
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thereto added by such Lender as required) annexed to and constituting a part of
its Note, which endorsement shall constitute prima facie evidence of the
accuracy of the information so endorsed; provided, however, that the failure of
any Lender to insert any such date or amount or other information on such
schedule shall not in any manner affect the obligation of the Borrower to repay
any Loan in accordance with the terms of this Agreement.
(b) Each Note shall (i) except as otherwise provided in Section
10.17, or 12.1 hereof, be dated as of the Effective Date, (ii) be payable at its
Maturity, and (iii) bear interest in accordance with the provisions of Section
2.3 hereof.
SECTION 2.3. Interest. (a) Rate of Interest. Subject to the
provisions of Sections 2.5 and 2.9, each Loan shall bear interest on the unpaid
principal amount thereof from the date made through the Maturity Date (whether
by acceleration or otherwise) at a rate determined by reference to the Adjusted
Eurodollar Rate; provided, however, that in the event that any Loan is to be
made on a day when there are already six Interest Periods outstanding, such Loan
shall be deemed to be an ABR Loan and shall bear interest at the Alternate Base
Rate until the commencement of the next succeeding Interest Period, at which
time such ABR Loan shall be converted (automatically and without the necessity
of any action on the part of any Person) to a Eurodollar Rate Loan in accordance
with Section 2.4(c) The basis for determining the interest rate with respect to
any Loan shall be changed from time to time in accordance with Section 2.4(c).
Subject to the provisions of Sections 2.8 and 2.9, the Loans shall bear
interest through maturity as follows:
(i) if an ABR Loan, then at a rate equal to the Alternate Base
Rate; or
(ii) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin.
(b) Computation of Interest. Interest on the Loans shall be computed
(i) in the case of ABR Loans, on the basis of a 365-day or 366-day year, as the
case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a
360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the day of the
making of such Loan or the first day of an Interest Period applicable to such
Loan shall be included, and the date of payment of such Loan or the expiration
date of an Interest Period applicable to such Loan shall be excluded; provided,
however, that if a Loan is repaid on the same day on which it is made, one
day's interest shall be paid on that Loan.
(c) Interest Payment Dates. Interest accrued on each Loan shall be
payable, without duplication, on:
(i) the Maturity Date of such Loan;
(ii) with respect to any repayment or prepayment of any Loans, the date of
such repayment or prepayment, as the case may be; and
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(iii) with respect to Eurodollar Rate Loans, the last day of each
applicable Interest Period and, in connection with any Loan having (A) a
six-month Interest Period, the day that would be the last day of a three-month
Interest Period commencing on the same day as such six-month Interest Period
commences and (B) a twelve-month Interest Period, the days that would be the
last days of a three-, six- and nine-month Interest Periods commencing on the
same day as such twelve-month Interest Period; and
(iv) with respect to ABR Loans, the date of the conversion of such ABR
Loans in accordance with Section 2.4(c) hereof or, if the Borrower has not
elected to convert such ABR Loans, monthly in arrears on the last business day
of each month.
SECTION 2.4. Borrowing and Conversion Procedures. (a) Borrowing
Mechanics. (i) Loans made on any Funding Date shall be in an aggregate minimum
amount of $1,000,000. The Borrower shall be permitted to make a borrowing
pursuant to this Section 2.4 only twice during any 30 day period. Whenever a
Borrower desires that the Lenders make Loans, Cornerstone shall deliver to the
Administrative Agent a Loan Request no later than 10:00 A.M. (New York time) at
least three Business Days in advance of the proposed Funding Date.
(ii) In lieu of delivering the above-described Loan Request, a
Borrower may give the Administrative Agent telephonic notice by the required
time of any proposed Loan under this Section 2.4; provided, however, that such
notice shall be promptly confirmed in writing by delivery of a Loan Request to
the Administrative Agent on or before the applicable Funding Date. Neither the
Administrative Agent nor any Lender shall incur any liability to the Loan
Parties in acting upon any telephonic notice referred to above that the
Administrative Agent believes in good faith to have been given by an Authorized
Officer or other person authorized to borrow on behalf of such Borrower or
otherwise acting in good faith under this Section 2.4 and upon funding of Loans
by the Lenders in accordance with this Agreement pursuant to any such telephonic
notice the Borrower shall have effected Loans hereunder.
(iii) A Borrower shall notify the Administrative Agent prior to the
funding of any Loans in the event that any of the matters to which such Borrower
is required to certify in the applicable Loan Request is no longer true and
correct as of the applicable Funding Date, and the acceptance by such Borrower
of the proceeds of any Loans shall constitute a re-certification by such
Borrower, as of the applicable Funding Date, as to matters to which such
Borrower is required to certify in the applicable Loan Request.
(iv) Except as otherwise provided in Sections 2.5(b) and 2.5(c), a
Loan Request (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and the Borrower shall be
bound to make a borrowing in accordance therewith.
(b) Interest Periods. Subject to Section 2.3(a), in connection with
each Eurodollar Rate Loan, a Borrower may, pursuant to the applicable Loan
Request, select an Interest Period to be applicable to such Loan, the term of
which Interest Period shall be at such Borrower's option; provided, however,
that the initial Interest Period for any Loan shall commence on the Funding Date
in respect of such Loan.
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(c) Conversion. Subject to the provisions of Sections 2.3 and 2.5,
so long as no Event of Default shall have occurred and be continuing, a
Borrower may convert any ABR Loan into a Eurodollar Rate Loan by irrevocable
written notice delivered to the Administrative Agent no later than 10:00 A.M.
(New York time) at least three Business Days in advance of the proposed date of
conversion. Such notice shall identify the ABR Loan or Loans to be converted
and the Interest Period to be applicable to such Eurodollar Rate Loan or Loans.
(d) Funding Mechanics. (i) Same Day Funding. Each Lender shall
provide the Administrative Agent with funds, on or before 12:00 noon, prevailing
New York time, on any Funding Date in an amount equal to such Lender's Pro Rata
Share of the Loans to be made on such Funding Date by transferring same day or
immediately available funds to such account as the Administrative Agent shall
specify from time to time by notice to the Lenders. Except as otherwise provided
in Section 2.7 hereof, on the date requested in such notice, the Administrative
Agent shall make available to the Borrower at the Borrower's account with the
Administrative Agent or at such other account as the Borrower shall designate in
the related Loan Request, in immediately available funds, the proceeds of the
Loans being made; provided, however, that the Administrative Agent shall be
obligated to make the proceeds of such Loans available only to the extent
received by it from the Lenders.
(ii) Separate Obligations. The amounts payable by a Borrower at any
time hereunder and under the Notes to each Lender shall be a separate and
independent debt of such Borrower.
(iii) Failure To Fund. (A) The failure of any Lender (each, a
"Defaulting Lender") to fund its Loan on a Funding Date as required hereunder
shall not relieve any other Lender of such other Lender's obligation to fund its
Loan on such date, but (I) neither any other Lender nor the Administrative Agent
nor the Syndication Agent shall be responsible for the failure of any Defaulting
Lender to fund such Defaulting Lender's Loan, (II) no other Lender's Commitment
or Loan shall be increased as a result of any such failure of any other Lender,
(III) except as otherwise provided in Section 2.4(d)(iii)(B) hereof, no
Defaulting Lender shall have any obligation to the Administrative Agent or any
other Lender for the failure by such Defaulting Lender to fund its Loan and (IV)
failure by a Defaulting Lender to fund shall not relieve any Loan Party of any
obligations to the Administrative Agent and the other Lenders hereunder or under
any other Facility Document.
(B) Repayment of Administrative Agent Advances. In the event that
the Administrative Agent advances proceeds of any Loan to or for the account of
the Borrower and one or more Defaulting Lenders fails to fund all or any portion
of such Loan, immediately upon receipt of notice from the Administrative Agent,
(I) such Defaulting Lender shall pay directly to the Administrative Agent the
amount thereof, together with interest thereon calculated, if such payment is
received by the Administrative Agent on or before the third (3rd) Business Day
following the date on which such funding was due, at the Federal Funds Rate and
in all other cases at the rate specified in Section 2.8 hereof and (II) if not
paid by such Defaulting Lender, the Borrowers shall repay directly to the
Administrative Agent such amount as will equal the amount that such Defaulting
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Lender or Lenders failed to fund, together with interest thereon at the
applicable rate determined in accordance with Section 2.3 hereof.
(C) Replacement Lenders. At any time within 60 days after the
applicable Funding Date and repayment by the Borrowers of any amount described
in Section 2.4(d)(iii)(B) above, the Borrowers, by writing addressed to the
Administrative Agent and such Defaulting Lender, may nominate or propose another
bank or financial institution, including an existing Lender, that is willing to
become a Replacement Lender or other Assignee of the Commitment of a Defaulting
Lender pursuant to Section 12.1 hereof, and, within 10 Business Days after
receipt of such proposal from the Borrowers, such Defaulting Lender shall
execute and deliver to the Administrative Agent an Assignment of its entire
Commitment in favor of the proposed Replacement Lender or other Assignee in
conformity with Section 12.1 hereof unless, prior to the expiration of such
period, the Administrative Agent shall have notified the Borrowers and such
Defaulting Lender that the proposed Replacement Lender or other Assignee is not
reasonably acceptable to the Administrative Agent. In no event will either the
Administrative Agent or the Lenders be obligated to assist the Borrower in
identifying any banks or financial institutions that are willing to become a
Replacement Lender or other Assignee of any Defaulting Lender.
(D) Reservation of Rights. Nothing contained in this Section 2.4
shall preclude the Borrowers from pursuing any other remedy against a Defaulting
Lender.
(e) Remittances by Administrative Agent. In the event that the
Administrative Agent remits in same day or immediately available funds to any
Lender its share of any payments to be made by the Borrower pursuant to this
Agreement or the Notes prior to the time that the Administrative Agent receives
such payments from the Borrower, and the Borrower fails to make such payments
when due, immediately upon receipt of notice from the Administrative Agent, such
Lender shall repay directly to the Administrative Agent in same day or
immediately available funds such amount as will equal such Lender's ratable
portion of the amount that the Borrower failed to pay, together with interest
thereon calculated, if such payment is received by the Administrative Agent on
or before the third (3rd) Business Day following the notice to such Lender, at
the Federal Funds Rate and in all other cases at the rate specified in Section
2.8 hereof.
(f) Continuations. Subject to the limitations applicable to Interest
Periods for Eurodollar Rate Loans as set forth in the definition of Interest
Period, a Borrower may continue any Eurodollar Rate Loan for an additional
Interest Period; provided, however, that:
(i) such Borrower shall give the Administrative Agent irrevocable written
notice in the form of a Continuation Request in the manner and by the applicable
time specified in Section 2.4(a)(i) hereof for the borrowing of such Loan and,
if applicable, the Interest Period therefor;
(ii) in the case of the continuation of less than all of the outstanding
Loans on the same Business Day for the same new Interest Period, the aggregate
principal amount of each Loan having the same
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new Interest Period shall not be less than $1,000,000 or any integral multiple
of $500,000 in excess thereof;
(iii) no Loan may be continued as such for less than the minimum
applicable Interest Period therefor; and
(iv) no Loan may be continued as such for an additional Interest Period if
any Default or Event of Default shall have occurred and be continuing as of any
date during the period commencing on the date the Continuation Request is
required to be submitted to the Administrative Agent and ending on the first day
of the requested Interest Period.
If the Borrower fails, in connection with the expiration of an Interest Period
applicable to a Loan, to furnish a Continuation Request to the Administrative
Agent for the continuation thereof or fails to elect a permitted Interest Period
therefor, or if the continuation of Loans is prohibited due to the occurrence
and continuance of a Default or Event of Default or otherwise, such Loan (unless
the Loans are prepaid in accordance with the provisions of Section 2.7 hereof or
accelerated in accordance with Section 9.1 hereof) shall be converted
automatically to an ABR Loan as of the expiration of then applicable Interest
Period. Promptly upon receipt of any Continuation Request, the Administrative
Agent shall give notice thereof to the Lenders.
SECTION 2.5 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to the Eurodollar Rate Loans as
to the matters covered:
(a) Determination of Applicable Interest Rate. As soon as
practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, the Reference Lenders shall determine (which determination
shall, absent manifest error, be final, conclusive and binding upon all
parties) the interest rate that shall apply to the Eurodollar Rate Loans for
which an interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to the Borrowers and each Lender.
(b) Inability to Determine Applicable Interest Rate. In the event
that the Administrative Agent shall have determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any Eurodollar Rate Loans, that by
reason of circumstances affecting the interbank Eurodollar market adequate and
fair means do not exist for ascertaining the interest rate applicable to such
Loans on the basis provided for in the definition of Adjusted Eurodollar Rate,
the Administrative Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to the Borrowers and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to
Eurodollar Rate Loans until such time as the Administrative Agent notifies the
Borrowers and the Lenders that the circumstances giving rise to such notice no
longer exist and (ii) any Loan Request given by the Borrowers
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with respect to the Loans in respect of which such determination was made shall
be deemed to contain a request that such Loans be made as ABR Loans.
(c) Compensation for Breakage or Non-Commencement of Interest
Periods. The Borrowers jointly and severally agree to compensate each Lender,
upon written request by that Lender (which request shall set forth the basis
for requesting such amounts), for all reasonable losses, expenses and
liabilities (including any interest paid by that Lender to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense
or liability sustained by that Lender in connection with the liquidation or
re-employment of such funds borrowed by it to make or carry its Eurodollar Rate
Loans and any loss, expense or liability sustained by that Lender in connection
with the liquidation or re-employment of such funds) which that Lender may
sustain: (i) if for any reason (other than a default by that Lender) a
borrowing of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Loan Request or a telephonic request for borrowing, or a
conversion to or continuation of any Eurodollar Rate Loan does not occur on the
date specified therefor, (ii) if any prepayment or conversion of any of its
Eurodollar Rate Loans occurs on a date that is not the last day of an Interest
Period applicable to that Loan other than repayment under Section
2.4(a)(iii)(B), 2.9, or 2.13, (iii) if any prepayment (including any mandatory
or voluntary prepayment pursuant to Section 2.7 or other principal payment of
any of its Eurodollar Rate Loans) is not made on any date specified in a notice
of prepayment given by the Borrowers or (iv) as a consequence of any other
default by the Borrowers in the repayment of their Eurodollar Rate Loans when
required by the terms of this Agreement.
(d) Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
(e) Assumptions Concerning Funding of Eurodollar Rate Loans.
Calculation of all amounts payable to a Lender under this Section 2.5 and under
Section 2.9(a) shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this Section 2.5 and
under Section 2.9(a).
SECTION 2.6 Letters of Credit. (a) Commitment. Subject to the terms
and conditions set forth in this Agreement, at any time and from time to time
through the day that is thirty (30) days prior to the applicable Maturity Date,
the Administrative Agent shall cause Bankers Trust Company or such other lender
designated by the Administrative Agent with the consent of such lender (the
"Issuing Bank") to issue such Letters of Credit for the account of the Borrowers
as the Borrowers may request by a request for Letter of Credit;
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provided, however, that (i) upon issuance of such Letters of Credit, the sum of
the aggregate principal amount of all outstanding Loans plus the aggregate face
amount of all outstanding Letters of Credit issued for the account of the
Borrowers shall not exceed the Aggregate Commitment; (ii) at any time, the
aggregate face amount of all outstanding Letters of Credit issued for the
account of the Borrowers shall not exceed Ten Million Dollars ($10,000,000);
(iii) the term of any Letter of Credit shall not extend beyond the Maturity
Date; and (iv) all Letters of Credit are to be issued on a sight basis and only
in United States dollars.
(b) Letter of Credit Request. The Borrowers shall deliver to the
Administrative Agent and the Issuing Bank a duly executed request for Letter of
Credit, in the form of Exhibit G hereto, not later than 10:00 A.M. (New York
time), at least five (5) Business days prior to the date upon which the
requested Letter of Credit is to be issued. The Borrowers shall further deliver
to the Administrative Agent and the Issuing Bank such additional instruments and
documents as the Administrative Agent and/or the Issuing Bank may reasonably
require, in conformity with the standard practices of its letter of credit
department, in connection with the issuance of such Letter of Credit.
(c) Letter of Credit Fees. (i) As consideration for to the issuance of any
Letters of Credit requested pursuant to Section 2.6(b), the Borrowers jointly
and severally agree to pay to the Administrative Agent, for distribution to each
Lender in proportion to that Lender's Pro Rata Share, an annual letter of credit
issuing fee equal to the Applicable Eurodollar Margin per annum on the daily
aggregate face amount of all Letters of Credit outstanding and undrawn. The fees
provided for in this Section 2.6(c) shall be calculated on the basis of a
360-day year and the actual number of days elapsed and shall be payable
quarterly in arrears on the last Business Day of each January, April, July, and
October, commencing with the first such date to occur after the Effective Date
on which any Letter of Credit shall be outstanding, and on the Maturity Date.
(ii) As additional consideration for the issuance of any Letters of
Credit pursuant to Section 2.6 hereof, in addition to the fee payable under
Section 2.6(c)(i) hereof, the Borrowers jointly and severally agree to pay to
each Issuing Bank, a facing fee, in addition to the processing, administrative,
and similar fees of the Issuing Bank in connection with the Letters of Credit,
equal to 0.15% per annum on the daily amount of the Letters of Credit issued by
such Issuing Bank and outstanding during such period; provided, however, that
the minimum facing fee shall be $500.00 per annum per Letter of Credit issued
and outstanding. The fees provided for in this Section 2.6(c)(ii) shall be
calculated on the basis of a 360-day year and the actual number of days elapsed
and shall be payable quarterly in arrears on the last Business Day of each
January, April, July, and October, commencing with the first such date to occur
after the Effective Date, and on the Maturity Date.
(d) Notice to Lenders. Upon issuance of a Letter of Credit, the
Administrative Agent shall promptly notify the Lenders of the amount and terms
thereof. The Administrative Agent shall provide copies of each Letter of Credit
to the Lenders promptly following issuance thereof and shall notify the Lenders
promptly of all payments, reimbursements, expirations, negotiations, transfers
and other activity with respect to outstanding Letters of Credit.
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(e) Participation. Upon the issuance of a Letter of Credit, each Lender
shall be deemed to have purchased a pro rata issuer participation therein from
the Issuing Bank in an amount equal to the Lender's Pro Rata Share of the face
amount of the Letter of Credit.
(f) Draws. Notwithstanding any other provisions of this Agreement, the
Borrowers hereby jointly and severally agree to reimburse the Issuing Bank, by
making payment to the Administrative Agent at its office, for any payment or
disbursement made by the Issuing Bank under any Letter of Credit immediately
after, and in any event on the date on which the Borrowers are notified by the
Issuing Bank of, such payment or disbursement. If and to the extent that any
amounts are drawn upon any Letters of Credit and are not reimbursed by the
Borrowers, the amount so drawn shall immediately be paid by the Administrative
Agent to the Issuing Bank, and, from the date of payment thereof by the Issuing
Bank, shall be considered (i) so long as there exists no Default or Event of
Default, a Eurodollar Rate Loan of the Administrative Agent having an initial
Interest Period of one month for all purposes hereunder and (ii) if there then
exists a Default or Event of Default, a purchase by the Administrative Agent of
the Issuing Bank's right to reimbursement in respect of such Letter of Credit.
(g) Funding. Promptly after payment by the Issuing Bank of any amounts
drawn upon any Letter of Credit, and provided that reimbursement has not been
promptly made by the Borrowers by the payment date, the Administrative Agent
shall, without notice to or the consent of the Borrowers, direct the Lenders to
advance to the Administrative Agent, their Pro Rata Share of the amount of the
Loan of the Administrative Agent described in clause (i) of Section 2.6(f). The
proceeds of such advances shall be applied by the Administrative Agent to
reimburse it for the payment made by it to the Issuing Bank under the Letter of
Credit. All amounts paid by the Lenders pursuant to this Section 2.6(g) shall be
deemed to be (i) so long as there exists no Default or Event of Default, Loans
made pursuant to this Agreement and (ii) if there then exists a Default or Event
of Default, a purchase by each Lender of a participation in the Letter of Credit
Obligations in respect of such Letter of Credit.
(h) Maturity Date. On the occurrence of the maturity of the Loans prior to
the expiration of all Letters of Credit, the Borrowers shall provide to the
Administrative Agent a standby letter of credit issued by a bank reasonably
satisfactory to the Administrative Agent, in form and substance satisfactory to
the Administrative Agent, in favor of the Administrative Agent in a face amount
equal to outstanding Letters of Credit on that date plus any outstanding Letter
of Credit fees which would be due through the expiry of each outstanding Letter
of Credit, or shall make other provisions satisfactory to the Administrative
Agent for the full collateralization, by cash or cash equivalent, of such
outstanding Letters of Credit. In the event of failure of the Borrowers to
comply with the requirement of this Section 2.6(h), such portion of the face
amount of all outstanding Letters of Credit as to which the Borrowers have
failed to comply shall be deemed to be immediately due and payable.
(i) Amendments, Supplements Etc. The issuance of any supplement,
modification, amendment, or extension to or of any Letter of Credit shall be
treated in all respects the same as issuance of a new Letter of Credit.
(j) Assumption of Risks. The Borrowers assume all risks of the acts or
omissions of any beneficiary or transferee of any Letter of Credit with respect
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to its use of such Letter of Credit. Neither the Issuing Bank, the
Administrative Agent, any Lender nor any of their respective agents, officers or
directors shall be liable or responsible for, nor shall the Borrowers'
obligations hereunder in respect of such Letters of Credit be impaired as a
result of:
(A) any lack of validity or enforceability of any Letter of Credit
or any other agreement or instrument relating thereto (such Letter
of Credit and any other agreement or instrument relating thereto
being, collectively, the "Letter of Credit Documents");
(B) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith;
(C) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in
any respect;
(D) the existence of any claim, set-off, defense or other right
that the Borrowers may have at any time against any beneficiary or
any transferee of a Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), the Issuing
Bank or any other Person, whether in connection with the
transactions contemplated by the Letter of Credit Documents or any
unrelated transaction;
(E) payment by the Issuing Bank against presentation of documents
that do not comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or
(F) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit.
In furtherance and not in limitation of the foregoing, the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 2.7. Prepayments; Reduction of Aggregate Commitment. (a)
Voluntary Prepayments. The Borrowers from time to time may prepay the Loans, in
whole at any time or in part from time to time, without premium or penalty in
the case of prepayments applied to Loans, upon irrevocable written notice to the
Administrative Agent, given by the Borrowers, at least as early before the
proposed date of such prepayment as the corresponding time specified in Section
2.4(a)(i) hereof for notice of the borrowing of Loans, specifying the date of
prepayment and the amount of the prepayment; provided, however, that each
partial prepayment shall be in an aggregate amount not less than $2,000,000 or
any integral multiple of $500,000 in excess thereof (or such lesser amount of
the Loans having Loans as may remain outstanding). If any such notice is given,
the amount specified in such notice shall be due and payable in the manner and
by the time provided in Section 3.2 hereof, on the date specified in such
notice, together with accrued interest thereon to such date as provided in
Section 2.3(d)
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hereof. Amounts voluntarily prepaid pursuant to this Section 2.7(a) may be
reborrowed.
(b) Mandatory Prepayments; Casualties. In the event a Borrower or a
Loan Party receives Net Casualty Proceeds as a result of damage to, destruction
of, or condemnation or Taking of, one or more Properties, the Borrowers will, on
the Business Day of receipt by such Loan Party of such Net Casualty Proceeds,
prepay the principal amount of the Loans in an amount equal to the amount of
such Net Casualty Proceeds, together with accrued interest thereon to such date.
Amounts mandatorily prepaid pursuant to this Section 2.7(b)(i) may be
reborrowed.
(c) Reduction of Aggregate Commitment. The Borrowers may, upon
thirty (30) days' irrevocable written notice to the Administrative Agent,
terminate in whole or permanently reduce in part the Aggregate Commitment
without premium or penalty, provided, however, that, after giving effect to such
reduction, the Aggregate Commitment equals or exceeds the amount of the Loans
plus the Letter of Credit Obligations then outstanding. Any such partial
reduction of the Aggregate Commitment shall be in a minimum amount of
$5,000,000, or integral multiples of $1,000,000 in excess of that amount, and
shall reduce the Commitment of each Lender proportionately in accordance with
its Pro Rata Share.
(d) Apportionment. Unless otherwise requested in writing by the
Borrowers, prepayments shall be applied first against ABR Loans then outstanding
before being applied against any Eurodollar Rate Loans then outstanding.
SECTION 2.8. Interest on Delinquent Payments. All unpaid amounts due
under the Notes or the terms of this Agreement or any other Facility Document
that are not paid when due and payable (including, to the extent permitted by
law, unpaid interest on the Notes) shall bear simple interest, subject to the
provisions of Section 10.13 hereof, from and including its due date until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(f), (g) or (h) hereof) at the Default Rate. Unpaid
amounts that are not yet due and payable shall bear interest as otherwise
provided herein or in the other Facility Documents.
SECTION 2.9. Additional Costs. (a) The Borrowers jointly and
severally agree to pay to the Administrative Agent from time to time for the
account of any Lender such amounts as such Lender may determine to be necessary
to compensate such Lender (or its bank holding company) for any increased costs
that such Lender (or bank holding company) determines are attributable to making
or maintaining any Loan or its obligation to make or maintain any Loan
hereunder, or any reduction in any amount receivable by such Lender hereunder in
respect of any of such Loan or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office for such
Loan) to any tax, duty or other charge in respect of such Loan or its Note or
changes the basis of taxation of any amounts payable to such Lender under this
Agreement or its Note in respect of such Loan (excluding changes in the rate of
tax on the overall net income of such Lender or of such Applicable Lending
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Office by the jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than any Eurodollar Reserve Percentage utilized in the
determination of the interest rate for any Loan) relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of, such
Lender, or any commitment of such Lender (including, without limitation, the
commitment of such Lender hereunder); or
(iii) imposes on such Lender any other condition affecting this Agreement,
or such Lender's Note or its commitment or the other Facility Documents or the
transactions contemplated hereby or thereby.
If any Lender requests compensation from the Borrowers under this Section
2.9(a), the Borrowers may, by notice to such Lender (with copies to the
Administrative Agent), suspend the obligation of such Lender thereafter to
continue or to convert Loans affected thereby, until the Regulatory Change
giving rise to such request ceases to be in effect (in which case the provisions
of Section 2.9(h) hereof shall be applicable); provided, however, that such
suspension shall not affect the right of such Lender to receive the compensation
so requested.
(b) Without limiting the effect of the provisions of Section 2.9(a),
in the event that, by reason of any Regulatory Change, any Lender either (i)
incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such
Lender that includes deposits by reference to which the interest rate on
particular Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender that includes such Lender's
Loan or (ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets that it may hold, then, if such Lender so elects by notice
to the Borrowers (with a copy to the Administrative Agent), the obligation of
such Lender to continue or to convert Loans affected thereby shall be suspended
until such Regulatory Change ceases to be in effect (in which case the
provisions of Section 2.9(h) hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 2.9 (but without duplication), the Borrowers jointly and severally agree
to pay directly to each Lender from time to time on request such amounts as such
Lender may determine to be necessary to compensate such Lender (or, without
duplication, the bank holding company of which such Lender is a Subsidiary) for
any costs that it determines are attributable to the maintenance by such Lender
(or any Applicable Lending Office or such bank holding company), pursuant to any
law or regulation or any interpretation, directive or request (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing at the national level any risk based
capital guideline or other requirement (whether or not having the force of law
and whether or not the failure to comply therewith would be unlawful) hereafter
issued by any government or governmental or supervisory authority implementing
the Basle Accord (including, without limitation, the Final Risk Based Capital
Guidelines of the Board of Governors of the Federal Reserve System (12 C.F.R.
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Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final Risk Based
Capital Guidelines of the Office of the Comptroller of the Currency (12 C.F.R.
Part 3, Appendix A)), of capital in respect of its Loan (such compensation to
include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Lender (or any Applicable Lending Office or
such bank holding company) to a level below that which such Lender (or any
Applicable Lending Office or such bank holding company) could have achieved but
for such law, regulation, interpretation, directive or request). For purposes of
this Section 2.9(c), "Basle Accord" shall mean the proposals for risk based
capital framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
(d) Each Lender shall notify the Borrowers of any event occurring
after the date of this Agreement entitling such Lender to compensation under
this Section 2.9(a) or 2.9(c) hereof as promptly as practicable, but in any
event within 45 days after such Lender obtains actual knowledge thereof;
provided, however, that (i) if any Lender fails to give such notice within 45
days after it obtains actual knowledge of such an event, such Lender shall, with
respect to compensation payable pursuant to this Section 2.9 in respect of any
costs resulting from such event, only be entitled to payment under this Section
2.9 for costs incurred from and after the date 45 days prior to the date that
such Lender does give such notice and (ii) each Lender will designate a
different Applicable Lending Office for the Loan of such Lender affected by such
event if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate an Applicable Lending Office located in the United States of
America. Each Lender will furnish to the Borrowers a certificate of such Lender
(or its bank holding company) setting forth the basis and amount of each request
by such Lender for compensation under this Section 2.9(a) or 2.9(c).
Determinations and allocations by any Lender or bank holding company for
purposes of this Section 2.9 of the effect of any Regulatory Change pursuant to
Section 2.9(a) or 2.9(c) hereof, or of the effect of capital maintained pursuant
to Section 2.9(c) hereof, on its costs or rate of return of maintaining its Loan
or its obligation to make its Loan, or on amounts receivable by it in respect of
its Loan, and of the amounts required to compensate such Lender or bank holding
company under this Section 2.9, shall be conclusive, absent manifest error.
(e) The protection of this Section 2.9 shall be available to such
Lender or any bank holding company regardless of any possible contention of
invalidity or inapplicability of the law, regulation or condition that has been
imposed. In the event that any such law, regulation or condition is subsequently
held to be invalid or inapplicable and the result thereof is to eradicate any
such Additional Cost, such Lender shall promptly pay to the Borrowers, (upon
such Lender's receipt from its bank holding company in the case of compensation
previously paid to such bank holding company) an amount equal to the amount of
compensation paid by the Borrowers to such Lender for its account or the account
of a bank holding company as a result of such invalid or inapplicable law,
regulation or condition.
(f) At any time within 60 days after any payment by the Borrowers of
any amount pursuant to Section 2.9(a) or 2.9(c) hereof that the Borrowers deem
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to be material, the Borrowers, by writing addressed to the Administrative Agent
and each Lender that requested the payment of such amount, may nominate or
propose another bank or financial institution, including an Existing Lender,
that is willing to become the Replacement Lender or other Assignee of the
Commitment of such Lender pursuant to Section 12.1 hereof, and, within 10
Business Days after receipt of such proposal from the Borrowers, each such
Lender shall execute and deliver to the Administrative Agent an Assignment of
its entire Commitment in favor of the proposed Replacement Lender or other
Assignee in conformity with Section 12.1 hereof unless, prior to the expiration
of such period, the Administrative Agent shall have notified the Borrowers and
such Lender that the proposed Replacement Lender or other Assignee is not
reasonably acceptable to the Administrative Agent. In no event will (i) any
Lender be required to enter into an Assignment of its Commitment (A) at a price
less than par plus accrued interest and prorated fees to the effective date
thereof or (B) unless all such affected Lenders enter into Assignments of their
entire Commitment or (ii)_either of the Administrative Agent or Lenders be
obligated to assist the Borrowers in identifying any banks or financial
institutions that are willing to become a Replacement Lender or other Assignee.
(h) If the obligation of any Lender to continue, or to convert Loans
shall be suspended pursuant to Section 2.9(a) or 2.13 hereof, such Lender's
Eurodollar Rate Loans shall be automatically converted into ABR Loans on the
last day(s) of the then current Interest Period(s) for Eurodollar Rate Loans
(or, in the case of a conversion required by Section 2.9(b) or 2.13 hereof, on
such earlier date as such Lender may specify to the Borrowers, with a copy to
the Administrative Agent) and, unless and until such Lender gives notice as
provided below that the circumstances specified in Section 2.9(a) or 2.9(b) or
2.13 hereof that gave rise to such conversion no longer exist:
(i) to the extent that such Lender's Eurodollar Rate Loans have been so
converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's Eurodollar Rate Loans shall be applied instead to its
ABR Loans; and
(ii) all Loans that otherwise would be made or continued by such Lender as
Eurodollar Rate Loans shall be made or continued instead as ABR Loans, and all
ABR Loans of such Lender that otherwise would be converted into Eurodollar Rate
Loans shall remain as ABR Loans.
If such Lender gives notice to the Borrowers, with a copy to the Administrative
Agent that the circumstances specified in Section 2.9(a) or 2.9(b) or 2.13
hereof that gave rise to the conversion of such Lender's Eurodollar Rate Loans
pursuant to this Section 2.9(h) no longer exist (which such Lender agrees to do
promptly upon such circumstances ceasing to exist) at a time when Eurodollar
Rate Loans made by other Lenders are outstanding, then such Lender's ABR Loans
shall be automatically converted, on the first day(s) of the next succeeding
Interest Period(s) for such outstanding Eurodollar Rate Loans of the same
duration, to the extent necessary so that, after giving effect thereto, all
Loans are held pro rata (as to principal amounts, interest rate and Interest
Periods) by the Lenders in accordance with their respective Commitments.
SECTION 2.10. Use of Proceeds. The proceeds of all Loans (including
Letters of Credit) made by the Lenders to the Borrowers hereunder shall be used
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by the Borrowers (a) to refinance the indebtedness under the Existing Agreement,
(b) for acquisitions of real properties and (c) for general working capital
purposes (but excluding Interest Expense and the amortization of the principal
portion of Indebtedness).
SECTION 2.11. Payment on Non-Business Days. Whenever any payment to
be made under the Notes (other than principal of or any interest on Loans) or
under this Agreement or any other Facility Document shall be stated to be due on
a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time in such case shall be
included in the computation of payment of interest or commitment fees, as the
case may be.
SECTION 2.12. Funding Losses. (a) The Borrowers jointly and
severally agree to pay within 10 days after demand therefor such amount as will
compensate the Agents and the Lenders for any loss or reasonable expense they
sustain as a consequence of:
(i) any default in payment of the principal amount of any Loan or any part
thereof or interest accrued thereon, or any other amount due,
(ii) the occurrence of any Default or Event of Default hereunder,
(iii) the receipt or recovery or conversion for any reason (including,
without limitation, any prepayment or any mandatory conversion pursuant to
Sections 2.4(c) or 2.7 hereof) of all or any part of such Loan prior to the last
day of the applicable Interest Period therefor, or
(iv) any failure to borrow or to continue any Loan after submitting a Loan
Request or a Continuation Request relating thereto to the Administrative Agent,
including, but not limited to, (A) any loss or expense sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof or (B) any loss of margin on reemployment
of the funds so received or recovered.
(b) Each Lender shall be entitled to fund its Loans hereunder in
such manner as it may determine in its sole discretion; provided, however, that,
for the purposes of calculations under this Section 2.12, each Loan shall be
deemed to have been funded by the purchase in the Eurodollar interbank market of
a Dollar deposit in an amount comparable to the principal amount of such Loan
and having a maturity comparable to the applicable Interest Period therefor.
(c) A certificate of the Administrative Agent or any Lender as to
any additional amounts payable pursuant to this Section 2.12 setting forth the
basis and method of determining such amounts shall be conclusive, absent
manifest error, as to the determination by the Administrative Agent or Lender
set forth therein.
SECTION 2.13. Change in Legality. (a) If, anything to the contrary
herein contained notwithstanding, any applicable existing or future law,
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regulation, guideline, treaty or directive or condition or interpretation
thereof (including, without limitation, any request, guideline or policy,
whether or not having the force of law), by any Governmental Authority charged
with the administration or interpretation thereof, or any change in any of the
foregoing shall make it unlawful or improper for any Lender or its Applicable
Lending Office to make or maintain any portion of its Loans as Eurodollar Rate
Loans, then, by oral notice to the Borrowers, and the Administrative Agent,
promptly confirmed in writing (which may be by teletransmission and which shall
state the basis for such notice), the Administrative Agent may declare that such
Lender's obligation to make or maintain Loans as Eurodollar Rate Loans is
suspended until such time as such Lender may again make and maintain Loans as
Eurodollar Rate Loans and all such Lender's Eurodollar Rate Loans shall convert
automatically into ABR Loans at the end of their then current Interest Period or
at such earlier time as such Lender may specify.
(b) At any time within 60 days after notice from the Administrative
Agent pursuant to this Section 2.13 and thereafter until 60 days after the date
on which such notice is withdrawn, the Borrowers, by writing addressed to the
Administrative Agent and each Lender for which it has become unlawful or
improper to make or maintain any Loans as Eurodollar Rate Loans, may nominate or
propose other banks or financial institutions that are willing to become
Replacement Lenders or other Assignees of the Commitments of such Lenders
pursuant to Section 12.1 hereof, and, within 10 Business Days after receipt of
such proposal from the Borrowers, each such Lender shall execute and deliver to
the Administrative Agent an Assignment of its entire Commitment in favor of the
proposed Replacement Lender or other Assignee indicated in the Borrower's
proposal in conformity with Section 12.1 hereof unless, prior to the expiration
of such period, the Administrative Agent shall have notified the Borrowers, and
such Lender that one or more of the proposed Replacement Lenders or other
Assignees is not reasonably acceptable to the Administrative Agent. In no event
will (i) any Lender be required to enter into an Assignment of its Commitment
(A) at a price less than par plus accrued interest and prorated fees to the
effective date thereof or (B) unless all such affected Lenders enter into
Assignments of their entire Commitment or (ii)_either of the Administrative
Agent or the Lenders be obligated to assist the Borrowers in identifying any
banks or financial institutions that are willing to become Replacement Lenders
or other Assignees.
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ARTICLE III
FEES AND PAYMENTS
SECTION 3.1. Fees. (a)__ Unused Line Fee. The Borrowers jointly and
severally agree to pay to the Administrative Agent, for distribution to each
Lender in proportion to that Lender's Pro Rata Share, a fee equal to Applicable
Unused Line Fee Margin per annum on the daily average amount by which the
Aggregate Commitment exceeds the outstanding principal balance of the Loans plus
the Letter of Credit Obligations. The fees provided for in this Section 3.1(a)
shall be calculated on the basis of a 360-day year and the actual number of days
elapsed and shall be payable monthly in arrears on the last day of each calendar
month, commencing with the first such date to occur after the Effective Date,
and on the Maturity Date.
(b) Administration Fee. The Borrowers jointly and severally agree to
pay to the Administrative Agent an administration fee equal to $50,000 per
annum. The fee provided for in this Section 3.1(b) shall be payable quarterly in
arrears on the last day of each calendar quarter, commencing with the first such
date to occur after the Effective Date, and on the Maturity Date. The
administration fee shall be payable as provided in this subsection
notwithstanding that the amount borrowed shall be less than the amount of the
Aggregate Commitment.
SECTION 3.2. Payments. Each payment (including each prepayment)
whether in respect of principal, interest, fees, increased costs, break funding
costs, or other amounts pursuant to this Agreement or the other Facility
Documents, shall be made to the Administrative Agent for the accounts of the
Persons entitled thereto. All such payments required to be made to the
Administrative Agent shall be made, without set-off, withholding, deduction, or
counterclaim, not later than 10:00 a.m., New York City time, on the date due, in
same day or immediately available funds, to such account as the Administrative
Agent shall specify from time to time by notice. Funds received after that time
shall be deemed to have been received by the Administrative Agent on the
following Business Day. The Administrative Agent shall remit in same day or
immediately available funds promptly to each Lender (or other holder of a Note
notified to the Administrative Agent) its share, if any, of such payments
received by the Administrative Agent for the account of such Lender or holder,
which shall be based upon (i) in the case of payments in respect of principal,
the Lenders' respective Loans and (ii) in the case of interest, the Lenders'
respective amounts of the ABR Loans and the Eurodollar Rate Loans.
SECTION 3.3. Taxes. (a) Any and all payments by the Borrowers
pursuant to the Facility Documents shall be made, in accordance with the terms
hereof and thereof, free and clear of and without deduction for any and all
present or future taxes (other than any tax on the overall net income of any
Lender), levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, no matter in what jurisdiction (collectively,
"Indemnified Taxes"), except as required by law. If the Borrowers or the
Administrative Agent shall be required by law to deduct or withhold any
Indemnified Taxes from or in respect of any sum payable hereunder or under the
other Facility Documents to the Administrative Agent or any Lender, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this
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Section 3.3) the Administrative Agent or Lender shall receive an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions, (iii) the Borrowers shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) the Borrowers shall deliver to the
Administrative Agent evidence of such payment to the relevant Governmental
Authority within 30 days after making such payment.
(b) In addition, the Borrowers jointly and severally agree to pay
any present or future stamp or documentary taxes, taxes on indebtedness or any
other excise, property or ad valorem taxes, charges or similar levies of the
United States or any State or political subdivision thereof or any applicable
foreign jurisdiction that arise from any payment made by them hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Facility Document (collectively, but excluding any income
or franchise taxes, "Other Taxes") and to deliver to the Administrative Agent
evidence of such payment to the relevant Governmental Authority.
(c) The Borrowers jointly and severally agree to indemnify the
Administrative Agent and the Lenders for the full amount of Indemnified Taxes
and Other Taxes (including, without limitation, Indemnified Taxes and Other
Taxes imposed by any jurisdiction on amounts payable under this Section 3.3)
paid by the Administrative Agent or any Lender (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 10 days
after written demand therefor by the Administrative Agent or any Lender.
(d) In the event that any such Indemnified Taxes or Other Taxes are
subsequently held to be invalid or inapplicable and the result thereof is to
eradicate the payment of any amounts paid pursuant to this Section 3.3, the
applicable Lender shall promptly notify the Administrative Agent and the
Borrowers of such fact and shall remit to the Borrowers (upon receipt by such
Lender from the relevant Governmental Authority of such amount, whether as a
refund or as a credit), an amount equal to such refund or credit. In the event
that a Lender otherwise receives a refund or credit for taxes paid or
indemnified by the Borrowers under this Section 3.3, such Lender shall notify
the Administrative Agent and the Borrowers, promptly of such fact and shall
remit to the Borrowers, the amount of such refund or credit applicable to the
payments made by the Borrowers in respect of such Lender under this Section 3.3.
(e) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 3.3 shall survive the payment in full of principal, interest,
fees and other amounts hereunder and under the other Facility Documents. For
each of the Indemnified Taxes or Other Taxes that is subject to a statute of
limitations by law, the indemnification by the Borrowers shall be limited in
duration to the actual expiration of the applicable statute of limitations.
(f) (i) Each Lender, if any, that is not organized under the laws of
the United States of America or any State agrees (A) prior to the first payment
to such Lender of any amounts due to such Lender under the Facility Documents,
upon request by the Borrowers, to execute and deliver to the Borrowers, and the
Administrative Agent completed counterparts of IRS Forms 1001
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or 4224 or W-8 (or any successor thereto or substitute therefor), as applicable,
which initially justify the complete elimination of United States withholding
obligations and (B) thereafter, upon written request by the Borrowers, from time
to time in order to maintain the effectiveness and accuracy of such tax forms
and otherwise to comply with United States tax laws, to execute and deliver to
the Administrative Agent and the Borrowers such additional or supplemental tax
forms with respect to amounts due to such Lender under the Facility Documents as
such Lender properly can execute in conformity with applicable law as in effect
at the time.
(ii) Notwithstanding the other provisions of this Section 3.3, the
Borrowers shall not be obligated to indemnify either of the Administrative Agent
or any Lender that is not organized under the laws of the United States of
America or any State for or against (A) any Indemnified Taxes if such Lender
fails to comply with the provisions of Section 3.3(f)(i) hereof or (B) any
increase in the amount of Indemnified Taxes otherwise reimbursable to such
Lender that results directly from any voluntary action taken by such Lender
(whether by changing its Applicable Lending Office or otherwise) that increases
the amount of such Indemnified Taxes.
(g) At any time within 60 days after any payment by the Borrowers of
any amount pursuant to Section 3.3(c) hereof that the Borrowers deem to be
material, the Borrowers, by writing addressed to the Administrative Agent and
the Lender that requested the payment of such amount, may nominate or propose
another bank or financial institution, including an existing Lender, that is
willing to become the Replacement Lender or other Assignee of the Commitment of
such Lender pursuant to Section 12.1 hereof, and, within 10 Business Days after
receipt of such proposal from the Borrowers, such Lender shall execute and
deliver to the Administrative Agent an Assignment of its entire Commitment in
favor of the proposed Replacement Lender or other Assignee in conformity with
Section 12.1 hereof unless, prior to the expiration of such period, the
Administrative Agent shall have notified the Borrowers, and such Lender that the
proposed Replacement Lender or other Assignee is not reasonably acceptable to
the Administrative Agent. In no event will (i) any Lender be required to enter
into an Assignment of its Commitment (A) at a price less than par plus accrued
interest and prorated fees to the effective date thereof or (B) unless all such
affected Lenders enter into Assignments of their entire Commitment or (ii)
either of the Administrative Agent or the Lenders be obligated to assist the
Borrower in identifying any banks or financial institutions that are willing to
become an Assignee.
(h) Any Lender claiming additional amounts payable pursuant to this
Section 3.3 agrees to use its reasonable efforts to change the jurisdiction of
its lending office if the making of such change would avoid the need for, or
reduce the amount of, any such additional amounts that may thereafter accrue and
would not be otherwise disadvantageous to such Lender. The parties agree that
New York, New York is an acceptable lending office jurisdiction for purposes of
this Section 3.3.
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ARTICLE IV
GUARANTY
SECTION 4.1. Guaranty of Payment. Subject to Section 4.7 below, each
of the Guarantors hereby, jointly and severally, unconditionally guarantees to
each Lender and the Agents the prompt payment of the Guaranteed Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) (the "Guaranty"). The Guarantors additionally,
jointly and severally, unconditionally Guarantee to each Lender and the Agents
the timely performance of all other obligations under Facility Documents. This
Guaranty is a guaranty of payment and not of collection and is a continuing
guaranty and shall apply to Guaranteed Obligations whenever arising.
SECTION 4.2. Obligations Unconditional. The obligations of the
Guarantors hereunder are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Facility
Documents, or any other agreement or instrument referred to therein, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor. Each Guarantor agrees that this
Guaranty may be enforced by the Lenders without necessity at any time of
resorting to or exhausting any other security or collateral and without the
necessity at any time of having recourse to the Notes any other of the Facility
Documents or any collateral, if any, hereafter securing the Guaranteed
Obligations or otherwise, and each Guarantor hereby waives the right to require
the Lenders to proceed against the Borrowers or any other Person (including a
co-guarantor) or to require the Lenders to pursue any other remedy or enforce
any other right. Each Guarantor further agrees that it shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrowers or
any other Guarantor of the Guaranteed Obligations for amounts paid under this
Guaranty until such time as Lenders been paid in full, all Commitments under
this Agreement have been terminated, and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under the Facility Documents. Each
Guarantor further agrees that nothing contained herein shall prevent the Lenders
from suing on the Notes or any of the other Facility Documents or foreclosing
its security interest in or Lien on any collateral, if any, securing Guaranteed
Obligations or from exercising any other rights available to them under this
Agreement, the Notes, any other of the Facility Documents, or other instrument
of security, if any, and the exercise of any of the aforesaid rights and the
completion of any foreclosure proceedings shall not constitute a discharge of
any of any Guarantor's obligations hereunder; it being the purpose and intent of
each Guarantor that its obligations hereunder shall be absolute, independent and
unconditional under any and all circumstances. Neither any Guarantor's
obligations under this Guaranty nor any remedy for the enforcement thereof shall
be impaired, modified, changed or released in any manner whatsoever by an
impairment, modification, change, release or limitation of the liability of the
Borrowers or by reason of the bankruptcy or insolvency of any Borrowers. Each
Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Guaranteed Obligations and notice of or proof of reliance
of by any Agent or any Lender upon this Guarantee or acceptance of this
Guarantee. The Guaranteed Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. All dealings between the
Borrowers and any of the Guarantors, on the one hand, and the Agents and the
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Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon this Guarantee.
SECTION 4.3. Modifications. Each Guarantor agrees that (a) all or
any part of the security now or hereafter held for the Guaranteed Obligations,
if any, may be exchanged, compromised or surrendered from time to time; (b) the
Lenders shall not have any obligation to protect, perfect, secure or insure any
such security interests, Liens or encumbrances now or hereafter held, if any,
for the Guaranteed Obligations or the properties subject thereto; (c) the time
or place of payment of the Guaranteed Obligations may be changed or extended, in
whole or in part, to a time certain or otherwise, and may be renewed or
accelerated, in whole or in part; (d) the Borrowers and any other party liable
for payment under the Facility Documents may be granted indulgences generally;
(e) any of the provisions of the Notes or any of the other Facility Documents
may be modified, amended or waived; (f) any party (including any co-guarantor)
liable for the payment thereof may be granted indulgences or be released; and
(g) any deposit balance for the credit of the Borrowers or any other party
liable for the payment of the Guaranteed Obligations or liable upon any security
therefor may be released, in whole or in part, at, before or after the stated,
extended or accelerated maturity of the Guaranteed Obligations, all without
notice to or further assent by such Guarantor, which shall remain bound thereon,
notwithstanding any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence or release. Each Guarantor hereby
appoints Cornerstone as its agent to execute and deliver any amendments to or
modifications or waivers of the Facility Documents, and the Agents and the
Lenders may rely on such appointment until such time as a Guarantor advises the
Agents and the Lenders in writing that Cornerstone is no longer authorized to so
act as its agent.
SECTION 4.4. Waiver of Rights. Each Guarantor expressly waives to
the fullest extent permitted by applicable law: (a) notice of acceptance of this
Guaranty by the Lenders and of all extensions of credit to the Borrowers by the
Lenders; (b) presentment and demand for payment or performance of any of the
Guaranteed Obligations; (c) protest and notice of dishonor or of default (except
as specifically required in this Agreement) with respect to the Guaranteed
Obligations or with respect to any security therefor; (d) notice of the Lenders
obtaining, amending, substituting for, releasing, waiving or modifying any
security interest, Lien or encumbrance, if any, hereafter securing the
Guaranteed Obligations, or the Lenders' subordinating, compromising, discharging
or releasing such security interests, Liens or encumbrances, if any; (e) all
other notices to which such Guarantor might otherwise be entitled; and (f)
demand for payment under this Guaranty.
SECTION 4.5. Reinstatement. The obligations of the Guarantors under
this Article IV shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of any Person in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and each Guarantor agrees that it
will indemnify the Agents and each Lender on demand for all reasonable costs and
expenses (including, without limitation, reasonable fees of counsel) incurred by
an Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
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SECTION 4.6. Remedies. The Guarantors agree that, as between the
Guarantors, on the one hand, and the Agents and the Lenders, on the other hand,
the Guaranteed Obligations may be declared to be forthwith due and payable as
provided in Article IX (and shall be deemed to have become automatically due and
payable in the circumstances provided in Article IX) notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing such
Guaranteed Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or such Guaranteed
Obligations being deemed to have become automatically due and payable), such
Guaranteed Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors.
SECTION 4.7. Limitation of Guaranty. Notwithstanding any provision
to the contrary contained herein or in any of the other Facility Documents, to
the extent the obligations of any Guarantor shall be adjudicated to be invalid
or unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers), then the obligations of such Guarantor hereunder shall be limited to
the maximum amount that is permissible under applicable law (whether federal or
state and including, without limitation, the Bankruptcy Code). The Borrowers and
the Guarantors agree to enter into a contribution agreement in form and
substance satisfactory to the Agents on or before the Effective Date providing
for contribution and indemnity among the Loan Parties.
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ARTICLE V REPRESENTATIONS AND WARRANTIES
In order to induce the Agents and the Lenders to enter into this
Agreement and to make the Loans herein provided for, the Loan Parties hereby
jointly and severally make the following representations and warranties, which
shall survive the execution and delivery of the Facility Documents:
SECTION 5.1. Organization and Good Standing. Each Loan Party is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Each Loan Party (a) is duly qualified and in good
standing and authorized to do business in every other jurisdiction where
ownership of its properties or the conduct of its business requires it to be so
unless the failure to be so qualified, in good standing or authorized would not
have a Material Adverse Effect and (b) has the requisite corporate or trust
power and authority to own its properties and to carry on its business as now
conducted and as proposed to be conducted.
SECTION 5.2. Due Authorization. Each Loan Party (a) has the
requisite corporate, partnership or trust power and authority to execute,
deliver and perform this Agreement and the other Facility Documents to which it
is a party and to incur the obligations herein and therein provided for and (b)
is duly authorized to, and has been authorized by all necessary corporate,
partnership or trust action, to execute, deliver and perform this Agreement and
the other Facility Documents to which it is a party.
SECTION 5.3. No Conflicts. Neither the execution and delivery of the
Facility Documents, nor the consummation of the transactions contemplated
therein, nor performance of and compliance with the terms and provisions thereof
by the Loan Parties will (a) violate or conflict with any provision of, as
applicable, their respective articles or certificate of incorporation or bylaws
or partnership agreement or certificate of formation or operating agreement or
certificate of trust, (b) violate, contravene or conflict, in each case, in any
material respect, with any law, regulation (including, without limitation,
Regulation U or Regulation X), order, writ, judgment, injunction, decree or
permit applicable to any of them, (c) violate, contravene or conflict with
contractual provisions of, or cause an event of default under, any indenture,
loan agreement, mortgage, deed of trust, contract or other agreement or
instrument to which any of them is a party or by which any of them may be bound,
the violation of which could have a Material Adverse Effect, or (d) result in or
require the creation of any Lien upon or with respect to any of their
properties.
SECTION 5.4. Consents. No consent, approval, authorization or order
of, or filing, registration or qualification with, any court or Governmental
Authority or third party in respect of any Loan Party is required in connection
with the execution, delivery or performance of this Agreement or any of the
other Facility Documents by such Loan Party.
SECTION 5.5. Enforceable Obligations. This Agreement and the other
Facility Documents have been duly executed and delivered and constitute legal,
valid and binding obligations of each Loan Party thereto enforceable against
such Loan Party in accordance with their respective terms, except as may be
limited by bankruptcy or insolvency lave or similar laws affecting creditors'
rights generally or by general equitable principles.
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SECTION 5.6. No Default. No Loan Party is in default in any respect
under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound which default would have or would be reasonably
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred or exists except as previously disclosed in writing to the Lenders.
SECTION 5.7. Ownership. As of the Effective Date, each Loan Party is
the owner of, and has good and marketable title to, all of its respective
assets, free and clear of all Liens except (a) as set forth on Schedule 5.7, (b)
Permitted Encumbrances, (c) Liens provided for in Section 8.1(f), and (d) Liens
the existence or enforcement of which, individually or in the aggregate, would
not result in a Material Adverse Effect. At all times after the Effective Date,
each Loan Party is the owner of, and has good and marketable title to, all of
its respective assets, free and clear of all Liens except (x) as provided for in
Section 8.1, and (y) Permitted Encumbrances.
SECTION 5.8. Indebtedness. The Loan Parties have no Indebtedness
except (a) as set forth on Schedule 5.8 and (b) as otherwise permitted by this
Agreement. Schedule 5.8 accurately sets forth the outstanding principal amounts
and the maturity dates of the Indebtedness of the Loan Parties and identifies
the holders of the obligations thereunder as of the date hereof.
SECTION 5.9. Litigation. There are no actions, suits or legal,
equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Loan Party, threatened against a Loan Party which could have or
might be reasonably expected to have a Material Adverse Effect.
SECTION 5.10. Taxes. Each Loan Party has filed, or caused to be
filed, all tax returns (federal, state, local and foreign) required to be filed
and paid (a) all amounts of taxes shown thereon to be due (including interest
and penalties) and (b) all other taxes, fees, assessments and other governmental
charges owing by it, except for such taxes (i) which are not yet delinquent or
(ii) that are being contested in good faith and by proper proceedings, and
against which adequate reserves are being maintained in accordance with GAAP. No
Loan Party is aware of any proposed tax assessments against it.
SECTION 5.11. Compliance with Law. Each Loan Party is in compliance
with all laws, rules, regulations, orders and decrees (including, without
limitation, Environmental Laws) applicable to it, or to its properties, unless
such failure to comply would not have a Material Adverse Effect.
SECTION 5.12. Subsidiaries. Set forth on Schedule 5.12 is a
complete list of all direct and indirect subsidiaries of the Borrowers and the
Guarantors and the type and amount of ownership of each.
SECTION 5.13. Use of Proceeds; Margin Stock. The proceeds of the
Loans hereunder will be used solely for the purposes specified in Section 2.10.
None of the proceeds of the Loans will be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U. Regulation X or
Regulation G, or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry "margin stock" or any "margin
security" or for any other purpose which might constitute this transaction a
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"purpose credit" within the meaning of Regulation U, Regulation X, Regulation G
or Regulation T. None of the Loan Parties owns any "margin stock".
SECTION 5.14. Government Regulation. No Loan Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 or the Interstate Commerce Act,
each as amended. In addition, no Loan Party is (a) an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, or controlled by such a company, or (b) a "holding company,"
or a "Subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "Subsidiary" or a "holding company," within the
meaning of the Public Utility Holding Company Act Of 1935, as amended. No
director, executive officer or principal shareholder of any Loan Party or any of
its Subsidiaries is a director, executive Officer or principal shareholder of
any Lender. For the purposes hereof the terms "director," "executive officer"
and "principal shareholder" (when used with reference to any Lender) have the
respective meanings assigned thereto in Regulation 0 issued by the Board of
Governors of the Federal Reserve System.
SECTION 5.15. Intellectual Property. Each Loan Party owns, or has
the legal right to use, all trademarks, tradenames, copyrights, technology,
know-how and recourses (the "Intellectual Property") necessary for each of them
to conduct to its business as currently conducted except for those the failure
to own or have which legal right to use would not have a Material Adverse
Effect.
SECTION 5.16. Solvency. Each Loan Party is and, after consummation
of the transactions contemplated by this Agreement, will be Solvent.
SECTION 5.17. Disclosure. To the best knowledge of the Borrowers,
neither this Agreement nor any financial statements delivered to the Agents or
the Lenders nor any other document, certificate or statement furnished to the
Agents or the Lenders by or on behalf of any in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not misleading.
SECTION 5.18. Licenses, etc. The Loan Parties have obtained and hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted, except where the failure to
obtain same would not have a Material Adverse Effect.
SECTION 5.19. No Burdensome Restrictions. No Loan Party is a party
to any agreement or instrument or subject to any other obligation or any charter
or corporate restriction or any provision of any applicable law, rule or
regulation which, individually or in the aggregate, would have or be reasonably
expected to have a Material Adverse Effect.
SECTION 5.20. ERISA. (i) Except as set forth on Schedule 5.20
hereto, neither the Loan Parties nor any ERISA Affiliate maintains, or
participates in, and has not at any time maintained or participated in, any
ERISA Plan. The Loan Parties and each of their ERISA Affiliates are in
compliance with all applicable provisions and requirements of ERISA and the
regulations and
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published interpretations thereunder with respect to each Employee Benefit Plan,
and have performed all their obligations under each Employee Benefit Plan.
(ii) No ERISA Event has occurred or is reasonably expected to occur.
(iii) Except to the extent required under Section 4980B of the Code,
no Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees of the
Loan Parties or any of their ERISA Affiliates.
(iv) As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $100,000.
SECTION 5.21. Hazardous Materials; Asbestos. Except as disclosed in
Schedule 5.21 hereto, to the knowledge of the Loan Parties:
(a) The Loan Parties are in compliance with all Legal Requirements
pertaining to Hazardous Materials the failure with which to comply would have a
Material Adverse Effect. None of the Properties and no other Property used by
the Loan Parties is included or proposed for inclusion on the National
Priorities List issued pursuant to CERCLA or on the Comprehensive Environmental
Response Compensation and Liability Information System maintained by the EPA or
on any analogous list maintained by any other Governmental Authority and has not
otherwise been identified by the EPA as a potential CERCLA site.
(b) The Loan Parties have not, at any time, and, to the actual
knowledge of the Borrower, no other Person has at any time, used, handled,
stored, buried, retained, refined, transported, processed, manufactured,
generated, produced, spilled, released, allowed to seep, escape or leach, or
pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or
otherwise disposed of, any Hazardous Materials at or about the Properties or any
other real property owned or occupied by any Loan Party except for use and
storage for use of reasonable amounts of ordinary supplies and other substances
customarily used in the operation of commercial office buildings; and provided,
however, that such use and/or storage for use is in substantial compliance with
applicable Legal Requirements.
(c) No actions, suits, or proceedings have been commenced, are
pending or, to the actual knowledge of the Borrower, threatened in writing with
respect to any Legal Requirements governing the use, manufacture, storage,
treatment, Release, disposal, transportation, or processing of Hazardous
Materials with respect to any Property or any part thereof which could have a
Material Adverse Effect. The Loan Parties have received no written notice of and
have no actual knowledge of any fact, condition, occurrence or circumstance
which could reasonably be expected to give rise to a claim under or pursuant to
any existing Legal Requirements pertaining to Hazardous Materials on, in, under
or originating from any Property or any part thereof or any other real property
owned or occupied by any Loan Party or arising out of the conduct of any Loan
Party, including claims for the presence of Hazardous Materials at any other
property which could have a Material Adverse Effect.
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(d) Other than as set forth in reviews, reports and surveys copies
of which have been delivered to the Agents, there have occurred no uses,
manufactures, storage, treatments, Releases, disposals, transportation, or
processing of Hazardous Materials with respect to any Property except those
which, taken as a whole, would not have a Material Adverse Effect.
SECTION 5.22. Federal Tax Matters. (i) Cornerstone has at all times
since 1983 elected to be taxed as a REIT under the Code.
(ii) None of the Loan Parties is a "foreign person" within the
meaning of Section 1445 or 7701 of the Code.
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ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Making of Loans. (a) The occurrence of
the Initial Funding Date is subject to the satisfaction of the following
conditions precedent:
(i) The Administrative Agent shall have received on behalf of the Agents
and the Lenders, on or before the Effective Date, the following, each in form
and substance reasonably satisfactory to the Administrative Agent in all
respects:
an original counterpart of this Agreement and an original Note for each
initial Lender, executed by Authorized Officers of the Borrowers;
(2) a copy of the articles or certificate of incorporation, partnership
agreement, certificate of limited partnership, limited liability agreement, or
declaration of trust, as the case may be, of the Borrowers and each of the
Guarantors and all amendments thereto, certified as of a recent date by the
appropriate State official, and certified by the Secretary or an Assistant
Secretary of each of the Borrowers and each of the Guarantors to the effect that
such documents or instruments have not been amended since such date;
(3) a copy of the by-laws, as applicable, of Cornerstone and each of the
Guarantors as in effect as of the Initial Funding Date, certified by a Secretary
or Assistant Secretary of the Borrower and each of the Guarantors;
(4) a copy of the resolutions of the board of directors, members or
partnership consent, as the case may be, of each of the Borrowers and each of
the Guarantors or their respective general partners, as the case may be,
approving each of the Facility Documents to which it is a party and each of the
other instruments and documents to be executed by the Borrowers and each of the
Guarantors and delivered to the Administrative Agent and the Lenders pursuant to
this Section 6.1(a), certified by a Secretary or an Assistant Secretary of each
of the Borrowers (or its general partner, as the case may be) and each of the
Guarantors, and certified copies of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect thereto;
(5) a certificate of a Secretary or an Assistant Secretary of each of the
Borrowers (or its general partner, as the case may be) and each of the
Guarantors certifying the names and true signatures of the Authorized Officers
of each of the Borrowers and each of
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the Guarantors authorized to sign each document to which it is a signatory and
which is to be delivered by it hereunder or pursuant to any other Facility
Document;
(6) an opinion or opinions of counsel to the Borrowers and the
Guarantors, subject to customary limitations and qualifications, covering such
matters incident to the transactions contemplated by this Agreement to occur on
or before the Initial Funding Date as the Administrative Agent or the Required
Lenders reasonably may request, including, without limitation, as to the due
authorization, execution and delivery by each of the Borrowers and each of the
Guarantors and the enforceability of all Facility Documents delivered pursuant
to this Section 6.1(a), and compliance with margin regulations;
(7) title insurance respecting each of the Existing Properties as
evidenced by copies of the most recent fully effective title insurance policies
(or marked and signed title insurance binders to the extent such policies have
not been issued or are not other otherwise available) and current Uniform
Commercial Code lien searches on the Borrower and each of the Guarantors; and
(8) evidence of insurance required under Section 7.6 hereof, reasonably
satisfactory to the Administrative Agent.
(ii) The Administrative Agent on behalf of the Agents and the Lenders
shall have received all information and copies of all documents, including,
without limitation, records of requisite corporate or other approvals, actions
and proceedings which the Administrative Agent and its counsel reasonably may
have requested in connection therewith, such documents, where so requested, to
be certified by appropriate Persons.
(iii) The Borrowers shall have paid to the Agents all fees owing under the
Fee Letter, and the Loan Parties shall have paid to the Administrative Agent all
third-party fees, costs and expenses incurred or sustained by the Administrative
Agent and the Syndication Agent (including all attorneys' fees and disbursements
of independent counsel retained by them) in connection with the preparation,
execution and delivery of this Agreement, the other Facility Documents and any
related documents and the other transactions contemplated by Article II hereof.
(iv) The Loan Parties shall have paid to the Administrative Agent all fees
then due pursuant to Section 3.1 hereof.
(v) Each of the representations and warranties made in or pursuant to any
Facility Document shall be true and correct in all material respects when made
and on and as of the Initial Funding
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Date (except to the extent any representation or warranty expressly relates to
an earlier date).
(vi) No Default or Event of Default shall have occurred and be continuing
on such date or after giving effect to the occurrence of the Initial Funding
Date and all other transactions contemplated by this Article VI.
(vii) No event, act or condition having or causing a Material Adverse
Effect shall have occurred since September 30, 1997.
(b) The obligation of any Lender to fund Loans (including Loans made
on the Initial Funding Date) is subject to the satisfaction of the following
conditions precedent:
(i) The Administrative Agent shall have received a Loan Request, executed
by an Authorized Officer of a Borrower and submitted on or before the applicable
time set forth in Section 2.4(a) hereof.
(ii) The Loan Parties shall have paid to the Administrative Agent all fees
then due pursuant to Section 3.1 hereof.
(iii) The Administrative Agent shall have received, on behalf of the
Agents and the Lenders, an Officer's Certificate from Cornerstone, individually
and as sole general partner of Cornerstone LP, certifying that (1) each of the
representations and warranties made in or pursuant to any Facility Document
shall be true and correct in all material respects when made and on and as of
the Funding Date (except to the extent any representation or warranty expressly
relates to an earlier date), and (2) no Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the making of
the Loans requested in the applicable Loan Request.
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ARTICLE VII
AFFIRMATIVE COVENANTS
The Loan Parties jointly and severally covenant and agree that,
until the Notes, together with interest and all other Indebtedness of the Loan
Parties to the Administrative Agent, the Syndication Agent or the Lenders under
this Agreement and the other Facility Documents, are paid in full, unless
specifically waived in writing by the Required Lenders:
SECTION 7.1. Financial Statements and Other Information. The Loan
Parties shall furnish to the Administrative Agent:
(a) Quarterly Financial Statements. As soon as practicable and in any
event within 45 days after the close of each of the first three fiscal quarters
of each fiscal year with respect to the financial statements referred to herein,
consolidated balance sheets of the Loan Parties and their Subsidiaries,
consolidated statements of income and retained earnings of the Loan Parties and
their Subsidiaries, and consolidated statements of cash flow of the Loan Parties
and their Subsidiaries, as at the end of and for the quarterly period then ended
and as at and for the period commencing at the end of the previous fiscal year
and ending with such quarter, all in reasonable detail and certified by the
chief financial officer of Cornerstone to be true and correct in all material
respects and to have been prepared in accordance with GAAP (except for the
omission of footnotes), subject to normal recurring year-end audit adjustments;
(b) Annual Financial Statements. As soon as practicable and in any event
within 90 days after the end of each fiscal year of the Loan Parties commencing
with the fiscal year ending December 31, 1997, consolidated balance sheets of
the Loan Parties and their Subsidiaries, consolidated statements of income and
retained earnings of the Loan Parties and their Subsidiaries, and consolidated
statements of cash flow of the Loan Parties and their Subsidiaries, as at the
end of and for the fiscal year just closed, all in reasonable detail, presented
in a manner consistent with the financial statements for the preceding fiscal
year (if any), and, with respect to such consolidated statements, certified
(without any going concern or scope of audit qualification) by Coopers & Lybrand
LLP, independent certified public accountants, or such other firm of independent
certified public accountants of recognized national standing as the Borrowers
may select from time to time;
(c) No Default Reports and Compliance Certificates. Concurrently with the
delivery of the financial statements required to be furnished under Section
7.1(a) and 7.1(b) hereof, a certificate, in the form annexed hereto as Exhibit
H, signed by the chief financial officer of Cornerstone individually and as sole
general partner of Cornerstone LP,, and promptly upon the occurrence of any
Default or Event of Default, certificates signed by Authorized Officers of the
Loan Parties stating (A) that a review of the activities of the Loan Parties
during such period has been made
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under their immediate supervision with a view to determining whether the Loan
Parties have observed, performed and fulfilled all of their obligations under
the Facility Documents, and (B) that there existed during such period no Default
or Event of Default or if any such Default or Event of Default has occurred and
is continuing, specifying the nature thereof, the period of existence thereof
and what action the Loan Parties propose to take, or have taken, with respect
thereto; each such certificate shall be accompanied by a schedule setting forth
the computations as of the end of such period of each of the financial ratios or
tests specified in Section 8.5 through 8.10 hereof, if any, that are applicable
to the Loan Parties;
(d) Management Letters. Concurrently with the delivery of the financial
statements required to be furnished under Section 7.1(b) hereof, any management
letters prepared by the independent certified public accountants of the Loan
Parties described above, setting forth any weaknesses in the accounting and
control procedures of the Loan Parties;
(e) Accountants' Certification. Concurrently with the delivery of the
financial statements required to be furnished under Section 7.1(b), a written
statement of the independent certified public accountants of the Loan Parties
described above stating that, in connection with their audit examination,
nothing came to their attention that caused them to become aware of any Default
or Event of Default that has occurred and is continuing and that relates to
financial or other accounting matters or the financial ratios and restrictions
contained in Article VIII, or, if such accountants have become aware of such
event, describing it (such written statement may be qualified by a certification
of such accountants that their audit was not directed primarily toward obtaining
knowledge of such events);
(f) SEC Filings and Press Releases. Promptly upon their becoming
available, copies of (i) all financial statements, reports, notices and proxy
statements sent or made available generally by the Borrowers to their respective
security holders, (ii) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses, if any,
filed by Cornerstone with the NYSE, any other securities exchange or with the
Securities and Exchange Commission or any other Governmental Authority or
private regulatory authority, and (iii) all press releases and other statements
made available generally by the Loan Parties or any of their Subsidiaries to the
public concerning material developments in the business of the Loan Parties or
such Subsidiary;
(g) Rent Rolls. Within 45 days after the end of each fiscal quarter (or
otherwise more frequently as requested by the Administrative Agent), a true,
complete and correct Rent Roll for each Property for such preceding fiscal
quarter, accompanied by an Officer's Certificate, dated as of the date of
delivery of such Rent
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Roll, certifying that such Rent Roll is true, correct and complete in all
material respects.
(h) Governmental Notices. Promptly upon the issuance or filing or receipt
thereof, copies of all material reports, written notices and other materials
sent by the Loan Parties to, or received by the Loan Parties from, any
Governmental Authority (including, without limitation, the Internal Revenue
Service and the PBGC);
(i) ERISA Events and Notices. (i) promptly upon becoming aware of the
occurrence of any ERISA Event, a written notice specifying the nature thereof,
what action the Loan Parties or any of their ERISA Affiliates has taken, is
taking or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto; and (ii) with reasonable promptness, copies of
(A) each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by the Borrowers or any of their respective ERISA Affiliates with
the Internal Revenue Service with respect to each Pension Plan; (B) all notices
received by the Loan Parties or any of their ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (C) such other
documents or governmental reports or filings relating to any Employee Benefit
Plan as the Administrative Agent shall reasonably request;
(j) Environmental Reporting. As soon as practicable following receipt
thereof, copies of all environmental audits and reports, whether prepared by
personnel of the Loan Parties or any of its Subsidiaries or by independent
consultants, with respect to significant environmental matters at any Property
or which relate to a claim under Environmental Laws which could result in a
Material Adverse Effect;
(k). Other Information. With reasonable promptness, such additional
information regarding the business, financial or corporate affairs of the Loan
Parties as the Administrative Agent, at the request of any Lender, reasonably
may request from time to time.
SECTION 7.2. Notice of Certain Events. The Loan Parties shall give
written notice to the Administrative Agent:
(a) promptly upon obtaining knowledge thereof, of any written notice of a
violation or violations received by the Loan Parties or any of their
Subsidiaries from any Governmental Authority which, if such violation or
violations were established, could reasonably be expected to have a Material
Adverse Effect;
(b) promptly upon obtaining knowledge thereof, of any Default or Event of
Default, specifying the nature and extent thereof;
(c) promptly upon obtaining knowledge thereof, of any breach or default by
any of the Loan Parties or any of their Subsidiaries or Affiliates with respect
to any material term of (A) any evidence of any secured or recourse
Indebtedness, any Contingent Obligation,
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or any Property Obligation or (B) any loan agreement, mortgage, indenture or
other agreement relating to such Indebtedness, Contingent Obligation or Property
Obligation, if the effect of such breach or default is to cause, or permit the
holder or holders of that evidence of Indebtedness, Contingent Obligation or
Property Obligation (or a trustee on behalf of such holder or holders) or
agreement described in the foregoing subclauses (ii)(A) and (ii)(B) to cause,
that Indebtedness, Contingent Obligation or Property Obligation to become or be
declared due and payable prior to its stated maturity or the stated maturity of
any underlying obligation, as the case may be (upon the giving or receiving of
notice, lapse of time, both, or otherwise), or to allow the contraparty to such
Property Obligation to terminate such Property Obligation;
(d) promptly upon obtaining knowledge thereof, of any other matter or
matters that have or cause or could reasonably be expected to have or cause a
Material Adverse Effect;
(e) promptly upon obtaining knowledge thereof, of any attachment,
judgment, lien, levy or order which may be placed on or assessed against or
threatened in writing against a Loan Party or any of its Subsidiaries which is
material to any Loan Party;
(f) promptly, and in any event within 10 days of a good faith
determination of an Authorized Officer, of all legal or arbitral proceedings or
investigations (including, without limitation, by any Governmental Authority)
against or relating to any Loan Party or any Property that (either individually
or in the aggregate) could reasonably be expected to have a Material Adverse
Effect and, to the extent permitted by law and requested by the Administrative
Agent, a copy of all material documents served on the Loan Parties relating to
any such proceeding or investigation;
(g) promptly, and in any event within 10 days after obtaining knowledge
thereof, of all legal or arbitral proceedings or investigations affecting the
Loan Parties or any of their Subsidiaries that:
(i) question or challenge either the validity, enforceability or priority
of any Facility Document;
(ii) seek to rescind, terminate, revoke, cancel, withdraw, suspend, modify
or withhold any necessary license, permit, registration or membership of the
Loan Parties;
and, to the extent permitted by law and requested by the Administrative Agent, a
copy of all documents served on the Loan Parties relating to any such proceeding
or investigation;
(h) promptly, and in any event within 10 days after obtaining knowledge
thereof, of all legal or arbitral proceedings or investigations (i) affecting
the Properties or (ii) arising out of or in respect to any Property Obligations,
and which, if adversely determined, would have a Material Adverse Effect;
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(i) promptly upon obtaining knowledge thereof, any fact, condition,
occurrence or circumstance which could reasonably be expected to give rise to a
claim under or pursuant to any existing Legal Requirements pertaining to
Hazardous Materials on, in, under or originating from any Property or any part
thereof or any other real property owned or occupied by any Loan Party or
arising out of the conduct of any Loan Party, including claims for the presence
of Hazardous Materials at any other property, and in each case which could
result in a Material Adverse Effect;
(j) promptly, and in any event at least 10 Business Days prior to the
occurrence, of any event giving rise to a mandatory prepayment of the Loans
under Section 2.7(b);
(k) promptly, and in any event no later than 10 days prior to the
occurrence thereof, of any sales or purchases of assets in an amount in excess
of $10,000,000 in book value and of any issuances of debt or equity securities
or incurrences of any Indebtedness, in each case by any of the Loan Parties; and
(l) promptly, and in any event within 1 Business Day after the occurrence
thereof, any change in the senior unsecured indebtedness rating of the Borrower
from Moody's or S&P.
For the purposes of this Section 7.2, the Loan Parties will be deemed to have
and obtain knowledge of any event or condition when any Authorized Officer of
the Loan Parties has or obtains actual knowledge thereof.
SECTION 7.3. Maintain Existence. Except as permitted under Section
8.13 or 8.18 hereof, the Loan Parties and each of their Subsidiaries shall do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its corporate or trust existence, as the case may be, and all rights,
licenses, permits and franchises required or useful in the conduct of its
business.
SECTION 7.4 Qualified Income Covenant; Cornerstone Common Stock. (a)
Each Borrower will conduct its affairs and the affairs of its Subsidiaries in a
manner so as to continue to qualify Cornerstone as a REIT under Sections 856-886
of the Code.
(b) Cornerstone shall at all times hereafter (i) cause the
Cornerstone Common Stock to be duly listed on the NYSE, and (ii) timely file all
reports required to be filed by it with the NYSE.
SECTION 7.5. Taxes and Claims. The Loan Parties shall duly pay and
discharge:
(a) all taxes, assessments and governmental charges upon or against the
Loan Parties or their properties or assets prior to the date on which penalties
attach thereto, unless and to the extent that the validity of such charges is
being diligently contested in good faith by appropriate proceedings and adequate
reserves in conformity with GAAP have been provided therefor on the books of the
Loan Parties;
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(b) all lawful Indebtedness, obligations and claims for labor, materials,
supplies, services or otherwise (including without limitation, obligations as a
tenant under leases) which, if unpaid, could reasonably be expected to become a
Lien upon property of a Loan Party (other than a Lien permitted by Section 8.1
hereof), unless and to the extent that the validity of such Indebtedness,
obligation or claim is being diligently contested in good faith by appropriate
proceedings and adequate reserves in conformity with GAAP have been provided
therefor on the books of the Loan Parties; and
(c) all legally required contributions to Employee Benefit Plans and
Multiemployer Plans and all legally required withdrawal liability payments.
SECTION 7.6. Insurance. (a) The Loan Parties shall (i) keep all of
the Properties adequately insured at all times with responsible insurance
carriers against loss or damage by fire and other hazards and (ii) maintain
adequate insurance at all times with responsible carriers against liability on
account of damage to persons and property and under all applicable workmen's
compensation laws. For the purposes of this Section 7.6(a), (x) insurance on
Unleveraged Properties shall be deemed adequate if the same is not less
extensive in coverage and amount (1) than is customarily maintained on Class A
office properties by other Persons engaged in the same or similar business
similarly situated, and (2) than is customarily required by lenders to be
maintained on Class A office properties in connection with real property
financing secured by or otherwise with recourse to such office properties, and
(y) insurance on all other Properties shall be deemed adequate if maintained in
coverage and amount in accordance with the requirements of any mortgages on or
financing with recourse to such Properties.
(b) The Loan Parties, from time to time upon the reasonable request
of the Administrative Agent, promptly shall furnish or cause to be furnished to
the Administrative Agent evidence, in form and substance reasonably satisfactory
to the Administrative Agent, of the maintenance of all insurance reasonably
required by Section 7.6(a) hereof to be maintained, including, but not limited
to, such originals or copies as the Administrative Agent reasonably may request
of policies, certificates of insurance, riders and endorsements relating to such
insurance and proof of premium payments.
SECTION 7.7. Books and Records; Fiscal Year. The Loan Parties shall
maintain, at all times, true and complete books, records and accounts in which
true and correct entries shall be made of its transactions in accordance with
GAAP consistently applied and in compliance in all material respects with the
applicable regulations of any Governmental Authority having jurisdiction. No
Loan Party shall change its fiscal year.
SECTION 7.8. Maintain Properties and Rights. (a) The Loan Parties
shall, and shall cause each of their Subsidiaries to, keep its properties,
including the Existing Properties, the New Properties, and the Unleveraged
Properties, in good repair, working order and condition (subject to such wear
and tear as may occur in the ordinary course of business) and, from time to
time, make all needful and proper repairs, renewals, replacements, additions and
improvements thereto, so that the business carried on may be properly and
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advantageously conducted at all times in accordance with reasonably prudent
business management.
(b) The Loan Parties shall, and shall cause each of their
Subsidiaries to, maintain the ownership of, or the right to use, all patents,
trademarks, trade names, copyrights and other intellectual property used or
useful in the conduct of its business, free of any and all claims of
infringement or violation, unless and to the extent that the validity of such
claim is being diligently contested in good faith by appropriate proceedings and
adequate reserves in conformity with GAAP have been provided therefore on the
books of the Loan Parties.
(c) Notwithstanding the foregoing, the Loan Parties shall not be
obligated to take any action that could reasonably be expected to void any
applicable exemption from liability with respect to the matters covered
hereunder.
SECTION 7.9. Inspection by Administrative Agent and Lenders;
Appraisals. (a) The Loan Parties shall allow any representative or
representatives of the Administrative Agent from time to time upon reasonable
prior notice to visit and inspect any of the offices of the Loan Parties and any
Properties, to examine and audit the books of account and other records and
files of the Loan Parties, to make copies thereof and to discuss the affairs,
business, finances and accounts of the Loan Parties with its officers and
employees, all at such reasonable times and as reasonably requested by the
Administrative Agent; provided, however, that such representative uses
reasonable efforts not unduly to interfere with or delay the reasonable
operation of normal business.
(b) The Administrative Agent may from time to time obtain Appraisals of
any assets or property of the Loan Parties, and the Loan Parties shall cooperate
fully with the Appraiser selected by the Administrative Agent to conduct such
Appraisals. In the event that the Loan Parties obtain an appraisal of one or
more of the Properties other than pursuant to this subsection, the Loan Parties
shall at their expense deliver a copy of such appraisal to the Administrative
Agent promptly upon the completion thereof and the agent may elect, in its sole
discretion and subject to Applicable Laws, to treat such appraisal as an
"Appraisal."
SECTION 7.10. Pay Indebtedness and Perform Obligations. The Loan
Parties shall:
(a) make full and timely payments of all amounts owed by the Loan Parties
to the Administrative Agent, the Syndication Agent or the Lenders, whether now
existing or hereafter arising,
(b) duly comply in all material respects with all the terms and covenants
contained in each of the instruments and documents furnished in connection with
or pursuant to this Agreement or the other Facility Documents, and
(c) duly comply in all material respects with all applicable provisions of
all other material agreements, indentures, leases, contracts and other documents
(including, but not limited to, all Property Obligations) binding upon any Loan
Party or any or its
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Properties or assets, except where noncompliance would not have or
cause a Material Adverse Effect,
all at the times (and in any case prior to the expiration of any applicable
grace periods) and places and in the manner set forth therein.
SECTION 7.11. Compliance With Laws. The Loan Parties shall comply
with all applicable Legal Requirements, including, without limitation, all Legal
Requirements relating to the operation of commercial office properties, except
where (i) the failure so to comply could not reasonably be expected to have a
Material Adverse Effect or (ii) the validity of such law, rule, regulation or
ordinance is being diligently contested in good faith by appropriate proceedings
and adequate reserves in conformity with GAAP have been provided therefor on the
books of the Loan Parties.
SECTION 7.12. Environmental Compliance. (a) The Loan Parties shall,
and shall cause each of their Subsidiaries to, keep all Properties and all other
property owned or operated by it free of Hazardous Materials (except customary
materials in the usual amounts used and/or stored for usage, used in the normal
operations of a Class A office property and in compliance with Legal
Requirements) and comply in all material respects with Legal Requirements.
(b) Except to the extent it does so on the date hereof in strict
compliance with all applicable Legal Requirements and in a manner that does not
cause a Release or threat of Release of Hazardous Materials, the Loan Parties
shall, and shall cause each of their Subsidiaries to, not use any Property, and
shall not suffer or permit the use of any Property, to generate, manufacture,
refine, transport, treat, store, handle, dispose, transfer, or produce Hazardous
Materials, and shall not cause or knowingly permit, as a result of any act or
omission on the part of the Loan Parties or any occupant, tenant, subtenant or
invitee or licensee, the installation, use storage, release, disposal or
handling of Hazardous Materials onto any Property or suffer the installation,
use, storage, release, disposal or handling of Hazardous Materials on any
Property, except, in each case, as used properly and in a manner as is customary
in the normal operation of a Class A office property. The Loan Parties shall
undertake promptly and pursue diligently to completion appropriate action
necessary to address any Release of Hazardous Materials on, upon, from or into
any real property owned or operated by them, from any real property adjacent to
any of the foregoing.
(c) The Loan Parties agree to provide the Administrative Agent with
copies of any written notifications of any Releases of Hazardous Materials at
any Property that any Authorized Officer of a Loan Party or any of its
Subsidiaries either gives to or receives from any Governmental Authority or
tenant or, if any Authorized Officer of a Loan Party or any of its Subsidiaries
has actual notice thereof, that any owner, manager or receiver of a Property
either gives or receives.
(d) The Loan Parties hereby jointly and severally agree to, and
shall cause each of their Subsidiaries to, defend, indemnify and hold the
Administrative Agent, the Syndication Agent, the Lenders and their Assignees and
each of their successors and assigns, and the employees, agents, officers and
directors of each of the foregoing, harmless from and against any and all
claims, demands, judgments, fines, penalties (civil or criminal), damages,
actions, causes of action, injuries, settlements, administrative orders, consent
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agreements and orders, liabilities, economic loss, costs and expenses of
whatever kind or nature whether imposed or incurred within or outside the
judicial process (including, without limitation, cleanup costs, reasonable
consultants' fees and disbursements and investigations and laboratory fees and
attorneys' fees) related to or arising at any time or from time to time directly
or indirectly from, out of or by reason of any of the following:
(i) the presence, disposal, escape seepage, leakage, spillage, discharge,
emission, release or threat of release of any Hazardous Materials at, over, on,
under or from or affecting any Property, regardless of its origin;
(ii) compliance with any Legal Requirement with respect to Hazardous
Materials governing the Loan Parties, their businesses, operations, property,
assets or equipment, or resulting from the exercise by the Administrative Agent
of any right under the Facility Documents;
(iii) any personal injury (including, without limitation, wrongful death,
disease or other health condition related to or caused by, in whole or in part,
any Hazardous Materials) or property damage (real or personal) arising out of or
related to any Hazardous Materials of whatever origin in, on, over, under, from
or affecting any Property or any part thereof whether or not disclosed by any
environmental report relative to such Property;
(iv) any action, suit or proceeding brought or threatened by or settlement
reached with any Governmental Authority or other Person, or order of any
Governmental Authority relating to such Hazardous Material (whether or not
disclosed by any environmental report relative to any Property);
(v) any violation of the provisions, covenants, representations or
warranties of Section 5.9, 5.21 and/or 7.12 hereof or of any Legal Requirement
which is based on or in any way related to any Hazardous Materials in, on, over,
under, from or affecting any Property or any part thereof including, without
limitation, the cost of any work performed and materials furnished in order to
comply therewith (whether or not disclosed by any environmental report relative
to such Property) or to enforce the provisions of this Section 7.12, including,
without limitation, the cost of assessment, containment and/or removal, to the
extent required by applicable Legal Requirements, of any and all Hazardous
Materials or any surrounding areas, the cost of any actions, to the extent
required by applicable Legal Requirements, taken in response to the presence,
release or threat of release of any Hazardous Materials on, in, under or
affecting any portion of any Property or any surrounding areas to prevent or
minimize such release or threat of release so that it does not migrate or
otherwise cause or threaten danger to present or future public health, safety,
welfare or the environment, and costs incurred to comply with applicable Legal
Requirements in connection with all or any portion of any Property or any
surrounding areas; and/or
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(vi) any act or omission of the Loan Parties, any owner, operator, manager
or receiver of a Property, its officers, employees, agents, contractors,
invitees, licensees, or permitees giving rise to liability under any Legal
Requirements with respect to Hazardous Materials;
provided, however, that the Loan Parties' obligation to defend, and to cause
each of its Subsidiaries to defend, under this Section 7.12 shall include the
right to assert in good faith any defense available under Legal Requirements,
including with respect to any exemptions from liability available to lenders
under environmental laws; and, provided, further, that indemnification shall not
apply with respect to any Person to any matter to the extent such matter is
determined to have been caused by such Person's gross negligence or willful
misconduct.
(e) The obligations and indebtedness of the Loan Parties under
Section 7.12(d) hereof, notwithstanding anything contained herein or in any
other document or agreement which may be construed to the contrary, shall
survive, the repayment of the Loans and the termination and/or discharge of the
Notes and other Facility Documents.
(f) If, in the reasonable judgment of the Administrative Agent based
upon governmental notice or a third party claim, there are grounds to suspect
that a reportable Release of Hazardous Materials has occurred or is occurring,
the Administrative Agent is hereby specifically authorized at its sole election,
at the expense of the Loan Parties, upon five (5) days' prior written notice to
the Borrowers, on behalf of the Loan Parties (except in the case of an
emergency), to cause one or more environmental assessments of the Release to be
undertaken. Environmental assessments may include a detailed visual inspection
of the Properties, or any of them, including, without limitation, all storage
areas, storage tanks, drains, dry wells and leaching areas, as well as the
taking of soil samples, surface water samples and ground water samples, and such
other investigation or analysis as is necessary or appropriate for an assessment
of Release. Notwithstanding the foregoing, the Administrative Agent, in its sole
discretion and from time to time (but not more often than once in any two-year
period), at the sole expense of the Loan Parties, may cause an environmental
site assessment (a "Phase I Assessment") of any or all of the Properties to
determine (i) if any Hazardous Materials exist on the Properties (including
groundwater on, in or under a Property) and (ii) if any condition, use or
operation exists at or on any Property about which a Governmental Authority
would, under Legal Requirements, require corrective action. The Phase I
Assessment shall be conducted by a qualified Environmental Consultant and may
include, in the reasonable discretion of the Administrative Agent, a visual
inspection of the Properties, examination of public records, research of the
Loan Parties' records pertaining to the Properties and sampling of suspected
asbestos-containing building materials and lead-based paint.
(g) Any sums expended or incurred by the Administrative Agent to
cure any breach or default by the Loan Parties under the provisions of this
Section 7.12 hereof shall be due and payable within 10 days after receipt of an
invoice therefor (accompanied by customary supporting material) with interest
thereon at the Default Rate.
SECTION 7.13. Further Assurances. Upon the reasonable request of the
Administrative Agent, the Syndication Agent or the Required Lenders, the Loan
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Parties, at their cost and expense, shall, and shall cause each of their
Subsidiaries to, duly execute and deliver, or cause to be duly executed and
delivered, to the Administrative Agent (without cost to the Administrative
Agent, the Syndication Agent or the Lenders) such further instruments and do and
cause to be done such further acts as may be reasonably necessary or proper in
the opinion of the Administrative Agent, the Syndication Agent or such Lenders
to carry out more effectually the provisions and purposes of this Agreement and
the other Facility Documents.
SECTION 7.14. Impositions and Discharge of Liens. (a) General Liens.
Each Loan Party shall, and shall cause each of its Subsidiaries to, promptly, at
its own cost and expense, take such action as may be necessary duly to
discharge, by bonding or otherwise, any Lien on any Property to the extent not
permitted under Section 8.1.
(b) Impositions. (i) Payment of Impositions. The Loan Parties shall
pay, or cause to be paid, before any penalty, interest or cost for nonpayment
thereof may be added thereto, all taxes, assessments, vault, water and sewer
rents, rates, charges and assessments, levies, inspection and license fees and
other governmental and quasi-governmental charges, general and special, ordinary
and extraordinary (collectively, "Impositions"), foreseen and unforeseen,
heretofore or hereafter assessed, levied or otherwise imposed against or upon,
or which may become a Lien upon, all or any part of a Property, the revenues,
rents, issues, income and profits of all or any part of a Property or arising in
respect of the occupancy, use or possession thereof if failure to pay could have
a Material Adverse Effect. The Loan Parties will also pay, or cause to be paid,
any penalty, interest or cost for non-payment of Impositions which may become
due and payable, and such penalties, interest or cost shall be included within
the term Impositions. The Loan Parties will furnish to the Administrative Agent
upon the request of the Administrative Agent, proof of payment at the time same
is made, and thereafter, upon receipt, validated receipts showing payment in
full of all Impositions.
(ii) Right To Contest. (A) Notwithstanding the provisions of Section
7.14(b)(i) hereof, the Loan Parties shall have the right, at their sole expense,
to contest by appropriate legal proceedings diligently conducted in good faith,
without cost or expense to the Lenders or the Administrative Agent, the
Syndication Agent or any of its or their agents, employees, officers or
directors, the validity, amount or application of any Imposition on or in
respect of any Property other than any Property on which a Borrower or any of
its Subsidiaries has granted a Lien or Liens to or for the benefit of the
Lenders to secure repayment of any part of the Obligations; provided, however,
that the prosecution of any such contest would not be likely to result in a
Material Adverse Effect.
(B) Notwithstanding the provisions of Section 7.14(b)(i) hereof, the
Loan Parties shall have the right, at their sole expense, to contest by
appropriate legal proceedings diligently conducted in good faith, without cost
or expense to the Lenders or the Administrative Agent, the Syndication Agent or
any of its or their agents, employees, officers or directors, the validity,
amount or application of any Imposition on or in respect of any Property on
which a Borrower or any of its Subsidiaries has granted a Lien or Liens to or
for the benefit of the Lenders to secure repayment of any part of the
Obligations; provided, however, that:
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(1) no Default or Event of Default shall have occurred and be continuing during
such proceedings and the failure to pay such Imposition shall not otherwise
violate the terms of the Facility Documents;
(2) such contest and/or the failure to pay such Imposition will not (I) subject
the Lenders, the Administrative Agent, the Syndication Agent or any of its or
their agents, employees, officers or directors, to any criminal or material
civil liability or (II) subject any Property or any portion thereof to any Lien
or (II) materially adversely affect the ownership, use or occupancy of any
Property or (III) adversely affect the priority of any Lien securing the Loans
or any guaranty thereof;
(3) such contest suspends enforcement of the Imposition and such contest is
maintained and prosecuted diligently;
(4) the applicable Property or any part thereof or any interest therein will not
be in any imminent danger of being sold, forfeited or lost by reason of such
contest;
(5) the Loan Parties shall apprise the Administrative Agent fully, upon request
by the Administrative Agent, from time to time, by written notice of the status
of such contest and/or confirmation of the continuing satisfaction of the
foregoing clauses of this Section 7.14(b)(ii)(B); and
(6) upon a final determination of such contest, the Loan Parties shall promptly
comply with the requirements thereof.
Upon completion of any contest, the Loan Parties shall immediately pay, or cause
to be paid, the amount due, if any, and deliver to the Administrative Agent,
proof of the completion of the contest and payment of the amount due, if any.
SECTION 7.15. Leases and Rents. (a) The Loan Parties will
(i)_perform or cause to be performed the lessor's obligations under any Lease
now or hereafter affecting the whole or any part of any Property, (ii) enforce,
or cause to be enforced, the performance by each lessee under its respective
Lease of all of said lessee's obligations thereunder and (iii) hold or cause to
be held all tenant security deposits in a separate account to be used only for
such purpose in accordance with all applicable Legal Requirements, in each case,
unless failure to do so would not be likely to result in a Material Adverse
Effect.
(b) The Loan Parties may not (i) assign, mortgage, pledge or
otherwise transfer, dispose of or encumber, whether by operation of law or
otherwise, any Lease of a Property or the Rents or other income thereunder or
therefrom except as permitted under Section 8.1 or (ii) accept or permit the
acceptance of a prepayment of any rents for more than one month in advance of
the due dates therefor, provided, however, that, so long as no Event of Default
shall have occurred and be continuing, the Loan Parties may accept or permit the
acceptance of a prepayment of rents of up to six months in advance of the due
dates therefor so long as (x) the aggregate amount of such prepaid rents of all
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tenants during any fiscal year of the Borrowers is not greater than $2,500,000,
and (y) any such prepayment shall apply to the then-current period of the
prepaying tenant's occupancy.
SECTION 7.16. Excess Cash Flow. Cornerstone LP shall cause all
"Excess Cash Flow" (as defined below) of each of its Subsidiaries to be
transferred to Cornerstone LP as promptly as possible but in no event less often
than once a month. "Excess Cash Flow" for any period of determination shall mean
an amount equal to all NOI of such Subsidiary for such period minus all debt
service payments of such Subsidiary made in such period minus normal and
customary Capital Expenditures incurred by such Subsidiary in such period.
SECTION 7.17. Acquisition of Properties. The Borrowers and their
Subsidiaries shall acquire, or shall invest in joint ventures which shall
acquire, only Class A office properties in major metropolitan central business
districts and major suburban markets of the Unites States; provided, however,
that the Borrowers and their Subsidiaries shall not acquire, and shall not
permit any Eligible Joint Venture in which any of them has invested to acquire,
any New Property which is an Unleveraged Property and which the Borrowers
intends to use in their calculations for the covenants set forth in Sections 8.9
and 8.10, unless and until
(i) the Borrowers shall have provided to the Administrative Agent
(A) the most recent rent rolls for each such New Property, (B) three-year
historical and projected operating statements for each such New Property, (C)
cash flow projections for each such New Property, (D) Capital Expenditure
budgets for each such New Property, (E) leases and lease summaries for each such
New Property (including any separate agreements regarding concessions to or
options from tenants), (F) tenant financial statements, to the extent available,
for each such New Property, (G) an aging of rent payments and rent payment
histories for each major tenant of each such New Property, (H) copies of the
most recent Phase 1 environmental reports for such New Property as well as
copies of all existing environmental reports and audits (whether prepared by a
Loan Party or any of its Subsidiaries or by independent consultants) pertaining
to such New Property, (I) copies of the partnership agreement or joint venture
agreement, if any, governing the entity acquiring such New Property, and (J) a
physical inspection (at the Borrower's expense) of each such New Property, and
(ii) the Administrative Agent shall have determined, in its sole and
reasonable discretion based on the financial analysis described in clause (i)
above, that the acquisition of such New Property is not reasonably likely to
cause a Material Adverse Effect.
SECTION 7.18. Additional Guarantors. The Borrowers and their
Subsidiaries will cause (i) each of their respective Wholly-Owned Subsidiaries
acquired after the date hereof, and (ii) each of their other Subsidiaries
acquired after the date hereof which directly or indirectly owns an interest in
a joint venture owning, or formed for the purpose of owning, title to a
Property, to become a Guarantor and to execute and deliver to the Administrative
Agent a counterpart of this Agreement executed by each such Subsidiary together
with all other documents, agreements and instruments reasonably requested by the
Administrative Agent to assure each such Subsidiary assumes all of the
obligations of a Guarantor hereunder; provided, however, that no Subsidiary of
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either Borrower listed on Schedule 7.18 shall be required to become a Guarantor
hereunder until such time as
(a) (X) it has material real property assets other than one or more of the
following properties (the "DIHC Collateral Properties"):
(1) the property identified as "Dearborn Land" on page 77 of the Cornerstone
Proxy Statement;
(2) the property identified as "Charlotte Plaza" on pages 70 to 71 of the
Cornerstone Proxy Statement;
(3) the property identified as "527 Madison Avenue" on pages 85 to 87 of the
Cornerstone Proxy Statement;
(4) the property identified as "One Lincoln Centre" on pages 88 to 89 of the
Cornerstone Proxy Statement;
(5) the property identified as "Market Square" on pages 63 to 65 of the
Cornerstone Proxy Statement; or
(6) the property identified as "200 Galleria" on pages 71 to 73 of the
Cornerstone Proxy Statement; or
(Y) it has material assets other than Capital Interests in one or more
Subsidiaries or joint ventures whose only material real property assets are one
or more of the DIHC Collateral Properties; and
(b) it is not a guarantor or co-obligor of payment of the DIHC Purchase Money
Notes.
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ARTICLE VIII
NEGATIVE COVENANTS
The Loan Parties jointly and severally covenant and agree that,
until the Notes, together with interest and all other Indebtedness of the Loan
Parties to the Administrative Agent or the Lenders under this Agreement and the
other Facility Documents, are paid in full, no Loan Party, without the prior
written consent of the Required Lenders except as otherwise expressly permitted
elsewhere herein, shall do or suffer to occur or exist, any of the following:
SECTION 8.1. Liens. Create, assume or suffer to exist any Lien upon
any of its Properties and other assets or those of its Subsidiaries, whether now
owned or hereafter acquired; provided, however, that the foregoing restriction
and limitation shall not apply to the following Liens :
(a) Permitted Encumbrances;
(b) other Liens (including pledges or deposits in accordance with workers'
compensation laws), incidental to the conduct of its business or the ownership
of its Property and assets, that are not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and that do not in
the aggregate, with respect to the Loan Parties taken as a whole, materially
detract from the value of their property or assets, or materially impair the use
thereof in the operation of their business;
(c) attachment, judgment and other similar Liens arising in connection
with judicial or administrative proceedings, provided, however, that either (i)
execution or other enforcement of such Liens is effectively stayed or (ii) the
claims secured thereby are being contested diligently in good faith by
appropriate proceedings, adequate reserves in conformity with GAAP have been
provided on the books of the Loan Parties, and no levy of execution or other
comparable proceeding has been issued thereon and a Loan Party would not
otherwise be subject to a forfeiture;
(d) Liens securing the repayment of Indebtedness for which no Properties
or assets of the Loan Parties and their Subsidiaries, other than the Properties
or assets subject to such Liens, are subject to recourse for payment of such
secured Indebtedness (other than for reasonable and customary exceptions to
non-recourse protection);
(e) Liens created under the Facility Documents or other Liens in favor of
the Administrative Agent;
(f) Liens securing Indebtedness of the Loan Parties under the DIHC
Purchase Money Notes and any guarantees of any of the Loan Parties thereof; and
(g) Liens in existence on the date hereof and identified on Schedule 5.7.
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SECTION 8.2. Limitation on Investments. Make, or commit to make, any
Restricted Investment, other than (i) Restricted Investments in joint ventures
formed for the purpose of acquiring a Property or (ii) an acquisition by
purchase or otherwise of all or substantially all the stock or other evidence of
beneficial ownership of, any Person for the purpose of acquiring one or more
Properties or as otherwise permitted pursuant to Section 8.13.
SECTION 8.3. Restricted Payments; Dividend Payout. Make, or obligate
itself to make, any Restricted Payment, except for (i) payments in respect of
Indebtedness and refinancings thereof incurred in accordance with the proviso in
Section 8.11 hereof, (ii) Dividends to holders of Cornerstone Preferred Stock,
(iii) Dividends to holders of Cornerstone Common Stock, but only to the extent
provided for in Section 8.20 hereof, (iv) distributions to holders of limited
partnership units in Cornerstone LP, and (v) Dividends or distributions to a
Borrower by any of its Subsidiaries; provided, however, that if an Event of
Default shall have occurred and be continuing, each Borrower may make the
Restricted Payments described in clauses (ii), (iii) and (iv) above only to the
extent necessary for such Borrower to maintain its status as a REIT under the
Code.
SECTION 8.4 Working Capital. Permit Working Capital at any time to
be less than $10,000,000.
SECTION 8.5. Equity Value. Permit Equity Value at any time to be
less than an amount equal to (i) eighty per cent (80%) of the Effective Date
Equity Value plus (ii) eighty per cent (80%) of all Equity Proceeds received by
the Loan Parties and their respective Subsidiaries subsequent to the Effective
Date.
SECTION 8.6. Leverage Ratio. Permit Consolidated Total Liabilities
as at the end of any fiscal quarter of the Loan Parties to exceed fifty-five per
cent (55%) of Total Property Asset Value as at the end of such fiscal quarter.
SECTION 8.7. Interest Coverage Ratio. Permit the ratio of Adjusted
EBITDA to Interest Expense for any quarterly period ending as of the last day of
any such calendar quarter of the Loan Parties to be less than 2.25 to 1.00.
SECTION 8.8. Fixed Charge Coverage Ratio. Permit the ratio of
Adjusted EBITDA to Consolidated Fixed Charges for any quarterly period ending as
of the last day of any such calendar quarter of the Loan Parties to be less than
1.75 to 1.00.
SECTION 8.9. Unleveraged Properties Asset Value. (i) Subject to the
proviso set forth in Section 7.17, permit the Unleveraged Properties Asset Value
at any time to be less than $475,000,000.
SECTION 8.10. Additional Financial Covenants. (i) Subject to the
proviso set forth in Section 7.17, permit at any time the ratio of (X) the
amount equal to the aggregate value of Unleveraged Properties at their
undepreciated cost to (Y) the amount equal to the aggregate unsecured
Indebtedness of the Loan Parties (including the Loan Parties' Ratable Share of
Indebtedness of Unconsolidated Affiliates), to be less than 2.25 to 1.00.
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(ii) Permit at any time the ratio of (X) Total Property Asset Value
to (Y) the amount equal to the aggregate secured Indebtedness of the Loan
Parties (including the Loan Parties' Ratable Share of Indebtedness of
Unconsolidated Affiliates) permitted under this Agreement, to be less than 2.50
to 1.00.
(iii) Subject to the proviso set forth in Section 7.17, permit at
any time the ratio of (X) Combined Adjusted NOI of all Unleveraged Properties to
(Y) Unsecured Interest Expense to be less than 2.50 to 1.00.
SECTION 8.11. Indebtedness. Incur Indebtedness the payment of which
is secured by Liens on any of the Properties or any of the Loan Parties' other
assets, whether now owned or hereafter acquired, or those of any of the Loan
Parties' Subsidiaries; provided, however, that the foregoing restriction and
limitation shall not apply to (i) Indebtedness of the Loan Parties under the
DIHC Purchase Money Notes and any guarantees of the Loan Parties thereof, and
(ii) Indebtedness for which no Properties or assets of the Loan Parties and
their Subsidiaries, other than the Properties or assets subject to such Liens,
are subject to recourse for payment of such secured Indebtedness (other than for
reasonable and customary exceptions to non-recourse protection) and refinancings
of such Indebtedness on terms no less favorable to the Loan Parties.
SECTION 8.12. Asset Sales and Transfers. (i) Sell any Properties,
unless prior to consummation of such sale, the Borrowers shall have delivered to
the Administrative Agent an Officer's Certificate certifying to the
Administrative Agent and the Lenders that immediately before and after giving
effect to such sale, no Default or Event of Default shall have occurred and be
continuing or would result therefrom, with such certificate to be accompanied by
a schedule setting forth the computations before and, on a pro forma basis,
after giving effect to such sale of each of the financial ratios or tests
specified in Section 8.5 through 8.10 hereof.
(ii) Subject to Section 8.13, sell or otherwise transfer any Capital
Interest in a Guarantor to a Person other than a Borrower or another Guarantor.
(iii) Subject to Section 7.2(k) hereof, sell any other assets other
than in the ordinary course of business or as such assets become obsolete,
damaged, or useless in the business of the Loan Parties.
SECTION 8.13 Certain Capital Transactions and Fundamental Changes.
Consolidate with or merge into any other Person (other than a merger of (a) a
Subsidiary into a Borrower or (b) a Subsidiary into another Subsidiary), or
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the business, property or fixed assets of the Borrowers and
their Subsidiaries taken as a whole to any other Person, or directly or
indirectly acquire by purchase or otherwise all or substantially all the
business, property, or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person, unless:
(i) either (X) a Borrower or a Subsidiary shall be the continuing
corporation or (Y) the corporation formed by such consolidation or into which a
Borrower or a Subsidiary is merged, or the Person who acquires all or
substantially all of property and assets of the Borrowers and their Subsidiaries
taken as a whole, expressly assumes pursuant to documentation and agreements
satisfactory to the Agent and the Required Lenders the due
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and punctual payment of the principal of and interest on the Loans and the
performance of all of the covenants and obligations of the Loan Parties
under the Facility Documents;
(ii) immediately before and after giving effect to such merger, sale,
conveyance, lease, or transfer on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such merger, sale, conveyance, lease, or
transfer), no Default or Event of Default shall have occurred and be continuing
or would result therefrom;
(iii) the business of (X) the corporation formed by such consolidation or
into which a Borrower or a Subsidiary is merged, or (Y) the Person who acquires
all or substantially all of property and assets of the Borrowers and their
Subsidiaries taken as a whole, or (Z) the Person of which a Borrower or a
Subsidiary has acquired by purchase or otherwise all or substantially all the
business, property, or fixed assets of, or stock or other evidence of beneficial
ownership, is the ownership and management of Class A office properties in major
metropolitan central business districts and major suburban markets of the United
States, and all of its real properties are Class A office properties in major
metropolitan central business districts and major suburban markets of the United
States;
(iv) Persons who are directors of Cornerstone immediately before such
merger, sale, conveyance, lease, or transfer shall, after giving effect to such
merger, sale, conveyance, lease, or transfer, constitute at least 90% of the
board of directors of (X) Cornerstone (if the continuing corporation) or (Y) the
corporation formed by such consolidation or into which Cornerstone is merged, or
(Z) the Person who acquires all or substantially all of property and assets of
Borrowers and their Subsidiaries taken as a whole; and
(v) In the case in which the Borrowers will acquire by purchase or
otherwise all or substantially all the business, property, or fixed assets of,
or stock or other evidence of beneficial ownership of another Person (the
"Acquired Person"), no persons who are directors of Cornerstone immediately
before such merger, sale, conveyance, lease, or transfer are also directors of
the Acquired Person.
SECTION 8.14. Certain Amendments. Consent to any amendment,
supplement, or other modification of, or by acts or omissions, permit to or
suffer to be waived, modified or amended any of the terms (including
acceleration, covenant, default, subordination, sinking fund, repayment,
interest rate or redemption provisions) contained in, or applicable to, or any
security for, any Subordinated Debt or other instrument evidencing or applicable
to any Subordinated Debt.
SECTION 8.15. Transactions with Affiliates. Enter into, or cause,
suffer, or permit to exist, any transactions including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service, with any Affiliate (other than reasonable and customary fees paid to
members of the board of directors of the Loan Parties) (i) on a basis less
favorable to the Loan Parties or their Subsidiaries, as the case may be, than
could be obtained on an arm's length basis from a Person other than an
Affiliate,
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or (ii) that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
SECTION 8.16. Management Agreements. Directly or indirectly enter
into any management agreement or similar agreement delegating to another Person
substantial authority over the leasing, maintenance or operation of any Property
on a basis less favorable to the Loan Parties or their Subsidiaries, as the case
may be, than could be obtained on an arm's length basis.
SECTION 8.17. Inconsistent Agreements. Enter into any agreement
containing any provisions that would be violated or breached by the borrowing of
the Loans hereunder or by the performance by any Loan Party of its obligations
under any of the Facility Documents.
SECTION 8.18. Maintenance of Corporate Existence.
(a)(i) At any time be engaged directly or indirectly, in any
business other than the ownership, management and operation of Properties; or
(ii) Fail to cause to be done all things necessary to preserve the
corporate, partnership, limited liability company, or trust existence of the
Loan Parties; or
(iii) Fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations.
(b) Anything to the contrary provided in this Section 8.18 or
Section 7.3 notwithstanding, the Borrowers shall have the right to wind up the
affairs and dissolve in compliance with all applicable Legal Requirements any
Subsidiary following the sale or other transfer by such Subsidiary in accordance
with the terms of this Agreement of any Property owned by such Subsidiary or
joint venture in which such Subsidiary holds a Capital Interest.
SECTION 8.19. Property Mix. Acquire New Properties that are not
Class A office properties in major metropolitan central business districts and
major suburban markets of the United States.
SECTION 8.20. REIT Dividend Covenant. Make, or obligate itself to
make, Dividends to holders of Cornerstone Common Stock and limited partnership
units in Cornerstone LP in an aggregate amount which exceeds, as of any date of
determination, the greater of (a) the aggregate amount necessary for Cornerstone
to maintain its status as a REIT under the Code, (b) ninety per cent (90%) of
Funds From Operations, or (c) one hundred ten per cent (110%) of Funds Available
for Distribution, in the case of each of the foregoing clauses (b) and (c)
calculated (1) as of December 31, 1997, for the immediately preceding fiscal
quarter of the Borrowers, (2) as of March 31, 1997, for the two immediately
preceding fiscal quarters of the Borrowers, (3) as of June 30, 1997, for the
three immediately preceding fiscal quarters of the Borrowers, and (4) as of
September 30, 1997 and for all periods thereafter, for the four immediately
preceding fiscal quarters of the Borrowers.
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ARTICLE IX
DEFAULTS AND REMEDIES
SECTION 9.1. Events of Default. If any one or more of the following
Events of Default shall occur for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body), that is to say:
(a) if default shall be made by the Loan Parties in the due and punctual
payment of the principal of any of the Loans; or default shall be made by the
Loan Parties in the due and punctual payment of interest on any of the Loans or
any other amounts due and owing to the Administrative Agent, the Syndication
Agent or the Lenders, when and as the same shall become due and payable, and
such default shall continue for a period of five (5) days; or
(b) (i) if default(s) shall be made by any of the Loan Parties or any of
their Subsidiaries in the due and punctual payment of the principal of or
interest on any other Indebtedness or any Contingent Obligations of such
Loan Party or such Subsidiaries in an aggregate amount equal to or in
excess of $10,000,000, and such default(s) shall not have been remedied
within such grace or cure period(s), if any, as may be provided therefor;
or
(ii) if breach or default shall be made by any of the Loan Parties
or any of their Subsidiaries or Affiliates with respect to any material
term of (A) any evidence of any Indebtedness or any Contingent Obligation
in an aggregate amount equal to or in excess of $10,000,000, or (B) any
loan agreement, mortgage, indenture or other agreement relating to such
Indebtedness or Contingent Obligation, if the effect of such breach or
default is to cause, or permit the holder or holders of that evidence of
Indebtedness or Contingent Obligation (or a trustee on behalf of such
holder or holders) or agreement described in the foregoing subclauses
(ii)(A) and (ii)(B) to cause, that Indebtedness or Contingent Obligation
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligation, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise);
provided, however, with respect to this Section 9.1(b) only, that a default in
payment or any other breach or default by any of the Loan Parties or any of
their Subsidiaries or Affiliates with respect to any secured or non-recourse
Indebtedness or any Contingent Obligation payment of which is secured solely by
one or more Properties (the "Mortgaged Properties") shall not constitute an
Event of Default if (W) no Default or Event of Default shall have previously
occurred under Section 9.1(b) (whether or not such Default or Event of Default
shall have been waived or cured), (X)
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such default shall not otherwise constitute a Default or Event of Default under
any provision of Section 9.1 other than Section 9.1(b), (Y) the principal amount
of the secured or recourse Indebtedness or Contingent Obligation in default is
$95,000,000 or less, and (Z) no Properties or assets of the Loan Parties and
their Subsidiaries, other than the Mortgaged Properties, are subject to recourse
for payment of such secured or recourse Indebtedness or Contingent Obligation;
(c) (i) if default shall be made by any of the Loan Parties in the
performance or observance of, or shall occur under, any covenant contained
in Article VIII of this Agreement; or
(ii) if default shall be made by any of the Loan Parties in the
performance or observance of, or shall occur under, any covenant,
agreement or provision of this Agreement other than those contained in
Article VIII of this Agreement, and such default shall not have been
remedied within 30 days after the date on which written notice thereof is
given to the Borrowers, on behalf of the Loan Parties, by the
Administrative Agent or a Lender (acting through the Administrative
Agent); provided, however, that if (x) such default shall result from a
failure of a Loan Party to furnish either notice of the occurrence of an
event or to deliver a document that describes or refers to such
occurrence, and (y) the Administrative Agent would have no knowledge of
such default under the terms of this Agreement unless so advised by such
Loan Party, then the 30-day period to remedy such default shall commence
one Business Day following the date on which such Loan Party first shall
be obligated to furnish such notice or to deliver such document under the
provisions of this Agreement; or
(d) if default shall be made by any Loan Party in the performance or
observance of, or shall occur under, any covenant contained in Article VIII of
this Agreement; or if default shall be made by any Loan Party in the performance
or observance of, or shall occur under, any covenant, agreement or provision of
any other Facility Document (other than those contained in Article VIII) or in
any other agreement, instrument or document delivered to either the
Administrative Agent or any Lender (and not constituting an Event of Default
otherwise under this Section 9.1), and such default shall not have been remedied
within 30 days after notice thereof has been given to the Borrowers by the
Administrative Agent or any Lender; or
(e) if any representation or warranty or any other statement of fact made
by any Loan Party in any Facility Document, or in connection with the
transactions contemplated hereby or thereby, or in any financial statement or
other writing, certificate, report or statement at any time furnished by any
Loan Party to the Administrative Agent or any of the Lenders pursuant to or in
connection with this Agreement or the other Facility Documents shall prove to
have been false or misleading in any material respect when made; or
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(f) if any of the Loan Parties (other than a Loan Party which is default,
or defaults by virtue of taking action described in this clause (f), under
secured or non-recourse Indebtedness where such default does not constitute an
Event of Default by operation of the priviso of clause (b) of this Section 9.1)
shall file a petition or seek relief under or take advantage of any insolvency
law; make an assignment for the benefit of its creditors; commence a proceeding
for the appointment of a receiver, trustee, liquidator, custodian or conservator
of itself or of the whole or substantially all of its or their property; file a
petition or an answer to a petition (other than an answer seeking to dismiss the
petition) under any chapter of the Bankruptcy Code; or file a petition or seek
relief under or take advantage of any other similar law or statute of the United
States of America, any State, or any foreign country; or
(g) if any court of competent jurisdiction shall enter an order, judgment
or decree appointing or authorizing a receiver, trustee, liquidator, custodian
or conservator of any of the Loan Parties (other than a Loan Party which is
default, or defaults by virtue of the taking of an action described in this
clause (g), under secured or non-recourse Indebtedness where such default does
not constitute an Event of Default by operation of the priviso of clause (b) of
this Section 9.1) or of the whole or substantially all of its or their property,
or enter an order for relief against any of the Loan Parties (other than a Loan
Party which is default, or defaults by virtue of the taking of an action
described in this clause (g), under secured or non-recourse Indebtedness where
such default does not constitute an Event of Default by operation of the priviso
of clause (b) of this Section 9.1) in any case commenced under any chapter of
the Bankruptcy Code, or grant relief under any other similar law or statute of
the United States of America, any State, or any foreign country; or if, under
the provisions of any law for the relief or aid of debtors, a court of competent
jurisdiction or a receiver, trustee, liquidator, custodian or conservator shall
assume custody or control or take possession of any of the Loan Parties or of
the whole or substantially all of the property of any thereof; or if there is
commenced against any of the Loan Parties any proceeding for any of the
foregoing relief or if a petition is filed against any of the Loan Parties or
any of their Subsidiaries under any chapter of the Bankruptcy Code or under any
other similar law or statute of the United States of America or any state
thereof or any foreign country and such proceeding or petition remains
undismissed for a period of 60 days; or if any of the Loan Parties or any of
their Subsidiaries by any act indicates its or their consent to, approval of or
acquiescence in any such proceeding or petition; or
(h) if any of the Loan Parties shall admit in writing its or their
inability to, or be generally unable to, pay its or their debts as such debts
become due; or
(i) if any judgment or judgments against any of the Loan
Parties or any of their Subsidiaries or any attachment or execution
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against any of its or their property for any amount or amounts at any time
aggregating in excess of $500,000, and such judgments, attachment or execution
remains unpaid, unstayed, undismissed or unbonded for a period of more than 30
days; or
(j) if any of the Facility Documents for any reasons attributable to an
act or omission of a Loan Party shall be terminated or shall cease to be in full
force and effect, or if the validity or enforceability thereof shall be
contested by or on behalf of any Loan Party (proof of payment shall not
constitute a contest of a guaranty); or
(k) if, for any reason, any provision of any agreement that provides for
the subordination of any Indebtedness to the Notes or any other obligations of
the Loan Parties to the Administrative Agent, the Syndication Agent or any
Lender shall be invalidated or otherwise shall cease to be of full force and
effect; or
(l) if the title of the Loan Parties to any or all of the Properties shall
be invalidated by any court of competent jurisdiction and the Loan Parties shall
not have prepaid the Loans within five (5) days after such invalidation if a
Loan Party was a party to the related proceeding or within fifteen (15) days
after any Authorized Officer of a Loan Party had actual knowledge thereof in all
other cases; or
(m) if one or more ERISA Events occurs which individually or in the
aggregate results in or might reasonably be expected to result in liability of
the Loan Parties or any of their ERISA Affiliates in excess of $100,000 during
the term of this Agreement; or if there exists an amount of unfunded pension
liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans with respect to which assets exceed benefit liabilities), which
exceeds $100,000;
(n) if John Moody or Rodney Dimock shall no longer be active in the
management of Cornerstone and a replacement satisfactory to the Administrative
Agent shall not have been obtained within 120 days thereof; or
(o) if Cornerstone shall cease to be the sole general partner of
Cornerstone LP; or
(p) if any event or change shall occur that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect or a Material
Adverse Change;
then, in the case of an Event of Default described in Section 9.1(f), (g) or (h)
hereof, the unpaid balance of all Notes and all interest accrued thereon and any
accrued and unpaid fees and expenses due and payable hereunder or under any
other Facility Document automatically (without any action on the part of the
Administrative Agent or the Lenders and without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived) forthwith shall
become due and payable, and, in the case of any other Event of Default, then and
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in any such event, and at any time thereafter, if such or any other Event of
Default shall then be continuing, the Administrative Agent, upon the direction
of the Lenders holding not less than 50.1% of the aggregate amount of the
Commitments, shall declare the Notes to be due and payable, whereupon then
unpaid balance of all Notes shall be accelerated and the same, and all interest
accrued thereon and any accrued and unpaid fees and expenses due and payable
hereunder or under any other Facility Document forthwith shall become due and
payable (without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived), anything contained herein in Notes or in any
other Facility Document to the contrary notwithstanding.
SECTION 9.2. Suits for Enforcement. In case any one or more Events
of Default shall occur and be continuing, the Administrative Agent, on behalf of
the Agents and the Lenders, may proceed to protect and enforce their rights or
remedies either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, agreement or other provision contained
herein, in the other Facility Documents, or in any document or instrument
delivered in connection with or pursuant to this Agreement or the other Facility
Documents or to enforce the payment of the Notes or any other legal or equitable
right or remedy.
SECTION 9.3. Rights and Remedies Cumulative. No right or remedy
herein conferred upon the Lenders or the Agents is intended to be exclusive of
any other right or remedy contained herein or in the other Facility Documents or
in any instrument or document delivered in connection with or pursuant to this
Agreement or the other Facility Documents, and every such right or remedy shall
be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
SECTION 9.4. Rights and Remedies Not Waived. No course of dealing
between the Loan Parties and any Lender or either Agent or any failure or delay
on the part of the Administrative Agent in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies of such Lender or
the Administrative Agent on behalf of the Lenders and no single or partial
exercise of any rights or remedies hereunder shall operate as a waiver or
preclude the exercise of any other rights or remedies hereunder.
SECTION 9.5. Waiver of Stay. The Loan Parties hereby jointly and
severally agree that, if any event described in Section 9.1(f), (g) or (h)
hereof shall occur, the Administrative Agent and the Lenders thereupon shall be
entitled, and the Loan Parties hereby irrevocably consent, to immediate and
unconditional relief from any automatic stay imposed by Section 362 of the
Bankruptcy Code, or otherwise, on or against the exercise of the rights and
remedies otherwise available to the Agents and the Lenders as provided in the
Facility Documents or otherwise provided by law, and the Loan Parties hereby
jointly and severally irrevocably waive any right to object to such relief and
will not contest any motion by the Administrative Agent seeking relief from the
automatic stay, and the Loan Parties will cooperate with the Administrative
Agent and the Lenders, in any manner requested by the Administrative Agent, in
its effort to obtain relief from any such stay or other prohibition.
SECTION 9.6. Additional Advances and Disbursements. The Loan
Parties agree that, upon the occurrence of a Default or Event of Default, the
Administrative Agent shall have the right, but not the obligation, in its own
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name acting for the account of the Loan Parties, and upon two (2) Business Days'
prior written notice to the Borrowers, on behalf of the Loan Parties, to advance
all or any part of amounts owing or to perform any or all required actions to
prevent or remedy any such Default or Event of Default. No such advance or
performance shall be deemed to have cured such Default or Event of Default. All
sums advanced and all expenses incurred by the Administrative Agent in
connection with such advances or actions, and all other sums advanced or
expenses incurred by Administrative Agent hereunder, under any other Facility
Document or under applicable law (whether required or optional and whether
indemnified hereunder or thereunder or not) shall be part of the obligations of
the Loan Parties to the Administrative Agent and the Lenders and shall bear
interest at the Default Rate. Upon making any such advance, the Administrative
Agent making such advance shall be subrogated to all of the rights of the Person
receiving such advance.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1. Administration and Collection Costs.
(a) The Loan Parties jointly and severally agree to pay, within 30
days after receipt of an invoice therefor (accompanied by customary supporting
materials), the reasonable fees and expenses of the Administrative Agent
incurred in connection with the administration of the Facility (including,
without limitation, the preparation, negotiation and closing of amendments of
and waivers to the Facility Documents, the delivery, release or substitution of
any collateral, and the monitoring or, to the extent requested by the Loan
Parties or required as a necessary party, participating in any foreclosure,
condemnation or other legal proceeding relating to Property).
(b) In the event that, upon the occurrence of an Event of Default,
the Administrative Agent or any of the Lenders shall retain or engage an
attorney or attorneys to collect or enforce or protect the interests of the
Administrative Agent and the Lenders with respect to this Agreement, any of the
other Facility Documents, or any instrument or document delivered pursuant to
this Agreement or any other Facility Document, including, without limitation,
each of the documents referred to in Article VI hereof, or to protect the rights
of any holder or holders with respect thereto, the Loan Parties jointly and
severally agree to pay, within 30 days after receipt of an invoice therefor
(accompanied by customary supporting materials), all of the reasonable costs and
expenses of such collection, enforcement or protection, including attorneys'
fees, of the Administrative Agent and the Lenders, and the Administrative Agent,
on behalf of the Lenders or the holders of such Notes, as the case may be, may
seek and obtain judgment for all such amounts, in addition to the unpaid
principal balance of the Notes and accrued interest thereon and any accrued and
unpaid fees and expenses due and payable hereunder.
(c) In the event that the Effective Date does not occur, the Loan
Parties nonetheless jointly and severally agree to pay, within 30 days after
receipt of an invoice therefor (accompanied by customary supporting materials),
to the Administrative Agent all reasonable third-party fees, costs and expenses
incurred or sustained by the Agents (including all reasonable attorneys' fees
and disbursements of independent counsel retained by it) in connection with the
preparation, execution and delivery of this Agreement, the other Facility
Documents and any related documents and the other transactions contemplated by
Article II hereof. The provisions of this Section 10.1(c) shall survive the
termination of this Agreement.
SECTION 10.2. Modification and Waiver. (a) No modification,
amendment or waiver of any provision of this Agreement, the other Facility
Documents or any other documents executed in connection herewith or therewith
and no consent by the Lenders or the Administrative Agent to any departure
therefrom by the Loan Parties shall be effective unless such modification,
amendment, waiver or consent shall be in writing and signed by the
Administrative Agent and the Required Lenders or the Administrative Agent on
behalf of the Required Lenders and, in the case of a modification or amendment
(other than those described in Section 10.2(b)(iv) hereof), by an Authorized
Officer of the Loan
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Parties, and the same shall then be effective only for the period and on the
conditions and for the specific instances and purposes specified in such
writing.
(b) Notwithstanding the provisions of Section 10.2(a) hereof:
(i)__no provision hereof that expressly requires the consent, approval or
waiver by all Lenders may be amended, modified or waived except by all Lenders,
(ii)__none of the following may be amended, modified or waived except with
the written consent of all Lenders:
(A) the definitions of "Adjusted Eurodollar Rate," "Alternate Base Rate,"
"Applicable Margin," "Default Rate," "Event of Default," "Required Lenders," and
all defined terms used in such definitions,
(B) any provision in any manner that would have the effect of: (I)
increasing the amount or (except as otherwise provided in Section 2.1(b) hereof)
extending the term of the Commitment of any Lender, (II) postponing or delaying
any date fixed by this Agreement or any other Facility Document for any payment
of principal, interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any other Facility Document, (III) reducing the
principal of, or the rate of interest specified herein on any Loan or Note or
any fees or other amounts (excluding fees set forth in the Fee Letter, which may
be waived by the Agents alone) payable hereunder of under any other Loan
Document, (IV) changing the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Lenders or any of
them to take any action hereunder, or (V) releasing any rights under any
guaranty applicable to the Loans (except as otherwise provided herein or
therein), and
(C) Sections 2.9, 2.12, 3.3, 6.1, 8.9, 8.10, 9.1, 10.2 and 10.9 hereof,
(iii) none of the following may be amended, modified or waived except with
the written consent of all Lenders and the Agents:
(A) the definitions of "Aggregate Commitment," "Commitment," "Loans," "Pro
Rata Share," or any other provisions of this Agreement which relate to the Loans
or the Aggregate Commitment, and
(B) any provision governing or providing for fees or other amounts payable
to the Agents,
(iv)__none of the following shall require the consent,
authorization or approval of the Loan Parties:
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(A) amendment or modification of any agreement to which no Loan Party is a
party, and
(B) amendment or modification of Article XI hereof (other than any
amendment or modification that would in any way either impair existing rights of
or impose additional obligations on the Loan Parties), and
(v)__any amendment to any Subordinated Debt that decreases the rate of
interest paid thereon or extends the maturity thereof shall require only the
written consent of the Administrative Agent.
None of the provisions of Article XI hereof may be amended, modified or waived
except with the written consent of the Administrative Agent. No notice to or
demand on the Loan Parties in any case shall entitle the Loan Parties to any
other or further notice or demand in similar or other circumstances.
SECTION 10.3. GOVERNING LAW. THIS AGREEMENT, THE NOTES, THE OTHER
FACILITY DOCUMENTS AND THE RIGHTS AND DUTIES OF THE PARTIES THEREUNDER AND WITH
RESPECT TO INTEREST, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER
JURISDICTION ARE MANDATORILY APPLICABLE TO THE EXERCISE OF REMEDIES AND THE
PERFECTION OF LIENS AND SECURITY INTERESTS UNDER THE UCC OR OTHER LAWS.
SECTION 10.4. Notices. All notices, requests, demands or other
communications provided for herein shall be in writing and shall be deemed to
have been given (i) three Business Days after the date mailed if sent by
registered or certified mail, postage prepaid, return receipt requested, (ii) on
the day of delivery if personally delivered, addressed, as the case may be, to
the Lenders as follows:
(a) To the Administrative Agent at:
Bankers Trust Company
130 Liberty Street
25th Floor
New York, New York 10006
(Attention: Alexander Johnson)
Telecopy No.: 212/669-0752
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 E. 53rd Street
New York, New York 10022-4669
(Attention: Monty Davis);
Telecopy No.: 212/821-8111
(b) To the Syndication Agent at:
The Chase Manhattan Bank
380 Madison Avenue
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New York, New York 10017
(Attention: Commercial Real Estate Finance)
Telecopy No.: 212/622-3397
With a copy to:
The Chase Manhattan Bank
Legal Department
270 Park Avenue
39th Floor
New York, New York 10017
(Attention: William C. Viets, Esq.)
Telecopy No.: 212/270-2876
And with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 E. 53rd Street
New York, New York 10022-4669
(Attention: Monty Davis);
Telecopy No.: 212/821-8111
(c) To the Lenders at the respective addresses set forth on the signature
pages hereof under the caption "Address for Notices"; and
(d) To each of the Loan Parties at:
c/o Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10019
(Attention: Kevin Mahoney)
Telecopy No.: 212/605-7199
With a copy to:
Shearman & Sterling
153 East 53rd Street
New York, New York 10022
(Attention: Timothy Little, Esq.)
Telecopy No.: 212/848-7300
or to such other person or address as any party shall designate to the other
parties from time to time in writing forwarded in like manner, or (iii) on the
day of transmission if sent by telecopier and confirmed (if such day is a
Business Day or, if not, on the next succeeding Business Day), on the same day
as such notice is sent, by telephonic notice (if such day is a Business Day or,
if not, on the next succeeding Business Day) or by one of the other two methods
listed above.
SECTION 10.5. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP,
consistently applied. Where any accounting determination or calculation is
required to be made under this Agreement, such determination or calculation
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(unless otherwise provided) will be made in accordance with GAAP, consistently
applied except that if because of a change in GAAP, the Loan Parties would have
to alter a previously utilized accounting method or policy in order to remain in
compliance with GAAP, such determination or calculation will continue to be made
in accordance with the Loan Parties' previous accounting methods or policy.
Unless otherwise specified herein all financial statements required to be
delivered hereunder, shall be prepared and all financial records shall be
maintained in accordance with GAAP.
SECTION 10.6. Indemnity. The Loan Parties jointly and severally
agree to indemnify and save harmless the Lenders and the Agents and each of
their respective officers, directors, employees, agents, attorneys-in-fact and
Affiliates from and against any and all actions, causes of action, suits,
losses, liabilities and damages and expenses (including, without limitation,
reasonable attorneys' fees) in connection therewith (herein called the
"Indemnified Liabilities") incurred by the Lenders or either of the Agents or
any of their respective officers, directors, employees, agents, attorneys-in-
fact or Affiliates (in their respective capacities as such) as a result of, or
arising out of or relating to any of the transactions contemplated hereby or by
the other Facility Documents, any breach hereof or thereof, matters arising from
or at the Properties and any work, use or negligence thereat or thereof, except
for any Indemnified Liabilities arising on account of the gross negligence or
willful misconduct of the Person seeking indemnity hereunder; provided, however,
that, if and to the extent such agreement to indemnify may be unenforceable for
any reason, the Loan Parties shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which shall be
permissible under applicable law. The agreements in this Section 10.6 shall
survive the payment of the Notes and related obligations.
SECTION 10.7. WAIVER OF JURY TRIAL AND SETOFF. EACH OF THE LOAN
PARTIES, THE AGENTS AND THE LENDERS HEREBY WAIVES (TO THE EXTENT PERMITTED BY
LAW) THE RIGHT TO A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT
TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER FACILITY
DOCUMENTS OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR
THE OTHER FACILITY DOCUMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER
ARISING, BETWEEN ANY LOAN PARTIES AND ANY OF THE LENDERS OR THE AGENTS, BETWEEN
ANY LOAN PARTIES OR ANY SUBSIDIARIES THEREOF, BETWEEN ANY LENDERS, AND BETWEEN
EITHER AGENT AND ANY LENDERS; AND THE LOAN PARTIES HEREBY WAIVE THE RIGHT TO
INTERPOSE ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH
LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR
CROSS-CLAIM (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSSCLAIM COULD NOT, BY REASON
OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR
ALLEGED IN ANY OTHER ACTION).
SECTION 10.8. Captions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purpose of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 10.9. Lien; Setoff by Lenders. (a) Upon the occurrence of
any Event of Default, the Agents and the Lenders are hereby authorized at any
time and from time to time, without notice to the Loan Parties, to setoff,
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appropriate and apply any or all items hereinabove referred to against all
Indebtedness of the Loan Parties to the Agents and the Lenders, whether under
this Agreement, the Notes or otherwise, and whether now existing or hereafter
arising. Each Agent and each Lender agree promptly to notify the Borrower, on
behalf of the Loan Parties, after any such setoff and application is made by
such Agent or Lender; provided, however, that the failure to give such notice
shall be without penalty to the Agents or the Lenders and in no event shall
affect the validity of such setoff and application.
(b) Each holder of a Note agrees that if it shall, through the
exercise of a right of banker's lien, setoff, counterclaim or otherwise, obtain
payment with respect to any Note that results in its receiving more than the
share of the aggregate payments or reductions of all Notes such holder would
have received in the absence of such action, it shall forthwith purchase from
such other holders a participation in all of the Notes held by such other
holders so that the amount of all unpaid Notes and participations therein held
by all holders shall be reinstated to the amounts existing prior to such action.
(c) The Loan Parties jointly and severally expressly consent to the
foregoing arrangements in Section 10.9(b) and agree that any holder of a
participation in a Note so acquired may exercise any and all rights of banker's
lien, setoff, counterclaim or otherwise with respect to any and all monies owing
by such holder to the Loan Parties as fully as if such holder were a holder of a
Note in the amount of such participation. If all or any portion of any such
excess payment is thereafter recovered from the holder which received the same,
the purchase provided for in Section 10.9(b) hereof shall be rescinded to the
extent of such recovery, without interest.
(d) Each Lender agrees that if and to the extent that any amount
received by the Administrative Agent or any Lender from any Loan Party is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or judicially required to be repaid to a trustee, receiver or any other person
under any applicable creditors' remedy proceeding with respect to a Loan Party,
including without limitation any bankruptcy proceeding, the other Lenders hereto
shall purchase from the Lender from which said amount is recovered an additional
participation in such amount equal to such Lender's Pro Rata Share of that
amount. The amount invalidated, declared to be fraudulent or preferential, set
aside or judicially required to be repaid to a trustee, receiver or any other
person under any applicable creditors' remedy proceeding shall be deemed to be
an amount immediately due and owing from the Loan Parties.
SECTION 10.10. Jurisdiction; Service of Process. The Loan Parties,
each Agent, and each Lender hereby irrevocably consent to the non-exclusive
jurisdiction of the Courts of the State of New York, County of New York, and of
any Federal Court located in the Southern District of New York, and agrees that
venue in each of such Courts is proper in connection with any action or
proceeding arising out of or relating to this Agreement, the other Facility
Documents, or any document or instrument delivered pursuant to this Agreement or
the other Facility Documents. Nothing herein shall affect the right of the
Administrative Agent or any Lender to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any Loan Party in any other jurisdiction if, in the sole determination of the
Administrative Agent or Lender, such proceeding or action is necessary or
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desirable in order to enforce or give effect to any Lien, security interest,
guaranty or other right granted to such party under the Facility Documents.
SECTION 10.11. Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of the Loan Parties, the Agents and the Lenders
and their respective successors and assigns, and all subsequent holders of the
Notes, except that the obligation of the Lenders to make Loans hereunder shall
not inure to the benefit of any successors or assigns of the Loan Parties.
SECTION 10.12. Counterparts. This Agreement may be executed by the
parties hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which shall together constitute
one and the same agreement.
SECTION 10.13. Interest. (a) Usury Limitation. It is the intention
of the parties hereto to conform strictly to the usury laws now in force in the
appropriate controlling jurisdiction. Accordingly, if the transactions
contemplated hereby would be usurious, under any controlling law, then, in that
event, notwithstanding anything to the contrary in this Agreement, the Notes or
any other instrument or agreement entered into in connection therewith, it is
agreed as follows: (i) the aggregate of all charges that constitute interest
under the laws of the controlling jurisdiction that are contracted for,
chargeable or receivable under this Agreement or under any of the other
aforesaid instruments or agreements or otherwise in connection with the Notes
("Interest") shall under no circumstances exceed the maximum amount of interest
permitted by law (the "Maximum Amount"), and any Interest in excess of the
Maximum Amount shall be canceled automatically and shall not be payable under
this Agreement, the Notes or the aforesaid instruments or agreements and, if
theretofore paid, shall be either refunded to the Loan Parties or credited
ratably on the principal of the Notes; and (ii) in the event that the maturity
of the Notes is accelerated by reason of an election of the Required Lenders
resulting from any Event of Default under this Agreement or otherwise, or in the
event of any prepayment by any of the Loan Parties permitted or required by this
Agreement, the Notes or any of the other aforesaid instruments or agreements,
then Interest may never include more than the Maximum Amount, and excess
Interest, if any, shall be canceled automatically as of the date of such
acceleration or prepayment, and if theretofore paid, shall be either refunded to
the Loan Parties or credited ratably on the principal of the Notes; provided,
however, that nothing contained in this Section 10.13 shall be deemed to imply
that the laws of any State other than the State of New York shall govern this
Agreement or the Notes.
(b) Recapture. (i) If, at any time, Interest would exceed the
Maximum Amount but for the foregoing limitation, Interest shall remain at the
Maximum Amount, notwithstanding any subsequent reduction of Interest, until the
total amount of Interest equals the amount of Interest which would have accrued
if Interest had not been limited to the Maximum Amount, but nothing in this
paragraph shall affect or extend the maturity of any of the Notes.
(ii) If, at maturity or final payment of any of the Notes, the total
amount of Interest paid is less than the total amount of Interest that would
have accrued had Interest not been limited to the Maximum Amount, the Loan
Parties jointly and severally agree, to the full extent permitted by law, to pay
to the Lenders an amount equal to the positive difference, if any, derived by
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subtracting (x) the amount of Interest that accrued on its respective Notes
pursuant to the provisions of Section 10.13(a) hereof from (y)_the lesser of (i)
the amount of Interest that would have accrued on such Notes if the Maximum
Amount had at all times been in effect, and (ii) the amount of Interest that
would have accrued if Interest on such Notes, not limited to the Maximum Amount,
had at all times been in effect.
SECTION 10.14. Attorneys' Fees. As used in this Agreement,
"attorneys' fees" shall include, but not be limited to, all reasonable fees of
counsel (including, without limitation, those incurred on appeals) arising from
such services and all reasonably incurred expenses, costs, charges and other
fees of such counsel, and all such fees shall constitute Indebtedness of the
Loan Parties to the Agents and the Lenders under this Agreement.
SECTION 10.15. Severability. Any provision of this Agreement
prohibited by the laws of any jurisdiction shall, as to such jurisdiction (after
giving effect to choice of law provisions hereof), be ineffective to the extent
of such prohibition, or modified to conform with such laws, without invalidating
the remaining provisions of this Agreement, and any such prohibition in any
jurisdiction shall not invalidate such provisions in any other jurisdiction.
SECTION 10.16. Confidentiality. (a) The Loan Parties acknowledge
that from time to time financial advisory, investment banking and other services
may be offered or provided to the Loan Parties or one or more of their
Subsidiaries or Affiliates (in connection with this Agreement or otherwise) by
any Lender or by one or more Subsidiaries or Affiliates of such Lender, and the
Loan Parties hereby authorizes each Lender to share any information delivered to
such Lender by a Loan Party and their Subsidiaries and Affiliates pursuant to
this Agreement or the other Facility Documents, or in connection with the
decision of such Lender to enter into this Agreement, with any such Subsidiary
or Affiliate, it being understood that any such Subsidiary or Affiliate
receiving such information shall be bound by the provisions of Section 10.16(b)
hereof as if it were a Lender hereunder.
(b) Each Lender and each Agent agrees (on behalf of itself and each
of its Affiliates, directors, officers, employees and representatives that
receives the confidential information referred to below from such Lender or the
Administrative Agent) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices, any non-public
information supplied to it by the Loan Parties or their Subsidiaries or
Affiliates pursuant to this Agreement or the other Facility Documents which is
identified in writing as being confidential at the time the same is delivered to
the Lenders or the Administrative Agent; provided, however, that nothing herein
shall limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any of the
Lenders or the Agents, (iii) to Governmental Authorities, or representatives
thereof, or regulatory personnel, auditors or accountants, (iv) to the Agents or
any other Lender, (v) in connection with any litigation to which any one or more
of the Lenders or the Agents is a party, (vi) to a Subsidiary or Affiliate of
such Lender as provided in Section 10.16(a) above, (vii) to any Assignee (or
prospective Assignee) so long as such Assignee (or prospective Assignee) first
executes and delivers to the respective Lender an agreement pursuant to which
such Assignee (or prospective Assignee) agrees to keep confidential the
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above-described information on substantially the same terms as set forth above,
or (viii) to the extent such information has become public otherwise than as a
result of the violation of this Section 10.16(b) by the Person disclosing such
information.
(c) In the event that any Lender receives a request to disclose any
non-public information of the Loan Parties or their Subsidiaries or Affiliates
under a subpoena or judicial or administrative order, such Lender shall, to the
extent not prohibited by law or such legal process, (i) notify the Loan Parties
thereof within ten (10) days after receipt of such request, (ii) consult with
the Loan Parties, to the extent reasonable, on the advisability of taking steps
to resist or narrow such request (it being understood that the cost of any such
steps would be payable by the Loan Parties within 10 days after receipt of an
invoice therefor (accompanied by customary supporting materials)), and (iii) if
disclosure is required or deemed advisable, cooperate, to the extent reasonable
(and also at the expense of the Loan Parties as described in clause (ii) above),
with the Loan Parties in any attempt that the Loan Parties may make to obtain an
order or other reliable assurance that confidential treatment will be accorded
to designated portions of the non-public information.
SECTION 10.17. Loss, Theft, Etc. of Notes. Upon receipt by the
Borrowers of (i) an affidavit of an authorized officer of any Lender setting
forth the fact of loss, theft or destruction of any Note and of its ownership of
the Note at the time of such loss, theft or destruction; provided, however, that
such Lender agrees in writing to indemnify the Loan Parties, or (ii) a mutilated
Note, such affidavit or mutilated Note shall be accepted as satisfactory
evidence thereof and no further indemnity shall be required as a condition to
the execution and delivery of a new Note of like tenor in lieu of such lost,
stolen, destroyed or mutilated Note without expense to the holder thereof.
SECTION 10.18. Replacement of Lender. At any time after a Lender
becomes insolvent and its assets become subject to a receiver, liquidator,
trustee, custodian, or other officer having similar powers, then the
Administrative Agent, by writing addressed to the Borrowers, and such Lender,
may nominate or propose another bank or financial institution that is willing to
become the Assignee of the Commitment of such Lender pursuant to Section 12.1
hereof (if such bank or financial institution is not then a Lender, then such
proposed Assignee shall be subject to the consent of the Borrower, which shall
not be unreasonably withheld), and, within 10 Business Days after receipt of
such notice from the Administrative Agent, such Lender shall execute and deliver
to the Administrative Agent an Assignment of its entire Commitment in favor of
the proposed Assignee in conformity with Section 12.1 hereof. In no event will
any such Lender be required to enter into an Assignment of its Commitment at a
price less than par plus accrued interest and prorated fees to the effective
date thereof.
SECTION 10.19. Entire Agreement. This Agreement and the Facility
Documents constitute the entire agreement between the parties relative to the
subject matter hereof and thereof. Any previous agreement among the parties with
respect to such subject matter is superseded by this Agreement and the Facility
Documents as in effect as of the date hereof. In the event of any conflict or
inconsistency between the provisions hereof and of any other Facility Document,
the provisions hereof shall control.
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SECTION 10.20. Consent to Amendment and Restatement. By executing
this Agreement, each Lender which is an Existing Lender consents and agrees to
this amendment and restatement of the Existing Agreement and the transactions
contemplated hereby.
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ARTICLE XI
AGENCY
The Lenders and the Administrative Agent agree as follows:
SECTION 11.1. Appointment and Actions. (a) Each Lender hereby
irrevocably designates and appoints Bankers Trust Company as the Administrative
Agent of such Lender under the Facility Documents (including any additional
documents referred to therein as "Facility Documents"). Bankers Trust Company
hereby agrees to act as the Administrative Agent under the Facility Documents.
Each Lender further hereby irrevocably designates and appoints The Chase
Manhattan Bank as the Syndication Agent of such Lender under the Facility
Documents (including any additional documents referred to therein as "Facility
Documents"). The Chase Manhattan Bank hereby agrees to act as the Syndication
Agent under the Facility Documents. Each Lender hereby irrevocably authorizes
each Agent to take such action on its behalf under the provisions hereof and
thereof and to exercise such powers and perform such duties as are expressly
delegated to such Agent by the terms hereof and thereof together with such other
powers as are reasonably incidental thereto. The Administrative Agent shall hold
any security pledged under the Facility Documents in accordance with the terms
thereof. Notwithstanding any provision to the contrary in this Agreement or any
of the other Facility Documents, the Agents shall not have any duties or
responsibilities except those expressly set forth herein or therein, nor any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the
Facility Documents or otherwise exist against the Agents.
(b) The Agents may execute any of its duties by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agents shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by either
of them with reasonable care.
(c) Neither the Agents nor any officers, directors, employees,
agents, attorneys-in-fact or Affiliates of the Administrative Agent shall be (i)
liable for any action lawfully taken or omitted to be taken by the Agents or any
such Person under or in connection with any of the Facility Documents (except
for its or such person's own gross negligence or willful misconduct), or (ii)
liable in any manner to the other Agent or any Lender for any recitals,
statements, representations or warranties made by the Loan Parties or any
Subsidiary thereof contained herein or in any certificate, report, statement or
other document referred to or provided for in, or received by either Agent under
or in connection with any of the Facility Documents, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of the Facility
Documents or for any failure of any Loan Party to perform its obligations under
any of the Facility Documents. The Agents shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of any of the Facility Documents,
or to inspect the properties, books or records of any Loan Party or any other
Person.
(d) The Agents shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message,
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statement, order or other document or conversation reasonably believed by it to
be genuine and correct and to have been signed, sent or made by the proper
person or persons and upon advice and statements of legal counsel (including,
without limitation, counsel to a Loan Party), independent accountants and other
experts selected by the Agents. The Agents may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed in accordance
with Section 12.1 hereof.
(e) The Agents shall be fully justified in failing or refusing to
take any action under any of the Facility Documents unless they shall first
receive such advice or concurrence of the Lenders as they shall deem appropriate
or as required by the specific terms of this Agreement or they shall first be
indemnified to their satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agents shall in all cases be fully protected in
acting, or in refraining from acting, under any of the Facility Documents in
accordance with a request of the Required Lenders (or all of the Lenders if
specifically required by the terms of this Agreement), and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
(f) The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default or any default
under any document, agreement or instrument delivered in connection therewith,
unless the Administrative Agent shall have actual knowledge thereof or shall
have received notice from any Lender or any Loan Party, describing such event,
act or condition, Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Administrative Agent has such actual
knowledge or receives such a notice, the Administrative Agent shall give notice
thereof to the Lenders. The Administrative Agent shall take such action with
respect to such event, act or condition or Default or Event of Default as shall
be reasonably directed by the Required Lenders (or all Lenders if specifically
required by the terms of this Agreement) in writing; provided, however, that,
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such event, act or
condition, Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
(g) Until such time as the Administrative Agent shall have been
notified in writing duly executed on behalf of any Lender by an officer thereof
duly authorized to take such action, that such Lender has sold all or a portion
of the Loan made by, or Commitment of, such Lender, the Administrative Agent may
treat such Lender as the owner or holder of such Lender's share of the Loans or
Aggregate Commitment, as applicable, in accordance with the percentages thereof
advanced by such Lender.
(h) At any time or times, in order to comply with any legal
requirement in any jurisdiction, the Administrative Agent may appoint another
bank or trust company or one or more other Persons, either to act as
co-administrative agent or co-administrative agents, jointly with the
Administrative Agent, or to act as separate agent or agents on behalf of the
Lenders with such power and authority as may be necessary for the effectual
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operation of the provisions hereof and may be specified in the instrument of
appointment (which may, in the discretion of the Administrative Agent, include
provisions for the protection of such co-agent or separate agent similar to the
provisions of this Article XI).
(i) The Administrative Agent shall forward promptly to the Lenders
copies of all reports, notices, and other information received by them pursuant
to Section 7.1 hereof.
SECTION 11.2. Independent Credit Decisions. Each Lender expressly
acknowledges that neither the Agents nor any officers, directors, employees,
agents, attorneys-in-fact or Affiliates of the Agents has made any
representations or warranties to it and that no act by the Agents hereinafter
taken, including any review of the affairs of the Loan Parties and their
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agents to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon the Agents or the other Lenders, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
Subsidiaries and made its own decision to enter into this Agreement. Each Lender
also represents that it will, independently and without reliance upon the Agents
or the other Lenders, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action hereunder, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their Subsidiaries. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Agents shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Loan Parties or their Subsidiaries which may come into
the possession of either of the Agents or any of officers, directors, employees,
agents, attorneys-in-fact or Affiliates of the Agents.
SECTION 11.3. Indemnification of Agents. (a) Each Lender agrees to
indemnify Bankers Trust Company in its capacity as Administrative Agent (to the
extent not reimbursed by the Loan Parties), ratably according to its percentage
of the Aggregate Commitment, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of any of the
Notes) be imposed on, incurred by or asserted against the Administrative Agent
in any way relating to or arising out of this Agreement, the other Facility
Documents or the transactions contemplated hereby or thereby or any action taken
or omitted to be taken by the Administrative Agent under or in connection with
any of the foregoing; provided, however, that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the Administrative Agent's gross negligence or willful misconduct.
The obligations of the Lenders under this Section 11.3(a) shall survive the
payment of the Notes and related obligations.
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(b) Each Lender agrees to indemnify The Chase Manhattan Bank in its
capacity as Syndication Agent (to the extent not reimbursed by the Loan
Parties), ratably according to its percentage of the Aggregate Commitment, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of any of the Notes) be imposed on, incurred by or
asserted against the Syndication Agent in any way relating to or arising out of
this Agreement, the other Facility Documents or the transactions contemplated
hereby or thereby or any action taken or omitted to be taken by the Syndication
Agent under or in connection with any of the foregoing; provided, however, that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Syndication Agent's gross
negligence or willful misconduct. The obligations of the Lenders under this
Section 11.3(b) shall survive the payment of the Notes and related obligations.
SECTION 11.4. Resignation and Succession. Either Agent may resign as
Administrative Agent or Syndication Agent, as the case may be, upon 10 days'
written notice to the other Agent, the Lenders and the Loan Parties, and the
Administrative Agent may be removed as Administrative Agent with cause upon 10
days' prior written notice to such effect to the Agents and the Loan Parties
from the Required Lenders; provided, however, that the resignation or removal of
the Administrative Agent shall not become effective until a successor
Administrative Agent shall have accepted its appointment hereunder; and
provided, further, that in the event Bankers Trust Company, as Administrative
Agent on and as of the Effective Date, resigns or is removed as Administrative
Agent, the Lenders shall offer to appoint The Chase Manhattan Bank as successor
Administrative Agent hereunder, which appointment The Chase Manhattan Bank shall
determine to accept or reject in its sole discretion, and the Borrowers shall be
deemed to have consented to the appointment of The Chase Manhattan Bank as
successor Administrative Agent; and provided, further, that if no successor
shall have so accepted within 45 days from the date of such notice, the
Administrative Agent may appoint a Lender as successor Administrative Agent; and
provided, further, that if the Syndication Agent shall resign, no successor
Syndication Agent shall be appointed. If the Administrative Agent shall resign
or be removed as such, then the Required Lenders, with (except in a case where
The Chase Manhattan Bank or Bankers Trust Company becomes the successor
Administrative Agent) the consent of the Borrowers (which consent shall not be
unreasonably withheld or delayed), shall appoint a successor Administrative
Agent, as the case may be, whereupon such successor shall succeed to the rights,
powers and duties of the resigning Agent, and the term "Administrative Agent"
shall mean such successor Administrative Agent effective upon its appointment,
and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Notes. After any retiring Agent's
resignation or removal hereunder as such, the provisions of this Article XI
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was an Administrative Agent or Syndication Agent under this Agreement.
In the event that the Administrative Agent becomes subject to the receivership
of the Federal Deposit Insurance Corporation or any successor entity, such
receiver commences the liquidation of such Administrative Agent, and Lenders
holding at least 10% of the Aggregate
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Commitments request the Agent to resign because of such receivership, the
Administrative Agent's agency under this Agreement shall terminate.
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ARTICLE XII
SALES AND TRANSFERS
SECTION 12.1. Sales and Transfers. (a) Subject to the provisions of
this Section 12.1, any Lender, after 10 days' prior written notice to the
Borrower and the Administrative Agent and subject to the prior written consent
of the Administrative Agent (which consent shall not be unreasonably withheld),
may execute an assignment and acceptance substantially in the form of Exhibit E
hereto, with appropriate insertions (herein individually called an "Assignment"
and collectively called the "Assignments"), whereby such Lender (herein each, an
"Assignor") shall assign, without recourse and without representation or
warranty except as specifically set forth in said Assignment, to one or more
Eligible Assignees (herein individually called an "Assignee" and collectively
called the "Assignees") all or any part of the Assignor's rights and benefits,
and delegate all or any part of the Assignor's obligations, under this
Agreement, the Commitment, the Loans and the Notes; provided, however, that the
of such Lender's Commitment proposed to be assigned is at least $5,000,000 or,
if less than $5,000,000, the totality of such Lender's Commitment; and provided,
further, that upon the occurrence and during the continuance of an Event of
Default, none of the foregoing restrictions shall apply, except that while an
Event of Default (other than an Event of Default that shall have required that
the Administrative Agent shall have delivered a notice of the underlying
default) shall be continuing but prior to acceleration, the applicable Lender
shall give the Administrative Assignor may not make an Assignment to an Assignee
unless the amount Agent five (5) business days' written notice by telecopy of
its intention to assign any or all of its interest in this Agreement.
(b) Upon execution, delivery and acceptance of each Assignment, from
and after the effective date specified therein, which effective date shall be at
least five Business Days after the execution thereof, the Borrowers, the
Administrative Agent, and each of the Lenders agree that, to the extent of any
such Assignment,
(i) the Assignee, in addition to any rights, benefits and obligations
hereunder held by it immediately prior to such effective date, shall have the
rights, benefits and obligations of a Lender under this Agreement, the
Assignor's Commitment, the Loans, and the Notes as it would have if it were a
Lender hereunder to the extent that the same have been assigned and delegated to
it pursuant to such Assignment; and
(ii) the Assignor, to the extent that rights, benefits and obligations
hereunder have been assigned and delegated by it pursuant to such Assignment,
shall relinquish its rights and benefits and be released from its obligations
under this Agreement (and, in the case of an Assignment covering all or the
remaining portion of the Assignor's rights, benefits and obligations under this
Agreement, the Assignor shall cease to be a Lender hereunder), except that in
all cases the Assignor shall remain entitled to the rights and benefits arising
under Sections 2.9, 2.12, 3.3, 7.12 and 10.6 hereof and shall remain liable with
respect to any of its obligations arising under Sections 2.9, 3.3 or 10.13 or
Article XI hereof, in either case with respect to any matters arising prior to
(or with respect to Sections 2.9 or 3.3 hereof, any payments made by
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a Loan Party in respect of any additional cost, reduction or other payment
referred to therein prior to) the effective date of any such Assignment;
provided, however, that the Administrative Agent and each Lender shall be
entitled to continue to deal solely and directly with the Assignor in connection
with the interests so assigned and delegated to the Assignee until written
notice of such Assignment, together with addresses and related information with
respect to the Assignee, shall have been given to the Administrative Agent and
each Lender by the Assignor and the Assignee.
(c) Upon its receipt of an Assignment executed by the Assignor and
an Assignee, together with the Note or Notes (if applicable) subject to such
Assignment and payment by the Assignor or the Assignee of an administrative fee
in the amount of $3,000 per Assignee, the Administrative Agent, if such
Assignment has been completed and is in substantially the form of Exhibit E
hereto, shall accept such Assignment and forward a photostatic copy thereof to
the Loan Parties and the Administrative Agent. Within 5 Business Days after its
receipt of a photostatic copy of such Assignment, the Loan Parties shall execute
and deliver to the Administrative Agent, to be exchanged for the Note or Notes
delivered to the Administrative Agent by the Assignor, a new Note or Notes
payable to the order of the Assignee in an amount equal to the Commitment
assumed by it pursuant to such Assignment and, if the Assignor has retained a
Commitment hereunder, a new Note or Notes payable to the order of the Assignor
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment, shall be payable to the order of the Assignee and, if
applicable, the Assignor, otherwise shall be in substantially the form of such
surrendered Note or Notes, and shall constitute Note(s) under this Agreement.
Such new Note or Notes shall be in replacement and substitution for, and not in
payment of, the Notes delivered to the Administrative Agent by the Assignor. The
Administrative Agent shall deliver such new Note or Notes to the payee or payees
thereof and shall mark the old Note or Notes previously held by the Assignor as
"replaced" and shall deliver the same to the Borrowers.
(d) Within five Business Days after each Assignment has been
accepted in accordance with the terms hereof, the Administrative Agent shall
revise Exhibit A hereto to set forth (i) the amount of the Loan of each Assignee
and such Assignee's name and address and (ii) the amount of the Loan, if any,
retained by the Assignor, and the appropriate officer of the Loan Parties and
the Administrative Agent shall initial each such revision.
(e) Notwithstanding the foregoing provisions of this Section 12.1,
any Lender at any time may assign all or any portion of its rights under this
Agreement and the other Facility Documents to (i) a Federal Reserve Bank without
complying with such provisions; provided, however, that no such assignment shall
release the assigning Lender from its obligations hereunder or under the other
Facility Documents or (ii) an Affiliate of such Lender without consent by the
Administrative Agent.
(f) Each Lender shall have the right at any time to sell
participations to any other Person in all or any part of such Lender's
Commitment and the Loans made by it; provided, however, that the holder of any
-99-
<PAGE>
participation, other than an Affiliate of the Lender granting such
participation, shall not be entitled to require such Lender to take or omit to
take any action hereunder except action directly affecting (i) the extension of
the scheduled final maturity date of or regularly scheduled maturity of any
portion of their principal amount of, or interest on, any Loan allocated to such
participation or (ii) a reduction of the principal amount of, or the rate of
interest payable on, any Loan allocated to such participation, and all amounts
payable by the Borrowers hereunder shall be determined as if such Lender had not
sold such participation.
-100-
<PAGE>
THIS AGREEMENT CONTAINS A WAIVER OF TRIAL BY JURY. SEE SECTION 10.7
HEREOF.
IN WITNESS WHEREOF, the Borrowers, the Guarantors, the Agents and
the Lenders have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
BORROWERS:
CORNERSTONE PROPERTIES INC.
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP
By: CORNERSTONE PROPERTIES, INC.,
Its General Partner
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
-101-
<PAGE>
GUARANTORS:
CORNERSTONE DENVER LLC
CORNERSTONE PEACHTREE LLC
500 BOYLSTON CORNERSTONE LLC
222 BERKELEY CORNERSTONE LLC
125 SUMMER STREET CORNERSTONE LLC
CORNERSTONE MINNEAPOLIS LLC
CORNERSTONE NEW YORK LLC
CORNERSTONE 11 CANAL CENTER LLC
CORNERSTONE 99 CANAL LLC
CORNERSTONE SEATTLE LLC
By: CORNERSTONE PROPERTIES LIMITED
PARTNERSHIP, the sole member of
each
By: CORNERSTONE PROPERTIES INC., its
general partner
By:/S/ Kevin P. Mahoney
Name: Kevin P. Mahoney
Title: Vice President
By:/S/ Thomas P. Loftus
Name: Thomas P. Loftus
Title: Vice President and
Secretary
ONE UNITED REALTY CORPORATION
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
CORPRO REAL ESTATE MANAGEMENT, INC.
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
NWC FUNDING CORPORATION
<PAGE>
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
TULP FUNDING CORPORATION
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
CSTONE-PITTSBURGH TRUST
By:__________________________
Name:
Title: Trustee
By:__________________________
Name:
Title:
AGENTS AND LENDERS:
BANKERS TRUST COMPANY
as Administrative Agent and Lender
By: ______________________________
Title:
Address for Notices:
130 Liberty Street
25th Floor
New York, New York 10006
(Attention: Alexander Johnson)
Telecopy No.: 212/669-0752
THE CHASE MANHATTAN BANK
as Syndication Agent and Lender
<PAGE>
By: ______________________________
Title:
Address for Notices:
380 Madison Avenue
New York, New York 10017
(Attention: Commercial Real Estate Finance)
Telecopy No.: 212/622-3397
THE BANK OF NOVA SCOTIA
as Lender
By
Title:
Address for Notices:
Attn: Kim Hartman
Relationship Manager
One Liberty Street
New York, New York 10005
Phone (212) 225-5175
Fax (212) 225-5166
COMMERZBANK AKTIENGESELLSCHAFT,
NEW YORK BRANCH
as Lender
By:
Title:
Address for Notices:
Attn: David Schwarz
Vice President
Two World Financial Center -- 33rd Floor
New York, New York 10281-1050
Phone (212) 266-7632
Fax (212) 266-7530
NATIONSBANK OF TEXAS, N.A.
as Lender
By:
Title:
Address for Notices:
Attn: Rick Bower
<PAGE>
Vice President
901 Main Street -- 51st Floor
Dallas, Texas 75202
Phone (214) 508-1552
Fax (214) 508-0085
KEYBANK NATIONAL ASSOCIATION
as Lender
By:
Title:
Address for Notices:
Attn: Rex E. Rudy
Vice President
127 Public Square -- 6th Floor
Cleveland, Ohio 44114-1306
Phone (216) 689-0801
Fax (216) 689-4997
PNC BANK, NATIONAL ASSOCIATION
as Lender
By:
Title:
Address for Notices:
Attn: Daniel P. Sefcik
Vice President
345 Park Avenue -- 29th Floor
New York, New York 10154
Phone (212) 409-3715
Fax (212) 409-3737
SUMMIT BANK
as Lender
By:
Title:
Address for Notices:
Attn: Gregory A. Haines
Vice President
750 Walnut Avenue -- 1st Floor
Cranford, New Jersey 07106
Phone (908) 709-6079
Fax (908) 709-6440
THE SUMITOMO BANK, LIMITED
<PAGE>
as Lender
By:
Title:
Address for Notices:
Attn: Anthony Mugno
Assistant Treasurer
277 Park Avenue -- 6th Floor
New York, New York 10005
Phone (212) 224-4170
Fax (212) 224-5198
CITIZENS BANK OF RHODE ISLAND
as Lender
By:
Title:
Address for Notices:
Attn: Laurel L. Bowerman
Senior Vice President
One Citizens Plaza
Providence, Rhode Island 02903
Phone (401) 456-7268
Fax (401) 455-5410
CRESTAR BANK
as Lender
By:______________________________
Title:
Address for Notices:
Attn: Donna M. Beames
Vice President
8245 Boone Boulevard -- Suite 820
Vienna, Virginia 22182
Phone (703) 902-9116
Fax (703) 902-9190
MELLON BANK, N.A.
as Lender
By:
Title:
<PAGE>
Address for Notices:
Attn: Lara Hartin
Assistant Vice President
1735 Market Street -- 193-0425
Philadelphia, Pennsylvania 19101
Phone (215) 553-3622
Fax (215) 553-3472
MICHIGAN NATIONAL BANK
as Lender
By:
Title:
Address for Notices:
Attn: Irwin S. Knox
Relationship Manager
27777 Inkster Road
Farmington Hills, Michigan 48333-9065
Phone (248) 473-5277
Fax (248) 473-5299
DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLANDS BRANCH
as Lender
By:
Title:
Address for Notices:
Attn: Linda O'Connell
Vice President
609 Fifth Avenue
New York, New York 10017-1021
Phone (212) 745-1586
Fax (212) 745-1556
<PAGE>
Exhibit A
LENDERS
Lender* Commitment Amount
BANKERS TRUST COMPANY $30,000,000
THE CHASE MANHATTAN BANK $35,000,000
THE BANK OF NOVA SCOTIA $30,000,000
COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH $30,000,000
NATIONSBANK OF TEXAS, N.A. $30,000,000
KEYBANK NATIONAL ASSOCIATION $30,000,000
PNC BANK, NATIONAL ASSOCIATION $25,000,000
SUMMIT BANK $25,000,000
THE SUMITOMO BANK $20,000,000
CITIZENS BANK OF RHODE ISLAND $20,000,000
CRESTAR BANK $20,000,000
MELLON BANK, N.A. $20,000,000
MICHIGAN NATIONAL BANK $20,000,000
DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLANDS BRANCH $15,000,000
- --------
* Lending Office indicated only if different than
office shown for notice purposes.
<PAGE>
EXHIBIT B
REVOLVING LOAN NOTE
Lender: New York, New York
Commitment: $________________ _________ __, 199__
FOR VALUE RECEIVED, the undersigned, CORNERSTONE PROPERTIES INC., a
corporation duly organized and validly existing under the laws of the State of
Nevada ("Cornerstone") and CORNERSTONE PROPERTIES LIMITED PARTNERSHIP, a
Delaware limited partnership (collectively with Cornerstone, the "Borrowers"),
hereby jointly and severally unconditionally promise to pay to the order of the
Lender stated above (the "Lender") at the office of Bankers Trust Company,
located at ____________, in lawful money of the United States of America and in
immediately available funds, on the Maturity Date the principal amount equal to
the lesser of (a) the Commitment stated above and (b) the aggregate principal
amount of the Loans from time to time outstanding made by the Lender to the
Borrowers pursuant to subsection 2.1 of the Credit Agreement as hereinafter
defined. The Borrowers further jointly and severally agree to pay interest in
like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in the Credit
Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, type and amount of each Loan
made pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof, each conversion of
all or a portion thereof to another type and, in the case of Eurodollar Rate
Loans, the length of each Interest Period with respect thereto. Each such
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement shall not affect
the obligation of Borrower to repay any Loan in accordance with the terms of the
Credit Agreement.
This Note (a) is one of the Notes referred to in the Amended and Restated
Revolving Credit and Guaranty Agreement dated as of January 20, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrowers, the Guarantors signatory therteto, the Lenders
signatory thereto, Bankers Trust Company, as Administrative Agent for the
Lenders, and The Chase Manhattan Bank, as Syndication Agent for the Lenders, (b)
is subject to the provisions of the Credit Agreement and (c) is subject to
optional and mandatory prepayment in whole or in part as provided in the Credit
Agreement.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note hereby
waive presentment, demand, protest and all other notices of any kind.
<PAGE>
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
CORNERSTONE PROPERTIES INC.
By:
Name:
Title:
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP
By: CORNERSTONE PROPERTIES, INC.,
Its General Partner
By:
Name:
Title:
<PAGE>
SCHEDULE 1
To REVOLVING LOAN NOTE
LOANS, CONVERSIONS AND PAYMENTS OF ABR LOANS
Amount Of Unpaid
Amount of ABR Loans Principal
Amount of Principal Converted Balance Of Notation
Date ABR Loans Repaid To ABR Loans Made By
Eurodollar
Rate Loans
- --------- ------------- ----------- ------------- ------------- -----------
- --------- ------------- ----------- ------------- ------------- -----------
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- --------- ------------- ----------- ------------- ------------- -----------
- --------- ------------- ----------- ------------- ------------- -----------
- --------- ------------- ----------- ------------- ------------- -----------
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========= ============= =========== ============= ============= ===========
<PAGE>
SCHEDULE 2
To REVOLVING LOAN NOTE
LOANS AND PAYMENTS OF EURODOLLAR RATE LOANS
Interest Amount Of Unpaid
and ABR Loans Principal
Amount of Eurodollar Amount of Converted Balance Of
Eurodollar Rate With Principal to Eurodollar Notation
Date Rate Loans Respect Repaid Eurodollar Rate Loans Made By
Thereto Rate Loans
- ------- ------------- ------------ ----------- ----------- ---------------------
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- ------- ------------- ------------ ----------- ----------- ---------------------
- ------- ------------- ------------ ----------- ----------- ---------------------
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- ------- ------------- ------------ ----------- ----------- ---------------------
======= ============= ============ =========== =========== =====================
<PAGE>
EXHIBIT C
LOAN REQUEST
______________, 19___
Bankers Trust Company
as Administrative Agent
130 Liberty Street
25th Floor
New York, New York 10006
Attention: Alexander Johnson
Re: Amended and Restated Revolving Credit and Guaranty
Agreement, dated as of January 20, 1998 (as amended or
supplemented from time to time, the "Credit Agreement"),
among Cornerstone Properties Inc. and Cornerstone
Properties Limited Partnership, as Borrowers, the
Guarantors signatory thereto, the Lenders signatory
thereto, Bankers Trust Company, as Administrative Agent
for the Lenders, and The Chase Manhattan Bank, as
Syndication Agent for the Lenders
---------------------------------
Dear Sir or Madam:
Reference is made to the above-referenced Credit Agreement (capitalized
terms used herein that are not defined shall have the respective meanings
ascribed thereto in the Credit Agreement). [NAME OF BORROWER] hereby gives
irrevocable notice of its intention to borrow (the "Borrowing") the following
amounts under the Credit Agreement as set forth below.
1. The Funding Date of the proposed Borrowing is ___________, 19__.
2. The aggregate amount of the proposed Borrowing is $_______.
3. The Borrowing is to be comprised of $_________ of [Eurodollar Rate]
[ABR] Loans.
4. The duration of the Interest Period for the proposed Loan, if a
Eurodollar Loan, shall be ____ months.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Borrowers contained in
Article V of the Credit Agreement are true and correct as through made on and as
of such date (except to the extent such representations and warranties relate to
a specific date, in which case they are true and correct as of such date);
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed Borrowing; and
-2-
<PAGE>
(c) The proposed Borrowing will not cause the aggregate principal amount
of all outstanding Loans plus the Letter of Credit Obligations to exceed the
combined Commitments of the Lenders.
The Borrowers represents and warrants, as of the date hereof, that after
giving effect to the Loans requested above, all the requirements contained in
Section 6.1 of the Credit Agreement are satisfied.
CORNERSTONE PROPERTIES INC.,
individually and as sole general
partner of CORNERSTONE PROPERTIES LIMITED
PARTNERSHIP
By:
Name:
Title:
By:
Name:
Title:
-1-
<PAGE>
EXHIBIT D
CONTINUATION REQUEST
____________, 19___
Bankers Trust Company
as Administrative Agent
130 Liberty Street
25th Floor
New York, New York 10006
Attention: Alexander Johnson
Re: Amended and Restated Revolving Credit and Guaranty Agreement, dated
as of January 20, 1998 (as amended or supplemented from time to
time, the "Credit Agreement"), among Cornerstone Properties Inc. and
Cornerstone Properties Limited Partnership, as Borrowers, the
Guarantors signatory thereto, the Lenders signatory thereto, Bankers
Trust Company, as Administrative Agent for the Lenders, and The
Chase Manhattan Bank, as Syndication Agent for the Lenders
Dear Sir or Madam:
Reference is made to the above-referenced Credit Agreement (capitalized
terms used herein that are not defined shall have the respective meanings
ascribed thereto in the Credit Agreement). The Borrower hereby gives irrevocable
notice of its intention to continue the Loans for an additional Interest Period
under the Credit Agreement as set forth below.
Please continue $ of the Loans of the undersigned, the Interest Period
with respect to which ends, 19 (which is not less than three Eurodollar Business
Days from the date hereof), as a Loan with an Interest Period commencing on and
including such date and ending, subject to the limitations applicable to
Interest Periods for Loans as set forth in the definition of Interest Period
contained in the Credit Agreement, on the date that is [one] [two] [three] [six]
[twelve]* months thereafter.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true as of the date any Loan is continued as
requested above, before and after giving effect thereto and to the application
of proceeds therefrom:
(a) the representations and warranties of the Borrower contained in
Article V of the Credit Agreement are true and correct as through made on and as
- --------
* 12-month Interest Periods may not be requested without the unanimous
consent of all Lenders.
-2-
<PAGE>
of such date (except to the extent such representations and warranties relate to
a specific date, in which case they are true and correct as of such date);
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed continuation; and
(c) The proposed continuation will not cause the aggregate principal
amount of all outstanding Loans plus the Letter of Credit Obligations to exceed
the combined Commitments of the Lenders.
CORNERSTONE PROPERTIES INC.,
individually and as sole general
partner of CORNERSTONE PROPERTIES
LIMITED PARTNERSHIP
By:
Name:
Title:
By:
Name:
Title:
-1-
<PAGE>
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Revolving Credit and
Guaranty Agreement, dated as of January 20, 1998 (as amended or supplemented
from time to time, the "Credit Agreement"), among Cornerstone Properties Inc.
and Cornerstone Properties Limited Partnership, as Borrowers, the Guarantors
signatory thereto, the Lenders signatory thereto, Bankers Trust Company, as
Administrative Agent for the Lenders, and The Chase Manhattan Bank, as
Syndication Agent for the Lenders (together with the Administrative Agent, the
"Agents"). Capitalized terms used herein and not otherwise defined shall have
the respective meanings assigned to such terms by the Credit Agreement.
(the "Assignor") and (the "Assignee") hereby
agree as follows:
1. The Assignor hereby irrevocably sells, assigns and delegates to
the Assignee without recourse to the Assignor, and the Assignee hereby purchases
and assumes from the Assignor, without recourse and without representation or
warranty except as otherwise specifically set forth in Section 2 below, a
$_______________** interest in and to all of the Assignor's rights and
obligations under Assignor's Loan and its Note set forth on Schedule I hereto
(the "Assigned Loan") and related rights and obligations under the Credit
Agreement and other Facility Documents.
2. The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Facility Document or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse claim
upon the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim; (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrowers
or the performance or observance by Borrowers of their obligations under the
Credit Agreement or any other Facility Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches the Revolving
Loan Note evidencing the Assigned Loan and requests that the Administrative
Agent exchange such Note for (i) a new Revolving Loan Note, dated
_______________, 19__, in the principal amount of $_______________ payable to
the order of the Assignee, and (ii) a new Revolving Loan Note, dated
_______________ 19__, in the principal amount of $_______________ payable to the
order of the Assignor.
- --------
* The minimum amount that may be assigned is equal to the lesser of (i)
$_______ or (ii) the Commitment of the Assignor as determined in
accordance with the Credit Agreement.
<PAGE>
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements referenced therein and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (c) acknowledges and agrees that it
has made and will make such inquiries and has taken and will take such care on
its own behalf as would have been the case had it made a Loan directly to the
Borrowers without the intervention of the Assignor, the Agents or any other
Person; (d) acknowledges and agrees that it will perform in accordance with
their terms all of the obligations that, by the terms of any Facility Document,
are required to be performed by it as a Lender; (e) agrees that it will,
independently and without reliance upon the Assignor, the Agents or any other
Person which has become a Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement; (f) appoints and
authorizes the Agents to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement as are delegated to the Agents by the
terms thereof, together with such powers under the Credit Agreement as are
incidental thereto; (g) agrees that it will be bound by the provisions of the
Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to Section
3.3(f) of the Credit Agreement to deliver the forms prescribed by the Internal
Revenue Service of the United States certifying as the Assignee's exemption from
United States withholding taxes with respect to all payments to be made to the
Assignee under the Credit Agreement, or such other documents as are necessary to
indicate that all such payments are subject to such tax at a rate reduced by an
applicable tax treaty; (h) confirms the Assignee is eligible as an "Assignee"
under the terms of the Credit Agreement; (i) acknowledges and agrees that
neither the Assignor nor the Agents makes any representation or warranty or
assumes any responsibility with respect to any statements, warranties or
representations made in or in connection with any Facility Document or the
authorization, execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Facility Document or any other instrument or
document furnished pursuant thereto; and (j) acknowledges and agrees that
neither the Assignor nor the Agents makes any representation or warranty or
assumes any responsibility with respect to the financial condition or
creditworthiness of the Loan Parties or any other Person or the performance or
observance by the Loan Parties or any other Person of any obligations under any
Facility Document or any other instrument or document furnished pursuant
thereto.
4. The effective date for this Assignment and Acceptance shall be
_______________ 19__ (the "Effective Date")** Following the execution of this
Assignment and Acceptance by the Assignor and the Assignee, it will be delivered
to the Administrative Agent for acceptance by the Administrative Agent, and the
- --------
** The requested Effective Date must be at least five Business Days
after the execution of this Assignment and Acceptance.
<PAGE>
Assignor shall pay to the Administrative Agent a $3,000 assignment fee.
Following such payment, and acceptance by the Agent of this Assignment and
Acceptance, a photostatic copy hereof shall be delivered to the Borrowers and
the Administrative Agent. Within five (5) Business Days after the Borrowers'
receipt of such photostatic copy, the Borrowers shall execute and deliver to the
Administrative Agent the new Revolving Loan Note or Notes to be held in escrow
pending release of the Revolving Loan Note (in the appropriate outstanding
principal amount) evidencing the Assigned Loan to the Borrowers. The
Administrative Agent shall deliver the new Revolving Loan Note or Notes to the
payee(s) thereof, shall mark the Revolving Loan Note evidencing the Assigned
Loan as "replaced" and shall deliver the same to the Borrowers.
5. Upon such acceptance by the Administrative Agent, as of the
Effective Date,
(a) From and after the Effective Date, (a) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Facility Documents and shall be bound by the provisions thereof, and
The Assignee, in addition to any rights, benefits and obligations under
the Facility Documents held by it immediately prior to the Effective Date, shall
have the rights, benefits and obligations of a Lender under the Facility
Documents that have been assigned to it (including, but not limited to,
obligations to the Borrower under the Facility Documents) pursuant to this
Assignment and Acceptance. The Assignee shall become a Lender for all purposes
of the Credit Agreement and the other Facility Documents, and execution hereof
shall be deemed to be execution of the Credit Agreement; and
(b) The Assignor, to the extent provided in this Assignment and
Acceptance, shall relinquish its rights and benefits and be released from its
obligations under the Credit Agreement (and, in the case of an Assignment
covering all or the remaining portion of the Assignor's rights, benefits and
obligations under the Facility Documents, the Assignor shall cease to be a
Lender under the Facility Documents).
6. Upon such acceptance by the Administrative Agent, from and after
the Effective Date, the Administrative Agent shall make payments under the
Credit Agreement in respect of the Assigned Loan (including, without limitation,
all payments of principal, interest and fees with respect thereto) to the
Assignee , whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and the Assignee agree
that they shall make all appropriate adjustments in payments under the Credit
Agreement by the Administrative Agent for periods prior to the Effective Date
directly between themselves.
7. The Assignor agrees to give written notice of this Assignment and
Acceptance to the Agents, each Lender and the Borrower, which written notice
shall include the addresses and related information with respect to the
Assignee.
<PAGE>
8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW.
9. EACH OF THE ASSIGNOR AND THE ASSIGNEE HEREBY WAIVES (TO THE
EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY JURY IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS ASSIGNMENT AND
ACCEPTANCE AGREEMENT, ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS
ASSIGNMENT AND ACCEPTANCE AGREEMENT, OR THE VALIDITY, INTERPRETATION, OR
ENFORCEMENT THEREOF.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Assignment and
Acceptance to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date and year first above written.
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
Title: Title:
Accepted this ______ day of
_______________, 19____
BANKERS TRUST COMPANY,
as Administrative Agent
By:
Title:
<PAGE>
EXHIBIT F
PRESENTATION RENT ROLL & CURRENT TERM TENANT SUMMARY
One Lincoln Centre (Board v. 2)
Oakbrook Terrace, Illinois
As of Nov. 1996 for 293,784 Square Feet
[To be provided upon request to the Company.]
<PAGE>
EXHIBIT G
LETTER OF CREDIT REQUEST
No. (1) ______________, 19___
Bankers Trust Company
as Administrative Agent
130 Liberty Street
25th Floor
New York, New York 10006
Attention: Alexander Johnson
[Name and address of Issuing Bank]
Re: Amended and Restated Revolving Credit and Guaranty
Agreement, dated as of January 20, 1998 (as amended or
supplemented from time to time, the "Credit Agreement"),
among Cornerstone Properties Inc. and Cornerstone
Properties Limited Partnership, as Borrowers, the
Guarantors signatory thereto, the Lenders signatory
thereto, Bankers Trust Company, as Administrative Agent
for the Lenders, and The Chase Manhattan Bank, as
Syndication Agent for the Lenders
---------------------------------
Dear Sir or Madam:
Reference is made to the above-referenced Credit Agreement (capitalized
terms used herein that are not defined shall have the respective meanings
ascribed thereto in the Credit Agreement).
The Borrower hereby requests that [name of Issuing Bank], in its
individual capacity, issue a Standby Letter of Credit for the account of the
undersigned on ________________, 19__ (the "Date of Issuance") in the aggregate
stated amount of $____________.
The beneficiary of the requested Letter of Credit will be ________________
[name of beneficiary], and such Letter of Credit will be in support of (2) and
will have a stated expiration date of (3) .
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the Date of Issuance, before and after
giving effect to the issuance of the Letter of Credit:
(a) the representations and warranties of the Borrower contained in
Article V of the Credit Agreement are true and correct as through made on and as
of such date (except to the extent such representations and warranties relate to
a specific date, in which case they are true and correct as of such date);
(b) no Default or Event of Default has occurred and is continuing, or
would result from the issuance of the Letter of Credit; and
<PAGE>
(c) The proposed Letter of Credit will not cause the aggregate principal
amount of all outstanding Loans plus the Letter of Credit Obligations to exceed
the combined Commitments of the Lenders.
The Borrower represents and warrants, as of the date hereof, that after
giving effect to the Loans requested above, all the requirements contained in
Section 6.1 of the Credit Agreement are satisfied.
CORNERSTONE PROPERTIES INC.,
individually and as sole general
partner of CORNERSTONE PROPERTIES LIMITED
PARTNERSHIP
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
- -----------------------
(1) Letter of Credit Request Number
(2) Describe Indebtedness supported by Letter of Credit and describe obligation
to which it relates
(3) Insert last date upon which drafts may be presented, which may not be later
than (i) the date which occurs twelve (12) months after the Date of Issuance or
(ii) the Maturity Date.
<PAGE>
EXHIBIT H
COMPLIANCE CERTIFICATE
____________, 19___
Bankers Trust Company
as Administrative Agent
130 Liberty Street
25th Floor
New York, New York 10006
Attention: Alexander Johnson
Re: Amended and Restated Revolving Credit and Guaranty
Agreement, dated as of January 20, 1998 (as amended or
supplemented from time to time, the "Credit Agreement"),
among Cornerstone Properties Inc. and Cornerstone
Properties Limited Partnership, as Borrowers, the
Guarantors signatory thereto, the Lenders signatory
thereto, Bankers Trust Company, as Administrative Agent
for the Lenders, and The Chase Manhattan Bank, as
Syndication Agent for the Lenders
---------------------------------
Dear Sir or Madam:
Reference is made to the above-referenced Credit Agreement (capitalized
terms used herein that are not defined shall have the respective meanings
ascribed thereto in the Credit Agreement).
Pursuant to Section 7.1(c) of the Credit Agreement, the undersigned, in
his capacity as _______________ of Cornerstone, hereby certifies that:
(i) During the period covered by the attached financial statements, a
review of the activities of the Borrowers and their Subsidiaries has been made
under my immediate supervision with a view to determining whether the Loan
Parties have observed, performed and fulfilled all of their obligations under
the Credit Agreement and the other Facility Documents;
(ii) As of the date hereof, no "Default" (as defined in the Credit
Agreement) or "Event of Default" (as defined in the Credit Agreement) exists [,
except as described below].
[Describe Defaults and Events of Default]
(iii) We are presently taking the following actions with respect to the
above-described Events of Default and Unmatured Events of Default:
(iv) The calculations with respect to the financial covenants set forth in
Article VIII of the Credit Agreement for the period covered by the attached
financial statements are as follows:
<PAGE>
(a) Equity Value (Section 8.5):
(b) Leverage Ratio (Section 8.6):
(c) Interest Coverage Ratio (Section 8.7):
(d) Fixed Charge Coverage Ratio (Section 8.8):
(e) Unleveraged Properties Asset Value (Section 8.9):
(f) Unleveraged Properties/unsecured Indebtedness (Section 8.10(i)):
(g) Total Property Asset Value/secured Indebtedness
(Section 8.10(ii)):
(h) Combined Adjusted NOI (Wholly-Owned Unleveraged
Properties/Unsecured Interest Expense (Section 8.10(iii)):
CORNERSTONE PROPERTIES INC.,
individually and as sole general
partner of CORNERSTONE PROPERTIES LIMITED
PARTNERSHIP
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
<PAGE>
SCHEDULE 1.1(a)
Authorized Officers
John S. Moody President and Chief Executive Officer
Rodney C. Dimock Executive Vice President and Chief Operating Officer
Scott M. Dalrymple Vice President
Thomas P. Loftus Vice President and Controller
Kevin P. Mahoney Vice President and Treasurer
Scott M. Haley Assistant Vice President
<PAGE>
SCHEDULE 1.1(b)
1. Norwest Center, Minneapolis, Minnesota
2. Frick Building, 437 Grant Street, Pittsburgh, Pennsylvania
3. Washington Mutual Tower, 1201 Third Avenue, Seattle, Washington
4. 527 Madison Avenue, New York, New York
5. 125 Summer Street, Boston, Massachusetts
6. One Norwest Center, Denver, Colorado
7. Tower 56, 126 East 56th Street, New York, New York
8. One Lincoln Centre, Oakbrook Terrace, Illinois
9. Charlotte Plaza, Charlotte, North Carolina
10. TransPotomac Plaza, Virginia
11. 191 Peachtree Tower, Atlanta, Georgia
12. 200 Galleria, Atlanta, Georgia
13. Dearborn Land (vacant), Chicago, Illinois
14. 99 Canal Centre Place, Virginia
15. 11 Canal Centre Place, Virginia
16. 500 Boylston Street, Boston, Massachusetts
17. 222 Berkeley Street, Boston, Massachusetts
18. Market Square, Washington, D.C.
<PAGE>
SCHEDULE 5.7
Schedule of Pre Existing Liens
(000's)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Loan Amount Maturity Lender
As of 9/30/97 Date
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Norwest Center 97,018 August-2001 CIGNA Mass Mutual American General
- --------------------------------------------------------------------------------------------------
125 Summer Street 97,251 January-2003 Northwestern Mutual Life Insurance Company
- --------------------------------------------------------------------------------------------------
Tower 56 17,860 May-2003 Northwestern Mutual Life Insurance Company
- --------------------------------------------------------------------------------------------------
Washington Mutual Tower 79,100 November-2005 Teachers Insurance and Annuity Association
- --------------------------------------------------------------------------------------------------
Norwest Center 110,000 December-2005 Norwest Bank
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 5.8
CONVERTIBLE DEBT AND CONVERTIBLE PREFERRED SHARES
1. Convertible Promissory Note, dated January 1, 1996, in the principal sum
of $12,925,976.48 made by Purchaser to the order of Hines Colorado Limited
is convertible into Purchaser Common Shares.
2. 3,030,303 Purchaser Preferred Shares are convertible into Purchaser
Common Shares.
<PAGE>
SCHEDULE 5.12
SUBSIDIARIES
CORPRO Real Estate Management, Inc.
CStone-Pittsburgh Trust
Cornerstone Denver LLC
Cornerstone Peachtree LLC
Cornerstone 200 Galleria LLC
Cornerstone Oakbrook LLC
Cornerstone Dearborn LLC
125 Summer Street Cornerstone LLC
500 Boylston Cornerstone LLC
222 Berkeley Cornerstone LLC
Cornerstone Minneapolis LLC
Cornerstone New York
Cornerstone 527 Madison LLC
Charlotte Plaza LLC
TransPotomac Plaza LLC
Cornerstone 99 Canal LLC
Cornerstone 11 Canal Center LLC
Cornerstone Seattle LLC
Cornerstone Market Square LLC
<PAGE>
SCHEDULE 5.20
ERISA Matters
None to report
<PAGE>
SCHEDULE 5.21
Environmental Matters
None except as disclosed in the following environmental reports previously
delivered to the lenders.
1. Report of Phase I Environmental Site Assessment prepared by Law
Environmental Consultants, Inc., dated January 31, 1997 for 527 Madison
Avenue, and title search inquiry prepared by Baretta Research Service
Corporation dated January 15, 1997.
2. Phase I Environmental Site Assessment prepared by IVI Environmental, Inc.,
dated November 7, 1996 for the Frick Building.
3. Phase I Environmental Site Assessment prepared by Smith Environmental
Technologies Corporation, dated October 23, 1996 for Norwest Center.
4. Phase I Environmental Site Assessment prepared by IVI Environmental, Inc.,
dated September 24, 1996 for One Lincoln Centre.
5. Phase I Environmental Site Assessment prepared by ATC Environmental Inc.,
dated May 13, 1996 for One Norwest Center.
6. Report for Environmental Site Assessment prepared by Law Environmental
consultants, Inc., dated December 15, 1995 for 125 Summer Street.
7. Phase I Environmental Site Assessments prepared by IVI Environmental,
Inc., dated February 22, 1995 for Tower 56.
8. Report of Phase I Environmental Assessments prepared by ENSR, dated
February 1997, for Washington Mutual Tower.
<PAGE>
SCHEDULE 7.17
CERTAIN NON-GUARANTOR SUBSIDIARIES
Cornerstone 200 Galleria LLC, a Delaware limited liability company
Cornerstone Oakbrook LLC, a Delaware limited liability company
Cornerstone Dearborn LLC, a Delaware limited liability company
Cornerstone 527 Madison LLC, a Delaware limited liability company
CStone 527 Madison, Inc., a Delaware corporation
Cornerstone Charlotte Plaza LLC, a Delaware limited liability company
Cornerstone TransPotomac Plaza LLC, a Delaware limited liability company
Cornerstone Market Square LLC, a Delaware limited liability company
<PAGE>
Exhibit 10.120
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (the "Agreement") is made as of the 11th day
of December, 1997 (the "Effective Date") by and among CORPORATE 500-PHASE I, an
Illinois limited partnership ("Phase I Owner"), CORPORATE 500, PHASE II, an
Illinois limited partnership ("Phase II Owner"; Phase I Owner and Phase II Owner
are sometimes together called "Contributors" and individually a "Contributor"),
and CORNERSTONE PROPERTIES, INC., a Nevada corporation ("Cornerstone").
RECITALS
A. Phase I Owner is the beneficial owner of the Phase I Property (as
hereinafter defined) and Phase II Owner is the beneficial owner of the Phase II
Property (as hereinafter defined).
B. Prior to Closing (as hereinafter defined), Cornerstone will form
Cornerstone Properties, L.P., a Delaware limited partnership (the "Operating
Partnership") having Cornerstoneas its general partner, and will contribute all
of its properties to the Operating Partnership.
C . Contributors desire to contribute the Property (as hereinafter
defined) to the Operating Partnership in exchange for limited partner units in
the Operating Partnership ("Units"), each Unit being convertible into one share
of common stock of Cornerstone.
NOW, THEREFORE, in consideration of and in reliance upon the above
Recitals, the terms, covenants and conditions contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
CONTRIBUTIONS TO OPERATING PARTNERSHIP
1.1 Contribution of Phase I Property. Subject to the terms and conditions
hereinafter set forth, Phase I Owner agrees to contribute the following
described property (the "Phase I Property") to the Operating Partnership:
<PAGE>
(a) (i) that certain tract or parcel of land situated in Lake County,
Illinois, more particularly described on Exhibit A-1 attached hereto and made a
part hereof, and (ii) all of Phase I Owner's right, title and interest in and to
that certain tract or parcel of land situated in Lake County, Illinois, more
particularly described on Exhibit A-2 (the "County Parcel") as provided in that
certain Agreement dated July 7, 1994, as amended, with the County of Cook
together with all and singular the easements, privileges and other rights and
appurtenances pertaining to such property, including any right, title and
interest of Phase I Owner in and to adjacent streets, alleys or rights-of-way
(the property described in clause (a) of this Section 1.1 being herein referred
to collectively as the "Phase I Land");
(b) the buildings, structures, fixtures and other improvements on the
Phase I Land, including specifically, without limitation, the two office
buildings located thereon having a street address of 500 and 510 Lake Cook Road,
Deerfield, Illinois (the property described in clause (b) of this Section 1.1
being herein referred to collectively as the "Phase I Improvements");
(c) all of Phase I Owner's right, title and interest in and to all
tangible personal property upon the Phase I Land or within the Phase I
Improvements, including specifically, without limitation, the items listed on
Exhibit B-1 attached hereto and made a part hereof and all other appliances,
furniture, carpeting, draperies and curtains, tools and supplies, all restaurant
equipment, fixtures and furniture used in connection with the operation of the
restaurant facilities in the Phase I Improvements, and other items of personal
property (excluding cash or escrow or other deposit accounts) used exclusively
in connection with the operation of the Land or the Improvements (both as
hereinafter defined) (the property described in clause (c) of this Section 1. 1
being herein referred to collectively as the "Phase I Personal Property");
(d) all of Phase I Owner's right, title and interest in and to all
agreements listed and described on Exhibit C-1 (the "Phase I Lease Schedule")
attached hereto and made a part hereof, and all leases and agreements entered
into subsequent to the date hereof in accordance with the terms of this
Agreement pursuant to which any portion of the Phase I Land or Phase I
Improvements is used or occupied by anyone other than Phase I Owner (the
property described in clause (d) of this Section 1.1 being herein referred to
collectively as the "Phase I Leases"); and
(e) all of Phase I Owner's right, title and interest in and to (i) all
contracts and agreements (collectively, the "Operating Agreements") listed and
described on Exhibit D (the "Operating Agreements Schedule") attached hereto and
made a part hereof, relating to the upkeep, repair, maintenance or operation of
the Land, Improvements or Personal Property (as hereinafter defined) which will
extend beyond the date of Closing (as such term is defined in Section 5.1
hereof), including specifically, without limitation, all assignable equipment
leases, (ii) all assignable existing warranties and guaranties (expressed or
implied) in favor of Phase I Owner in connection with the Phase I Improvements
or the Phase I Personal Property, and (iii) all assignable licenses and other
assignable governmental permits relating to the Phase I Land and Phase I
Improvements (the property described in this Section 1.1 (e) being sometimes
herein referred to collectively as the "Phase I Intangibles").
2
<PAGE>
1.2 Contribution of Phase II Property. Subject to the terms and conditions
hereinafter set forth, Phase II Owner agrees to contribute the following
described property (the "Phase II Property") to the Operating Partnership:
(a) that certain tract or parcel of land situated in Lake County,
Illinois, more particularly described on Exhibit A-3 attached hereto and
made a part hereof, together with all and singular the easements,
privileges and other rights and appurtenances pertaining to such property,
including any right, title and interest of Phase II Owner in and to
adjacent streets, alleys or rights-of-way (the property described in
clause (a) of this Section 1.2 being herein referred to collectively as
the "Phase II Land");
(b) the buildings, structures, fixtures and other improvements on
the Phase II Land, including specifically, without limitation, the two
office buildings located thereon having a street address of 520 and 540
Lake Cook Road, Deerfield, Illinois (the property described in clause (b)
of this Section 1.2 being herein referred to collectively as the
"Improvements");
(c) all of Phase II Owner's right, title and interest in and to all
tangible personal property upon the Phase II Land or within the Phase II
Improvements, including specifically, without limitation, the items listed
on Exhibit B-2 attached hereto and made a part hereof and all other
appliances, furniture, carpeting, draperies and curtains, tools and
supplies, all restaurant equipment, fixtures and furniture used in
connection with the operation of the restaurant facilities in the Phase II
Improvements and other items of personal property (excluding cash or
escrow or other deposit accounts) used exclusively in connection with the
operation of the Land or the Improvements (the property described in
clause (c) of this Section 1.2 being herein referred to collectively as
the "Phase II Personal Property");
(d) all of Phase II Owner's right, title and interest in and to all
agreements listed and described on Exhibit C-2 (the "Phase II Lease
Schedule") attached hereto and made a part hereof, and all leases and
agreements entered into subsequent to the date hereof in accordance with
the terms of this Agreement pursuant to which any portion of the Phase II
Land or Phase II Improvements is used or occupied by anyone other than
Phase II Owner (the property described in clause (d) of this Section 1.2
being herein referred to collectively as the "Phase II Leases"); and
(e) all of Phase II Owner's right, title and interest in and to (i)
all Operating Agreements, (ii) all assignable existing warranties and
guaranties (expressed or implied) in favor of Phase II Owner in connection
with the Phase II Improvements or the Phase II Personal Property, and
(iii) all assignable licenses and other assignable governmental permits
relating to the Phase II Land and Phase II Improvements (the property
described in this Section 1.2(e) being sometimes herein referred to
collectively as the "Phase II Intangibles").
3
<PAGE>
The Phase I Land and the Phase II Land are herein sometimes together
called the "Land", the Phase I Improvements and the Phase II Improvements are
herein sometimes together called the "Improvements," the Phase I Personal
Property and the Phase II Personal Property are herein sometimes called the
"Personal Property," the Phase I Leases and the Phase II Leases are herein
sometimes together called the "Leases," the Phase I Intangibles and the Phase II
Intangibles are herein sometimes called the "Intangibles," and the Phase I
Property and the Phase II Property are herein sometimes together called the
"Property."
1.3 Existing Loans; Operating Partnership Loan. The Property shall be
contributed to the Operating Partnership subject to the existing loans secured
by the Property (the "Existing Loans"). Cornerstone agrees to cause the
Operating Partnership to borrow at least $80,000,000 on a non-recourse basis
secured by the Property, the proceeds of which loan (the "Operating Partnership
Loan") will be used to repay a portion of the Existing Loans.
ARTICLE II
CONSIDERATION FOR CONTRIBUTIONS
2.1 Consideration to Contributors. In exchange for the contribution of the
Property, and upon execution and delivery of the Partnership Agreement by
Contributors, Contributors shall receive, at the Closing, a number of Units
(rounded to the nearest whole number) equal to (a) One Hundred Fifty Million
Dollars ($150,000,000) less (b) the sum of (i) all unpaid principal of and
accrued interest and other charges and amounts outstanding under the Existing
Loans and (ii) closing costs, net prorations, and adjustments charged against
Contributors pursuant to this Agreement, divided by (c) Eighteen and 50/100
Dollars ($18.50). Each Contributor shall be entitled to receive the number of
Units as set forth in a written notice from Contributors to Cornerstone given at
least one business day prior to the date of Closing.
In consideration of the contribution of the Property by the Contributors
and subject to the terms and conditions of this Agreement, Cornerstone shall pay
at the Closing (A) all amounts payable under the Existing Loans and (B) those
closing costs charged against Contributors pursuant to clause (b)(ii) above and
shall cause the Operating Partnership to issue the Units in accordance with the
terms of this Agreement; provided, however, that in no event shall the aggregate
amount of such payments by Cornerstone plus the product of $18.50 multiplied by
the number of Units issued by the Operating Partnership (determined as set forth
in this Section 2.1) exceed $150,000,000.
2.2 Distribution of Units. At the Closing, the Operating Partnership shall
issue the Units either to Contributors or, at the option of Contributors,
directly to Contributors' partners (or to partners of such partners) in
accordance with written instructions provided to the Operating Partnership by
Contributors (or Contributors' partners) setting forth the name and address of,
and the number of Units to be received by, each partner, provided that each such
partner (i) makes
4
<PAGE>
each of the representations and warranties set forth in Section 6.10 hereof,
(ii) completes and delivers to Cornerstone an investor questionnaire furnished
by Cornerstone, and (iii) has executed and delivered the Partnership Amendment
(as hereinafter defined).
2.3 Earnest Money. Within one (1) business day following the execution and
delivery of this Agreement, Cornerstone shall deposit with Chicago Title and
Trust Company (the "Escrow Agent"), the sum of Five Million Dollars ($5,000,000)
(the "Earnest Money") in good funds, either by certified bank or cashier's check
or by federal wire transfer. The Escrow Agent shall hold the Earnest Money in an
interest-bearing account in accordance with the terms and conditions of an
escrow agreement entered into among Contributors, Cornerstone and Escrow Agent
simultaneously with the execution of this Agreement. All interest accruing on
such sum shall become a part of the Earnest Money and shall be distributed as
Earnest Money in accordance with the terms of this Agreement. Upon Closing, the
Earnest Money shall be returned to Cornerstone.
ARTICLE III
TITLE AND SURVEY
3.1 Title Examination; Commitment for Title Insurance. Contributor shall
deliver to Cornerstone, an ALTA title insurance commitment (the "Title
Commitment") covering the Land and Improvements from Chicago Title Insurance
Company (the "Title Company"), showing all matters affecting title to the Land
and Improvements and binding the Title Company to issue at Closing an Owner's
Policy of Title Insurance in the amount of $150,000,000 and a Mortgage Policy of
Title Insurance in an amount equal to the principal amount of the Operating
Partnership Loan. Contributors shall instruct the Title Company to deliver to
Cornerstone, Contributors and the surveyor described in Section 3.2 below copies
of the Title Commitment and copies of all instruments referenced in Schedule B
thereof.
3.2 Survey. Contributors shall deliver to Cornerstone and the Title
Company an ALTA survey of the Land and Improvements (the "Survey") prepared by a
surveyor licensed by the State of Illinois and certified to Contributors,
Cornerstone, the Operating Partnership, the lender under the Operating
Partnership Loan and the Title Company in a manner reasonably acceptable to each
such party and reflecting the total area of the Land and Improvements, the
location of all improvements, recorded easements and encroachments, if any,
located thereon and all building and set back lines and other matters of record
with respect thereto.
3.3 Title Objections; Cure of Title Objections. Cornerstone shall have
until the later to occur of (a) the expiration of the Inspection Period and (b)
five (5) business days from Cornerstone's receipt of the Title Commitment,
instruments of record and the Survey (the "Title Date"), to notify Contributors,
in writing, of such objections as Cornerstone may have to anything contained in
the Title Commitment or the Survey other than (i) real property taxes, not yet
due and payable; (ii) local, state and federal laws, ordinances and regulations,
including, without
5
<PAGE>
limitations, building and zoning laws, ordinances and regulations now or
hereafter in effect relating to the Property (provided nothing herein shall
prevent Cornerstone from objecting to any violations thereof prior to the
expiration of the Inspection Period); (iii) right of tenants under leases, (iv)
the liens of the Existing Loans and (v) acts of the Operating Partnership and
parties acting by or through the Operating Partnership all of which shall be
deemed "Permitted Exceptions" hereunder. In addition to the Permitted Exceptions
listed in clauses (i) through (v), any item contained in the Title Commitment or
any matter shown on the Survey to which Cornerstone does not object by the Title
Date or during the period described in Section 3.5 shall be deemed a Permitted
Exception. In the event Cornerstone shall notify Contributors of objections to
title or to matters shown on the Survey on or prior to the Title Date in
accordance with the foregoing, Contributors shall have the right, but not the
obligation, to cure such objections (which cure may be effected either by the
removal, satisfaction or cure of same or, with the consent of Cornerstone (which
consent shall not be unreasonably withheld), by causing the Title Company to
issue an endorsement insuring over loss from the existence of such defect).
Within ten (10) days after receipt of Cornerstone's notice of objections,
Contributors shall notify Cornerstone in writing whether Contributors elect to
attempt to so cure such objections. If Contributors elect to attempt to cure,
and provided that Cornerstone shall not have terminated this Agreement in
accordance with Section 4.2 hereof, Contributors shall have until the date of
Closing to attempt to remove, satisfy or cure the same and for this purpose
Contributors shall be entitled to a reasonable adjournment of the Closing if
additional time is required, but in no event shall the adjournment exceed sixty
(60) days after the date for Closing set forth in Section 5.1 hereof. If
Contributors elect not to cure any objections specified in Cornerstone's notice,
or if Contributors are unable to effect a cure prior to the Closing (or any date
to which the Closing has been adjourned in accordance with this Section 3.3),
Cornerstone shall have the following options: (i) to accept a conveyance of the
Property subject to the Permitted Exceptions, specifically including any matter
objected to by Cornerstone which Contributors are unwilling or unable to cure,
and without reduction in the consideration to be received by Contributors; or
(ii) to terminate this Agreement by sending written notice thereof to
Contributors, and upon delivery of such notice of termination, this Agreement
shall terminate and the Earnest Money shall be returned to Cornerstone, and
thereafter neither party hereto shall have any further rights, obligations or
liabilities hereunder except to the extent that any right, obligation or
liability set forth herein expressly survives termination of this Agreement. If
Contributors notify Cornerstone that Contributors do not intend to attempt to
cure any title objection; or if, having commenced attempts to cure any
objection, Contributors later notify Cornerstone that Contributors will be
unable to effect a cure thereof; Cornerstone shall, within five (5) business
days after such notice has been given, notify Contributors in writing whether
Purchaser shall elect to accept the conveyance under clause (i) or to terminate
this Agreement under clause (ii).
3.4 Conveyance of Title. At Closing, Contributors shall convey and
transfer to the Operating Partnership good and marketable title to the Property,
subject only to the Permitted Exceptions, it being agreed that either fee title
or valid and subsisting easement rights to the County Parcel shall be conveyed
to the Operating Partnership depending on whether the Phase I Owner has acquired
the County Parcel prior to Closing.
6
<PAGE>
3.5 Pre-Closing "Gap" Title Defects. Whether or not Cornerstone shall have
furnished to Contributors any notice of title objections pursuant to the
foregoing provisions of this Agreement, Cornerstone may, at or prior to Closing,
notify Contributors in writing of any objections to title first raised by the
Title Company or the Surveyor between (a) the effective date of the Title
Commitment referred to above, and (b) the date on which the transaction
contemplated herein is scheduled to close. With respect to any objections to
title set forth in such notice, Contributors shall have the same option to cure
and Cornerstone shall have the same option to accept title subject to such
matters or to terminate this Agreement as those which apply to any notice of
objections made by Cornerstone in accordance with Section 3.3. If Contributors
elect to attempt to cure any such matters, the date for Closing shall be
automatically extended by a reasonable additional time to effect such a cure,
but in no event shall the extension exceed sixty (60) days after the date for
Closing set forth in Section 5.1 hereof.
ARTICLE IV
INSPECTION PERIOD
4.1 Right of Inspection. During the period which began on December 3, 1997
and will end at 5:00 p.m. (local time at the Property) on December 22, 1997
(hereinafter referred to as the "Inspection Period"), Cornerstone shall have the
right to make a physical inspection of the Property, to perform tests on the
Property and to examine at such place or places at the Property, in the offices
of the property manager or elsewhere as the same may be located, any operating
files maintained by Contributors or their property manager in connection with
the leasing, maintenance and/or management of the Property, including, without
limitation, the Leases, lease files, Operating Agreements, insurance policies,
bills, invoices, receipts and other general records relating to the income and
expenses of the Property, correspondence, surveys, plans and specifications,
warranties for services and materials provided to the Property, engineering
reports, environmental audits and similar materials, but excluding materials
unrelated to the leasing, maintenance, construction, development, operation
and/or management of the Property such as Contributors' internal memoranda and
income tax records. At Cornerstone's request, Contributors shall afford
Cornerstone the opportunity to discuss the Property and the operation thereof
with Contributors' employees and agents and, after the end of the Inspection
Period, with any tenant under any Lease, at such reasonable times as Cornerstone
may from time to time request provided that Contributors shall be afforded the
opportunity to accompany Cornerstone in connection with any discussion with a
tenant under a Lease. Cornerstone understands and agrees that any on-site
inspections or testing of the Property shall be conducted upon at least
twenty-four (24) hours' prior written notice to Contributors and in the presence
of Contributors or their representative. Any such inspections and testing shall
be performed by companies selected by Cornerstone and approved by Contributors,
which approval shall not be unreasonably withheld. Cornerstone agrees to repair
any damage to the Property and to indemnify Contributor against and hold
Contributor harmless from any claim for liabilities, costs, expenses (including
reasonable attorneys' fees actually incurred) damages or injuries arising out of
or resulting from the
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inspection or testing of the Property by Cornerstone or its consultants or
agents, and notwithstanding anything to the contrary in this Agreement, such
obligation to repair and to indemnify and hold harmless Contributors shall
survive Closing or any termination of this Agreement. All inspections and
testing shall occur at reasonable times agreed upon by Contributors and
Cornerstone and shall be conducted so as not to interfere unreasonably with use
of the Property by Contributor or its tenants.
4.2 Right of Termination. Contributors agree that in the event Cornerstone
determines (such determination to be made in Cornerstone's sole discretion) that
the Property is not suitable for its purposes for any reason, Cornerstone shall
have the right to terminate this Agreement by giving written notice thereof to
Contributors prior to the expiration of the Inspection Period. If Cornerstone
gives such notice of termination within the Inspection Period, this Agreement
shall terminate and the Earnest Money shall be returned to Cornerstone. Time is
of the essence with respect to the provisions of this Section 4.2. If
Cornerstone falls to give Contributors a notice of termination prior to the
expiration of the Inspection Period, Cornerstone shall no longer have any right
to terminate this Agreement under this Section 4.2 and (subject to the
provisions of Section 3.5 and the other conditions to Closing set forth in this
Agreement) shall be bound to proceed to Closing and consummate the transaction
contemplated hereby pursuant to the terms of this Agreement.
4.3 Partnership Agreement; Registration Rights Agreement. (a) Promptly
after the Effective Date, Cornerstone shall deliver to Contributors drafts of
the limited partnership agreement of the Operating Partnership (the "Partnership
Agreement") and a registration rights agreement between Cornerstone and the
Contributors (the "Registration Rights Agreement"). The Partnership Agreement
shall be subject to Contributors' review and approval during the Inspection
Period and shall be attached to this Agreement as Exhibit F. The parties agree
to negotiate the terms of the Registration Rights Agreement in good faith during
the Inspection Period and upon agreement thereof to attach the Registration
Rights Agreement to this Agreement as Exhibit G. In the event the Partnership
Agreement or the Registration Rights Agreement is not finalized by the
expiration of the Inspection Period, this Agreement shall terminate and the
Earnest Money shall be returned to Cornerstone. Notwithstanding the foregoing,
Contributors shall have the right to extend the time period for completion of
the Partnership Agreement or Registration Rights Agreement up to fifteen (15)
additional days by giving written notice thereof to Cornerstone prior to the
expiration of the Inspection Period.
(b) The parties agree that the Partnership Agreement will provide, among
other things, that each Unit is convertible into one share of common stock of
Cornerstone.
(c) The parties agree that the Registration Rights Agreement will provide,
among other things, (i) that within 90 days of written request from any person
or persons who hold at least one-third (1/3) of the Units issued at Closing,
Cornerstone shall cause a shelf registration statement to become effective for
shares issued upon the conversion of the Units which will continue to be
effective for a period of four years after the effective date of such
registration
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statement, (ii) for piggyback registration rights, (iii) for the right of any
person holding at least 10% of the Units issued at Closing to request, at any
time prior to the time a request for a shelf registration statement is made and
at any time after any shelf registration statement is no longer effective, that
Cornerstone cause a registration statement be filed which will remain effective
for a period of at least 180 days, provided that no more than one such request
will be made by any one person prior to the filing of the shelf registration and
no more than one such request will be made by any one person after the shelf
registration statement is no longer effective, and (iv) for black out periods of
no longer than 90 days in length and no more than two such periods in any twelve
(12) month period.
4.4 Completion of Other Exhibits. With respect to any other Exhibits to
this Agreement which are not attached to this Agreement at execution hereof, the
parties agree to complete said Exhibits and attach them to this Agreement prior
to the expiration of the Inspection Period.
ARTICLE V
CLOSING
5.1 Time and Place. The consummation of the transaction contemplated
hereby ("Closing") shall be held at the offices of Contributor's counsel, Katten
Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois, at 10:00
a.m. on a date mutually agreed to by Contributors and Cornerstone, but in no
event later than January 31, 1998. At Closing, Contributors and Cornerstone
shall perform the obligations set forth in, respectively, Section 5.2 and
Section 5.4, the performance of which obligations shall be concurrent
conditions.
5.2 Contributors' Obligations at Closing. At Closing, Contributors shall:
(a) deliver to Operating Partnership duly executed trustee deeds
(the "Deeds") in recordable form, conveying the Land and Improvements,
subject only to the Permitted Exceptions, in form reasonably acceptable to
Contributors and Cornerstone;
(b) deliver to Operating Partnership duly executed bills of sale
conveying the Personal Property without warranty of title or use and
without warranty, expressed or implied, as to merchantability and fitness
for any purpose, in form reasonably acceptable to Contributors and
Cornerstone;
(c) assign to Operating Partnership, and Operating Partnership shall
assume, the landlord/lessor interest in and to the Leases by duly executed
assignment and assumption agreements, in form reasonably acceptable to
Contributors and Cornerstone;
(d) to the extent assignable, assign to Operating Partnership, and
Operating
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Partnership shall assume, Contributors' interest in the Operating
Agreements and the other Intangibles by duly executed assignment and
assumption agreements, in form reasonably acceptable to Contributors and
Cornerstone;
(e) deliver to Operating Partnership such Tenant Estoppels (as
defined in Section 6.4(b) hereof) as are in Contributors' possession;
(f) join with Operating Partnership to execute a notice in form and
content reasonably satisfactory to Cornerstone and Contributors which
notice Operating Partnership shall send to each tenant under each of the
Leases informing such tenant of the sale of the Property and of the
assignment to Operating Partnership of Contributors' interest in, and
obligations under, the Leases (including, if applicable any security
deposits) and directing that all rent and other sums payable after the
Closing under each such Lease shall be paid as set forth in the notice;
(g) deliver to Operating Partnership a certificate, dated as of the
date of Closing, stating that the representations and warranties of each
Contributor contained in this Agreement are true and correct in all
material respects as of the date of Closing (with appropriate
modifications of those representations and warranties made in Section 6.1
or Section 6.2 hereof to reflect any changes therein including without
limitation any changes resulting from actions under Section 6.5 hereof) or
identifying any representation or warranty which is not, or no longer is,
true and correct and explaining the state of facts giving rise to the
change. In no event shall a Contributor be liable to Cornerstone or
Operating Partnership for, or be deemed to be in default hereunder by
reason of, any breach of representation or warranty which results from any
change that (i) occurs between the Effective Date and the date of Closing
and (ii) is expressly permitted under the terms of this Agreement or is
beyond the reasonable control of such Contributor to prevent; provided,
however, that the occurrence of a change which is not permitted hereunder
or is beyond the reasonable control of such Contributor to prevent shall,
if materially adverse to Cornerstone or Operating Partnership, constitute
the non-fulfillment of the condition set forth in Section 5.7(b); if,
despite changes or other matters described in such certificate, the
Closing occurs, such Contributor's representations and warranties set
forth in this Agreement shall be deemed to have been modified by all
statements made in such certificate;
(h) deliver to Cornerstone such evidence as Cornerstone's counsel
and/or the Title Company may reasonably require as to the authority of the
person or persons executing documents on behalf of Contributors;
(i) deliver to Operating Partnership affidavits duly executed by
Contributors stating that each Contributor is not a "foreign person" as
defined in the Federal Foreign Investment in Real Property Tax Act of 1980
and the 1984 Tax Reform Act;
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(j) deliver to Operating Partnership the Leases, Operating
Agreements and licenses and permits, if any, in the possession of
Contributors or Contributors' agents, together with such leasing and
property files and records which are material in connection with the
continued operation, leasing and maintenance of the Property. Operating
Partnership shall cooperate with each Contributor for a period of seven
(7) years after Closing in case of such Contributor's need in response to
any legal requirement, a tax audit, tax return preparation or litigation
threatened or brought against such Contributor, by allowing such
Contributor and its agents or representatives access, upon reasonable
advance notice (which notice shall identify the nature of the information
sought by such Contributor), at all reasonable times to examine and make
copies of any and all instruments, files and records, which right shall
survive the Closing;
(k) deliver to Operating Partnership possession and occupancy of the
Property, subject to the Permitted Exceptions;
(1) deliver to Cornerstone counterparts of an amendment to the
Partnership Agreement (the "Partnership Amendment") executed by
Contributors admitting the Contributors as limited partners in the
Operating Partnership, in form reasonably acceptable to Contributors and
Cornerstone;
(m) deliver to Cornerstone counterparts of the Registration Rights
Agreement executed by Contributors;
(n) deliver to the Title Company a customary title affidavit and
such other instruments as may be required by the Title Company to issue
the title policies to be delivered hereunder;
(o) deliver to Cornerstone evidence of the termination of the
existing management agreements and the lease with Matas Corporation;
(p) deliver to Cornerstone a pay-off letter or other evidence
reasonably acceptable to Cornerstone of the aggregate amounts payable
under the Existing Loans; and
(q) deliver such additional documents as shall be reasonably
required to consummate the transaction contemplated by this Agreement.
5.3 Intentionally Omitted.
5.4 Cornerstone's Obligations at Closing. At Closing, Cornerstone shall or
shall cause Operating Partnership, as applicable, to:
(a) join Contributors in the execution of the instruments described
in Sections 5.2(c), 5.2(d), 5.2(f), 5.2(l) and 5.2(m) above;
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(b) deliver to Contributors the Units as required by Article II
hereof;
(c) deliver to Contributors certified copies of the Partnership
Agreement and the Certificate of Limited Partnership of the Operating
Partnership;
(d) deliver to Contributors such evidence as Contributors' counsel
and/or the Title Company may reasonably require as to the authority of the
person or persons executing documents on behalf of Cornerstone and
Operating Partnership; and
(e) deliver such additional documents as shall be reasonably
required to consummate the transaction contemplated by this Agreement.
5.5 Credits and Prorations.
(a) The following shall be apportioned with respect to the Property
as of 12:01 a.m., on the day of Closing, as if Operating Partnership were
vested with title to the Property during the entire day upon which Closing
occurs:
(i) rents, if any, as and when collected (the term "rents" as
used in this Agreement includes all payments due and payable by
tenants under the Leases, other than payments under the Tenant
Improvement Loans (as hereinafter defined));
(ii) general real estate taxes and assessments levied against
the Property for the years 1997 and 1998;
(iii) payments under the Operating Agreements;
(iv) gas, electricity and other utility charges for which
Contributors are liable, if any, such charges to be apportioned at
Closing on the basis of the most recent meter reading occurring
prior to Closing;
(v) any accrued and unpaid interest under the Tenant
Improvement Loans; and
(vi) any other operating expenses or other items pertaining to
the Property which are customarily prorated between a purchaser and
a seller in the area in which the Property is located.
(b) Notwithstanding anything contained in the foregoing provisions:
(i) At Closing, (A) Contributors shall, at Contributors'
option, either deliver to Operating Partnership any security
deposits actually held by Contributors
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pursuant to the Leases or credit to the account of Operating
Partnership the amount of such security deposits (to the extent such
security deposits are not applied against delinquent rents or
otherwise as provided in the Leases), and (B) Operating Partnership
shall credit to the account of Contributors all refundable cash or
other deposits posted with utility companies serving the Property,
or, at Contributors' option, Contributors shall be entitled to
receive and retain such refundable cash and deposits.
(ii) General real estate taxes for the year 1997, payable in
1998, and for the year 1998, payable in 1999, shall be prorated at
Closing based upon the amount of such taxes reasonably estimated by
Contributor for purposes of tenants' monthly tax payments under the
Leases. Operating Partnership shall be responsible for the payment
of all such taxes. Upon issuance of the actual tax bills, taxes
shall be reprorated as follows: (y) in the event the actual taxes
are higher than the estimate therefor, Operating Partnership shall
look solely to the tenants under the Leases for their share of such
excess and Contributors shall pay to the Operating Partnership the
portion of such excess which is not payable by tenants under the
Leases, and (z) in the event the actual taxes are less than the
estimate therefor, the Operating Partnership shall refund to tenants
the portion of such excess payable to the tenants and shall pay to
Contributors their portion of the balance.
(iii) As to gas, electricity and other utility charges
referred to in Section 5.5(a)(iv) above, Contributors may on notice
to Cornerstone elect to pay one or more of all of said items accrued
to the date hereinabove fixed for apportionment directly to the
person or entity entitled thereto, and to the extent Contributors so
elect, such item shall not be apportioned hereunder, and
Contributor's obligation to pay such item directly in such case
shall survive the Closing.
(iv) Operating Partnership shall be responsible for the
payment of (A) all Tenant Inducement Costs (as hereinafter defined)
and leasing commissions which become due and payable (whether before
or after Closing) as a result of (1) the leases, renewals or
expansions described on Exhibit H-1 hereto, (2) any renewals or
expansions of existing Leases in accordance with the terms of such
Leases occurring after the Effective Date, and (3) any new Leases
entered into after the Effective Date which are approved or deemed
approved by Cornerstone pursuant to Section 6.6(c) hereof. The
Tenant Inducement Costs and leasing commissions payable by the
Operating Partnership with respect to the leases, renewals or
expansions described on Exhibit H-1, as estimated as of the
Effective Date, are listed on said Exhibit H-1. If, as of the date
of Closing, a Contributor shall have paid any Tenant Inducement
Costs or leasing commissions for which Operating Partnership is
responsible pursuant to the foregoing provisions, Operating
Partnership shall reimburse such Contributor therefor at Closing.
Contributors shall be responsible for the payment of all Tenant
Inducement Costs and leasing commissions under the Leases listed on
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Exhibit H-2 hereto which are payable after Closing. The Operating
Partnership shall receive a credit at Closing for any such amounts
which are unpaid as of Closing. For purposes hereof, the term
"Tenant Inducement Costs" shall mean reasonable attorneys' fees and
costs incurred in connection with the preparation and negotiation of
a new Lease or a renewal or expansion of an existing Lease and any
out-of-pocket payments required under a Lease to be paid by the
landlord thereunder to or for the benefit of the tenant thereunder
which is in the nature of a tenant inducement, including
specifically, without limitation, tenant improvement costs, space
planning costs, construction management fees, lease buyout costs,
and moving, design and refurbishment allowances. The term "Tenant
Inducement Costs" shall not include loss of income resulting from
any free rental period, it being agreed that Contributors shall bear
the loss resulting from any free rental period until the date of
Closing and that Cornerstone shall bear such loss from and after the
date of Closing.
(v) Unpaid and delinquent rent collected by Contributors and
Operating Partnership after the date of Closing shall be delivered
as follows: (a) if Contributors collect any unpaid or delinquent
rent for the Property, Contributors shall, within fifteen (15) days
after the receipt thereof, deliver to Operating Partnership any such
rent which Operating Partnership is entitled to hereunder relating
to the date of Closing and any period thereafter, and (b) if
Operating Partnership collects any unpaid or delinquent rent from
the Property, Operating Partnership shall, within fifteen (15) days
after the receipt thereof, deliver to Contributors any such rent
which Contributors are entitled to hereunder relating to the period
prior to the date of Closing. Contributors and Operating Partnership
agree that all rent received by Contributors or Operating
Partnership after the date of Closing shall be applied first to
current rentals and then to delinquent rentals, if any, in inverse
order of maturity. Operating Partnership will make a good faith
effort after Closing to collect all rents in the usual course of its
operation of the Property, but Operating Partnership will not be
obligated to institute any lawsuit or other collection procedures to
collect delinquent rents. In the event that there shall be any rents
or other charges under any Leases which, although relating to a
period prior to Closing, do not become due and payable until after
Closing or are paid prior to Closing but are subject to adjustment
after Closing (such as reimbursements for year end operating expense
reimbursements and the like), then any rents or charges of such type
received by Operating Partnership or its agents or Contributors or
their agents subsequent to Closing shall, to the extent applicable
to a period extending through the Closing, be prorated between
Contributors and Operating Partnership as of Closing and
Contributors' portion thereof shall be remitted promptly to
Contributors by Operating Partnership.
(vi) The aggregate principal amount owed Contributors by the
tenants under the Leases described on Exhibit I hereto (the "Tenant
Improvement Loans")
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for tenant improvement costs previously funded by Contributors, the
reimbursement of which is not included in base rent, shall be
credited to Contributors at Closing. The principal amounts
outstanding under the Tenant Improvement Loans as of the Effective
Date are set forth on said Exhibit I.
(c) The provisions of this Section 5.5 shall survive Closing.
5.6 Closing Costs. Contributors shall pay (a) the fees of any counsel
representing it in connection with this transaction, (b) the fee for the title
examination and the Title Commitment and the premium for the Owner's Policy of
Title Insurance to be issued to Operating Partnership by the Title Company at
Closing, (c) the cost of the Survey, (d) the transfer tax imposed by the State
of Illinois, the County of Lake and the City of Deerfield (if any), and (e)
one-half (1/2) of any escrow fee which may be charged by the Escrow Agent or
Title Company. Cornerstone shall pay (w) the fees of any counsel representing
Cornerstone or Operating Partnership in connection with this transaction; (x)
fees for recording the deeds conveying the Property to Operating Partnership;
(y) the fee for any endorsements required by Cornerstone to the Owner's Policy
of Title Insurance to be issued to Operating Partnership by the Title Company at
Closing; and (z) one-half (1/2) of any escrow fees charged by the Escrow Agent
or Title Company. All other costs and expenses incident to this transaction and
the closing thereof shall be paid by the party incurring same.
5.7 Conditions Precedent to Obligation of Cornerstone. The obligation of
Cornerstone to consummate the transaction hereunder shall be subject to the
fulfillment on or before the date of Closing of all of the following conditions,
any or all of which may be waived by Cornerstone in its sole discretion:
(a) Contributors shall have delivered to Cornerstone or Operating
Partnership all of the items required to be delivered to Cornerstone or
Operating Partnership pursuant to the terms of this Agreement, including
but not limited to, those provided for in Section 5.2.
(b) All of the representations and warranties of Contributors
contained in this Agreement shall be true and correct in all material'
respects as of the date of Closing (with appropriate modifications
permitted under this Agreement).
(c) Contributors shall have performed and observed, in all material
respects, all covenants and agreements of this Agreement to be performed
and observed by Contributors as of the date of Closing.
(d) Cornerstone shall have received a Tenant Estoppel from Jim Beam
Brands Company, Gaylord Container and MMI Companies, Inc. (the "Major
Tenants") and a Tenant Estoppel or Seller Estoppel (as hereinafter
defined) from other tenants of the Improvements such that Cornerstone
shall have received Tenant Estoppels or Seller Estoppels from tenants
occupying at least 70% of the rentable area of the Improvements which is
leased and occupied as of the Effective Date which reflect matters which
are not
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materially inconsistent with the representations and warranties of
Contributors contained in Sections 6.1 (c), 6.1 (m), 6.2(c) and 6.2(m) of
this Agreement.
In the event any of the foregoing conditions are not fulfilled or waived by
Cornerstone by Closing, this Agreement shall terminate and the Earnest Money
shall be returned to Cornerstone.
5.8 Conditions Precedent to Obligation of Contributors. The obligation of
Contributors to consummate the transaction hereunder shall be subject to the
fulfillment on or before the date of Closing of all of the following conditions,
any or all of which may be waived by Contributors in their sole discretion:
(a) Contributors shall have received the Units in the number
provided for in this Agreement.
(b) Cornerstone and Operating Partnership shall have delivered to
Contributors all of the items required to be delivered to Contributors
pursuant to the terms of this Agreement, including but not limited to,
those provided for in Section 5.4.
(c) All of the representations and warranties of Cornerstone
contained in this Agreement shall be true and correct in all material
respects as of the date of Closing.
(d) Cornerstone shall have performed and observed, in all material
respects, all covenants and agreements of this Agreement to be performed
and observed by Cornerstone as of the date of Closing.
In the event any of the foregoing conditions are not fulfilled or waived by
Contributors by Closing, this Agreement shall terminate and the Earnest Money
shall be returned to Cornerstone.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Representations and Warranties of Phase I Owner. Phase I Owner hereby
makes the following representations and warranties to Cornerstone as of the
Effective Date:
(a) Organization; Authority; Binding Obligations; No Violation.
Phase I Owner has been duly organized and is validly existing under the
laws of the State of Illinois. Phase I Owner has full right, authority,
power and capacity: (i) to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by Phase I Owner
pursuant to this Agreement; and (ii) to carry out the transactions
contemplated hereby and thereby. This Agreement and each agreement,
document and instrument executed and delivered by Phase I Owner pursuant
to this Agreement constitutes, or when
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executed and delivered will constitute, the legal, valid and binding
obligation of Phase I Owner enforceable against Phase I Owner in
accordance with their respective terms. The execution, delivery and
performance of this Agreement and each agreement, document and instrument
executed and delivered by Phase I Owner: (x) does not and will not violate
Phase I Owner's organizational documents; (y) does not and will not
violate any federal, state, local or other laws applicable to Phase I
Owner or require Phase I Owner to obtain any approval, consent or waiver
of, or make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made or which does not remain in
effect; and (z) does not and will not violate or conflict with, or result
in a breach of, or constitute a default under, any notice, mortgage,
contract or agreement to which Phase I Owner is a party, or by which Phase
I Owner or any of its properties is bound, other than the documents
evidencing and securing the Existing Loans.
(b) Pending Actions. To Phase I Owner's knowledge, except as
described on Exhibit J-1 hereto, there is no action, suit, arbitration,
unsatisfied order or judgment, governmental investigation or proceeding
pending against the Phase I Property or the transaction contemplated by
this Agreement.
(c) Phase I Leases. The Phase I Leases listed in the Phase I Lease
Schedule constitute all of the leases, licenses and occupancy agreements
affecting the Phase I Property to which the Phase I Owner is a party
(either directly or by successor to ownership of the Building) and, except
as set forth on the Phase I Lease Schedule or on Exhibit K- 1 attached
hereto: (i) the Phase I Leases have not been modified or amended, (ii) as
of the date hereof, to Phase I Owner's knowledge, the Leases are in full
force and effect, and the Phase I Owner has not sent written notice to any
tenant under a Lease claiming that the tenant is in default under its
Lease, which default remains uncured, and the Phase I Owner has no
knowledge of any such default, and (iii) Phase I Owner has delivered to
Cornerstone, true and complete copies of the Phase I Leases. Exhibit L-1
attached hereto sets forth a true and correct schedule of all security
deposits held by Phase I Owner pursuant to the Phase I Leases, specifying
the tenant which deposited such security deposit. No interest is payable
by Phase I Owner to any tenant with respect to such security deposits. To
Phase I Owner's actual knowledge, there are no subleases under, or
assignment of, the Phase I Leases except as set forth on the Phase I Lease
Schedule. Except as set forth in the Phase I Leases, Phase I Owner has not
granted to any person any right to acquire an interest in or to lease, or
any right of first offer or first refusal with respect to, all or any
portion of the Phase I Property. Except as set forth on Exhibit K-1, (A)
each of the tenants under the Phase I Leases has taken possession of its
respective demised premises and has commenced payment of rent, (B) all
work allowances or other sums required to be paid as of the date hereof by
the landlord under the Phase I Leases, and all work required to be
performed by the landlord with respect to the preparation of such demised
premises or the Phase I Property for the tenant's occupancy under the
Phase I Leases, and any other work or other obligation required to be
performed by the landlord under the Leases, and any other work or other
obligation required to be performed by the landlord under the Leases, has
been performed
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and/or paid for, (C) Phase I Owner has not received from any of the
tenants under the Phase I Leases any written notice (i) claiming any
default by the landlord under its Lease that has not been remedied, (ii)
claiming that it is entitled to any offset, setoff or deduction against
rent, (iii) disputing any rent computation that has not been resolved,
(iv) advising Phase I Owner that it intends to vacate its premises upon
the expiration of the term of its Phase I Lease or exercise any right to
terminate its Phase I Lease, and (D) to Phase I Owner's knowledge, Phase I
Owner is not in default of any of its obligations under the Phase I
Leases, no tenant under the Phase I Leases is entitled to any offset,
setoff, or deduction against rent and there are no disputes regarding rent
computations that have not been resolved. In the event that any Tenant
Estoppel delivered to Cornerstone with respect to any Phase I Lease shall
contain any statement of fact, information or other matter which is
inconsistent with the matters stated in Phase I Owner's representations in
this Section 6.l(c), the Tenant Estoppel shall control and Phase I Owner
shall have no liability for any claim based upon a breach of
representation regarding such statement of fact, information or other
matter contained in the Tenant Estoppel. Notwithstanding anything to the
contrary contained in this Agreement, Phase I Owner does not represent or
warrant that any particular Phase I Lease will be in force or effect at
Closing or that the tenants under the Phase I Leases will have performed
their obligations thereunder. The termination of any Phase I Lease prior
to Closing by reason of the tenant's default shall not affect the
obligations of Cornerstone under this Agreement in any manner or entitle
Cornerstone to an abatement of or credit against the Purchase Price or
give rise to any other claim on the part of Cornerstone. The Lease with
Matas Corporation shall terminate as of Closing.
(d) Lease Brokerage. Phase I Owner has paid all leasing commissions
heretofore due and payable with respect to the Phase I Leases and, except
as set forth on Exhibit M-1, (i) to Phase I Owner's knowledge, no person
is entitled to any leasing commission in connection with the extension or
renewal of any Phase I Lease or in connection with the exercise by any
tenant of any expansion or extension option contained in any of the Phase
I Leases, (ii) neither the Phase I Owner nor the Phase I Property is
subject to any "protection list" or similar obligation with respect to the
future leasing of the Phase I Property, and (iii) Phase I Owner has not
received any notice of any valid claim for commission with respect to the
Phase I Leases which has not been paid.
(e) No Violations. To Phase I Owner's knowledge, Phase I Owner has
not received prior to the Effective Date any written notification from any
governmental or public authority (i) that the Phase I Property is in
violation of any applicable fire, health, building, use, occupancy or
zoning laws where such violation remains outstanding and, if unaddressed,
would have a material adverse effect on the use of the Phase I Property as
currently owned and operated or (ii) that any work is required to be done
upon or in connection with the Phase I Property, where such work remains
outstanding and, if unaddressed, would have a material adverse effect on
the use of the Phase I Property as currently owned and operated.
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(f) Taxes and Assessments. True and complete copies of the most
recent real estate tax bills for the Phase I Property have been delivered
to Cornerstone.
(g) Condemnation. No condemnation proceedings relating to the Phase
I Property are pending or, to Phase I Owner's knowledge, threatened.
(h) Insurance. Phase I Owner has not received any written notice
from any insurance company or board of fire underwriters of any defects or
inadequacies in or on the Phase I Property or any part or component
thereof that would materially and adversely affect the insurability of the
Phase I Property or cause any material increase in the premiums for
insurance for the Phase I Property that have not been cured or repaired.
(i) Environmental Matters. Except as set forth in any environmental
assessment reports in Phase I Owner's possession and disclosed to
Cornerstone or as otherwise disclosed to Cornerstone, to Phase I Owner's
knowledge, Phase I Owner has received no written notification that any
governmental or quasi-governmental authority has determined that there are
any violations of environmental statutes, ordinances or regulations
affecting the Phase I Property. Phase I Owner has delivered or made
available to Cornerstone true and correct copies of all engineering,
environmental and similar reports relating to the Phase I Property which
are in Phase I Owner's possession. As used herein, "Hazardous Substances"
means all hazardous or toxic materials, substances, pollutants,
contaminants, or wastes currently identified as a hazardous substance or
waste in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (commonly known as "CERCLA"), as amended, the
Superfund Amendments and Reauthorization Act (commonly known as "SARA"),
the Resource Conservation and Recovery Act (commonly known as "RCRA"), or
any other federal, state or local legislation or ordinances applicable to
the Property.
(j) Operating Agreements. The Operating Agreements Schedule lists
all service, maintenance, supply and management contracts affecting the
Phase I Property in effect on the date hereof, and (i) except as set forth
on the Operating Agreements Schedule, the Operating Agreements have not
been modified or amended and are in full force and effect, (ii) Phase I
Owner has delivered to Cornerstone true and complete copies of the
Operating Agreements and (iii) except as set forth on the Operating
Agreements Schedule, Phase I Owner has not sent written notice to any
contractor under any Operating Agreement claiming such party to be in
default, which default remains uncured.
(k) Licenses and Permits. All licenses and permits from governmental
authorities necessary for the operation or maintenance of the Phase I
Property have been issued and, Phase I Owner has not received written
notice of the termination or expiration thereof or any violations
thereunder, and to the knowledge of Phase I Owner, the same are in full
force and effect.
(l) Employees. Phase I Owner does not directly employ any employees
who
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work at the Phase I Property.
(m) Rent Roll. Attached hereto as Exhibit N-1 is a true and correct
rent roll for the Phase I Property (specifying the name of the tenant, the
space leased, the amount of base rent payable, the tenant's share of
escalations, the amount of any arrearages (and the age of such
arrearages), and the commencement and expiration dates of each Phase I
Lease).
(n) Financial Statements. To Phase I Owner's knowledge, the
financial statements of the Phase I Property heretofore delivered to
Cornerstone by or on behalf of Phase I Owner are true and correct in all
material respects as to the period to which they relate.
(o) Beneficial Interest. Phase I Owner is the sole owner of the
beneficial interest in the Illinois land trust which holds title to the
Phase I Land and the Phase I Improvements, free and clear of any liens,
encumbrances or rights of others, other than the holder of the Existing
Loan which is secured by the Phase I Property.
6.2 Representations and Warranties of Phase II Owner. Phase II Owner
hereby makes the following representations and warranties to Cornerstone as of
the Effective Date:
(a) Organization; Authority; Binding Obligations; No Violation.
Phase II Owner has been duly organized and is validly existing under the
laws of the State of Illinois. Phase II Owner has full right, authority,
power and capacity: (i) to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by Phase II Owner
pursuant to this Agreement; and (ii) to carry out the transactions
contemplated hereby and thereby. This Agreement and each agreement,
document and instrument executed and delivered by Phase II Owner pursuant
to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of Phase II Owner
enforceable against Phase II Owner in accordance with their respective
terms. The execution, delivery and performance of this Agreement and each
agreement, document and instrument executed and delivered by Phase II
Owner: (x) does not and will not violate Phase II Owner's organizational
documents; (y) does not and will not violate any federal, state, local or
other laws applicable to Phase II Owner or require Phase II Owner to
obtain any approval, consent or waiver of, or make any filing with, any
person or authority (governmental or otherwise) that has not been obtained
or made or which does not remain in effect; and (z) does not and will not
violate or conflict with, or result in a breach of, or constitute a
default under, any notice, mortgage, contract or agreement to which Phase
II Owner is a party, or by which Phase II Owner or any of its properties
is bound, other than the documents evidencing and securing the Existing
Loans.
(b) Pending Actions. To Phase II Owner's knowledge, except as
described on Exhibit J-2 hereto, there is no action, suit, arbitration,
unsatisfied order or judgment, governmental investigation or proceeding
pending against the Phase H Property or the
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transaction contemplated by this Agreement.
(c) Phase II Leases. The Phase II Leases listed in the Phase II
Lease Schedule constitute all of the leases, licenses and occupancy
agreements affecting the Phase II Property to which the Phase II Owner is
a party (either directly or by successor to ownership of the Building)
and, except as set forth on the Phase II Lease Schedule or on Exhibit K-2
attached hereto: (i) the Phase II Leases have not been modified or
amended, (ii) as of the date hereof, to Phase II Owner's knowledge, the
Leases are in full force and effect, and the Phase II Owner has not sent
written notice to any tenant under a Lease claiming that the tenant is in
default under its Lease, which default remains uncured, and the Phase II
Owner has no knowledge of any such default, and (iii) Phase II Owner has
delivered to Cornerstone, true and complete copies of the Phase 11 Leases.
Exhibit L-2 attached hereto sets forth a true and correct schedule of all
security deposits held by Phase II Owner pursuant to the Phase II Leases,
specifying the tenant which deposited such security deposit. No interest
is payable by Phase II Owner to any tenant with respect to such security
deposits. To Phase II Owner's actual knowledge, there are no subleases
under, or assignment of, the Phase II Leases except as set forth on the
Phase II Lease Schedule. Except as set forth in the Phase II Leases, Phase
II Owner has not granted to any person any right to acquire an interest in
or to lease, or any right of first offer or first refusal with respect to,
all or any portion of the Phase II Property. Except as set forth on
Exhibit K-2, (A) each of the tenants under the Phase II Leases has taken
possession of its respective demised premises and has commenced payment of
rent, (B) all work allowances or other sums required to be paid as of the
date hereof by the landlord under the Phase II Leases, and all work
required to be performed by the landlord with respect to the preparation
of such demised premises or the Phase II Property for the tenant's
occupancy under the Phase II Leases, and any other work or other
obligation required to be performed by the landlord under the Leases, and
any other work or other obligation required to be performed by the
landlord under the Leases, has been performed and/or paid for, (C) Phase
II Owner has not received from any of the tenants under the Phase II
Leases any written notice (i) claiming any default by the landlord under
its Lease that has not been remedied, (ii) claiming that it is entitled to
any offset, setoff or deduction against rent, (iii) disputing any rent
computation that has not been resolved or (iv) advising Phase II Owner
that it intends to vacate its premises upon the expiration of the term of
its Phase II Lease or exercise any right to terminate its Phase II Lease,
and (D) to Phase II Owner's knowledge, as Phase II Owner is not in default
of any of its obligations under the Phase II Leases, no tenant under the
Phase II Leases is entitled to any offset, setoff, or deduction against
rent and there are no disputes regarding rent computations that have not
been resolved. In the event that any Tenant Estoppel delivered to
Cornerstone with respect to any Phase II Lease shall contain any statement
of fact, information or other matter which is inconsistent with the
matters stated in Phase II Owner's representations in this Section 6.l(c),
the Tenant Estoppel shall control and Phase II Owner shall have no
liability for any claim based upon a breach of representation regarding
such statement of fact, information or other matter contained in the
Tenant Estoppel. Notwithstanding anything to the contrary contained in
this Agreement, Phase II Owner does
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not represent or warrant that any particular Phase 11 Lease will be in
force or effect at Closing or that the tenants under the Phase II Leases
will have performed their obligations thereunder. The termination of any
Phase II Lease prior to Closing by reason of the tenant's default shall
not affect the obligations of Cornerstone under this Agreement in any
manner or entitle Cornerstone to an abatement of or credit against the
Purchase Price or give rise to any other claim on the part of Cornerstone.
(d) Lease Brokerage. Phase II Owner has paid all leasing commissions
heretofore due and payable with respect to the Phase II Leases and, except
as set forth on Exhibit M-2, (i) to Phase II Owner's knowledge, no person
is entitled to any leasing commission in connection with the extension or
renewal of any Phase II Lease or in connection with the exercise by any
tenant of any expansion or extension option contained in any of the Phase
II Leases, (ii) neither the Phase II Owner nor the Phase II Property is
subject to any "protection list" or similar obligation with respect to the
future leasing of the Phase II Property, and (iii) Phase II Owner has not
received any notice of any valid claim for commission with respect to the
Phase II Leases which has not been paid.
(e) No Violations. To Phase II Owner's knowledge, Phase II Owner has
not received prior to the Effective Date any written notification from any
governmental or public authority (i) that the Phase II Property is in
violation of any applicable fire, health, building, use, occupancy or
zoning laws where such violation remains outstanding and, if unaddressed,
would have a material adverse effect on the use of the Phase II Property
as currently owned and operated or (ii) that any work is required to be
done upon or in connection with the Phase II Property, where such work
remains outstanding and, if unaddressed, would have a material adverse
effect on the use of the Phase II Property as currently owned and
operated.
(f) Taxes and Assessments. True and complete copies of the most
recent real estate tax bills for the Phase II Property have been delivered
to Cornerstone.
(g) Condemnation. No condemnation proceedings relating to the Phase
II Property are pending or, to Phase II Owner's knowledge, threatened.
(h) Insurance. Phase II Owner has not received any written notice
from any insurance company or board of fire underwriters of any defects or
inadequacies in or on the Phase II Property or any part or component
thereof that would materially and adversely affect the insurability of the
Phase II Property or cause any material increase in the premiums for
insurance for the Phase II Property that have not been cured or repaired.
(i) Environmental Matters. Except as set forth in any environmental
assessment reports in Phase II Owner's possession and disclosed to
Cornerstone or as otherwise disclosed to Cornerstone, to Phase II Owner's
knowledge, Phase II Owner has received no written notification that any
governmental or quasi-governmental authority has determined
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that there are any violations of environmental statutes, ordinances or
regulations affecting the Phase II Property. Phase II Owner has delivered
or made available to Cornerstone true and correct copies of all
engineering, environmental and similar reports relating to the Phase II
Property which are in Phase II Owner's possession.
(j) Operating Agreements. The Operating Agreements Schedule lists
all service, maintenance, supply and management contracts affecting the
Phase II Property in effect on the date hereof, and (i) except as set
forth on the Operating Agreements Schedule, the Operating Agreements have
not been modified or amended and are in full force and effect, (ii) Phase
II Owner has delivered to Cornerstone true and complete copies of the
Operating Agreements and (iii) except as set forth on the Operating
Agreements Schedule, Phase II Owner has not sent written notice to any
contractor under any Operating Agreement claiming such party to be in
default, which default remains uncured.
(k) Licenses and Permits. All licenses and permits from governmental
authorities necessary for the operation or maintenance of the Phase II
Property have been issued and, Phase II Owner has not received written
notice of the termination or expiration thereof or any violations
thereunder, and to the knowledge of Phase II Owner, the same are in full
force and effect.
(l) Employees. Phase II Owner does not directly employ any employees
who work at the Phase II Property.
(m) Rent Roll. Attached hereto as Exhibit N-2 is a true and correct
rent roll for the Phase II Property (specifying the name of the tenant,
the space leased, the amount of base rent payable, the tenant's share of
escalations, the amount of any arrearages (and the age of such
arrearages), and the commencement and expiration dates of each Phase II
Lease).
(n) Financial Statements. To Phase II Owner's knowledge, the
financial statements of the Phase II Property heretofore delivered to
Cornerstone by or on behalf of Phase II Owner are true and correct in all
material respects as to the period to which they relate.
(o) Beneficial Interest. Phase II Owner is the sole owner of the
beneficial interest in the Illinois land trust which holds title to the
Phase II Land and the Phase II Improvements, free and clear of any liens,
encumbrances or rights of others, other than the holder of the Existing
Loan which is secured by the Phase II Property.
6.3 Intentionally Omitted.
6.4 Knowledge Defined. References to the "knowledge" of Phase I Owner and
Phase II Owner shall refer only to the actual knowledge of Myron Levin and Arvin
L. Reiger, and shall
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not be construed, by imputation or otherwise, to refer to the knowledge of Phase
I Owner or Phase II Owner or any affiliate of either of them, to any property
manager, or to any other officer, agent, manager, representative or employee of
Phase I Owner or Phase II Owner or any affiliate or to impose upon such persons
any duty to investigate the matter to which such actual knowledge, or the
absence thereof, pertains.
6.5 Survival of Contributors' Representations and Warranties. The
representations and warranties of Contributors set forth in Sections 6.1 and
6.2, as updated by the certificates of Contributors to be delivered to
Cornerstone at Closing in accordance with Section 5.2(g) hereof, and the
representations and warranties of Manager set forth in Section 6.3, shall
survive Closing for a period of one year. No claim for a breach of any
representation or warranty of Contributors shall be actionable or payable (a) if
the breach in question results from or is based on a condition, state of facts
or other matter which was known to Cornerstone prior to Closing and contained in
any written documents, reports, instruments or correspondence delivered to
Cornerstone by Contributors or made available by Contributors for Cornerstone's
review or prepared by any of Cornerstone's consultants or employees, (b) unless
the valid claims for all such breaches collectively aggregate more than Three
Hundred Thousand Dollars ($300,000), in which event the full amount of such
claims shall be actionable, and (c) unless written notice containing a
description of the specific nature of such breach shall have been given by
Cornerstone to Contributors and Manager prior to the expiration of said one year
period and an action shall have been commenced by Cornerstone against
Contributors or Manager within six months thereafter.
6.6 Covenants of Contributors. Contributors hereby covenant with
Cornerstone as follows:
(a) From the Effective Date hereof until the Closing or earlier
termination of this Agreement, Contributors shall operate and maintain the
Property in a manner generally consistent with the manner in which
Contributors have operated and maintained the Property prior to the date
hereof.
(b) Contributors shall use reasonable efforts (but without
obligation to incur any cost or expense) to obtain and deliver to
Cornerstone prior to Closing, a written estoppel certificate in the form
of Exhibit E attached hereto and made a part hereof as modified for
specific lease terms and circumstances signed by each tenant occupying
space in the Improvements. The signed certificates are referred to herein
as the "Tenant Estoppels". In the event that any such Tenant Estoppels are
not so obtained and delivered, Phase I Owner or Phase II Owner, as
applicable, shall have the right (but not the obligation) to execute and
deliver to Purchaser at the Closing a certificate (hereinafter referred to
as a "Seller Estoppel") in favor of the Operating Partnership warranting
that the items set forth in Exhibit E with respect to tenants (other than
the Major Tenants) under Leases for which a Tenant Estoppel has not been
obtained are true, provided that: (i) the Seller Estoppels shall survive
the Closing and shall automatically expire and terminate on the first
anniversary of the Closing if no claim has theretofore been made
thereunder or earlier upon receipt by the
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Operating Partnership of a Tenant Estoppel from the applicable tenant, and
(ii) any statement of facts which is not contained in such tenant's Lease
shall be made to the knowledge of Phase I Owner or Phase II Owner, as
applicable.
(c) A copy of any renewal or expansion of an existing Lease or of
any new Lease which Contributor wishes to execute between the Effective
Date and the date of Closing will be submitted to Cornerstone prior to
execution by Contributor. Cornerstone agrees to notify Contributor in
writing within five (5) business days after its receipt thereof of either
its approval (which approval will not be unreasonably withheld) or
disapproval, including all Tenant Inducement Costs and leasing commissions
to be incurred in connection therewith. In the event Cornerstone fails to
notify Contributor in writing of its approval or disapproval within the
five (5) day time period for such purpose set forth above, such failure
shall be deemed the approval by Cornerstone.
6.7 Representations and Warranties of Cornerstone. Cornerstone hereby
represents and warrants to Contributors and Manager:
(a) Authority; Binding Obligations; and No Violation. Cornerstone
has full right, authority, power and capacity: (i) to enter into this
Agreement, the Partnership Agreement and each other agreement, document
and instrument to be executed and delivered by or on behalf of Cornerstone
and the Operating Partnership pursuant to this Agreement; and (ii) to
carry out the transactions contemplated hereby and thereby. This
Agreement, the Partnership Agreement and each other agreement, document
and instrument executed and delivered by or on behalf of Cornerstone and
the Operating Partnership pursuant to this Agreement constitutes, or when
executed and delivered will constitute, the legal, valid and binding
obligation of Cornerstone and the Operating Partnership, as applicable,
each enforceable in accordance with their respective terms. The execution,
delivery and performance of this Agreement, the Partnership Agreement and
each other agreement, document and instrument executed and delivered by or
on behalf of Cornerstone and the Operating Partnership: (x) does not and
will not violate Cornerstone's or the Operating Partnership's
organizational documents; (y) does not and will not violate any foreign,
federal, state, local or other laws applicable to Cornerstone or the
Operating Partnership or require Cornerstone or the Operating Partnership
to obtain any approval, consent or waiver of, or make any filing with, any
person or authority (governmental or otherwise) that has not been obtained
or made or which does not remain in effect; and (z) does not and will not
violate or conflict with, or result in a breach of, or constitute a
default under, any note, mortgage, contract or agreement to which
Cornerstone or the Operating Partnership is a party, or by which
Cornerstone or Operating Partnership or any of their properties is bound.
(b) Units and Shares. The Units to be issued upon contribution of
the Property and the Management Agreements will have been duly authorized
and validly issued, free and clear of all mortgages, pledges, liens,
security interests, encumbrances and restrictions of every nature, except
as provided in this Agreement, the Partnership Agreement and the
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Registration Rights Agreement. The shares of common stock of Cornerstone
that may be issued upon conversion of the Units under the terms of the
Partnership Agreement will have been duly authorized and when issued in
accordance with the terms of the Partnership Agreement, will be validly
issued and fully paid and non assessable.
(c) No Litigation. There is no action, suit, arbitration,
unsatisfied order or judgment, government investigation or proceeding
pending against Cornerstone which, if adversely determined, could
individually or in the aggregate materially interfere with the
consummation of the transaction contemplated by this Agreement.
(d) REIT Qualification. Cornerstone is qualified, has been qualified
since the year ended December 31, 1983, and has been operating since the
beginning of the current fiscal year, in a manner that would continue to
permit it to be qualified, and intends to operate so it continues to be
qualified, as a real estate investment trust under Section 856 et seq. of
the Code.
(e) Tax Returns and Financial Statements. Cornerstone's federal
income tax returns and financial statements for the calendar years 1995
and 1996, have been provided to Contributors and together with all interim
financial statements for 1997 heretofore furnished to Contributors are
true, correct and complete.
(f) No Material Adverse Change. Since September 30, 1997, there has
not been any material adverse change in the business, operations,
properties, assets or condition of Cornerstone or any event, condition, or
contingency that is likely to result in such a material adverse change.
(g) SEC Reports. Cornerstone has filed all forms, reports and
documents required to be filed with the SEC since December 31, 1996,
including (i) its Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, (ii) its Quarterly Reports on Form 10-Q for the periods
ended March 31, June 30 and September 30, 1997, (iii) all other reports or
registration statements filed by Cornerstone with the SEC since December
31, 1996, and (iv) all amendments and supplements to all such reports and
registration statements filed by Contributor with the SEC. All such
required forms, reports and documents (including those enumerated in
clauses (i) through (iv) of the preceding sentence) are referred to herein
as the "SEC Reports".
(h) Operating Partnership. Upon formation, the Operating Partnership
(i) will be a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware, (ii) will have all
requisite partnership power and authority to own, operate, lease and
encumber its properties and conduct the business for which it is formed,
and (iii) will be duly qualified to do business and be in good standing in
each jurisdiction in which the ownership of its property or the conduct of
its business requires such qualification. The sole general partner of the
Operating Partnership will be Cornerstone.
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6.8 Survival of Cornerstone's Representations and Warranties. The
representations and warranties of Cornerstone set forth in Section 6.7 shall
survive Closing and shall be a continuing representation and warranty without
limitation.
6.9 Covenants of Cornerstone. Cornerstone hereby covenants with
Contributors as follows:
(a) Cornerstone shall, in connection with its investigation of the
Property during the Inspection Period, inspect the Property for the
presence of Hazardous Substances (as defined in Section 6. 1 (i) hereof),
and shall furnish to Contributors copies of any reports received by
Cornerstone in connection with any such inspection. Cornerstone shall also
furnish to Contributors copies of any other reports received by
Cornerstone relating to any other inspections of the Property conducted on
Cornerstone's behalf, if any (including, specifically, without limitation,
any reports analyzing compliance of the Property with the provisions of
the Americans with Disabilities Act ("ADA"), 42 U.S.C. ss.12101, et seq.,
if applicable).
6.10 Investment Representations and Warranties. Each Contributor
represents and warrants as follows:
(a) It is an "accredited investor" within the meaning of Rule 501
promulgated under Regulation D of the Securities Act of 1933, as amended
(the "Securities Act"). It understands the risks of, and other
considerations relating to, the purchase of the Units. It, by reason of
its business and financial experience, together with the business and
financial experience of those persons, if any, retained by it to represent
or advise it with respect to its investment in the Units, has such
knowledge, sophistication and experience in financial and business matters
and in making investment decisions of this type that it is capable of
evaluating the merits and risks of an investment in the Operating
Partnership and of making an informed investment decision, (ii) is capable
of protecting its own interest or has engaged representatives or advisors
to assist it in protecting its interest and (iii) is capable of bearing
the economic risk of such investment.
(b) The Units to be issued to it will be acquired by it for its own
account for investment only and not with a view to, or with any intention
of, a distribution or resale thereof, in whole or in part, or the grant of
any participation therein.
(c) Each Contributor acknowledges that (i) the Units to be issued to
it have not been registered under the Securities Act or state securities
laws by reason of a specific exemption or exemptions from registration
under the Securities Act and applicable state securities laws, (ii)
Cornerstone's and the Operating Partnership's reliance on such exemptions
is predicated in part on the accuracy and completeness of the
representations and warranties of it contained herein, (iii) such Units,
therefore, cannot be resold unless registered under the Securities Act and
applicable state securities laws, or unless an
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exemption from registration is available, (iv) there is no public market
for such Units, and (v) the Operating Partnership has no obligation or
intention to register such Units for resale under the Securities Act or
any state securities laws or to take any action that would make available
any exemption from the registration requirements of such laws. Each
Contributor hereby acknowledges that because of the restrictions on
transfer or assignment of such Units to be issued hereunder which are set
forth in this Agreement and in the Partnership Agreement, it may have to
bear the economic risk of the investment commitment evidenced by this
Agreement and any Units purchased hereby for an indefinite period of time,
although (x) under the terms of the Partnership Agreement, Units may be
converted into common stock of Cornerstone and (y) the holder of any such
common stock issued upon a presentation of Units for conversion will be
afforded certain rights to have such common stock registered for resale
under the Securities Act or applicable state securities laws under the
Registration Rights Agreement.
(d) Contributors are sophisticated investors and their respective
decisions to acquire the Units (and upon conversion Cornerstone common
stock) are based upon their independent evaluations of publicly available
information regarding the financial condition, operations, properties and
prospects of Cornerstone, and other facts that Contributors deem material
to Contributors' decision. Contributors have not relied in entering into
this Agreement upon any oral or written information from Cornerstone, or
any of its respective employees, affiliates, agents or representatives,
other than the representations and warranties of Cornerstone contained
herein and Cornerstone's periodic public filings with the Securities
Exchange Commission. Contributors have conducted such due diligence and
analysis as Contributors deemed necessary, proper or appropriate in order
to make a complete informed decision with respect to its acquisition of
the Units. Contributors acknowledge that the Units may have limited or no
liquidity until converted to shares of Cornerstone common stock.
ARTICLE VII
DEFAULT
7.1 Default by Cornerstone. If Cornerstone defaults for any reason other
than Contributors' default or the permitted termination of this Agreement by
Contributors or Cornerstone as herein expressly provided, Contributors shall be
entitled, as their sole remedy, to terminate this Agreement and receive the
Earnest Money as liquidated damages for the breach of this Agreement, it being
agreed between the parties hereto that the actual damages to Contributors in the
event of such breach are impractical to ascertain and the amount of the Earnest
Money is a reasonable estimate thereof.
7.2 Default by Contributors or Manager. In the event that Contributors
fail to consummate this Agreement for any reason other than Cornerstone's
default or the permitted termination of this Agreement by Contributors or
Cornerstone as herein expressly provided,
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Cornerstone shall be entitled, as its sole remedy, either (a) to receive the
return of the Earnest Money, which return shall operate to terminate this
Agreement and release Contributors from any and all liability hereunder, or (b)
to enforce specific performance of Contributors' obligations to execute the
documents required to contribute the Property to the Operating Partnership, it
being understood and agreed that the remedy of specific performance shall not be
available to enforce any other obligations of Contributors hereunder.
Cornerstone expressly waives its rights to seek damages in the event of
Contributors' default hereunder. Cornerstone shall be deemed to have elected to
terminate this Agreement and receive back the Earnest Money if Cornerstone fails
to file suit for specific performance against Contributors in a court having
jurisdiction in the county and state in which the Property is located, on or
before sixty (60) days following the date upon which Closing was to have
occurred.
ARTICLE VIII
RISK OF LOSS
8.1 Minor Damage. In the event of loss or damage to the Property or any
portion thereof which is not "major" (as hereinafter defined), this Agreement
shall remain in full force and effect provided Contributors perform any
necessary repairs or, at Contributors' option, assigns to the Operating
Partnership all of Contributors' right, title and interest to any claims and
proceeds Contributors may have with respect to any casualty insurance policies
or condemnation awards relating to the premises in question. In the event that
Contributors elect to perform repairs upon the Property, Contributors shall use
reasonable efforts to complete such repairs promptly and the date of Closing
shall be extended a reasonable time in order to allow for the completion of such
repairs. If Contributors elect to assign a casualty claim to the Operating
Partnership, the Property Acquisition Value shall be reduced by an amount equal
to the deductible amount under Contributors' insurance policy. Upon Closing,
full risk of loss with respect to the Property shall pass to the Operating
Partnership.
8.2 Major Damage. In the event of a "major" loss or damage, either
Contributors or Cornerstone may terminate this Agreement by written notice to
the other party, in which event the Earnest Money shall be returned to
Cornerstone. If neither Contributors nor Cornerstone elects to terminate this
Agreement within ten (10) days after Contributors send Cornerstone written
notice of the occurrence of major loss or damage, then Contributors and
Cornerstone shall be deemed to have elected to proceed with Closing, in which
event Contributors shall, at Contributors' option, either (a) perform any
necessary repairs, or (b) assign to the Operating Partnership all of
Contributors' right, title and interest to any claims and proceeds Contributors
may have with respect to any casualty insurance policies or condemnation awards
relating to the premises in question. In the event that Contributors elect to
perform repairs upon the Property, Contributors shall use reasonable efforts to
complete such repairs promptly and the date of Closing shall be extended a
reasonable time in order to allow for the completion of such repairs. If
Contributors elect to assign a casualty claim to the Operating Partnership, the
Property Acquisition Value shall be reduced by
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an amount equal to the deductible amount under Contributors' insurance policy.
Upon Closing, full risk of loss with respect to the Property shall pass to the
Operating Partnership.
8.3 Definition of "Major" Loss or Damage. For purposes of Sections 8.1 and
8.2, "major" loss or damage refers to the following: (i) loss or damage to the
Property or any portion thereof such that the cost of repairing or restoring the
premises in question to a condition substantially identical to that of the
premises in question prior to the event of damage would be, in the opinion of an
architect selected by Contributors and reasonably approved by Cornerstone, equal
to or greater than Seven Million Five Hundred Thousand and No/100 Dollars
($7,500,000.00), and (ii) any loss due to a condemnation which permanently and
materially impairs the current use of the Property. If Cornerstone does not give
notice to Contributors of Cornerstone's reasons for disapproving an architect
within five (5) business days after receipt of notice of the proposed architect,
Cornerstone shall be deemed to have approved the architect selected by
Contributors.
ARTICLE IX
COMMISSIONS
9.1 Brokerage Commissions. Each party represents to the other that there
has been no broker or finder engaged in connection with the transaction
contemplated hereby other than Julian Taft & Downey, Inc. (the "Broker").
Contributors agree to pay any fee payable to Broker pursuant to a separate
agreement between Contributors and Broker. Each party agrees that should any
claim be made for brokerage commissions or finder's fees by any broker or finder
other than the Broker by, through or on account of any acts of said party or its
representatives, said party will indemnify and hold the other party free and
harmless from and against any and all loss, liability, cost, damage and expense
in connection therewith. The provisions of this paragraph shall survive Closing.
ARTICLE X
DISCLAIMERS AND WAIVERS
10.1 No Reliance on Documents. Except as expressly stated herein,
Contributors make no representation or warranty as to the truth, accuracy or
completeness of any materials, data or information delivered by Contributors to
Cornerstone in connection with the transaction contemplated hereby. Cornerstone
acknowledges and agrees that all materials, data and information delivered by
Contributors to Cornerstone in connection with the transaction contemplated
hereby are provided to Cornerstone as a convenience only and that any reliance
on or use of such materials, data or information by Cornerstone shall be at the
sole risk of Cornerstone, except as otherwise expressly stated herein. Without
limiting the generality of the foregoing provisions, Cornerstone acknowledges
and agrees that (a) any environmental or other report with respect to the
Property which is delivered by Contributors to Cornerstone shall be for general
informational purposes only,
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<PAGE>
(b) Cornerstone shall not have any right to rely on any such report delivered by
Contributors to Cornerstone, but rather will rely on its own inspections and
investigations of the Property and any reports commissioned by Cornerstone with
respect thereto, and (c) neither Contributors, any affiliate of Contributors,
Manager nor the person or entity which prepared any such report delivered by
Contributors to Cornerstone shall have any liability to Cornerstone for any
inaccuracy in or omission from any such report.
10.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, IT IS
UNDERSTOOD AND AGREED THAT CONTRIBUTORS ARE NOT MAKING AND HAVE NOT AT ANY TIME
MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR
IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE, ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL
OR ENVIRONMENTAL CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS,
VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH
GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE PROPERTY DOCUMENTS
OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF CONTRIBUTORS TO
CORNERSTONE, OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY. CORNERSTONE
ACKNOWLEDGES AND AGREES THAT UPON CLOSING CONTRIBUTORS SHALL CONVEY TO OPERATING
PARTNERSHIP AND OPERATING PARTNERSHIP SHALL ACCEPT THE PROPERTY "AS IS, WHERE
IS, WITH ALL FAULTS", EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS
AGREEMENT. CORNERSTONE HAS NOT RELIED AND WILL NOT RELY ON, AND CONTRIBUTORS ARE
NOT LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES,
STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR
RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, PROPERTY
INFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY) MADE OR FURNISHED
BY CONTRIBUTORS, THE MANAGER OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR AGENT
REPRESENTING OR PURPORTING TO REPRESENT CONTRIBUTORS, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN
THIS AGREEMENT. CORNERSTONE REPRESENTS TO CONTRIBUTORS THAT CORNERSTONE HAS
CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE
PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL
CONDITIONS THEREOF, AS CORNERSTONE DEEMS NECESSARY TO SATISFY ITSELF AS TO THE
CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION
TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED
FROM THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION
PROVIDED BY OR ON BEHALF OF CONTRIBUTORS OR THEIR AGENTS OR EMPLOYEES WITH
RESPECT THERETO, OTHER THAN SUCH REPRESENTATIONS,
31
<PAGE>
WARRANTIES AND COVENANTS OF CONTRIBUTORS AS ARE EXPRESSLY SET FORTH IN THIS
AGREEMENT. UPON CLOSING, THE OPERATING PARTNERSHIP SHALL ASSUME THE RISK THAT
ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE
PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY
CORNERSTONE'S INVESTIGATIONS, AND CORNERSTONE AND OPERATING PARTNERSHIP, UPON
CLOSING, SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED CONTRIBUTORS
(AND CONTRIBUTORS' PARTNERS AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES,
LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT COSTS) OF
ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH CORNERSTONE OR
OPERATING PARTNERSHIP MIGHT HAVE ASSERTED OR ALLEGED AGAINST CONTRIBUTORS (AND
CONTRIBUTORS' PARTNERS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR
PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF ANY APPLICABLE
LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS) AND ANY AND ALL
OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY.
CORNERSTONE AGREES THAT SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS
SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED AFTER
THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALL BE THE
RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF
OPERATING PARTNERSHIP.
10.3 Effect and Survival of Disclaimers. Contributors and Cornerstone
acknowledge that the compensation to be paid to Contributors for the Property
takes into account that the Property is being sold subject to the provisions of
this Article IX. Contributors and Cornerstone agree that the provisions of this
Article IX shall survive Closing.
ARTICLE XI
CONTINUING AGREEMENTS AMONG CONTRIBUTORS, CORNERSTONE
AND OPERATING PARTNERSHIP; TAX MATTERS
11.1 Disposition of Property. Cornerstone agrees that the Operating
Partnership shall not sell or dispose of the Land and Improvements prior to the
date (the "End Date") which is the earlier to occur of (a) the tenth anniversary
of the Closing, and (b) date on which Units aggregating less than 25% of the
number of Units distributed at Closing are held by the Contributors (or their
constituent partners), without the prior written consent of the then holders of
the Units, except in
32
<PAGE>
connection with a like-kind exchange under Section 1031 of the Internal Revenue
Code of 1986, as amended (the "Code") or other disposition that pursuant to a
nonrecognition provision in the Code does not result in the current recognition
of any gain to said holders of the Units.
11.2 Maintenance of Operating Partnership Loan. Cornerstone agrees that
the Operating Partnership shall keep outstanding the Operating Partnership Loan
in the principal amount of no less than $80,000,000 until the End Date.
11.3 Conversion of Units. Contributors shall not convert any of the Units
into shares of Cornerstone for a period of one year from the Closing (the
"Lock-Up Period").
11.4 Section 704(c) Allocation. Cornerstone and Contributors agree that,
for purposes of Section 704(c) of the Internal Revenue Code of 1986 as amended
(the "Code"), the consideration payable to Contributors as set forth in this
Agreement will be allocated among the various components of the Property in a
manner to be reasonably agreed upon by Cornerstone and Contributors prior to the
Closing. The method under Section 704(c) of the Code used by Cornerstone with
respect to the Property to adjust for discrepancies between the agreed upon
value of the various components of the Property and the adjusted tax basis of
such components will be the "traditional method," as set forth in Treasury
Regulation ss.1.704-3(c)(1).
11.5 Allocation of Operating Partnership Loan. If requested in writing by
Contributors, the Operating Partnership Loan shall be split between the Phase I
Property and the Phase II Property in such amount as Contributors reasonably
request. Each portion of the Operating Partnership Loan may be cross defaulted
and cross collateralized with the other portion. In addition, the Contributors'
basis in the Operating Partnership Loan shall be allocated to each Contributor,
or to such Contributor's partners (or to partners of such partners), in
accordance with written instructions provided to the Operating Partnership by
Contributors, which allocation shall be subject to the approval of the Operating
Partnership, which approval will not be unreasonably withheld.
ARTICLE XII
MISCELLANEOUS
12.1 Confidentiality. Cornerstone and its representatives shall hold in
strictest confidence all data and information obtained with respect to
Contributor or its business, whether obtained before or after the execution and
delivery of this Agreement, and shall not disclose the same to others; provided,
however, that it is understood and agreed that Cornerstone may disclose such
data and information as required by law (including securities laws) and to the
employees, consultants, accountants and attorneys of Cornerstone provided that
such persons agree in writing to treat such data and information confidentially.
In the event this Agreement is terminated or Cornerstone fails to perform
hereunder, Cornerstone shall promptly return to Contributors any statements,
documents, schedules, exhibits or other written information obtained from
Contributors in connection with this
33
<PAGE>
Agreement or the transaction contemplated herein. It is understood and agreed
that, with respect to any provision of this Agreement which refers to the
termination of this Agreement and the return of the Earnest Money to
Cornerstone, such Earnest Money shall not be returned to Cornerstone unless and
until Cornerstone has fulfilled its obligation to return to Contributors the
materials described in the preceding sentence. In the event of a breach or
threatened breach by Cornerstone or its agents or representatives of this
Section 12.1, Contributors shall be entitled to an injunction restraining
Cornerstone or its agents or representatives from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting Contributors from pursuing any other available remedy at law or in
equity for such breach or threatened breach. The provisions of this Section 12.1
shall survive Closing.
12.2 Public Disclosure. Prior to Closing, any release to the public of
information with respect to the transaction contemplated herein or any matters
set forth in this Agreement, other than any disclosure required by securities
laws, will be made only in the form approved by Cornerstone and Contributors and
their respective counsel.
12.3 Discharge of Obligations. The acceptance of the Deeds by the
Operating Partnership shall be deemed to be a full performance and discharge of
every representation and warranty made by Contributors herein and every
agreement and obligation on the part of Contributors to be performed pursuant to
the provisions of this Agreement, except those which are herein specifically
stated to survive Closing.
12.4 Assignment. Cornerstone may not assign its rights under this
Agreement, other than to the Operating Partnership, without first obtaining
Contributors' written approval, which approval may be given or withheld in
Contributor's sole discretion.
12.5 Notices. Any notice pursuant to this Agreement shall be given in
writing by (a) personal delivery, or (b) reputable overnight delivery service
with proof of delivery, or (c) United States Mail, postage prepaid, registered
or certified mail, return receipt requested, or (d) legible facsimile
transmission sent to the intended addressee at the address set forth below, or
to such other address or to the attention of such other person as the addressee
shall have designated by written notice sent in accordance herewith, and shall
be deemed to have been given either at the time of personal delivery, or, in the
case of expedited delivery service or mail, as of the date of first attempted
delivery at the address and in the manner provided herein, or, in the case of
facsimile transmission, as of the date of the facsimile transmission provided
that an original of such facsimile is also sent to the intended addressee by
means described in clauses (a), (b) or (c) above. Unless changed in accordance
with the preceding sentence, the addresses for notices given pursuant to this
Agreement shall be as follows:
34
<PAGE>
If to Contributors:
c/o Matas Corporation
500 Lake Cook Road
Deerfield, Illinois 60015
Attn.: Myron Levin
TELECOPY: (847) 948-9364
with a copy to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attn.: Nina B. Matis, Esq.
TELECOPY: (312) 902-1061
If to Purchaser: Cornerstone Properties, Inc.
126 East 56th Street
New York, New York 10022
Attn.: Francis H. Shields, Jr.
TELECOPY: (212) 605-7199
with a copy to: Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attn.: Timothy G. Little, Esq.
TELECOPY: (212) 848-7179
12.6 Intentionally Omitted.
12.7 Modifications. This Agreement cannot be changed orally, and no
executory agreement shall be effective to waive, change, modify or discharge it
in whole or in part unless such executory agreement is in writing and is signed
by the parties against whom enforcement of any waiver, change, modification or
discharge is sought.
12.8 Tenant Notification Letters. Operating Partnership shall deliver to
each and every tenant of the Property under a Lease thereof a signed statement
acknowledging Operating Partnership's receipt and responsibility for each
tenant's security deposit (to the extent delivered by Contributors to Operating
Partnership at Closing), if any, all in compliance with and pursuant to the
applicable provisions of applicable law. The provisions of this paragraph shall
survive Closing.
12.9 Calculation of Time Periods. Unless otherwise specified, in computing
any period of time described in this Agreement, the day of the act or event
after which the designated period of time begins to run is not to be included
and the last day of the period so computed is to be
35
<PAGE>
included, unless such last day is a Saturday, Sunday or legal holiday under the
laws of the State in which the Property is located, in which event the period
shall run until the end of the next day which is neither a Saturday, Sunday or
legal holiday. The final day of any such period shall be deemed to end at 5
p.m., local time.
12.10 Successors and Assigns. The terms and provisions of this Agreement
are to apply to and bind the permitted successors and assigns of the parties
hereto.
12.11 Entire Agreement. This Agreement, including the Exhibits, contains
the entire agreement between the parties pertaining to the subject matter hereof
and fully supersedes all prior written or oral agreements and understandings
between the parties pertaining to such subject matter.
12.12 Further Assurances. Each party agrees that it will without further
consideration execute and deliver such other documents and take such other
action, whether prior or subsequent to Closing, as may be reasonably requested
by the other party to consummate more effectively the purposes or subject matter
of this Agreement. Without limiting the generality of the foregoing, Cornerstone
shall, if requested by Contributors, execute acknowledgments of receipt with
respect to any materials delivered by Contributors to Cornerstone with respect
to the Property. The provisions of this Section 12.12 shall survive Closing.
12.13 Counterparts. This Agreement may be executed in counterparts, and
all such executed counterparts shall constitute the same agreement. It shall be
necessary to account for only one such counterpart in proving this Agreement.
12.14 Severability. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable, the remainder of
this Agreement shall nonetheless remain in full force and effect.
12.15 Applicable Law. This Agreement is performable in the state in which
the Property is located and shall in all respects be governed by, and construed
in accordance with, the substantive federal laws of the United States and the
laws of such state. Contributors and Cornerstone hereby irrevocably submit to
the jurisdiction of any state or federal court sitting in the state in which the
Property is located in any action or proceeding arising out of or relating to
this Agreement and hereby irrevocably agree that all claims in respect of such
action or proceeding shall be heard and determined in a state or federal court
sitting in the state in which the Property is located. Cornerstone and
Contributors agree that the provisions of this section 12.15 shall survive the
Closing of the transaction contemplated by this Agreement.
12.16 No Third Party Beneficiary. The provisions of this Agreement and of
the documents to be executed and delivered at Closing are and will be for the
benefit of Contributors, Cornerstone and Operating Partnership only and are not
for the benefit of any third party, and accordingly, no third party shall have
the right to enforce the provisions of this Agreement or of the documents to be
executed and delivered at Closing.
36
<PAGE>
12.17 Exhibits and Schedules. The following schedules or exhibits attached
hereto shall be deemed to be an integral part of this Agreement:
(a) Exhibit A-1 - Legal Description of the Phase I Land
(b) Exhibit A-2 - Legal Description of the County Parcel
(c) Exhibit A-3 - Legal Description of the Phase II Land
(d) Exhibit B-1 - Phase I Personal Property
(e) Exhibit B-2 - Phase II Personal Property
(f) Exhibit C-1 - Phase I Lease Schedule
(g) Exhibit C-2 - Phase II Lease Schedule
(h) Exhibit D - Operating Agreements Schedule
(i) Exhibit E - Tenant Estoppel Form
(j) Exhibit F - Partnership Agreement
(k) Exhibit G - Registration Rights Agreement
(l) Exhibit H-1 - Tenant Inducement Costs Payable by Operating
Partnership
(m) Exhibit H-2 - Tenant Inducement Costs Payable by Contributors
(n) Exhibit I - Tenant Improvement Loans
(o) Exhibit J-1 - Phase I Litigation
(p) Exhibit J-2 - Phase II Litigation
(q) Exhibit K-1 - Phase I Lease Matters
(r) Exhibit K-2 - Phase II Lease Matters
(s) Exhibit L-1 - Phase I Security Deposits
(t) Exhibit L-2 - Phase II Security Deposits
(u) Exhibit M-1 - Phase I Leasing Commissions
(v) Exhibit M-2 - Phase II Leasing Commissions
(w) Exhibit N-1 - Phase I Rent Roll
(x) Exhibit N-2 - Phase II Rent Roll
12.18 Captions. The section headings appearing in this Agreement are for
convenience of reference only and are not intended, to any extent and for any
purpose, to limit or define the text of any section or any subsection hereof.
12.19 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
12.20 Termination of Agreement. It is understood and agreed that if any of
Cornerstone or Contributors terminates this Agreement pursuant to a right of
termination granted hereunder, such termination shall operate to relieve
Contributors and Cornerstone from all obligations under this Agreement, except
for such obligations as are specifically stated herein to survive the
termination of this Agreement.
37
<PAGE>
12.21 Survival. The provisions of Article XI and the following Sections of
this Agreement shall survive Closing and shall not be merged into the execution
and delivery of the Deeds: 4.1; 5.2(j); 5.5; 6.5; 6.8; 9.1; 10.3; 12.1; 12.8;
12.12; and 12.15.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the Effective Date.
CONTRIBUTOR:
CORPORATE 500-PHASE I, an Illinois limited
partnership
By: Matas Partners, an Illinois limited partnership,
its general partner
By: /s/ Myron Levin
-----------------------------
Name: Myron Levin
Title: General Partner
CORPORATE 500-PHASE I, an Illinois limited
partnership
By: Matas Partners, an Illinois limited partnership,
its general partner
By: /s/ Myron Levin
-----------------------------
Name: Myron Levin
Title: General Partner
CORNERSTONE:
CORNERSTONE PROPERTIES, INC.,
a Nevada corporation
By: /s/ (signature illegible)
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
By: /s/ Francis H. Shields, Jr.
-----------------------------
Name: Francis H. Shields, Jr.
Title: Vice President
<PAGE>
Exhibit A-1
LEGAL DESCRIPTION OF THE PHASE I LAND
LOT 1 EXCEPT THE SOUTH 20 FEET THEREOF) IN CORPORATE 500 SUBDIVISION, A
SUBDIVISION OF PART OF THE SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP 43 NORTH, RANGE
12, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED
FEBRUARY 4, 1988 AS DOCUMENT 2654632, IN LAKE COUNTY, ILLINOIS.
<PAGE>
Exhibit A-2
LEGAL DESCRIPTION OF THE COUNTY PARCEL
THE NORTH 217 FEET OF THE SOUTH 267 FEET OF THE WEST 276.18 FEET OF THE EAST
476.18 FEET OF THE SOUTH 788.62 FEET OF THE SOUTH HALF OF THE SOUTHWEST QUARTER
OF SECTION 33, TOWNSHIP 43 NORTH, RANGE 12 EAST OF THE THIRD PRINCIPAL MERIDIAN,
(EXCEPTING THEREFROM THE SOUTH 20 FEET THEREOF), IN LAKE COUNTY, ILLINOIS.
<PAGE>
Exhibit A-3
LEGAL DESCRIPTION OF THE PHASE II LAND
PARCEL 1:
LOT 2 IN CORPORATE 500 SUBDIVISION, A SUBDIVISION OF PART OF THE SOUTH WEST 1/4
OF SECTION 33, TOWNSHIP 43 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL
MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED FEBRUARY 4, 1988 AS DOCUMENT
2654632, IN LAKE COUNTY, ILLINOIS.
PARCEL 2:
EASEMENT FOR PARKING AND INGRESS AND EGRESS FOR THE BENEFIT OF PARCEL 1 OVER THE
SOUTHERLY 15 FEET OF THE FOLLOWING DESCRIBED PROPERTY: THAT PART OF THE SOUTH
WEST 1/4 OF SECTION 33, TOWNSHIP 43 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL
MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTH EAST CORNER OF SAID
SOUTH WEST 1/4; THENCE NORTH 90 DEGREES 00 MINUTES 00 SECONDS WEST, A DISTANCE
OF 876.18 FEET ALONG THE SOUTH LINE OF SAID SOUTH WEST 1/4 TO THE NORTHEASTERLY
LINE OF THE CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD; THENCE NORTH 25
DEGREES 09 MINUTES 46 SECONDS WEST, A DISTANCE OF 1,944.80 FEET ALONG THE
NORTHEASTERLY LINE OF SAID RAILROAD TO A POINT ON THE SOUTHEASTERLY LINE OF
KATES ROAD; THENCE NORTH 32 DEGREES 28 MINUTES 02 SECONDS EAST, A DISTANCE OF
69.23 FEET ALONG THE SOUTHEASTERLY LINE OF SAID ROAD TO THE POINT OF BEGINNING;
THENCE NORTH 32 DEGREES 28 MINUTES 02 SECONDS EAST A DISTANCE OF 185.48 FEET TO
A POINT ON THE SOUTH LINE OF SAID KATES ROAD; THENCE SOUTH 89 DEGREES 54 MINUTES
13 SECONDS EAST ALONG SAID SOUTH LINE, A DISTANCE OF 824.12 FEET TO A POINT;
THENCE SOUTHWESTERLY ALONG THE ARC OF A CIRCLE HAVING A RADIUS OF 2,251.83 FEET
AND CONVEX NORTHWESTERLY, A DISTANCE OF 215.94 FEET TO A POINT; THENCE SOUTH 84
DEGREES 36 MINUTES 14 SECONDS WEST ALONG TANGENT, A DISTANCE OF 392.01 FEET TO A
POINT; THENCE SOUTHWESTERLY ALONG THE ARC OF A CIRCLE HAVING A RADIUS OF 634.07
FEET AND CONVEX NORTHWESTERLY, A DISTANCE OF 219.82 FEET TO A POINT; THENCE
SOUTH 64 DEGREES 44 MINUTES 24 SECONDS WEST, A DISTANCE OF 118.14 FEET TO THE
POINT OF BEGINNING, AS GRANTED BY INSTRUMENT RECORDED DECEMBER 8, 1988 AS
DOCUMENT 2747296, (EXCEPT THAT PART THEREOF LYING EAST OF THE WEST LINE OF
PARCEL 2 EXTENDED NORTHERLY) IN LAKE COUNTY, ILLINOIS.
<PAGE>
Exhibits B-1 and B-2
LIST OF PERSONAL PROPERTY OF THE COMPANY
[To be provided upon request to the Company.]
<PAGE>
Exhibit C-1
PHASE I LEASE SCHEDULE
As of December 17, 1997
[To be provided upon request to the Company.]
<PAGE>
Exhibit C-2
PHASE II LEASE SCHEDULE
As of December 17, 1997
[To be provided upon request to the Company.]
<PAGE>
Exhibit D
C500 CENTRE
OPERATING AGREEMENTS SCHEDULE
As of December 17, 1997
- -------------------------------------------------------------------------------
VENDOR NAME SERVICE EXPIRATION
- -------------------------------------------------------------------------------
B.P. Services Snow plowing 4/30/98
Brickman Landscaping Landscaping 11/30/98
Champion recycling Recycling 30 day's notice
Dover Elevator Phase II elevator 90 days (?)
Kroschell Engineering Co. HVAC 30 days notice
Lakeside Building Maintenance Janitorial At will
Smith Security Security guard 5 days' notice
U.S. Elevator Phase I elevator 90 days
North Shore Waste Control Scavenger 7/1/00
Up 'N Adam Service & Supply Inc. Restaurant equip. maint. Any time
Hobart Dishwasher 5/31/98
Alliance Refrigeration Restaurant refrigeration 30 days notice
ATT Automotive Services Auto Lease 12/31/98
<PAGE>
Exhibit E
TENANT ESTOPPEL FORM
Lease Date:
Landlord: American National Bank and Trust Company of Chicago, not
personally, but as Trustee under Trust No. 59087 [for Phase I,
or 65110 for Phase II]
Tenant:
Premises: Corporate 500 Centre, Building No. _______, _______ Floor
Area: _________________________________, Sq. Ft.
The undersigned Tenant of the above-referenced lease (the "Lease") hereby
ratifies the Lease and certifies to Landlord and Cornerstone Deerfield LLC
("Purchaser") as purchaser of the Real Property of which the premises demised
under the Lease (the "Premises") is a part, as follows:
1. That the term of the Lease commenced on __________________, 19__ and the
Tenant is in full complete possession of the Premises and has commenced
full occupancy and use of the Premises, such possession having been
delivered by the original landlord and having been accepted by the Tenant
or if the term has not commenced that it will commence on _______________,
19__ and Tenant will take occupancy on _______________, 19__.
2. That the Lease calls for the current payment of monthly installments of
Base Rent of $__________. [Abatement of Base Rent under the Lease runs
through__________, 19__ and thereafter the Tenant is paying monthly
installments of Base Rent of $_________ which commence on the ___ day of
___________, 19__.]
3. That no advance rental or other payment has been made in connection with
the Lease, except rental for the current month, and the rent has been paid
to and including ____________, 19__.
4. That a security deposit in the amount of $___________ is being held by
Landlord, which amount is not subject to any set-off or reduction or to
any increase for interest or other credit due to Tenant.
5. That all obligations and conditions under said Lease to be performed to
date by Landlord or Tenant have been satisfied, free of defenses and
set-offs including all construction work in the Premises.
E-1
<PAGE>
6. That the Lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no
existing default on the part of the Landlord or the Tenant in any of the
terms and conditions thereof and no event has occurred which, with the
passing of time or giving of notice or both, would constitute an event of
default; and that said Lease has not been amended, modified, supplemented,
extended, renewed, subleased or assigned, except as follows by the
following described agreements:
7. That the Lease provides for a primary term of ____________ months; the
term of the Lease expires on the day of _______________, 19__; and that
neither the Lease nor any of the documents listed in Paragraph 6 (if any),
contain an option for any additional term or term [or the Lease and/or the
documents listed under Paragraph 6, above, contain an option for
__________________ additional term(s) of _________ year(s) and ________
month(s) (each) at a rent to be determined as set forth in the Lease].
8. That there are no expansion rights or rights of first refusal or first
offer to lease additional space except as set forth in the Lease and/or
the documents listed under Paragraph 6 above.
9. That there are no actions, voluntary or involuntary, pending against the
Tenant under the bankruptcy laws of the United States or any state
thereof.
10. That this certification is made knowing that Landlord, Purchaser and
Purchaser's lender are relying upon the representations herein made.
Dated _________________, 19__.
TENANT:
-----------------------------------
By: _______________________________
Name: _____________________________
Title: ____________________________
E-2
<PAGE>
Exhibit F
AGREEMENT OF LIMITED PARTNERSHIP
OF
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP
[See Exhibit 10.118 to the Company's Annual Report filed on Form
10-K for the year ended December 31, 1997]
<PAGE>
Exhibit G
REGISTRATION RIGHTS AGREEMENT
[To be provided upon request to the Company.]
<PAGE>
Exhibit H-1
TENANT INDUCEMENT COSTS PAYABLE BY OPERATING PARTNERSHIP
1. Specialty Foods Corporation (improvement allowance) $100,920
2. Knowledge University (leasing commissions) 40,512
<PAGE>
Exhibit H-2
TENANT INDUCEMENT COSTS PAYABLE BY CONTRIBUTORS
1. MMI Companies, Inc. (gross improvement
allowance of $311,880 less $54,994
costs paid to date) $256,886
2. Prudential Securities Inc. (improvement
allowance) 200,000
<PAGE>
Exhibit I
TENANT IMPROVEMENT LOANS
Franklin Enterprises $ 14,656
Drake Beam Morin 102,619
<PAGE>
Exhibit J-1
PHASE I LITIGATION
Kleinschmidt, Inc. v. The County of Cook, et al.,
No. 95 CH 501 (Circuit Court of Lake County, Illinois)
On or about June 20, 1995, this lawsuit was filed by Plaintiff,
Kleinschmidt, Inc., against defendants Cook County, Lake County, Corporate 500
Centre Phase I, and American National Bank and Trust Company of Chicago, as
trustee under Trust No. 59087 (the "Trust"). Plaintiff's complaint sought
injunctive and permanent relief from defendants for allegedly violating
Plaintiff's constitutional rights by Cook County's conveyance of Plaintiff's
former property to the Trust.
On or about May 30, 1996, the trial court entered summary judgment in
favor of all defendants and against Plaintiff on all counts of its Complaint. On
March 19, 1997, the Illinois Appellate Court for the Second District affirmed
the trial court's entry of summary judgment. The decision is published as
Kleinschmidt v. County of Cook, 678 N.E.2d 1065 (2nd Dist. 1997). On or about
October 1, 1997, the Illinois Supreme Court defined Plaintiff's petition for
leave to appeal the Appellate Court decision to the Illinois Supreme Court.
<PAGE>
Exhibit J-2
PHASE II LITIGATION
None
<PAGE>
Exhibit K-1
PHASE I LEASE MATTERS
None
<PAGE>
Exhibit K-2
PHASE II LEASE MATTERS
None
<PAGE>
Exhibit L-1
PHASE I
SECURITY DEPOSITS
TENANT AMOUNT
- --------------------------------------------------------------------------------
OCCONNOR 1,488.00
TRAVEL DUET 4,555.63
TRAVEL DUET 1,293.46
AMER BOARD 9,747.96
DIGINET 1,400.00
------------------------
18,485.05
========================
KNOWLEDGE UNIVERSITY (LETTER OF CREDIT) 500,000.00
<PAGE>
Exhibit L-2
PHASE II SECURITY DEPOSITS
SECURITY
TENANT DEPOSIT
- --------------------------------------------------------------------------------
FRANKLIN 3,100.50
JACQUARD 3,126.00
DAVID GILFAND 4,357.33
DRAKE BEAM 10,087.00
RANK VIDEO 54,829.42
MCG ELLERMAN 17,983.59
ELKINS 2,253.75
XMEN 1,590.00
ARBITRATION FORUMS 4,248.63
FIRST PREMIUM 8,300.00
AMERICAN AIAKOKU 3,466.67
CITI PLATE 2,641.17
INTREPID 4,625.50
----------------------
TOTAL 120,609.56
======================
NEW YORK LIFE
(CONSTRUCTION DEPOSIT) $211,233.00
<PAGE>
Exhibit M-1
PHASE I LEASING COMMISSIONS
Knowledge University - $58,887 commission to Syndicated Equities Inc., $18,375
of which was paid by prior tenant (Acco). The balance of $40,512 is payable by
the Operating Partnership (see Exhibit H-1).
<PAGE>
Exhibit M-2
PHASE II LEASING COMMISSIONS
New York Life (pending amendment) - $11,960 commission to Grubb & Ellis to be
paid by the Operating Partnership.
<PAGE>
Exhibit N-1
C500 PHASE I
COMMERCIAL RENT ROLL
REPORT DATE: 1/1/98 TO 1/31/98
as of 12/17/97
[To be provided upon request to the Company.]
<PAGE>
Exhibit N-2
C500 PHASE II
COMMERCIAL RENT ROLL
REPORT DATE: 1/1/98 TO 1/31/98
as of 12/17/98
[To be provided upon request to the Company.]
<PAGE>
Exhibit 10.121
AGREEMENT OF SALE AND PURCHASE
BETWEEN
527 MADISON HOLDINGS
as Seller
AND
CORNERSTONE PROPERTIES INC.
as Purchaser
PERTAINING TO
527 MADISON AVENUE, NEW YORK, NEW YORK
<PAGE>
TABLE OF CONTENTS
Page
----
I.
Sale and Purchase; Property
1.01 Sale and Purchase................................................1
1.02 License of Excluded Property.....................................2
II.
Consideration
2.01 Purchase Price...................................................3
2.02 Deposit..........................................................3
III.
Inspection; Representations, Operating Covenants; Estoppels
3.01 Inspection.......................................................3
3.02 Document Review..................................................4
3.03 Inspection Obligations...........................................4
3.04 Right of Termination.............................................5
3.05 Property Conveyed "AS IS"........................................5
3.05 Seller's and Purchaser's Representations.........................6
3.06 Interim Operating Covenants.....................................10
3.07 Estoppel Certificates...........................................11
3.08 Contracts.......................................................11
3.09 Existing Mortgage Notes and Mortgages...........................12
3.10 Hokkaido Lease..................................................12
IV.
Survey
4.01 Survey..........................................................13
V.
Title
5.01 Title...........................................................13
VI.
Remedies
6.01 Seller's Remedies...............................................14
6.02 Purchaser's Remedies............................................14
6.03 Legal Fees......................................................15
i
<PAGE>
VII.
Closing
7.01 Closing Date....................................................15
7.02 Closing Matters.................................................15
7.03 Closing Costs...................................................19
7.04 Brokerage Commissions...........................................19
7.05 Property Management Agreement...................................19
VIII.
Condemnation
8.01 Condemnation....................................................20
IX.
Risk of Loss
9.01 Risk of Loss....................................................20
9.02 Material Loss...................................................21
9.03 Nonmaterial Loss................................................21
9.04 Completion of Repairs...........................................22
9.05 Postponement of Closing.........................................22
X.
Miscellaneous
10.01 Entire Agreement...............................................22
10.02 Agreement Binding on Parties...................................22
10.03 Effective Date.................................................22
10.04 Notice.........................................................22
10.05 Time of the Essence............................................24
10.06 Governing Law..................................................24
10.07 Section Headings...............................................24
10.08 Business Days..................................................24
10.09 No Recordation.................................................24
10.10 Multiple Counterparts..........................................24
10.11 Severability...................................................24
10.12 Guaranty.......................................................24
ii
<PAGE>
EXHIBITS
Exhibit "A" - Legal Description
Exhibit "B" - List of Excluded Personalty
Exhibit "C" - Escrow Agreement
Exhibit "D" - Documents for Purchaser's Review
Exhibit "E" - Leasing Commissions
Exhibit "F" - Tenant Delinquencies
Exhibit "G" - Rent Roll
Exhibit "H" - Form of Tenant Estoppel
Exhibit "I" - Tax Reduction Proceedings
iii
<PAGE>
AGREEMENT OF SALE AND PURCHASE
FOR
527 MADISON AVENUE, NEW YORK, NEW YORK
THIS AGREEMENT OF SALE AND PURCHASE ("Agreement") is made on this
22nd day of January, 1997 by and between 527 MADISON HOLDINGS, a New York
general partnership ("Seller"), and CORNERSTONE PROPERTIES INC., a Nevada
corporation ("Purchaser"), and is as follows:
WITNESSETH:
WHEREAS, Seller desires to sell and Purchaser desires to purchase
the property described in Section 1.01 below, on the terms and conditions
hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged. the parties hereto agree as follows:
I.
Sale and Purchase; Property
1.01 Sale and Purchase. Seller agrees to sell and convey unto
Purchaser, and Purchaser agrees to purchase and accept from Seller, for the
price and subject to the terms, covenants, conditions and provisions herein set
forth, the following:
(a) All those certain plots, pieces or parcels of land (the "Land")
known as Block 1289, Lot 52 and located in the borough of Manhattan, New
York County, New York being more particularly described in Exhibit "A"
attached hereto and incorporated herein;
(b) All right, title and interest of Seller in and to all buildings
and all other structures, improvements and fixtures (collectively,
"Improvements") located in or on the Land. The Land and the Improvements
are sometimes referred to herein collectively as the "Real Property" and
includes, without limitation, any and all utility, plumbing, electrical,
heating, air-conditioning and ventilation lines, systems, and boilers, the
parking garage (the "Garage") and an office building commonly known as 527
Madison Avenue, New York, New York;
(c) All right, title and interest, of Seller, if any, and, except as
expressly provided in this Agreement, without any warranty of Seller, in
and to any land lying in the bed of any street, road or access way, opened
or proposed, in front of, at a side of or adjoining the Land to the
centerline thereof ("Property Rights");
<PAGE>
(d) All right, title and interest of Seller, reversionary or
otherwise. in and to all easements in or upon the Land and all other
rights and appurtenances belonging or in anywise pertaining thereto, if
any ("Appurtenances");
(e) All furniture, carpeting, draperies, appliances, building
supplies, equipment, machinery, inventory tools, computers, books and
records and other items of personal property owned by Seller and presently
affixed or attached to, placed or situated upon the Real Property and used
in connection with the ownership, operation, management, leasing and
occupancy of the Real Property ("Personalty"), but specifically excluding
(i) any items of personal property owned by tenants ("Tenants") at the
Improvements and (ii) the personalty listed in Exhibit B (the "Excluded
Personalty");
(f) Seller's interest as landlord in all leases ("Leases") listed in
Exhibit D and all New Leases (as defined in Section 3.06) now or hereafter
affecting the Real Property, together with all security deposits
("Security Deposits") of Tenants held by Seller which are not and have not
been applied to amounts due under the Leases;
(g) Seller's interest in all Contracts listed in Exhibit G and all
New Contracts; and
(h) All right, title and interest of Seller, if any, in and to all
intangible and mixed property relating to the ownership or operation of
the Real Property or Personalty, in each case only to the extent
assignable, including, without limitation, licenses, permits, guaranties,
warranties, bonds, approvals, applications, plans, drawings,
specifications, surveys, maps, trade names, telephone numbers and similar
property but in each case, except as expressly provided in this Agreement,
without warranty ("Intangible Property"), but specifically excluding all
bank accounts and cash of Seller other than the Security Deposits.
The items described in (a) through (h) of this Section 1.01 are
hereinafter collectively called the "Property".
1.02 License of Excluded Property. Seller agrees that from and after
the Closing Date, Purchaser shall have a license to use the Excluded Property in
the Building for no charge; provided that (a) Purchaser shall maintain and
insure the Excluded Property in such manner and amounts as reasonably requested
by Seller and (b) either party may terminate the license at any time upon not
less than three months' prior notice delivered not earlier than March 1, 1998.
This Section 1.02 shall survive this Closing.
2
<PAGE>
II.
Consideration
2.01 Purchase Price. The purchase price ("Purchase Price") to be
paid by Purchaser to Seller for the sale and conveyance of the Property shall be
Sixty-Seven Million and No/100 Dollars ($67,000,000.00), which shall be payable
to Seller on the day that the closing of the transaction contemplated hereby
occurs ("Closing") by Federal Reserve wire transfer of immediately available
funds to an account or accounts which shall be designated by Seller not less
than two (2) business days before the Closing Date (hereinafter defined in
Section 7.01), plus or minus prorations and adjustments as hereinafter provided.
2.02 Deposit. Upon execution and delivery of this Agreement by
Purchaser, Purchaser shall deposit into an escrow account with Battle Fowler,
Seller's counsel, Two Million Dollars ($2,000,000) pursuant to an escrow
agreement in the form of Exhibit C annexed hereto. The total down payment
deposit together with all interest earned thereon (the "Deposit") shall be paid
to Seller at the Closing and $2,000,000 thereof shall be credited against the
Purchase Price, unless Purchaser shall have elected to terminate this Agreement
pursuant to the provisions of Section 3.04 of this Agreement or the Closing
shall not occur for any reason other than a default by Purchaser, in which
cases, the entire Deposit shall be returned to Purchaser.
III.
Inspection; Representations, Operating Covenants; Estoppels
3.01 Inspection. Subject to the provisions of this Section 3.01 and
the rights of entry in Seller (and any limitations thereon) under applicable
Leases, Seller shall and hereby does permit Purchaser and its affiliates and
their respective directors, employees, investors, lenders, agents,
representatives. advisors. consultants and contractors (collectively, "Purchaser
Related Parties") the right to enter upon the Real Property at all reasonable
times during normal business hours to inspect the Property and conduct
non-invasive tests, provided that entry into any Tenant's space shall be done
after business hours and, if requested by Seller, accompanied by a
representative of Seller. Purchaser shall conduct such entry and inspections
diligently and in good faith during the period commencing on the date hereof and
ending on the day prior to the Closing Date. Purchaser shall notify Seller, in
writing, of its intention, or the intention of the Purchaser Related Parties, to
enter the Real Property at least twenty-four (24) hours prior to such intended
entry. If Purchaser or the Purchaser Related Parties intend to conduct any
physical testing or sampling of the Property, Purchaser shall describe such
testing and sampling in its notice and shall obtain Seller's prior written
consent thereto, which may be withheld in Seller's sole discretion. Purchaser
shall bear the cost of all inspections and tests. At Seller's option, Seller or
its representatives may be present for any inspection or test.
3
<PAGE>
3.02 Document Review. (a) Seller agrees to permit Purchaser and the
Purchaser Related Parties, at either the office of Seller's property manager or
at the Real Property (at Seller's option), the right to inspect the items set
forth in Exhibit "D" attached hereto and made a part hereof or such other
non-proprietary or non-confidential documents reasonably requested by Purchaser
relating to the Property (collectively, "Documents"). Purchaser at its expense
shall have the right to make photocopies of the Documents.
(b) Purchaser acknowledges that any and all of the Documents may be
proprietary and confidential in nature and have been or will be delivered to
Purchaser or a Purchaser Related Party solely to assist Purchaser in making its
decision as to the purchase of the Property. Purchaser and any Purchaser Related
Party shall not disclose the contents of the Documents, or any of the
provisions, terms or conditions thereof, or any other information that Purchaser
or any Purchaser Related Party acquires as a result of Purchaser's due diligence
or otherwise to any party other than a Purchaser Related Party. Notwithstanding
the foregoing, Purchaser or any Purchaser Related Party may disclose any such
information if (i) it is legally compelled to make such disclosure or (ii) such
information is or becomes generally available to the public from a source other
than the Purchaser Related Parties. Purchaser further agrees that as to the
Purchaser Related Parties, the Documents shall be disclosed and exhibited only
to those Purchaser Related Parties who have been notified of the necessity to
preserve the confidentiality of such information as required herein. Purchaser
further acknowledges that the Documents and other information relating to the
leasing arrangements between Seller and the Tenants or prospective tenants are
proprietary and confidential in nature. Purchaser agrees not to divulge the
contents of such Documents and other information except in strict accordance
with the confidentiality standards set forth in this Section 3.02. In permitting
the Purchaser Related Parties to review the Documents or other information to
assist Purchaser, Seller has not waived any privilege or claim of
confidentiality with respect thereto, and no third party benefits or
relationships of any kind, either express or implied, have been offered,
intended or created by Seller and any such claims are expressly rejected by
Seller and waived by Purchaser and the Purchaser Related Parties, for whom, by
its execution of this Agreement, Purchaser is acting as an agent with regard to
such waiver.
(c) Seller shall reasonably cooperate with Purchaser so that
Purchaser shall have the opportunity after February 5, 1997 (but not prior
thereto) and prior to the Scheduled Closing Date to contact and meet with any
and all Tenants at the Property as part of Purchaser's investigation of the
Property; provided, that Purchaser shall provide not less than 24 hours' notice
to Seller of its intention to meet with any Tenant and provided, further, that
Seller shall have the opportunity to have its representative present at any such
meeting.
3.03 Inspection Obligations. (a) In conducting any inspections,
investigations or tests of the Property and/or Documents. Purchaser and the
Purchaser Related Parties shall: (i) not unreasonably disturb the Tenants or
interfere with their use of the Property pursuant to their respective Leases;
(ii) not unreasonably interfere with the operation and maintenance of the Real
Property; (iii) not damage any part of the Property or any personal property
owned by any
4
<PAGE>
Tenant or any other person or entity; (iv) not injure or otherwise cause bodily
harm to Seller, the Seller Related Parties, any Tenant or any other person or
entity; (v) maintain appropriate comprehensive general liability (occurrence)
insurance covering any accident arising in connection with the presence of
Purchaser and the Purchaser Related Parties on the Real Property; (vi) not
permit any liens to attach to the Real Property by reason of the exercise of its
rights hereunder: and (vii) fully restore the Real Property to the condition in
which the same was found before any such inspection or tests were undertaken.
(b) Purchaser hereby agrees to indemnify, defend and hold Seller and
Seller's Partners, affiliates, employees, agents and representatives
(collectively, "Seller Related Parties") harmless from and against any and all
liens, claims, causes of action, damages, liabilities, demands, suits,
obligations, losses, penalties, costs and expenses (including reasonable
attorneys' fees) arising out of Purchaser's conducting its inspections or tests
of the Property or out of any violation of the provisions of this Section 3.03.
Notwithstanding any provision of this Agreement to the contrary, neither the
Closing nor any termination hereof shall terminate Purchaser's obligations
pursuant to this Section 3.03.
3.04 Right of Termination. If, prior to February 13, 1997 (the
"Scheduled Closing Date"), Purchaser shall, for any reason, in Purchaser's sole
discretion, judgment and opinion, be dissatisfied with any aspect of the
Property or any item examined by Purchaser pursuant to Sections 3.01 and 3.02,
Purchaser shall be entitled to terminate this Agreement by giving written notice
to Seller on or before the Scheduled Closing Date, whereupon this Agreement
shall terminate, and upon such termination, neither Seller nor Purchaser shall
have any further obligation or liability to the other hereunder, except for the
provisions of this Agreement which are expressly provided to survive termination
of this Agreement (the "Termination Surviving Obligations"). If Purchaser shall
fail to timely notify Seller in writing of its option to terminate this
Agreement on or before the Scheduled Closing Date, the termination right
described in this Section 3.04 shall be null and void.
3.05 Property Conveyed "AS IS". (a) Disclaimer of Representations
and Warranties by Seller. Notwithstanding anything contained herein to the
contrary, except for the representations set forth in Sections 3.05(a) and 7.04,
it is understood and agreed that Seller and the Seller Related Parties have not
made and are not now making, and they specifically disclaim. any warranties,
representations or guaranties of any kind or character, express or implied, oral
or written, past, present or future, with respect to the Property, including,
but not limited to, warranties, representations or guaranties as to (i) matters
of title, (ii) environmental matters relating to the Property or any portion
thereof, (iii) geological conditions, including, without limitation, subsidence
or subsurface conditions, (iv) zoning to which the Property or any portion
thereof may be subject, (v) the availability of any utilities to the Property or
any portion thereof including, without limitation, water, sewage, gas and
electric, (vi) usages of adjoining Property, (vii) access to the Property or any
portion thereof, (viii) the value, compliance with the plans and specifications,
size, location, age, use, design, quality, description, suitability, structural
integrity, operation or physical or financial condition of the Property or any
portion thereof, (ix) any
5
<PAGE>
income, expenses, charges, liens, encumbrances, rights or claims on or affecting
or pertaining to the Property or any part thereof, (x) the presence of Hazardous
Substances (hereinafter defined) in or on, under or in the vicinity of the
Property, (xi) the condition or use of the Property or compliance of the
Property with any or all past, present or future federal, state or local
ordinances, rules, regulations or laws, building, fire or zoning ordinances,
codes or other similar laws, or (xii) the merchantability of the Property or
fitness of the Property for any particular purpose (Purchaser affirming that
Purchaser has not relied on Seller's skill or judgment to select or furnish the
Property for any particular purpose, and that Seller makes no warranty that the
Property is fit for any particular purpose).
(b) Sale "As Is". Except for the limited representations set forth
in Sections 3.05(a) and 7.04, Purchaser has not relied upon and will not rely
upon, either directly or indirectly, any representation or warranty of Seller or
the Seller Related Parties and acknowledges that no such representations or
warranties have been made. Purchaser represents that it is a knowledgeable,
experienced and sophisticated purchaser of real estate and that it is relying
solely on its own expertise and that of the Purchaser Related Parties in
purchasing the Property. Purchaser will conduct such inspections and
investigations of the Property as Purchaser deems necessary, including, but not
limited to, the physical and environmental conditions thereof, and shall rely
upon same. Upon Closing, except for the limited representations set forth in
Sections 3.05(a) and 7.04, Purchaser shall assume the risk that adverse matters
including, but not limited to, adverse physical and environmental conditions,
may not have been revealed by Purchaser's inspections and investigations.
Purchaser acknowledges and agrees that except for the limited representations
set forth in Sections 3.05(a) and 7.04, upon Closing, Seller shall sell and
convey to Purchaser and Purchaser shall accept the Property "AS IS, WHERE IS,"
with all faults. The terms and conditions of this Section 3.05 shall expressly
survive the Closing and not merge with the provisions of any closing documents.
(c) "Hazardous Substances" Defined. For purposes hereof, "Hazardous
Substances" means any hazardous, toxic or dangerous waste, substance or
material, pollutant or contaminant, as defined for purposes of the Comprehensive
Environmental Response. Compensation and Liability Act of 1980 (42 U.S.C.
Sections 9601 et seq.), as amended ("CERCLA"), or the Resource Conservation and
Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended ("RCRA"), or any
other federal, state or local law, ordinance, rule or regulation applicable to
the Property, or any substance which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or any
substance which contains gasoline, diesel fuel or other petroleum, hydrocarbons,
polychlorinated biphenyls (pcbs), radon gas, urea formaldehyde, asbestos, lead
or electromagnetic waves.
3.05 Seller's and Purchaser's Representations. (a) The
representations set forth in this Section 3.05(a) and in Section 7.04 constitute
the only representations of Seller to Purchaser in connection with the sale of
the Property. Seller represents to Purchaser as of the date hereof as follows:
6
<PAGE>
(i) Seller is a New York general partnership, duly formed and
validly existing and in good standing under the laws of the State of New
York.
(ii) Seller has the authorization and power to execute and deliver
this Agreement and to consummate the Closing contemplated hereby. Any
required consents from third parties to Seller's execution and delivery of
this Agreement have been obtained, except for the consent of General
Electric Capital Corporation to the release of the Mortgage (as defined in
Section 3.09) from the Property which Seller agrees to use reasonable
efforts to obtain, and if Seller is unable to obtain such consent prior to
the Closing Date, Purchaser or Seller may terminate this Agreement and
Seller shall reimburse Purchaser for its reasonable, actual third-party
out-of-pocket costs and expenses in conducting its due diligence but in no
event to exceed $250,000 in the aggregate. Except as provided in the
foregoing sentence, the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein by Seller will not
violate Seller's documents of formation or any other agreement, judicial
decree, statute or regulation to which Seller is a party or by which it is
bound.
(iii) Seller is neither insolvent nor has it made an assignment for
the benefit of its creditors, nor has it filed or had filed against it,
any petition for bankruptcy or reorganization.
(iv) The documents listed in Exhibit D include all Leases of the
Property which are in effect on the date hereof. Seller has delivered to
Purchaser copies of all such Leases and such copies are true, accurate and
complete. The documents listed in Exhibit D include all Contracts relating
to the Property in effect on the date hereof. Seller has delivered to
Purchaser copies of all such Contracts and such copies are true, accurate
and complete.
(v) On the Closing Date, there will be no Contracts affecting the
Property except (A) the Contracts listed in Exhibit D and any New
Contracts, (B) the Leases listed in Exhibit D and any New Leases, and (C)
any agreements delivered by Seller to Purchaser prior to the Closing Date
which have been approved in writing by Purchaser.
(vi) Seller has not received any written notice or citation (a
"Notice"):
(A) From any federal, state, county or municipal authority
alleging a violation of any fire, health, safety, building
pollution, environmental (including, without limitation, relating to
any Hazardous Substances), zoning law, regulation, permit, order or
directive in respect of the Property or any part thereof, which
relates to a violation which would cost more than $5,000 to correct
which has not been corrected;
7
<PAGE>
(B) From any insurance company of any material defects or
inadequacies in the Property or any part thereof, which would
materially, adversely affect the insurability of the same or of any
termination or threatened termination of any policy of insurance; or
(C) 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 Purchaser promptly thereof and provide a copy of such Notice
to Purchaser.
(vii) Seller has not received any notice of the pendency of any
litigation or judicial or administrative proceeding affecting Seller or
the Property which is not covered by insurance and which claims damages in
excess of $100,000. Seller has not with respect to the Property suffered
or confessed any judgment in or before any such court, commission, agency
or other administrative authority against which remains unsatisfied.
(viii) Seller does not directly employ any employees who work at the
Property.
(ix) Except as set forth in Exhibit "E' hereto, Seller has not
granted to any person the right to receive 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 Lease. Neither Seller nor the Property is subject to any
"protection list" or similar obligation with respect to the future leasing
of the property. Except as set forth in Exhibit "F" hereto, no Tenant is
delinquent in payment of any rent owed under its Lease for more than
thirty (30) days.
(x) Seller is not a party to any construction contracts for material
tenant improvements to the Property or any portion thereof other than
Contracts included in Exhibit D annexed hereto, and not more than $500,000
in the aggregate remains unpaid under said Contracts.
(xi) No portion of the Property is subject to any real property or
other tax abatement, reduction or phase-in program or agreement. There are
no tax certiorari or tax reduction proceedings currently pending in
respect of the Property except as set forth in Exhibit I.
(xii) Attached hereto as Exhibit G is a rent roll of the Property
which is true and complete in all material respects as of the date
thereof. Except as set forth on Exhibit G hereto, (a) no rent has been
paid by any Tenant 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
8
<PAGE>
threatened offsets against rent or for any other monetary or material
claim against Seller which has not been cured and no future rent
concessions have been created which are not disclosed in the Leases, and
(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
prior to the date hereof 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 exercise by any Tenant of any expansion or extension option contained
in any of the Leases.
(xiii) To the best of Seller's knowledge, 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 in any material respect 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 material 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.
(xiv) To the best of Seller's knowledge, there are no Hazardous
Substances at the Property except for ordinary cleaning, landscaping,
maintenance, and office supplies which are used and stored in compliance
with applicable laws, and Seller has not previously used, manufactured.
generated, treated, stored, disposed of, or released any Hazardous
Substances on or under the Property or transported any Hazardous
Substances over the Property.
(xv) There has been no sale by Seller of any of the development
rights or air rights relating to or forming a part of the Property.
(b) Purchaser represents and warrants that:
(i) Purchaser is a corporation, duly formed, validly existing and in
good standing under the laws of the State of Nevada.
(ii) Purchaser has the authorization and power to execute and
deliver this Agreement and will on the Closing Date have the authorization
and power to consummate the Closing. Any required consents from third
parties to Purchaser's execution and delivery of this Agreement have been
obtained. The execution and delivery of this Agreement do not, and,
assuming due authorization of Purchaser, the consummation of the
transactions contemplated herein by Purchaser will not, violate
Purchaser's documents of formation or any other agreement, judicial
decree, statute or regulation to which Purchaser is a party or by which it
is bound.
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(iii) Purchaser is neither insolvent nor has it made an assignment
for the benefit of its creditors, nor has it filed or had filed against
it, any petition for bankruptcy or reorganization.
(c) Conditions for Bringing a Claim for Breach of a Representation
or Warranty. 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 Jeffrey Sussman, Rolland Baribeau or David Shepherd. In no
event will either party be entitled to recover damages for any breach of the
above representations unless such party files a lawsuit in a court of competent
jurisdiction on or prior to the date which is twelve (12) months following the
Closing Date. Neither party may assert a claim against the other party for
breach of one or more representations or warranties unless the aggregate loss
sustained by the claiming party as a result of such breach or breaches equals or
exceeds $50,000. Purchaser shall not have the right to make any claim against
Seller for breach of any representation or warranty by Seller if Purchaser had
actual knowledge of the facts and circumstances giving rise to such breach prior
to the Closing. As used herein with respect to Purchaser, the term "actual
knowledge" shall mean the actual, and not constructive, knowledge of either John
Moody or Francis Shields.
(d) Changed Conditions. It shall be a condition precedent to
Purchaser's obligations hereunder that the representations set forth in Section
3.06(a) be remade as of the Closing Date. If Seller shall become aware of any
fact or circumstance that makes any representation of Seller untrue in any
material and adverse respect, it shall disclose the same to Purchaser and, if
such changed condition is material, Purchaser may, as its sole and exclusive
remedy therefor, elect to terminate this Agreement and receive a return of the
Deposit on or before the earlier to occur of five (5) days after Seller's notice
thereof, or the Closing Date, or accept the Property and close without
adjustment to the Purchase Price, in which event the applicable representation
shall be deemed modified by such changed condition.
3.06 Interim Operating Covenants. (a) Seller covenants to Purchaser
that, from the date hereof until Closing, Seller shall:
(i) Operate the Property in substantially the manner that it is
presently being operated in the ordinary course of Seller's business
(which shall not include any major capital improvements or repairs and
shall be subject to casualty and the occurrence of force majeure events).
(ii) Maintain its existing insurance for the Property and, subject
to Articles VIII and IX hereof, keep and maintain the Property in its
current condition, reasonable wear and tear excepted.
(iii) Not enter into or record any easement, lien, covenant, or any
license, permit agreement or other instrument affecting the Property or
any portion thereof that would materially adversely affect the value of
the Property without Purchaser's approval,
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not to be unreasonably withheld, and Seller shall provide Purchaser with
true and complete copies thereof' within two (2) business days after
execution.
(iv) Not remove any of the Personalty owned by Seller from the
Property unless such removal is due to obsolescence or for the purpose of
repair.
(v) Seller shall deliver notice to Purchaser within two (2) business
days after execution thereof, but in no event later than February 10,
1997, if Seller shall enter into (A) any new lease or any amendment,
modification, assignment or sublease to or of any Lease (any of the
foregoing of which notice has been given to Purchaser in the manner herein
required, a "New Lease") or any termination of any Lease or (B) any
material extension, modification or amendment of any Contract or any
material new service, maintenance or operating agreement (any of the
foregoing of which notice has been given to Purchaser in the manner herein
required, a "New Contract"). In the event that Seller enters into a New
Contract or New Lease and Purchaser delivers notice to Seller within two
(2) business days after receipt of Seller's notice of such New Contract or
New Lease that Purchaser (i) objects to the terms of such New Contract or
New Lease (and Purchaser shall be entitled to make only reasonable
objections) and (ii) desires to terminate this Agreement pursuant to
Section 3.04 as a result thereof, unless Seller shall terminate such New
Lease or New Contract within five (5) business days thereafter, Seller
shall be obligated to reimburse Purchaser for its reasonable actual third
party, out-of-pocket costs and expenses incurred in conducting its due
diligence to the date of termination of this Agreement, but in no event to
exceed $250,000 in the aggregate. Seller is expressly authorized, without
Purchaser's consent, to enforce all Lease obligations, including
collection of rents, and is authorized, without Purchaser's consent, to
compromise and settle amounts owing to Seller for periods prior to Closing
and to accept the surrender or termination of a lease at the scheduled
expiration of its term.
(b) It shall be a condition precedent to Purchaser's obligations
hereunder that Seller not have breached in any material respect any of the
covenants set forth in Section 3.06(a).
3.07 Estoppel Certificates. Purchaser's obligation to purchase the
Property shall be subject to the receipt, by the Closing Date, of estoppel
certificates in the form of Exhibit H annexed hereto and indicating no
materially adverse circumstances (such as landlord defaults or Tenant options to
purchase the Property) from (A) Sumitomo Trust & Banking, W.P. Stewart Co.,
Inc., Hill Samuel New York. Inc.. Saudi Petroleum International and the Gap,
Inc., (B) any combination of Tenants whose Leases, together with the Leases in
Clause (A), cover seventy-five percent (75%) of the net rentable area of the
Property (exclusive of the Garage) and (C) the operator of the Garage (the
"Tenant Estoppels").
3.08 Contracts. Prior to the date of this Agreement, Seller
delivered to Purchaser copies of each contract and agreement relating to the
Property (including, without limitation, all service and maintenance contracts,
brokerage and listing agreements, construction
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contracts and management agreements) (other than Leases, each, a "Contract")
listed in Exhibit "D". On the Closing Date, Purchaser shall assume all Contracts
on Exhibit D and all New Contracts, provided that, except as provided in Section
7.05, all management and leasing agreements for the Property shall be terminated
by the Closing Date. Seller shall either terminate prior to the Closing any
Contract not included in Exhibit D or which is not a New Contract, or otherwise
be solely responsible for the payment of any sums due or that become due under
such Contracts.
3.09 Existing Mortgage Notes and Mortgages. Seller shall cooperate
with Buyer in causing the assignment on the date of Closing to Purchaser or any
lender designated by Purchaser (the "Assignee"), in consideration of $10.00 to
be paid by Purchaser, of the $35,000,000 existing note and mortgage (the
"Mortgage") encumbering the Property held by Property Equity Corp., a
corporation the stock of which is owned by affiliates of Seller and General
Electric Capital Corporation ("Assignor"), without any cost or expense to Seller
or any residual risk of liability to Seller. Seller shall be entitled to receive
from Purchaser twenty five percent (25%) of the amount, if any, of mortgage
recording tax savings resulting from such assignment of the Mortgage if, as and
when such savings are realized; provided that (i) savings shall be determined
net of Purchaser's out-of-pocket costs and expenses (including reasonable legal
fees) incurred in obtaining such savings, not to exceed $75,000 in the
aggregate, (ii) such savings may only be realized, if at all, upon the first
assignment, conversion or amendment of the Mortgage following the assignment of
the Mortgage to Assignee on the Closing Date, to a lender which is not
affiliated with Purchaser and (iii) if at any time after payment to Seller of
its share of any savings, Purchaser is required or elects to pay, and actually
pays, the mortgage recording tax which may be payable in respect of the
Mortgage, then Seller shall promptly refund to Purchaser the entire payment made
by Purchaser to Seller hereunder. Purchaser shall keep Seller generally apprised
of its undertakings under the foregoing provisions. The provisions of this
Section 3.09 shall survive the Closing for a period of ten years.
3.10 Hokkaido Lease. Seller represents to Purchaser that the certain
Lease (the "Hokkaido Lease"), dated November 25, 1987 between Seller and The
Hokkaido Bank ("Hokkaido") has been terminated prior to the date hereof and that
neither party thereto has any surviving rights or obligations with respect
thereto. Notwithstanding the foregoing, from and after the Closing Date, Seller
shall pay to Purchaser all base rent and tax and operating expense escalation
payments which would have been due by Hokkaido to Purchaser under the Hokkaido
Lease had the Hokkaido Lease not been terminated prior to its stated expiration
on November 24, 1997, as and when such payments would have been due under the
Hokkaido Lease. In addition to the foregoing, the pro-ration of rents to be made
pursuant to Section 7.01(d) shall be made as if the base rent on tax and
operating expense escalation payment due under the Hokkaido Lease for the month
in which the Closing occurs had been paid to Seller. In the event that Purchaser
executes a lease with a tenant for all or any portion of the premises demised
under the Hokkaido Lease and such tenant commences paying rent for such space
prior to November 24, 1997, then Seller shall receive a credit against its
obligation to make payments to Purchaser under this Section 3.10 on a
dollar-for-dollar basis for the amount of base rental and operating expense
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escalation payments, collected by Purchaser from the new tenant for the period
up to November 24, 1997. The obligations of Seller under this Section 3.10 shall
survive the Closing.
3.11 Audits. Seller has informed Purchaser that Seller has retained
Ernst & Young LLP (the "Accountant") to audit Seller's 1996 financial statements
(the "First Audit"). Seller shall use reasonable efforts to ensure that the
Accountant completes such audit in a timely manner. Purchaser has informed
Seller that Purchaser intends to engage the Accountant to audit for Purchaser's
benefit, in connection with the preparation of Purchaser's regulatory filings,
certain financial statements of the Property for 1996 prepared by Purchaser (the
"Second Audit"). Upon request of Purchaser, in connection with the Second Audit,
Seller agrees to execute and deliver a letter to the Accountant which (i)
permits the Accountant to use information and data obtained from Seller in
connection with the First Audit for the purpose of conducting the Second Audit
and (ii) contains Seller's representations as to the accuracy and completeness
of all such information and data and such other representations as are
customarily delivered to accountants in connection with the auditing of
financial statements. Seller shall otherwise cooperate with Purchaser and the
Accountant (or any other reputable accountant retained by Purchaser) as may be
reasonably requested by Purchaser in connection with the Second Audit.
IV.
Survey
4.01 Survey. If Purchaser desires to obtain an update, revision or
recertification of any existing survey of the Property or to obtain a new survey
thereof it may do so at its sole cost and expense, but in no event will a
revised or new survey be deemed to be or constitute a condition precedent to
Purchaser's Performance hereunder.
V.
Title
5.01 Title. (a) Purchaser shall obtain such information concerning
title to the Property and a title insurance policy commitment as it shall desire
at its sole cost and expense. Purchaser shall provide to Seller a copy of any
title commitment which it obtains. Prior to 5:00 p.m. (New York City time) on
the date seven (7) business days prior to the Closing Date, Purchaser shall
advise Seller of any good faith objection to any matter affecting title to the
Property or shown on any survey of the Property ("Title Objection"). Seller may,
but shall not be obligated to, cure such Title Objection which has been timely
made; provided, however, that Seller shall be obligated to obtain a release of
any mortgage which encumbers the Property and any lien created by Seller (each,
a "Required Cure Matter"). Within five (5) business days after receipt of any
Title Objection that it is not obligated to cure, Seller shall notify Purchaser
either that Seller shall attempt to cure such Title Objection or that Seller is
unable or unwilling, to do so. If Seller elects not to cure such Title
Objection, Purchaser shall be deemed to have waived all
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Title Objections unless on or prior to the Closing Date, Purchaser delivers to
Seller written notice terminating this Agreement. If Seller shall have notified
Purchaser within said five (5) business day period that it shall attempt to cure
such Title Objection, then Seller shall have an additional fifteen (15) days in
which to complete such cure and the Closing Date shall be extended accordingly.
If Seller is unable to complete such cure during such additional fifteen (15)
day period, then at the end of such period Purchaser shall either waive such
Title Objection and complete the Closing within five (5) business days
thereafter or Purchaser shall notify Seller of the termination of this
Agreement. Seller shall not be liable to Purchaser in the event Seller attempts
but is unable to cure such Title Objection. (Those matters which Purchaser is
[illegible] to take title subject to in accordance with this Agreement,
"Permitted Exceptions").
(b) It shall be a condition to Purchaser's obligation to purchase
the property and consummate the Closing that the Deed convey to Purchaser good
and [illegible] marketable fee simple title to the Property, subject only to
Permitted Exceptions and the [illegible] of Tenants, which is insurable at
standard rates by a reputable title insurance company [illegible] to do business
in New York.
(c) In the event of termination of this Agreement pursuant to
Section (a), the Deposit shall be returned to Purchaser, and thereafter neither
party shall have further rights or obligations hereunder, except for the
Termination Surviving Obligations.
VI.
Remedies
6.01 Seller's Remedies. In the event Purchaser fails to perform its
[illegible] pursuant to this Agreement for any reason except the failure by
Seller to perform hereunder or the failure of any condition precedent to
Purchaser's obligations hereunder or Purchaser fails to terminate this Agreement
in accordance with Section 3.01, Seller shall be [illegible] as its sole and
exclusive remedy, to terminate this Agreement and recover the [illegible] as
liquidated damages and not as a penalty, in full satisfaction of all claims
against Purchaser hereunder (excluding any claim for breach of a Termination
Surviving Obligation). Seller and Purchaser agree that Seller's damages
resulting from Purchaser's default are difficult, if not impossible, to
determine and the Deposit is a fair estimate of those damages which has been
agreed to in an effort to cause the amount of said damages to be certain.
6.02 Purchaser's Remedies. In the event (A) Seller fails to perform
its obligations pursuant to this Agreement for any reason except the failure by
Purchaser to perform hereunder, or (B) of a failure of any condition precedent
to Purchaser's obligation to consummate the Closing, Purchaser shall elect, as
its sole and exclusive remedy, either to terminate this Agreement by giving
Seller timely written notice of such election prior to the Closing and recover
the Deposit or (ii) enforce specific performance of this Agreement. In the event
that Seller willfully and in bad faith defaults in the performance of its
obligations under this Agreement, and
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Purchaser is otherwise ready, willing and able to consummate the Closing,
Purchaser shall, as a sole addition to its rights under clauses (i) and (ii) of
the first sentence of this Section 6.02, be entitled to recover from Seller its
reasonable actual third out-of-pocket costs and expenses; provided, however, in
no event shall Purchaser be [illegible] to recover from Seller any amount in
excess of $250,000.
6.03 Legal Fees. In the event either party hereto employs attorneys
to enforce any provisions hereof or in the event any litigation arises out of
this Agreement between the parties hereto, the non-prevailing party shall pay
all reasonable legal fees and [illegible] of the prevailing party incurred in
connection therewith.
VII
Closing
7.01 Closing Date. The Closing shall be held in the offices of
counsel to Seller in New York City (or such other location as may be mutually
agreed upon by Seller and Purchaser) at 10:00 A.M. on the Scheduled Closing Date
(the date on which the Closing occurs being the "Closing Date"), time being of
the essence.
7.02 Closing Matters. (a) At Closing, Seller shall:
(i) Deliver originals or certified copies of the Leases and all
Contracts affecting the Real Property either at the place of Closing or by
making same available at the Property;
(ii) Deliver possession of the Property, subject only to the
Permitted Exceptions and the rights of Tenants;
(iii) To the extent available and in Seller's possession, deliver
copies of all permits issued by appropriate governmental authorities and
utility companies relating to the Property and other items of Intangible
Property, any plans and specifications, guaranties, warranties, manuals,
keys and similar items;
(iv) Execute, acknowledge and deliver a quit claim deed ("Deed") of
the Real Property;
(v) Execute, acknowledge and deliver a bill of sale ("Bill of Sale")
conveying without representation or warranty the Personalty and an
instrument of assignment ("Assignment") assigning without representation
or warranty, except as expressly provided herein. Seller's interest in the
Leases included in Exhibit D, any New Leases, the Intangible Property, the
Security Deposits, the Contracts included in Exhibit D and any New
Contracts and providing that Purchaser assumes all obligations under such
Leases
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and Contracts accruing after the Closing and that each party shall
indemnify the other for losses arising out of claims based on
circumstances prevailing during their respective periods of ownership of
the Property;
(vi) Deliver evidence reasonably satisfactory to Purchaser's title
company of its authority to execute the Deed;
(vii) Deliver a non-foreign entity certification;
(viii) Deliver a notice letter to each Tenant acknowledging that
Seller has conveyed its interest in the Property and Leases to Purchaser;
(ix) Deliver evidence of the termination of the existing property
management agreement and leasing agreement for the Property together with
any prospect list prepared by the leasing agent in connection with such
termination;
(x) Deliver originals of all Estoppel Certificates received by
Seller which were not previously furnished to Purchaser;
(xi) Deliver transfer tax affidavits, resolutions of Seller's board
of trustees authorizing the sale of the Property in accordance with this
Agreement and designating those persons authorized to execute and deliver
all necessary documents at Closing and an affidavit in favor of such title
company in form and substance customarily delivered in connection with
commercial transactions in New York City to omit from any title insurance
policy issued to Purchaser or Purchaser's mortgagee exceptions for (x)
parties in possession (other than with respect to Tenants under the Leases
or New Leases), (y) mechanic's liens created by or through Seller and (z)
and the so-called "recordation gap";
(xii) Deliver all 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 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 thereof naming Purchaser 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 Purchaser reasonably acceptable to both parties pursuant to
which Seller shall acknowledge that any such letter of credit is in the
name of Seller as agent for Purchaser, and that Seller will, as agent for
Purchaser and at Purchaser's expense, present and draw upon such letter of
credit upon demand by Purchaser. The obligations of Seller with respect to
such letter of credit Security Deposit shall survive the Closing;
(xiii) Execute and deliver a management agreement pursuant to
Section 7.05;
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(xiv) Execute and deliver a current rent roll for the Property,
certified as true, correct and complete by Seller; and
(xv) Execute and deliver the New York State Real Estate Transfer Tax
and New York City Real Property Transfer Tax forms.
(b) At Closing, Purchaser shall:
(i) Deliver the Purchase Price (less $2,000,000 and any adjustments
provided herein) by wire transfer to Seller on the Closing Date;
(ii) Execute and deliver a management agreement pursuant to Section
7.05;
(iii) Execute and deliver the New York State Real Estate Transfer
Tax and New York City Real Property Transfer Tax forms;
(iv) Execute and deliver such other documents as may be reasonably
required by Seller or the title company including, but not limited to, a
certified copy of a resolution of the board of directors, general partners
or managers of Purchaser authorizing Purchaser to consummate the purchase
of the Property in accordance with this Agreement and designating those
persons authorized to execute and deliver all necessary documents at
Closing;
(v) Execute and deliver the Bill of Sale and the Assignment; and
(vi) Execute and deliver the notice letters to each Tenant
acknowledging that Purchaser has received and is responsible for the
Security Deposits.
(c) At Closing, Purchaser and Seller shall execute and deliver a
Closing Statement setting forth the Purchase Price and all prorations,
adjustments and credits thereto, and, if necessary, a post-closing agreement
with respect to any adjustments based on estimates that are to be re-adjusted
after Closing.
(d) At Closing, the following items shall be prorated as of the
Closing Date with all items of income and expense for the Property being borne
by Purchaser for the Closing Date: rents (including base rent, operating expense
and tax escalations and other additional rent); prepaid and accrued expenses
(including, without limitation, utility charges, water and sewer charges, fees
for licenses and permits, and the cost of fuel) and obligations under Contracts
listed in Exhibit D and any New Contracts, and real and personal ad valorem and
other taxes and assessments against the Property ("Ad Valorem Taxes"); provided
that:
(i) If the Ad Valorem Taxes for the 1996-1997 tax year are not known
or cannot be reasonably estimated, they shall be adjusted based on an
estimate obtained using
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the then current assessed value of the Property as of the Closing and the
tax rate and multiplier reflected by the Ad Valorem Taxes due and payable
in the 1995-1996 tax year. After the Ad Valorem Taxes for the year of
Closing are known, adjustments will be made between the parties. The
provisions of this Section 7.02(d)(i) shall survive Closing.
(ii) From and after the Closing Date, Purchaser shall have the right
to control all tax certiorari and tax reduction proceedings relating to
the Property, whether for tax years prior to, on or after the Closing
Date. Any tax refund or credit obtained by Purchaser (net of any costs of
obtaining such refund) attributable to the period prior to the Closing
Date shall be paid, first, to any Tenants entitled thereto and the
balance, if any, to Seller (and with respect to any credit, the balance
shall be paid to Seller when Purchaser realizes the benefit of such
credit).
(iii) Purchaser shall take all steps necessary to effectuate the
transfer of all utilities to Purchaser's name as of the Closing Date, and
where necessary, Purchaser shall post deposits with the utility companies.
Seller shall ensure that all utility meters are read as of the Closing
Date. Seller shall pay all utility charges accruing up to the Closing Date
and all utilities thereafter shall be paid for by Purchaser. Seller shall
be entitled to recover any and all deposits held by any utility company as
of the date of Closing. To the extent Purchaser fails to provide, where
required, deposits to any such utility company(s) (or to provide any other
deposits with service providers) so as to prevent the timely release of
Seller's deposit(s) by the utility company(s) (or such other service
providers) on the Closing Date, the amount of such deposit(s) shall be
credited to Seller and the Purchase Price shall be adjusted accordingly.
In such event, the Seller's deposit(s) will be assigned to Purchaser who
shall have rights to have the deposit(s) released to it upon satisfaction
of the conditions imposed by the utility company (or such other service
providers).
(iv) Seller shall at Closing provide to Purchaser a credit for the
amount of any rents paid to Seller by the Tenants for the Closing Date and
periods subsequent to the Closing Date. No proration shall be made for
rents delinquent as of the Closing Date (the "Delinquent Rents"). All
Delinquent Rents collected on or after the Closing Date shall be
allocated, first, to the then current month, next, to the month in which
the Closing occurs, next, to any other delinquency after the Closing Date,
and finally to any other delinquency prior to the Closing Date. Any
Delinquent Rents collected by Purchaser after Closing shall be held in
trust and forthwith paid by Purchaser to Seller subject to and in
accordance with the foregoing allocation provision. Purchaser shall use
reasonable efforts to collect such Delinquent Rents, but in no event shall
Purchaser be obligated to commence legal proceedings for collection
against any Tenant. All rights to pursue collection of Delinquent Rents
shall vest solely in Purchaser. Purchaser shall settle all common area
maintenance charges, tax reimbursements and any percentage rents based on
sales for 1997 with the Tenants and (1) to the extent the Tenants are
required to pay additional amounts for 1997, Purchaser shall pay to Seller
its pro rata share thereof as and when received, or (2) to the extent the
landlord is required to refund or credit amounts for
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common area maintenance charges or tax reimbursements to the Tenants.
Seller shall pay to Purchaser its pro rata share thereof promptly
following a request therefor (which request shall be supported by
appropriate financial information). Purchaser shall provide to Seller such
financial information as shall be reasonably requested by Seller to verify
the items described in clauses (1) and (2) above.
(v) The costs incurred or agreed to by Seller in securing Leases
executed after the date hereof, including, without limitation, brokerage
commissions (including in respect of renewals and expansions), work letter
or tenant installation costs or allowances, lease takeover costs,
reasonable attorneys' fees and disbursements, advertising expenses and any
other tenant inducement costs (collectively, "Leasing Costs") shall be the
responsibility of Purchaser. To the extent such Leasing Costs relate to
Leases executed prior to the date hereof, such costs shall remain the
obligation of Seller, except that Purchaser will be responsible for all
leasing commissions due with respect to renewals and extensions of
existing Leases first exercised after the date hereof.
(vi) The terms of Section 7.02(d) of this Agreement shall survive
the Closing.
7.03 Closing Costs. Purchaser shall pay any title examination fees,
costs of any title commitment and title policy (including any endorsements or
amendments thereto or any title company inspection fees or mortgage title policy
costs) and any other charge relating to title as well as any survey of the
Property. Seller shall pay all transfer taxes associated with filing the Deed.
Purchaser shall pay any recording fees, mortgage taxes or other similar taxes,
fees or assessments, and all costs relating to inspections or tests it
authorizes or conducts. Except as otherwise provided in Section 6.03 and 7.04,
each party shall be responsible for the payment of its own attorneys' fees
incurred in connection with the transaction that is the subject of this
Agreement.
7.04 Brokerage Commissions. Purchaser agrees to pay to Edward S.
Gordon Company ("Purchaser's Broker") a brokerage commission at Closing pursuant
to a separate agreement between Purchaser and Purchaser's Broker. Other than
Purchaser's Broker, Seller and Purchaser each represent and warrant to the other
that it has not dealt with any broker in connection with the transaction
contemplated hereby, and each agrees to and does hereby indemnify and hold the
other harmless against the payment of any commission to any person or entity
claiming by, through or under Seller or Purchaser, as applicable. This
indemnification shall extend to any and all claims, liabilities, costs and
expenses (including reasonable attorneys' fees and litigation costs) arising as
a result of such claims and shall survive the Closing. Purchaser shall indemnify
and hold Seller harmless against the payment of the commissions due to
Purchaser's Broker.
7.05 Property Management Agreement. At the Closing, Seller and
Purchaser will enter into a management agreement pursuant to which Seller or an
affiliate of Seller will be designated as the property manager and leasing agent
for the property. The management
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agreement will be cancellable by either party with or without cause on 30 days
prior notice; provided that Purchaser shall not exercise its right to cancel the
agreement without cause at any time prior to 120 days after the Closing Date.
The management agreement shall be based on Purchaser's standard form thereof
(provided same is generally on market terms and in customary form) and shall
otherwise be on market terms and subject to market conditions.
VIII.
Condemnation
8.01 Condemnation. If, prior to Closing, any governmental authority
or other entity having condemnation authority shall institute an eminent domain
proceeding with regard to all or any material portion of the Real Property,
Seller shall give prompt notice of same to Purchaser. If such proceedings are
not dismissed on or before ten (10) business days prior to Closing, Purchaser
shall be entitled, as its sole and exclusive remedy, to terminate this Agreement
upon written notice to Seller on or before the Closing Date. In the event
Purchaser does not terminate this Agreement pursuant to the preceding sentence,
Purchaser shall be conclusively deemed to have elected to accept such
condemnation and waives any right to terminate this Agreement as a result
thereof. Notwithstanding anything to the contrary herein, if any eminent domain
proceeding is instituted solely for the taking of any subsurface rights for
utility easements or for any right-of-way easement. and the surface [illegible],
after such taking, be used in substantially the same manner as though such
rights had not been taken. Purchaser shall not be entitled to terminate this
Agreement as to any part of the Real Property, but any award resulting therefrom
shall be assigned to Purchaser at Closing and shall be the exclusive property of
Purchaser upon Closing. In the event Purchaser elects to terminate this
Agreement under this Section 8.01, the Deposit shall be returned to Purchaser in
accordance with Section 6.04 and neither party to this Agreement shall
thereafter have any further rights or obligations hereunder, except the
Termination Surviving Obligations. If Purchaser waives (or is deemed to have
waived) the right to terminate this Agreement as a result of such a
condemnation, despite such condemnation Seller and Purchaser shall close this
Agreement in accordance with the terms hereof with no reduction in the Purchase
Price, and Seller shall assign to Purchaser at Closing all of Seller's right,
title and interest in and to all proceeds resulting or to result from said
condemnation.
IX.
Risk of Loss
9.01 Risk of Loss. If, prior to the Closing, any of the Improvements
shall be damaged by a fire or other casualty ("Casualty"), Seller shall deliver
to Purchaser written notice ("Casualty Loss Notice") of such Casualty promptly
after it has made its termination determination provided for in Section 9.02
hereof.
20
<PAGE>
9.02 Material Loss. For the purposes of this Section 9.02, "Material
Damage" shall mean damage to the Improvements of such nature that the cost of
restoring same to their condition prior to the Casualty will, in Seller's
reasonable determination, equal or exceed $1,000,000. If, in Seller's reasonable
determination, which determination shall be made as promptly as is practicable,
the Improvements have sustained Material Damage by a Casualty, Seller may, at
its option, terminate this Agreement by delivering written notice to Purchaser
on or before Closing, and neither party hereto shall have any further rights or
obligations hereunder except the Termination Surviving Obligations. In the event
Seller does not so terminate this Agreement, Purchaser may, as its sole option,
within fifteen (15) days after delivery of the Casualty Loss Notice, either (a)
terminate this Agreement by delivering written notice of same to Seller or (b)
waive its right of termination and elect to proceed to close this transaction in
accordance with the terms hereof ("Waiver Option").
Failure of Purchaser to deliver written notice of termination within
said fifteen (15) day period shall be conclusively deemed to be an election by
Purchaser of the Waiver Option. In the event Seller or Purchaser elects to
terminate this Agreement under this Section 9.02, the Deposit shall be returned
to Purchaser in accordance with Section 6.04 and thereafter neither party to
this Agreement shall thereafter have any further rights or obligations
hereunder, except the Termination Surviving Obligations.
If Purchaser elects the Waiver Option, then, at its option, Seller
shall (a) repair the Improvements to substantially their condition prior to such
damage, if and to the extent Seller reasonably determines that repairs cannot be
delayed until Closing, subject to Section 9.04 or (b) deliver to Purchaser at
Closing an amount equal to the insurance deductible and assign to Purchaser all
of its rights in the resulting casualty insurance proceeds (but the amount of
such deductible plus insurance proceeds shall not exceed the lesser of (i) the
cost of repair or (ii) the Purchase Price). In the event Seller assigns
insurance proceeds, (A) Purchaser may notify all appropriate insurance companies
of its interest in the insurance proceeds, and (B) all casualty insurance
proceeds payable as a result of the loss (subject to the limitation herein
described) shall be assigned to Purchaser at Closing.
9.03 Nonmaterial Loss. In the event, in Seller's reasonable
determination, the cost of restoration following a Casualty is less than
$250,000.00, the rights and obligations of the parties shall not be affected
thereby and at its option Seller shall (a) repair the Improvements (subject to
Section 9.04) to substantially their condition prior to such damage, if and to
the extent Seller reasonably determines that repairs cannot be delayed until
Closing, or (b) deliver to Purchaser at Closing an amount equal to the insurance
deductible and assign to Purchaser all of its rights in the resulting casualty
insurance proceeds (but the amount of such deductible plus insurance proceeds
shall not exceed the lesser of (i) the cost of repair or (ii) the Purchase
Price). In the event Seller assigns insurance proceeds. (A) Purchaser may notify
all appropriate insurance companies of its interest in the insurance proceeds,
and (B) all casualty insurance proceeds payable as a result of the loss (subject
to the limitation herein described) shall be assigned to Purchaser at Closing.
21
<PAGE>
9.04 Completion of Repairs. If and to the extent Seller reasonably
determines that repairs cannot be delayed until Closing, Seller shall cause such
repairs to be performed as promptly as practicable, in a good and workman-like
manner and in compliance with applicable laws. Subject to Section 3.04, if
Seller is repairing the Property and the repairs cannot be completed by the
Closing Date, (i) this transaction shall close on the Closing Date and Seller
shall complete the repairs within a reasonable period after Closing, (ii) Seller
shall assign the applicable construction contracts and agreements to Purchaser,
pay to Purchaser an amount equal to the deductible and assign to Purchaser all
of its rights in the resulting casualty insurance proceeds (less amounts
expended to date) and cooperate with Purchaser in the transfer of the repair
process to Purchaser at Closing and (iii) Purchaser shall release Seller from
liability with respect to any repair or replacement activities undertaken by
Seller prior to Closing.
9.05 Postponement of Closing. If, as a result of a Casualty, any
determination, election or agreement required by the terms of this Article IX is
not made by the Closing Date, the Closing Date shall be extended until ten (10)
business days after said determination, election or agreement is made,
notwithstanding anything in this Agreement to the contrary.
X.
Miscellaneous
10.01 Entire Agreement. This Agreement contains the entire agreement
of the parties hereto. There are no other agreements, oral or written, and this
Agreement can be amended only by written agreement signed by the parties hereto,
and by reference, made a part hereof.
10.02 Agreement Binding on Parties. This Agreement, and the terms,
covenants, and conditions herein contained, shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto. Purchaser
may not assign its rights hereunder without the prior written consent of Seller
other than to a wholly-owned subsidiary of Purchaser; provided, however, such
assignment shall not relieve Purchaser of its obligations hereunder.
10.03 Effective Date. The effective date of this Agreement shall be
the date first above written.
10.04 Notice. Any notice, communication, request, reply or advice
(collectively, "Notice") provided for or permitted by this Agreement to be made
or accepted by either party must be in writing. Notice may, unless otherwise
provided herein, be given or served by (i) depositing the same in the United
States mail, postage paid, certified, and addressed to the party to be notified,
with return receipt requested, (ii) by depositing the same into custody of a
nationally recognized overnight delivery service such as Federal Express
Corporation, Airborne Express, UPS, Emery or Purolator or (iii) by telecopier
with a hard copy to follow. Notice deposited in the mail in the manner described
in (i) above shall be effective on the third (3rd)
22
<PAGE>
business day after such deposit. Notice delivered pursuant to clause (ii) shall
be effective on the first business day after mailing. Notice given by telecopier
shall be effective when sent by the notifying party between the hours of 8:00
A.M. and 5:00 P.M. (EST) of any business day with delivery made after such hours
to be deemed received the following business day. For the purposes of notice,
the addresses of the parties shall, until changed as hereinafter provided, be as
follows:
Seller: 527 Madison Holdings
c/o Louis Dreyfus Property Group, Inc.
405 Lexington Avenue
57th Floor
New York, New York 10174
Attention: Jeffrey I. Sussman
Phone: (212) 490-2626
Facsimile: (212) 490-1060
with a copy to: BATTLE FOWLER
75 East 55th Street
New York, New York 10022
Attention: Martin L. Edelman, Esq.
Phone: (212) 856-7000
Facsimile: (212) 856-7813
Purchaser: CORNERSTONE PROPERTIES INC.
126 East 56th Street
New York, New York 10022
Attention: President
Phone: (212) 605-7100
Facsimile: (212) 605-7199
with copy to: Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Timothy G. Little, Esq.
Phone: (212) 848-7720
Facsimile (212) 848-7179
The parties hereto shall have the right from time to time to change their
respective addresses, and each shall have the right to specify as its address
any other address within the United States of America by at least five (5) days'
written notice to the other party.
10.05 Time of the Essence. Time is of the essence in all things
pertaining to this Agreement, including all times and dates specified herein for
performance by either party.
23
<PAGE>
10.06 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York.
10.07 Section Headings. The section headings contained in this
Agreement are for convenience only and shall in no way enlarge or limit the
scope or meaning of the various and several sections hereof.
10.08 Business Days. In the event that any date or any period
provided for in this Agreement shall end on a Saturday, Sunday or legal holiday,
the applicable date or period shall be extended to the first business day
following such Saturday, Sunday or legal holiday.
10.09 No Recordation. There shall be no recordation of either this
Agreement or any memorandum hereof, or any affidavit pertaining hereto and any
such recordation of this Agreement or memorandum hereof without the prior
written consent of Seller shall constitute a willful default hereunder by
Purchaser, whereupon this Agreement shall, at the option of Seller, terminate
and be of no further force and effect and Seller shall be entitled to pursue all
of its rights at law or in equity.
10.10 Multiple Counterparts. This Agreement may be executed in
multiple counterparts (each of which is to be deemed an original for all
purposes).
10.11 Severability. If any provision of this Agreement or
application to any party or circumstance shall be determined by any court of
competent jurisdiction to be invalid and unenforceable to any extent, the
remainder of this Agreement or the application of such provision to such person
or circumstances, other than those as to which it is so determined invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
valid and shall be enforced to the fullest extent permitted by law.
10.12 Guaranty. From and after the Closing Date, The Louis Dreyfus
Property Group, Inc., a Delaware corporation, shall be liable for and hereby
guarantees the full and punctual payment of any monetary obligations of Seller
hereunder. The provisions of this Section 10.12 shall survive the Closing.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above written.
"SELLER"
527 MADISON HOLDINGS, a New York
general partnership
By: 527 Madison Avenue Holdings, Inc.,
general partner
By: /s/ Jeffrey I. Sussman
-----------------------------------
Name: Jeffrey I. Sussman
Title: President
"PURCHASER"
CORNERSTONE PROPERTIES INC., a Nevada
corporation
By: /s/ John S. Moody
-----------------------------------
Name: John S. Moody
Title: President
By: /s/ Rodney C. Dimock
-----------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
<PAGE>
The undersigned, The Louis Dreyfus Property Group, Inc., a Delaware
corporation, joins in the foregoing Agreement for the limited purpose of
agreeing to the provisions of Section 10.12 thereof, and agrees that, from and
after the Closing Date, Purchaser may assert claims against The Louis Dreyfus
Property Group, Inc. as though it were "Seller" under the Agreement.
THE LOUIS DREYFUS PROPERTY
GROUP, INC.
By: /s/ Jeffrey I. Sussman
----------------------
Name: Jeffrey I. Sussman
Authorized Signatory
26
<PAGE>
EXHIBIT "A"
Legal Description
<PAGE>
ALL that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:
BEGINNING at the corner formed by the intersection of the southerly side of 54th
Street with the easterly side of Madison Avenue;
RUNNING THENCE Southerly along the said easterly side of Madison Avenue, 60 feet
5 inches;
THENCE Easterly parallel with the southerly side of 54th Street and part of the
way through a party wall, 80 feet;
THENCE Southerly parallel with the easterly side of Madison Avenue, 40 feet to
the center line of the block;
THENCE Easterly along the said center line of the block, 68 feet;
THENCE Northerly parallel with the easterly side of Madison Avenue and part of
the way through a party wall, 100 feet 5 inches to the southerly side of 54th
Street;
THENCE Westerly along the said southerly side of 54th Street, 148 feet to the
point or place of BEGINNING.
Premises Address: 527 Madison Avenue, New York City
Tax Designation: Block: 1289 Lot: 52
<PAGE>
EXHIBIT "B"
List of Excluded Property
<PAGE>
Louis Dreyfus Property Group [letterhead]
January 22, 1997
The following artwork installed at 527 Madison Avenue is not to be included in
any sales arrangements:
Mason, Raymond Barcelona Streetcar
1953, bronze 5/8
31 1/2" x 49 1/4" x 9"
The Crowd
1963-68, bronze 1/8
6' x 12' x 4'
Latin Quarter
1987, treated polyester resin 1/9
33" x 46" x 27.7"
<PAGE>
EXHIBIT "C"
Escrow Agreement
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") made as of the ___ day of
January, 1997, by and among 527 MADISON HOLDINGS, a New York general
partnership, having an office at 405 Lexington Avenue, New York, New York 10174
("Seller"), CORNERSTONE PROPERTIES INC., a Nevada corporation, having an office
at 126 East 56th Street, New York, New York 10022 ("Purchaser") and BATTLE
FOWLER LLP, having an address at 75 East 55th Street, New York, New York 10020
("Escrow Agent").
RECITALS
Pursuant to that certain Agreement of Sale and Purchase, dated as of
the date hereof, between Seller and Purchaser (the "Contract") and to facilitate
the closing and completion of the transactions contemplated thereby, Seller and
Purchaser (collectively, the "Parties") hereby nominate constitute and appoint
Escrow Agent to hold in escrow the amount of $2,000,000 (the "Escrow"). The
Escrow shall be held in escrow and disposed of by Escrow Agent in accordance
with the directions contained in the attached Schedule "A" and on the following
terms and conditions:
1. Position of Escrow Agent.
Escrow Agent acts hereunder as a depositary only and is not a party
to or bound by any agreement or undertaking which may be evidenced by or arise
out of the Escrow deposited with it hereunder, including, without limitation,
the Contract, and is not responsible or liable in any manner for the sufficiency
of the Escrow and undertakes no responsibility or liability for the form of
execution of such items or the identity, authority, title, or rights of any
person executing or depositing the Escrow. Escrow Agent shall have the right to
represent Seller in any dispute between the Parties with respect to the
Contract, the Escrow or otherwise.
2. Liability of Escrow Agent.
Escrow Agent shall not be liable for any error of judgment or for
any act done or omitted by it in good faith nor for any negligence other than
gross negligence and willful misconduct, or for any thing which it may do or
refrain from doing in connection herewith except to the extent any of the
foregoing shall constitute gross negligence or willful misconduct. Escrow Agent
shall have the right to rely upon the genuineness of all certificates, notice
and instruments delivered to it pursuant hereto, and all the signatures thereto
or to any other writing received by Escrow Agent purporting to be signed by
Seller or Purchaser and upon the truth of the contents thereof. Before making
payment or delivery in accordance with the provisions hereof or otherwise, of
any moneys or documents held by Escrow Agent pursuant hereto, Escrow Agent shall
have the right, but not the obligation, to require delivery to it of an executed
and acknowledged receipt for the subject matter of the delivery to be made by
it. If Purchaser delivers a check to Escrow Agent in the amount of the escrow,
Escrow Agent shall have no obligation to
<PAGE>
enforce collection of said check. If the directions set forth in Schedule A
require Escrow Agent to deposit said check in an interest bearing account to
purchase United States Government Obligations or certificate(s) of deposit with
the Escrow and renew same when same come due, Escrow Agent shall make reasonable
efforts to keep such funds at interest and to purchase such certificate(s) of
deposit and renew same but shall have no liability to the Parties for its
failure to do so, except as provided in this Section 2.
3. Disbursement of Escrow.
(a) As used in this Agreement, a "Final Determination" of the
respective rights of the Parties to all or any portion of the Escrow and
interest earned thereon shall mean (i) a final order which is binding upon
Escrow Agent and the Parties has been entered and finally affirmed on appeal by
the highest court before which such review is sought, or has become final by
lapse of time or is otherwise not subject to appeal or (ii) a final decision has
been rendered by an arbitrator pursuant to binding arbitration acceptable to the
Parties, in either case establishing the rights of the Parties with respect to
the Escrow and any interest earned thereon. Escrow Agent may rely on a
certification by one of the Parties stating that a Final Determination has been
rendered, which statement shall be accompanied by a written opinion of such
Party's counsel to the effect that a Final Determination has been rendered.
(b) Escrow Agent shall continue to hold the Escrow until such time
as the Escrow Agent shall have received (1) a joint written direction executed
by the Parties or (2) a Final Determination with respect to all or such portion
of the Escrow, and interest earned thereon. Escrow Agent shall then distribute
all or such portion of the Escrow and interest earned thereon as directed by
such joint direction or Final Determination, as the case may be.
(c) Notwithstanding any provision hereof to the contrary, Escrow
Agent shall have the right at any time to file a suit in interpleader, and/or
deposit the Escrow in a court of competent jurisdiction, and in either such
case, it shall thereupon be fully released and discharged from all further
obligations to perform any and all duties or obligations imposed upon it by this
Agreement.
4. Indemnification.
Seller and Purchaser shall be jointly and severally liable for all
costs, damages, judgments and expenses, including reasonable attorneys' fees and
disbursements, to Escrow Agent and its counsel, suffered or incurred by Escrow
Agent in connection with or arising out of this Agreement, including, but
without limiting the generality of the foregoing, a suit in interpleader brought
by Escrow Agent and the costs and expenses of defending against any claim or
liability arising out of or related to this Agreement. Escrow Agent shall have a
first lien on the Escrow for any costs, liability, expenses or fees it may
incur.
<PAGE>
5. Notices.
All notices under this Agreement shall be in writing and shall be
(i) delivered personally with receipt acknowledged, (ii) sent by prepaid
registered or certified mail, return receipt requested, (iii) sent by prepaid
overnight delivery service, or (iv) sent by telecopy or other facsimile
transmission (followed by hard copies sent by method (i), (ii) or (iii) above),
addressed as set forth below, or as the Parties or Escrow Agent shall otherwise
have given notice as herein provided.
All notices shall be deemed given when actually received or when
proper delivery is refused by the party to whom the same are directed (except if
method (ii) is used, notices shall be deemed delivered five (5) days after
mailing). Any notice required to be sent under the terms of this Agreement shall
be sent as follows:
(a) If to Seller, to it at the address first above written, Attn:
Jeffrey I. Sussman, with a copy to Escrow Agent;
(b) If to Purchaser, to it at the address first above written,
Attention: John Moody, with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Timothy G. Little, Esq.; and
(c) If to Escrow Agent, to it at the address first above written,
Attn: Robert J. Wertheimer.
Attorneys for Seller and Purchaser may give and receive notices with the same
effect as if such notice was given or received to or by the party represented by
such attorney. A party may by notice select alternate parties to receive notices
hereunder; such change shall be effective ten (10) days after receipt of such
change in this notice provision.
6. Modification.
Escrow Agent shall not be bound by any modification of this
Agreement or any agreement incorporated by reference herein, unless there is
delivered to Escrow Agent a written modification signed by the Parties. Not such
modification shall, without the consent of Escrow Agent, modify the provisions
of this Agreement relating to the duties, obligations or rights of Escrow Agent.
<PAGE>
7. Taxpayer Identification Number.
Each party hereto, except Escrow Agent, shall provided Escrow Agent
with their taxpayer identification number ("TIN") as assigned by the Internal
Revenue Service. All interest or other income earned under this Agreement shall
be allocated and paid as provided herein and reported by the recipient to the
Internal Revenue Service as having been so allocated and paid.
8. Controlling Law/Assignment.
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York and shall be binding upon Escrow Agent and the
Parties and their respective successors and assignees; provided, however, that
any assignment or transfer by either of the Parties of their respective rights
under this Agreement shall be void as against Escrow Agent unless (a) a written
notice hereof shall be given to Escrow Agent and (b) the assignee or transferee
shall agree in writing to be bound by the provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties have hereunto set their hands and
seals as of the day and year first appearing above.
SELLER:
527 Madison Holdings, Inc.
By: 527 Madison Avenue Holdings, Inc.
By: /s/ Jeffrey I. Sussman
-----------------------------------
Name: Jeffrey I. Sussman
Title: President
PURCHASER:
Cornerstone Properties Inc.
By: /s/ John S. Moody
-----------------------------------
Name: John S. Moody
Title: President
By: /s/ Rodney C. Dimock
-----------------------------------
Name: Rodney C. Dimock
Title: Executive Vice President
AGREED TO AND ACCEPTED this
22nd day of January, 1997
BATTLE FOWLER LLP,
as Escrow Agent
By: /s/ Robert J. Wertheimer
-------------------------
Robert J. Wertheimer
a partner
<PAGE>
Schedule A
Instructions
1. Escrow Agent shall deposit the Escrow in an interest bearing escrow
account at Chase Manhattan Bank in New York City.
2. On the date of the closing of title under the Contract, the Parties shall
jointly instruct Escrow Agent to deliver to Seller the Escrow together
with all interest earned thereon ("Interest"). If the Closing under the
Contract does not occur and Purchaser in entitled to a refund of the
Escrow pursuant to the terms thereof, then the Parties shall jointly
instruct the Escrow Agent to deliver the Escrow and the Interest to
Purchaser. If the Closing under the Contract does not occur and Seller is
entitled to retain the Escrow pursuant to the terms thereof, then the
Parties shall jointly instruct the Escrow Agent to deliver the Escrow and
the interest to Seller. To the extent that Seller is entitled to be
indemnified by Purchaser for any losses, costs or expenses (collectively,
the "Indemnified Expenses") pursuant to Section 3.03(b) of the Contract,
then, in addition to Seller's right to seek reimbursement and/or
indemnification directly from Purchaser for such Indemnified Expenses, and
at Seller's election, the Parties shall jointly instruct Escrow Agent to
deliver to Seller all or a portion of such Escrow and Interest to pay
Indemnified Expenses.
3. Seller's Taxpayer Identification Number is: 22-2727750.
4. Purchaser's Taxpayer Identification Number is: 74-2170858.
<PAGE>
EXHIBIT "D"
Documents for Purchaser's Review
<PAGE>
EXHIBIT D
DOCUMENTS FOR PURCHASERS REVIEW
January 22, 1997
RE: 527 Madison Avenue, New York, NY
The Documents For Purchaser's Review submitted by Louis Dreyfus Property Group
("Seller") to Cornerstone Properties, Inc. ("Purchaser") are listed below. In
addition, there are various statements noted below which were submitted in
writing by Seller, and which Purchaser is assuming to be true and accurate
information.
TENANT INFORMATION:
1. Copy of all leases, amendments and sublease agreements - listed as
follows:
- Lease dated July 31, 1992 between 527 Madison Holdings and 527 Madison
Holdings.
- Lease dated April 1, 1989 between 527 Madison Holdings and The Bank for
Foreign Economic Affairs of the USSR.
a) First Amendment to lease dated April 5, 1994
b) Second Amendment to lease dated January 10, 1995
c) Third Amendment to lease dated July 12, 1995
d) Fourth Amendment to lease dated June 12, 1996
- Lease dated September 27, 1996 between 527 Madison Holdings and Capital
Properties Associates, L.P.
- Lease dated August 1, 1988 between 527 Madison Holdings and The Gap,
Inc.
a) First Amendment to lease dated August 1, 1988
- Lease dated September 30, 1988 between 527 Madison Holdings and Genex
New York Inc.
a) First 527 Madison Holdings Lease Amendment Agreement dated January
9, 1989
b) Second 527 Madison Holdings Lease Amendment Agreement dated May 28,
1991
c) Third 527 Madison Holdings Lease Amendment Agreement dated December
31, 1991
d) Fourth 527 Madison Holdings Lease Amendment Agreement and Consent to
Assignment to Tokyo General U.S.A. dated June 12, 1996
e) Guaranty of lease effective January 1, 1997 by Tokyo General
Corporation
- Lease dated September 19, 1988 between 527 Madison Holdings and Hill
Samuel New York, Inc.
<PAGE>
a) Amendment to lease dated October 31, 1989
b) Consent to sublease to Lovell White Durrant dated February 14, 1992
(sublease dated January 27, 1992)
c) Consent to sublease to Shattuck Hamond Partners Inc. dated May 10,
1993 (sublease dated May 5, 1993)
d) Consent to sub-sublease to between Shattuck Hammond Partners, Inc.
to Enzo Biochem, Ind. dated July 23, 1996 (sub-sublease dated April
1996)
- Lease dated January 31, 1995 between 527 Madison Holdings and Icatu
Securities, Inc.
- Lease dated March 4, 1993 between 527 Madison Holdings and Kastle New
York Limited Partnership d/b/a Kastle Systems.
a) First Amendment to lease dated October 11, 1995.
- Lease dated September 3, 1992 between 527 Madison Holdings and LTCB
Latin America, Inc.
a) Consent to sublease to Exanc, Inc. dated September 30, 1996
(sublease dated September 9, 1996).
-Lease dated May 25, 1988 between 527 Madison Holdings and The Mitsubishi
Bank Ltd.
a) Assignment of Office Lease with Covenant Assuming Obligations of
Lease by The Mitsubishi Bank Ltd. to Mitsubishi Capital Inc. dated
September 15, 1988.
b) Amendment Agreement dated October 30, 1989.
c) Consent to sublease to W P. Stewart & Co., Inc. dated June 29, 1994
(sublease dated May 29, 1994).
- Lease dated November 1, 1987 between 527 Madison Holdings and New York
Parking 54th St. Corp.
a) Letter of Amendment to Lease dated April 30, 1991.
b) Second Amendment to lease dated March 15, 1994.
- Lease dated May 30, 1995 between 527 Madison Holdings and Pactual
Capital Corporation.
- Lease dated February 19, 1993 between 527 Madison Holdings and Security
Asset Management, Inc.
a) First 527 Madison Holdings Lease Amendment Agreement dated March 14,
1995.
- Lease dated June 30, 1987 between 527 Madison Holdings and Sibson &
Company.
a) First Amendment to lease dated August 1989.
- Lease dated January 19, 1988 between 527 Madison Holdings and Aramco
Services Company.
a) Assignment of lease by Aramco Service Company to Saudi Petroleum
International, Inc. dated April 28, 1988.
b) First Amendment to lease dated October 17, 1988.
c) Second Amendment to lease dated March 15, 1989.
<PAGE>
d) Third Amendment to lease dated February 28, 1992.
- Lease dated February 24, 1987 between 527 Madison Holdings and The
Solomon R. Guggenheim Foundation.
a) First Amendment to lease dated May 2, 1996.
- Lease dated February 24, 1987 between 527 Madison Holdings and The
Solomon R. Guggenheim Foundation.
a) First Amendment to lease dated May 2, 1996.
- Lease dated April 25, 1986 between 527 Madison Holdings and The Sumitomo
Trust & Banking Co., Ltd. covering 2nd and 3rd floors.
a) Supplement Lease Agreement dated May 28, 1986 among 527 Madison
Holdings, E&W Development, U.S.A., Inc and The Sumitomo Trust &
Banking Co., Ltd.
b) First Amendment to lease dated December 31, 1991 (adding the 8th
floor).
- Lease dated April 25, 1986 between 527 Madison Holdings and The Sumitomo
Trust and Banking Co., Ltd., covering the 4th Floor.
a) Assignment of Lease to The Sumitomo Trust & Banking Co. (U.S.A.)
dated September 21, 1987.
- Lease dated April 25, 1986 between 527 Madison Holdings and E&W
Development U.S.A., Inc., covering the 5th and 6th Floors.
a) First Amendment to lease dated November 1, 1987 (adding the 7th
floor).
b) Assignment of lease by E&W Development U.S.A., Inc. to The Sumitomo
Trust & Banking Co., Ltd. dated March 31, 1993.
c) Assignment of 5th floor lease by The Sumitomo Trust & Banking Co.,
Ltd. to Sumitomo Trust & Banking Co. (U.S.A.) dated March 31, 1993.
- Lease dated June 18, 1987 between 527 Madison Holdings and Printon Kane
Capital Corp.
a) Assignment and Assumption Agreement between Printon Kane Capital
Corp. and MIC Consulting, Inc. dated April 17, 1990.
- Lease dated August 24, 1987 between 527 Madison Holdings and W.P.
Stewart & Co., Inc.
a) First Amendment to lease dated May 19, 1994.
b) Second Amendment to lease dated June 7, 1996.
c) Third Amendment to lease dated August 31, 1996.
d) Letter of amendment to third amendment dated September 13, 1996.
e) Letter of agreement dated November 20, 1996.
2. Copy of area book showing floor by floor area calculations and detailed
lease abstracts.
3. Master rent roll date January 1, 1997 & January 21, 1997.
<PAGE>
4. Aged accounts receivable reports for December 1995 through December 1996.
5. Aged accounts receivable reports as of January 20, 1997 and January 21,
1997.
6. Schedule of tenant security deposits.
7. Broker's Agreement for Saudi Petroleum and Genex New York (Tokyo General).
OPERATIONS
1. Complete 1997 budget.
2. Audited financials from 1991 to 1995.
3. Audited operating expenses and real estate taxes for 1994 and 1995 with
tenant escalation billing and worksheets.
4. Real estate tax bills for last 3 years. 1994/1995; 1995/1996; 1996/1997.
5. Letter from tax lawyer Hubert Brandt concerning real estate tax protests,
dated January 17, 1997.
6. We (Seller) have received a tax refund for 1993/1994 tax year in the
amount of $119,759.14. We (Seller) will apply this refund to the tenants
in the form of a credit in February. The exact net refund to the tenants
is not available at this time.
7. Variance report: 1995 and YTD November 1996.
8. Con Edison monthly electric bills from 12/05/94 to 1/03/97
9. Capital expenditures status report/recently completed capital expenditures
report: both dated January 17, 1997 (details any TI, commissions and
capital projects outstanding).
SERVICE CONTRACTS:
List of service contracts (copies not provided as of January 22, 1997).
OTHER:
1. There are no obligations remaining to the City since the development of
the project.
2. Items not provided include:
- general ledger (available for Purchaser's review in Seller's office).
- tenant rent invoices.
<PAGE>
- correspondence regarding tenant audits or tenants seeking relief (no
such conditions exist).
- accounts payable (no outstanding bills exist).
- schedule of litigation (no legal issues exist).
- information on each tenant (verbal descriptions provided).
3. Floor 26 - Long Term Credit Bank: Tenant had the right to terminate
12/1/97 with prior written notice to landlord by 11/30/96 which was not
exercised. LTCB subleased their space 10/1/96 to EXANE with a 11/29/2000
expiration date (essentially coterminous with the LTCB lease). Further,
EXANE's rental rate is equal to LTCB's, being $241,206 per annum. We
(Seller) have not received any expression from LTCB to cancel their lease.
4. HVAC Amortization: If you (Purchaser) examine our (Seller) 1997 budget,
under HVAC repair (line 9000 Amortization) there is an amount for $28,020.
This represents an HVAC capital repair (condenser water branch pipe
replacement) which will be amortized over three years. This is placed in
expenses so that it may be part of the recoverable operating expenses, yet
does not represent an actual disbursement of cash. For simplicity, our
(Seller) budgets carry amortization forward at CPI in future years. The
information I (Purchaser) sent ESG had this amortization removed to
reflect a true cash expense. The 1997 budget which you (Purchaser) now
have does not deduct any amortization.
The capital cost is shown in the 1997 budget under capital (see Capital
spreadsheet $72,360). However, this project has been paid for, completed
and should no longer be considered a reduction of cash flow.
5. Hokkaido Termination: You (Purchaser) should treat the lease as in effect.
Rather than negotiate a price reduction based on their early termination,
we (Seller) are prepared to cover their lease obligation until the
contractual expiration of 11/24/97. If the space is relet prior to
11/24/97, any rental income generated would be used to offset our (Seller)
obligation to cover Hokkaido rental payments.
6. Saudi Petroleum Right of First Offer: I (Seller) am faxing pages 9 & 10 of
the Third Amendment of Lease, dated February 28, 1992 and a letter of
correspondence notifying Saudi Petroleum of the availability of the 24th
floor. Following the notification on October 28, 1993, Saudi Petroleum had
15 days to deliver written acceptance of the space which never occurred.
Subsequently, the 24th floor was subleased by Mitsubishi to W. P. Stewart
May 29, 1994. Saudi Petroleum's right of first offer was only on the first
occasion that the 24th floor became available and therefore has expired.
7. Regarding Sumitomo, they have trading operations on the 24th floor and
part of the 4th.
8. Parking rates are as follows:
1/2 hour: $16.91 1 hour: $20.30 2 hours: $24.52 3 hours: $28.75
<PAGE>
daily: $32.98 monthly: $526.34 (all of the above exclude the 18.25% tax)
9. Listing of personal property: building office, shop equipment and art work
(list provided by 527 Madison Avenue management office January 21, 1997).
10. Please note that the lease abstract for Genex New York (Tokyo General)
indicated their right of first offer expired. Under their recent lease
renewal, Tokyo General still has a one time option on Suite 1200.
<PAGE>
EXHIBIT "E"
Leasing Commissions
<PAGE>
Louis Dreyfus Property Group letterhead
January 22, 1997
Attached are the broker agreements on file for the following tenants which have
either rights of first offer for expansion space or options to renew. Leasing
commission on such transactions may be payable to the original broker.
Saudi Petroleum: option to renew and right of first offer
Genex New York (Tokyo General): right of first offer
<PAGE>
EXHIBIT "F"
Tenant Delinquencies
[To be provided upon request to the Company.]
<PAGE>
EXHIBIT "G"
Rent Roll
[To be provided upon request to the Company.]
<PAGE>
EXHIBIT "H"
Form of Tenant Estoppel
To: Cornerstone Properties Inc. ("Buyer")
and
The Louis Dreyfus Property Group
("Landlord")
Re: 527 Madison Avenue (the "Property")
New York, New York
The undersigned __________, a __________ ("Tenant") is the tenant
under that certain lease dated __________ (the "Lease"), which Lease shall
include the amendments, if any, referred to below, by and between Tenant and
Landlord, covering premises commonly known as Suite ___ in the Property (the
"Lease Premises"). Tenant hereby certifies to 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 __________.
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 except as follows:
_____________________________________
_____________________________________
_____________________________________
b. Tenant is not aware of any renewal, extension or expansion option,
right of first offer or right of first refusal or other similar
right to renew or extend the term of the Lease or expand the
property demised thereunder except as may be expressly set forth
herein or in the Lease;
c. the current monthly rent for the Lease Premises as of __________ is
$__________ and has been paid through __________;
d. the total current additional/escalation rent for common area
maintenance, real estate taxes, insurance and the like (all charges
other than fixed rent) as of __________ is $__________ and is
payable monthly;
<PAGE>
e. Tenant is not in arrears on any rent or other material charges
payable by Tenant under the Lease;
f. Tenant has accepted and is occupying the Leased Premises, and the
Leased Premises have been completed by Landlord as required by the
Lease without defect;
g. the Lease has been neither assigned nor any portion of the Leased
Premises subleased by Tenant except as follows:
_____________________________________
_____________________________________
_____________________________________
h. (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;
i. 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;
j. 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;
k. All contributions, if any, required to be paid by Landlord under the
Lease to date for improvements to the Leased Premises have been
paid;
l. Tenant has paid a security deposit in the amount of $__________, on
which no interest is payable;
m. 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 $__________; and
n. Tenant has no option or right to purchase all or any part of the
Leased Premises or the Property.
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.
<PAGE>
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.
Dated this ___ day of __________, 1996.
_________________________
By:______________________
Name:____________________
Title:___________________
<PAGE>
EXHIBIT "I "
Tax Reduction Proceedings
<PAGE>
Peter H. & Hubert J. Brandt letterhead
January 17, 1997
Louis Dreyfus Property Group
24 Richmond Hill Avenue
Stamford, Connecticut 06903
Attn: Mr. Thomas Gallagher
Re: 527-31 Madison Avenue, Manhattan
Block 1289 Lot 52
Dear Mr. Gallagher:
In response to your request, the following is a brief status report with
respect to proceedings challenging the assessed valuation of the above property.
The last disposition with respect to these protests was made in 1994
wherein the matter was settled before the Tax Commission of the City of New
York. 1993/94 was reduced from an actual assessment of $25,020,495 to
$22,500,000 and 1994/95 was reduced from an actual assessment of $21,375,000 to
$21,000,000. The 1994/95 reduction was made on the final tax roll and tax bills
for the year were predicated on the reduced assessment; the refund with respect
to the reduction in the 1993/94 tax year was received and disbursed to you on
January 6, 1997 in the net amount, after payment of our fee, of $119,759.14.
Judicial proceedings are pending with respect to the 1995/96 and 1996/97
assessed valuations, each of which presently stands at $21,150,000. The Real
Estate Tax Audit Report Form prescribed by Court rules to advance these matters
to the judicial calendar for disposition was filed in August, 1996. We are
awaiting review of that submission by the Office of the Corporation Counsel of
the City of New York after which we will engage in pre-trial settlement
negotiations. We will, of course, keep you apprised of the progress of that
prosecution.
The 1997/98 tentative assessment roll was published by the City of New
York on January 15th, fixing the value at an actual total assessment of
$21,150,000, with a transitional assessment of $21,390,000. The application for
correction of this tentative assessment has been prepared and was mailed
yesterday. The income and expense schedule which is to be filed with the
application was transmitted in December 1996. The deadline for filing the
application is March 3rd.
We trust this satisfies your request. Should you require any additional
information, please do not hesitate to call.
Very truly yours,
/s/
PETER H. & HUBERT J. BRANDT
RAS:jr
<PAGE>
Exhibit 10.122
PLEDGE OF CASH COLLATERAL AGREEMENT
THIS PLEDGE OF CASH COLLATERAL AGREEMENT (this "Agreement") dated as
of February 13, 1997 is made by CSTONE-527 MADISON, INC. , a Delaware
corporation ("Pledgor"), having an address at c/o Cornerstone Properties Inc.,
126 East 56th Street, Suite 600, New York, New York 10022, in favor of BANKERS
TRUST COMPANY, a New York banking corporation ("Lender"), having an office at
280 Park Avenue, New York, New York 10017.
W I T N E S S E T H:
WHEREAS, Pledgor desires to purchase certain improved real property
known as 527 Madison Avenue, New York, New York (the "Property"); and
WHEREAS, the Property is encumbered by a certain Amended and
Restated Consolidated First Mortgage, Spreader, Modification, Extension,
Consolidation and Security Agreement and Assignment of Rents, dated July 24,
1996, made by 527 Madison Holdings ("527") to Property Equity Corp. (the
"Mortgage") , which Mortgage secures an Amended and Restated Demand Note, dated
July 24, 1996, made by 527 in favor of Property Equity Corp. (as modified,
amended and restated from time to time, the "Note"), which Mortgage and Note
have been assigned to Lender; and
WHEREAS, pursuant to a certain Note Modification Agreement and
Mortgage Modification Agreement of even date herewith between 527 and Lender,
the Note and the Mortgage have been modified and amended; and
WHEREAS, a portion of the consideration for the purchase by Pledgor
of the Property is Pledgor's agreement to take title to the Property subject to
the Note and the Mortgage; and
WHEREAS, it is an Event of Default under the Mortgage and the Note
if the Property is transferred or conveyed without the consent of the holder of
the Mortgage; and
WHEREAS, Pledgor has requested that Lender consent to the transfer
of the Property to Pledgor without invoking Lender's right to declare a default
under the Mortgage and demand payment in full of the Note; and
WHEREAS, Lender is unwilling to consent to the transfer of the
Property to Pledgor unless, among other things, Pledgor executes and delivers
this Pledge of Cash Collateral Agreement pursuant to which Pledgor makes a
deposit and opens an account with Lender and pledges and assigns such account to
Lender as additional security for the obligations of 527 under the Note; and
<PAGE>
2
WHEREAS, in order to induce Lender to consent to the transfer of the
Property to Pledgor, Pledgor desires to execute this Agreement and to deliver
the same to Lender.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises contained herein, Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, and in order to induce Lender to consent to the
transfer of the Property to Pledgor, Pledgor and Lender hereby agree as follows:
SECTION 1. Deposit. Immediately following its acquisition of the
Property, Pledgor will open an account with Lender in the name of Pledgor and
made a deposit therein in the sum of THIRTY-SIX MILLION SEVEN HUNDRED FIFTY
THOUSAND DOLLARS ($36,750,000) (the "Deposit"). The Deposit shall be held in an
interest-bearing account which shall be accessible to Pledgor only upon
compliance by Pledgor with the terms and conditions contained in Section 27
hereof and, at the option of Lender, may be invested in short-term financial
instruments having maturities not later than May 13, 1997 and issued by entities
carrying a rating of no lower than A1/P1. All interest accruing on the Deposit
shall be credited by Lender to payment of interest due under the Note.
SECTION 2. Pledge. Pledgor hereby pledges to Lender and grants to
Lender a security interest in the following collateral (collectively, the
"Pledged Collateral"):
(a) the Deposit (including all interest accruing thereon and any
renewals, extensions, replacements and reinvestments thereof);
(b) all certificates, instruments and book entry records, if any,
from time to time representing the Deposit, and all substitutions for or
additions to the same, and all money and property of any nature of Pledgor
hereafter delivered to or held in custody or otherwise by Lender or any of its
branches, subsidiaries or affiliates; and
(c) to the extent not covered by clauses (a) and (b) above, all
proceeds of any and all of the foregoing (including, without limitation,
proceeds that constitute property of the types described in such clauses) and
any and all investments and reinvestments made with such proceeds.
SECTION 3. Security for Obligations. This Agreement secures the
payment of all obligations of (i) 527 now or hereafter existing under the Note
and the Mortgage and (ii) the Pledgor now or hereafter existing under this
Agreement, and any other instruments and agreements relating thereto and
executed by 527 or Pledgor in connection therewith, together with all expenses
incurred by Lender in enforcing any rights thereunder or hereunder, including
without limitation, reasonable attorney's fees (all such obligations, whether of
Pledgor or of 527 under the Note and Mortgage, are referred to herein
collectively as the "Obligations"). Without
<PAGE>
3
limiting the generality of the foregoing, this Agreement secures the payment of
all amounts which constitute part of the Obligations and would be owed to
Lender, but are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving 527.
SECTION 4. Delivery of Pledged Collateral.
(a) All funds and instruments representing or evidencing the Pledged
Collateral have been delivered to and are being held by Lender. Pledgor hereby
acknowledges and agrees that Lender shall have the normal rights of a custodian
and depository of such funds and instruments, as well as the rights of a
pledgee, as set forth herein, it being intended that the assets comprising the
Deposit be considered to be in the full possession and control of Lender in its
capacity as pledgee so as to perfect a pledge of the said assets and to permit
Lender to exercise all rights and remedies of a pledgee with respect to such
assets. Pledgor and Lender hereby acknowledge and agree that Lender shall have
no liability hereunder with respect to any of its acts or omissions made in good
faith.
(b) The instruments delivered to Lender pursuant to Section 2(a)
hereof, and any additional instruments to be delivered from and after the date
hereof are and shall be in suitable form for transfer by delivery, or are to be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to Lender. Lender shall have the
right, upon the occurrence and during the continuance of an Event of Default (as
hereinafter defined) (unless Lender shall specifically in writing agree
otherwise in lieu of declaring an Event of Default) in its discretion and
without notice to Pledgor, to transfer to or to register in the name of Lender,
or any of its nominees, any or all of the Pledged Collateral.
(c) Except in accordance with Section 27 hereof, Pledgor shall not
be entitled to withdraw or remove any cash, certificates, instruments or other
collateral comprising the Deposit or the other Pledged Collateral, nor shall
Pledgor be entitled to sell, assign, pledge, transfer or hypothecate all or any
portion of such Pledged Collateral until the payment in full of the Obligations
and the termination of this Agreement.
(d) It is anticipated that on May 13, 1997, the Note shall be repaid
in full and Lender shall return the Deposit to Pledgor. Upon the occurrence of
such events, the obligations of the parties hereto under this Agreement shall
terminate (except to the extent any obligations therein are expressly stated to
survive). Notwithstanding the foregoing, Lender and Pledgor acknowledge and
agree that if the Obligations are not repaid and this Agreement is not
terminated on May 13, 1997 as anticipated, the Deposit may be reinvested
pursuant to Section 10(b) hereof (or as otherwise provided herein).
SECTION 5. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding, the exercise by Lender of any of its rights hereunder shall not
release Pledgor
<PAGE>
4
from any of its duties or obligations under the contracts and agreements, if
any, included in the Pledged Collateral.
SECTION 6. Representations and Warranties. Pledgor hereby represents
and warrants as follows:
(a) Pledgor has full legal power and authority to execute, deliver
and perform this Agreement and such execution, delivery and performance does not
contravene any law or any contractual restriction binding on or affecting
Pledgor, and does not result in or require the creation of any lien, security
interest or other charge or encumbrance (other than pursuant hereto) upon or
with respect to any of Pledgor's properties.
(b) Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, security interest, option or other charge
or encumbrance except for the security interest created by this Agreement or any
other security agreement in favor of Lender or any of its Affiliates. No
effective financing statement or other document similar in effect covering all
or any part of the Pledged Collateral is on file in any recording office, except
as may have been filed in favor of Lender or any of its Affiliates.
(c) The assignment and pledge of the Deposit and the other Pledged
Collateral and the delivery of such Pledged Collateral to Lender pursuant to
this Agreement creates a valid and perfected first priority security interest in
such portion of the Pledged Collateral, securing the payment of the Obligations.
(d) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required (i) for the pledge by Pledgor of the
Pledged Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Pledgor, (ii) for the perfection or maintenance
of the security interest created hereby (including the first priority nature of
such security interest) or (iii) for the exercise by Lender of the rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement.
(e) The place of business and chief executive office of Pledgor and
the office where Pledgor keeps its records concerning the Pledged Collateral are
located at its address specified in the first paragraph of this Agreement.
(f) To the best knowledge of Pledgor, there are no conditions
precedent to the effectiveness of this Agreement that have not been satisfied or
waived.
(g) Pledgor has, independently and without reliance upon Lender, and
based on such documents and information as it has deemed appropriate, made its
own analysis and decision to enter into this Agreement.
<PAGE>
5
(h) All financial, net worth and other statements relating to
Pledgor and any of its Affiliates that have been delivered to Lender in
connection with this transaction are true, complete and correct.
SECTION 7. Covenants and Agreements.
(a) Pledgor shall not incur direct or contingent liabilities during
the period that this Agreement is in effect other than the indebtedness incurred
in the ordinary course of owning and operating the Property.
(b) Upon the written request of Lender, Pledgor shall furnish to
Lender updated financial statements of Pledgor substantially in the form
heretofore delivered to Lender by Pledgor in connection with other borrowings
made by affiliates of Pledgor from Lender.
(c) For so long as this Agreement is in effect and any Obligations
are outstanding, Pledgor shall not engage in any business or activity other than
the ownership and operation of the Property.
SECTION 8. Further Assurances.
(a) Pledgor agrees that at any time and from time to time, at the
expense of Pledgor, Pledgor shall promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that Lender may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Lender to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.
(b) Pledgor hereby authorizes Lender to file one or more financing
or continuation statements, and amendments thereto, relating to all or any part
of the Pledged Collateral without the signature of Pledgor where permitted by
law. A photocopy or other reproduction of this Agreement or any financing
statement covering the Pledged Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
SECTION 9. Place of Perfection; Records. Pledgor shall keep its
place of business, chief executive office, and the office where it keeps its
records concerning the Pledged Collateral at its address set forth in Section 20
hereof. Pledgor will hold and preserve such records and, upon reasonable, prior
notice from Lender, will permit representatives of Lender at any time during
normal business hours to inspect and make abstracts from such records.
SECTION 10. Interest; Voting or Other Consensual Rights; Etc.
(a) So long as this Agreement is in effect:
<PAGE>
6
i) Any and all interest, dividends, redemption payments and other
distributions paid in respect of the Pledged Collateral or any portion thereof
shall be held in an account with Lender and shall become part of the Pledged
Collateral.
(b) In the event the Note is not repaid when due and Lender chooses
not to draw upon the Deposit in payment of the Note, then the Deposit shall be
reinvested in an account or instrument with Lender in such manner and for such
period of time as Lender and Pledgor shall mutually agree, provided that all
necessary steps are taken to insure that Lender retains its perfected security
interest in the Pledged Collateral following such reinvestment. If Pledgor and
Lender are unable to agree on the manner in which the Deposit is to be invested,
Lender shall invest the Deposit overnight each day until an agreement is reached
as to the manner of investment.
(c) Upon the occurrence and during the continuance of an Event of
Default (unless Lender shall otherwise have agreed in writing):
i) All rights of Pledgor to exercise or refrain from exercising the
consensual rights which Pledgor would otherwise be entitled to exercise pursuant
to this Section 10 shall cease, and all such rights shall thereupon become
vested in Lender, which shall thereupon have the sole right to receive and hold
as Pledged Collateral such interest payments and to exercise or refrain from
exercising such consensual rights.
ii) All payments which are received by Pledgor contrary to the
provisions of this Section shall be received in trust for the benefit of Lender,
shall be segregated from other funds of Pledgor and shall be forthwith paid over
to Lender as Pledged Collateral in the same form as so received (with any
necessary endorsement or assignment).
SECTION 11. Events of Default.
(a) An "Event of Default" shall occur when:
i) Pledgor fails to maintain the Deposit in an amount equal to 105%
of the principal balance due under the Note; or
ii) there is any failure to pay any payments due under the Note, the
Mortgage or this Agreement when the same becomes due and payable after any
applicable grace period; or
iii) any warranty, representation or other statement made by Pledgor
under or in connection with this Agreement or any related document is false or
misleading in any material respect when made; or
<PAGE>
7
iv) there is any failure to perform or observe any term, covenant or
agreement contained in this Agreement or the Note or the Mortgage and any such
failure shall remain unremedied for ten (10) days after written notice thereof
shall have been given to Pledgor by Lender; or
v) Pledgor shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against Pledgor seeking to adjudicate
Pledgor as bankrupt or insolvent, or seeking liquidation, winding-up,
reorganization, arrangement, adjustment, protection, relief, or composition of
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for Pledgor or for
any substantial part of its property, and, in the case of any such proceeding
instituted against it (but not instituted by Pledgor), either such proceedings
shall remain undismissed or unstayed for a period of ninety (90) days, or any of
the actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee or
other similar official for, it or for any substantial part of Pledgor's
property) shall occur; or
vi) any judgment for the payment of money in excess of $250,000
(other than those fully covered by insurance) shall be rendered by a court of
record against Pledgor and Pledgor shall not discharge (by bonding or otherwise)
the same or provide for its discharge in accordance with its terms, or procure a
stay of execution thereof within sixty (60) days from the date of entry thereof
and within such period of sixty (60) days, or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal; or
vii) any provision of this Agreement shall for any reason cease to
be valid and binding on Pledgor, or Pledgor shall so state in writing and such
cessation shall, in Lender's reasonable opinion, impair Lender's security
interest under this Agreement; or
viii) if for any reason Lender at any time fails or ceases to have a
valid and perfected first priority security interest in any of the Pledged
Collateral purported to be covered hereby; or
ix) Pledgor shall be in default in respect to any other obligations
(excluding the Obligations described herein) owed to Lender or any of its
Affiliates following the expiration of any applicable notice or grace period.
(b) Upon the occurrence of an Event of Default, Lender may apply the
proceeds from the Pledged Collateral to the payment of the Obligations in such
order as Lender shall determine in its sole discretion, and if Lender has been
unable immediately to satisfy all of the Obligations by resort to the Pledged
Collateral, then, Lender may consider such default
<PAGE>
8
hereunder to be a default under any other agreement between Pledgor or its
affiliates (or any of them) and Lender and shall have all of the rights granted
under such other agreement upon the occurrence of an Event of Default
thereunder.
(c) Notice of Default. Pledgor shall furnish to Lender as soon as
possible and in any event within five (5) Business Days after the occurrence of
an Event of Default and each event which, with the giving of notice or lapse of
time or both would constitute an Event of Default, a statement of Pledgor
setting forth (i) the details of such Event of Default or event and the action
which Pledgor have taken and propose to take with respect thereto, and (ii) such
other information respecting the condition or operations, financial or
otherwise, of Pledgor as Lender may from time to time reasonably request.
SECTION 12. Remedies upon Default. In addition to other rights
granted herein (including, without limitation, the right granted under Section
10(c)) or under law, if any Event of Default shall have occurred and be
continuing:
(a) Lender may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all of the rights and remedies of a secured party upon a default under
the Uniform Commercial Code in effect in the State of New York at that time (the
"Code") (whether or not the Code applies to the affected Pledged Collateral),
and may also, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of Lender's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as Lender may
deem commercially reasonable. Pledgor acknowledges and agrees that to the extent
notice of sale shall be required by law, ten (10) days' notice by Lender to
Pledgor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. Lender
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. Lender may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.
(b) Any cash held by Lender as Pledged Collateral and all cash
proceeds received by Lender in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of Lender, be held by Lender as collateral for, and/or then or at any
time thereafter be applied (after payment of any amounts payable to Lender
pursuant to Section 17)) against all or any part of the Obligations in such
order as Lender shall elect. Any surplus of such cash or cash proceeds held by
Lender and remaining after payment in full of all the Obligations shall be paid
over to Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
<PAGE>
9
SECTION 13. Transfers and Other Liens. Pledgor agrees that it will
not (i) sell, assign (by operation of law or otherwise), pledge or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral
or (ii) create or permit to exist any lien, security interest, option, or other
charge or encumbrance upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement.
SECTION 14. Lender Appointed Attorney-in-Fact. Pledgor hereby
appoints Lender Pledgor's attorney-in-fact, with full authority in the place and
stead of Pledgor and in the name of Pledgor or otherwise, upon the occurrence
and during the continuance of an Event of Default, from time to time in Lender's
discretion to take any action and to execute any instrument which Lender may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, endorse and collect all instruments
made payable to Pledgor representing any interest payment or other distribution
in respect of the Pledged Collateral or any part thereof and to give full
discharge for the same. This appointment shall be irrevocable so long as any
Obligations have not been fully paid, discharged and satisfied.
SECTION 15. Lender May Perform. If Pledgor fails to perform any
agreement contained herein, Lender may itself perform, or cause performance of,
such agreement, and the expenses of Lender incurred in connection therewith
shall be payable by Pledgor under Section 17.
SECTION 16. Lender's Duties. The powers conferred on Lender
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise such powers. Except for the safe custody
of any Pledged Collateral in its possession and the accounting for moneys
actually received by it hereunder, Lender shall have no duty as to any Pledged
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not Lender has or is deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged Collateral.
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of any Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Lender
accords its own property.
SECTION 17. Indemnity and Expenses. Pledgor agrees to indemnify
Lender from and against any and all claims, liens and liabilities (including
reasonable attorneys' fees) growing out of or resulting from this Agreement,
except claims, losses or liabilities resulting from the gross negligence or
unlawful misconduct of Lender. Pledgor will within ten (10) days of demand pay
to Lender the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
Lender may incur in connection with (a) the administration of this Agreement,
(b) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (c) the exercise or enforcement
of any of the rights of Lender hereunder or (d) the failure by Pledgor to
<PAGE>
10
perform or observe any of the provisions hereof; provided, however, that any
reasonable expenses of Lender incurred in connection with an Event of Default
that has occurred and is continuing shall be paid on demand.
SECTION 18. Security Interest Absolute. All rights of Lender and
security interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of Pledgor secured hereby, or any
other amendment or waiver of or any consent to any departure from the Note or
any related agreement or instrument, including, without limitation, any increase
in the Obligations resulting from the extension of additional credit to Pledgor
or otherwise;
(b) any taking, exchange, release or nonperfection of any other
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations; or
(c) any manner of application of collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other disposition of any
collateral for all or any of the Obligations or any other assets of Pledgor.
SECTION 19. Amendments, Etc. This Agreement incorporates and
supersedes all prior agreements and undertakings with respect to the subject
matter of this Agreement. No amendment or waiver of any provision of this
Agreement, and no consent to any departure by Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Lender and
Pledgor, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 20. Notices. All notices and other communications provided
for hereunder shall be in writing (including telecopier, telegraphic, telex or
cable communication) and mailed first class, postage prepaid, sent by certified
or registered mail, return receipt requested, telecopied, telegraphed, telexed,
cabled or delivered by messenger or overnight courier to it, at the following
addresses:
if to Pledgor: Cstone-527 Madison, Inc.
c/o Cornerstone Properties , Inc.
126 East 56th Street
New York, New York 10022
Fax: (212) 605-7199
with a copy to: Shearman & Sterling
<PAGE>
11
599 Lexington Avenue
New York, New York 10022
Attention: Mason Sleeper, Esq.
Fax: (212) 848-7300
if to Lender: Bankers Trust Company
280 Park Avenue
New York, New York 10017
Attention: Alexander B.V. Johnson
Managing Director
Fax: (212) 454-1733
with a copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attention: Monty Davis, Esq.
Fax: (212) 821-8111
or, as to any of the parties, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and other
communications shall, when mailed, or telecopied, or delivered by messenger or
overnight courier, be effective three (3) days after deposited in the mails, or
when telecopied, or when delivered (or when proper delivery is refused),
respectively. Lender covenants and agrees to send to Pledgor in the manner
hereinabove provided copies of all notices sent by Lender under the Note and
Mortgage, as modified.
SECTION 21. Continuing Security Interest; Assignments by Lender.
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall (a) constitute a "security agreement" within the meaning of
the Uniform Commercial Code as in effect in the State of New York from time to
time, (b) remain in full force and effect until the payment in full of the
Obligations and all other amounts payable under this Agreement, (c) be binding
upon Pledgor, and its successors and assigns, and (d) inure to the benefit of,
and be enforceable by, Lender and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (d), Lender may assign
or otherwise transfer all or any portion of its rights and obligations under
this Agreement, the Note or any other Loan Document to any other person or
entity, and such other person or entity shall thereupon become vested with all
the benefits in respect thereof granted to Lender herein or otherwise. In the
event of any such assignment by Lender, Lender shall provide reasonable notice
thereof to Pledgor. Upon the payment in full of the Obligations and all other
amounts payable under this Agreement, the security interest granted hereby shall
automatically terminate and all rights to the Pledged Collateral shall revert to
Pledgor. Upon any such termination, Lender will, at Pledgor's expense, promptly
return to
<PAGE>
12
Pledgor that portion of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof and execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination.
SECTION 22. Release of Mortgage. If, upon the maturity of the Note
or an Event of Default, Lender exercises its rights to apply the Pledged
Collateral in payment in full of the Obligations, then at the option of Pledgor,
Lender shall release the Mortgage or shall assign the Mortgage without recourse
to Pledgor or an entity designated by Pledgor.
SECTION 23. Governing Law; Terms. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by the
laws of a jurisdiction other than the State of New York. Unless otherwise
defined herein or in the Note, terms defined in Article 9 of the Code are used
herein as therein defined.
SECTION 24. Waiver of Jury Trial. PLEDGOR AND LENDER HEREBY WAIVE,
TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THIS AGREEMENT OR THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART
AND/OR THE DEFENSE OR ENFORCEMENT OF ANY OF LENDER'S RIGHTS AND REMEDIES IN
CONNECTION THEREWITH. PLEDGOR AND LENDER ACKNOWLEDGE THEY MAKE THIS WAIVER
KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS.
SECTION 25. Severability. In case any one or more of the provisions
contained in this Agreement 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. The parties hereto agree to negotiate in good faith either to replace
any illegal, invalid or unenforceable provision so that, to the extent possible,
the economic bargain of this Agreement shall be preserved, or otherwise to amend
the same to achieve such result.
SECTION 26. Sale of Property. Lender hereby consents to the sale of
the Property by 527 to Pledgor.
SECTION 27. Withdrawals by Pledgor.
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13
(a) Subject to the conditions of this Section, Pledgor shall have
the right from time to time to request a withdrawal of funds from the Deposit to
Pledgor. Each such request shall be in writing and shall be delivered not less
than ten (10) days prior to the date on which Pledgor requires such funds.
(b) The right of Pledgor to withdraw funds from the Deposit (each
such withdrawal, a "Withdrawal") shall be subject to the following conditions
precedent:
i) There shall be no Event of Default on the part of Pledgor or 527
under the Note.
ii) Prior to the first Withdrawal, Pledgor shall have delivered to
Lender a full and unconditional guaranty of all amounts due under the Note
from Cornerstone Properties, Inc., together with an opinion of counsel
acceptable to Lender in its sole discretion as to the due authorization,
execution and delivery of such guaranty.
iii) Prior to the first Withdrawal, Pledgor shall have delivered to
Lender a current Phase I environmental assessment report of the Property
prepared by an environmental engineer acceptable to Lender in its sole
discretion, which report shall indicate the absence of any adverse
environmental conditions at the Property and shall otherwise be acceptable
to Lender in its sole discretion.
iv) Prior to the first Withdrawal, Pledgor shall have delivered to
Lender an appraisal of the Property prepared by an appraiser acceptable to
Lender in its sole discretion and in accordance with all applicable
regulations governing such appraisals, which shall show a fair market
value for the Property of not less than $70,000,000 and which shall
otherwise be acceptable to Lender in its sole discretion.
v) Prior to the first Withdrawal, Pledgor shall have delivered to
Lender a current structural engineering report covering the Property
prepared by an engineer or contractor acceptable to Lender in its sole
discretion, indicating no material adverse conditions at the Property and
otherwise acceptable to Lender in its sole discretion.
vi) At the time of each Withdrawal, the ratio of Cash Flow from the
Property to debt service shall be not less than 4.25:1.
SECTION 28. Defined Terms. Unless the context otherwise specifies
or requires, the following terms shall have the meanings herein specified.
"Affiliate" means, with respect to a Person, any other Person that,
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person, which, in the
case of a partnership, shall include each of the direct
<PAGE>
14
and indirect controlling venturers or partners thereof, and in the case of a
corporation, shall include each of the controlling shareholders thereof. For
purposes of this definition only, the term "control" means the possession,
directly or indirectly, of the power (not necessarily the exclusive power) to
direct or cause the direction of the management, business and policies of a
Person, whether by contract or otherwise.
"Person" means an individual, a corporation, a partnership, an
association, a joint venture, an estate, a trust or any other legal entity.
"Cash Flow from the Property" means the excess of (i) fixed rent and
additional rents payable under all leases at the Property over (ii) operating
and other expenses of the Property other than debt service on the Note.
For purposes of this Agreement, whenever the circumstances or the
context of this Agreement so requires, the singular shall be construed as the
plural, the masculine shall be construed as the feminine and/or the neuter and
vice versa, and the phrase "including" shall mean "including without
limitation".
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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15
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed and delivered as of the date first above written.
PLEDGOR:
CSTONE-527 MADISON, INC.
By: /s/ Francis H. Shields, Jr.
-----------------------------------
Name: Francis H. Shields, Jr.
Title: Vice President
By: /s/ Rodney C.D. Mock
-----------------------------------
Name: Rodney C.D. Mock
Title: Executive Vice President
LENDER:
BANKERS TRUST COMPANY
By: /s/ A BV Johnson
-----------------------------------
Name: A BV Johnson
Title: MD
<PAGE>
Exhibit 10.123
NOTE MODIFICATION AGREEMENT
THIS NOTE MODIFICATION AGREEMENT (this "Agreement"), dated as of
February 13, 1997, is made by and between BANKERS TRUST COMPANY, a New York
banking corporation ("Lender"), and 527 MADISON HOLDINGS, a New York general
partnership ("Borrower").
W I T N E S S E T H :
WHEREAS, Borrower is the owner of certain real property situated in
the City of New York, and commonly known as 527 Madison Avenue, New York, New
York (the ("Mortgaged Property");
WHEREAS, Lender is considering acquiring that certain loan in the
principal amount of $35,000,000 (the "Loan") made to Borrower, which Loan is
evidenced by the Amended and Restated Demand Note described on Exhibit A
attached hereto (the "Existing Note"), and which Loan is secured by, among other
things, the mortgage (the "Existing Mortgage") and the assignment of leases and
rents (the "Assignment of Leases") described in Exhibit B attached hereto; and
WHEREAS, Lender is unwilling to acquire the Loan unless Borrower
executes and delivers (i) this Agreement modifying the terms of the Existing
Note, as assigned to Lender, and (ii) an agreement modifying the Existing
Mortgage to reflect the terms of this Agreement (the Existing Note, as modified
hereby, the "Notes"; the Existing Mortgage, as modified, the "Mortgage"; and the
Note, the Mortgage and the Assignment of Leases, collectively, the "Loan
Documents"); and
WHEREAS, Borrower desires to execute this Agreement for the purpose
of modifying the Note on the terms provided for herein and to deliver the same
to Lenders in order to induce Lender to acquire the Loan.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises contained herein, Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, and in order to induce Lender to acquire the
Loan, Borrower, hereby agrees as follows:
SECTION 1. DEFINITIONS
As used in this Agreement the following terms shall have the meanings
herein specified unless the context otherwise requires. Defined terms in this
Agreement shall include in the singular number the plural and in the plural
number the singular.
"Additional Amounts" shall have the meaning ascribed thereto in Section
2.1(c) hereof.
<PAGE>
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"Additional Eurodollar Interest" shall have the meaning ascribed thereto
in Section 2.1(b) hereof.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which state or national banks in the City of New
York, New York are authorized, or obligated, by law or executive order to be
closed.
"Default Rate" shall mean the per annum interest rate equal to the lesser
of (i) the highest rate permitted by applicable law to be charged on commercial
mortgage loans, and (ii) the applicable interest rate then payable under the
Note plus three percent (3%) per annum.
"Eurodollar Interest Period" shall mean two (2) successive periods, the
first of which shall commence on the date hereof and end on April 14, 1997, and
the second of which shall commence on April 14, 1997 and end on May 13, 1997
(provided such Eurodollar Interest Period is available to Lender).
"Eurodollar Rate" shall mean one quarter percent (.25%) per annum above
the Offered Rate.
"Event of Default" shall have the meaning set forth in the Mortgage.
"Maturity Date" shall mean May 13, 1997.
"Offered Rate" shall mean the offered quotation, if any, to first-class
banks in the Eurodollar market by Lender for United States dollar deposits of
amounts comparable to the Principal Amount with maturities comparable to the
Eurodollar Interest Period for which the applicable Eurodollar Rate will apply
as of approximately 10:00 a.m. (New York City time) two (2) Business Days prior
to the first day of the applicable Eurodollar Interest Period.
"Person" means any individual, corporation, partnership, joint venture,
estate, trust, limited liability company, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Prime Rate" shall mean the per annum rate of interest which Lender
announces from time to time as its "Prime Rate". The Prime Rate is only a
reference rate and is not intended to signify a "best" or "lowest" rate. Lender
may make loans at rates which are the same, greater or lower than the Prime
Rate.
SECTION 2. NOTE PAYMENTS
2.1. Note Payments. Payments under the Note shall be due and payable as
follows:
<PAGE>
-3-
(a) Except as specifically set forth herein, interest on the entire
principal amount of the Loan shall accrue at the Eurodollar Rate and shall be
due and payable monthly, in arrears on the first day of each and every calendar
month (for the prior month). The entire principal balance of the Loan shall be
due and payable on the Maturity Date.
(b) Additional interest ("Additional Eurodollar Interest") on the
Principal Amount shall be payable on the last day of each Eurodollar Interest
Period, at an annual rate of interest equal, at all times during such Eurodollar
Interest Period, to the excess of (i) the rate obtained by dividing the Offered
Rate for such Eurodollar Interest Period by a percentage equal to 100% , minus
the reserve percentage applicable during such Eurodollar Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or if more than one such percentage is so applicable, minus the
daily average for such percentages for those days in such Eurodollar Interest
Period during which any such percentage shall be so applicable) for determining
the maximum reserve requirement (including any marginal reserve requirement) for
Lender in respect of liabilities or assets consisting of or including
Eurocurrency liabilities (as defined in Regulation D of the Board of Governors
of the Federal Reserve System as in effect from time to time), over (ii) the
Offered Rate for such Eurodollar Interest Period. A certificate as to the amount
of any such Additional Eurodollar Interest due hereunder prepared by Lender and
submitted to Borrower shall be conclusive as to the matters set forth therein,
absent manifest error. The Note shall not be deemed to have been paid and/or
satisfied in full until all Additional Eurodollar Interest payable hereunder
shall have been paid. In addition to all payments of interest due hereunder,
Borrower shall, from time to time, during any Eurodollar Interest Period in
which the Eurodollar Rate is in effect hereunder, pay to Lender upon demand by
Lender, additional amounts (the "Additional Amounts") sufficient to compensate
Lender for (i) any loss, cost or expense incurred by reason of the liquidation
or reemployment of deposit or other funds acquired by Lender, or incurred by
reason of Lender's failure to acquire deposits or funds it shall have arranged
to acquire, to fund or maintain the Principal Amount during any Eurodollar
Interest Period as a result of (a) any payment or prepayment of all or any
portion of the Principal Amount of the Note, whether voluntary or involuntary
(including, without limitation, any payment or prepayment resulting from an
acceleration of the Note), or (b) any involuntary conversion, from the
Eurodollar Rate to the Prime Rate on a day other than a day on which such
conversion is otherwise permitted under the terms hereof ; and (ii) any
increased costs incurred by Borrower as a result of (a) the introduction of, or
any change in, any law or regulation applicable to loans made at the Eurodollar
Rate (including any change in the reserve requirements applicable thereto), or
(b) Lender's compliance with any guideline or request applicable to loans made
at the Eurodollar Rate which may be issued after the date hereof by any central
bank or other governmental authority with respect to banks or financial
institutions generally (without regard to whether such guideline or request has
the force of law). Lender's certificate as to any Additional Amounts which
become due and payable by Borrower hereunder shall be conclusive with respect to
the Additional Amounts described therein, absent manifest error. The Note shall
not be deemed to have been paid and/or satisfied in full until all Additional
Amounts payable hereunder shall have been paid.
<PAGE>
-4-
(c) The entire Principal Amount, together with all accrued and
unpaid interest and any other charges due hereon shall be due and payable on the
Maturity Date.
(d) To the extent any payments are or become due and payable under
the Note or any of the other Loan Documents on a day which is not a Business
Day, such payments are and shall be due and payable on the next succeeding
Business Day.
2.2. Unavailability of Eurodollar Rate. If at any time Lender determines
that (i) by reason of the introduction of any applicable law or any change in
the interpretation or application of any existing law by any authority charged
with the interpretation or application thereof (including reserve, capital
adequacy, asset ratio or similar requirements), or by reason of any judgment or
order of any competent court, tribunal or authority (whether or not having the
force of law), or by reason of any assertion of any central bank or other
governmental authority in the United States or in Europe, it is unlawful for
Lender to obtain funds in the Eurodollar market in order to fund or maintain the
Principal Amount hereof bearing interest at the Eurodollar Rate, (ii) any sum
received or receivable by it under the Note or the effective dollar return to
Lender under the Note is or will be reduced, or Lender will make or will be
required to make any payment (except on account of tax on its overall net
income) or will forego or will be required to forego any interest or other
return on or calculated by reference to the amount of any sum received or
receivable by it under the Note, or (iii) by reason of circumstances affecting
the Eurodollar market, it is unable to obtain matching deposits in the
Eurodollar market at or about 10:00 A.M. on the first day of any Eurodollar
Interest Period in sufficient amounts to fund or maintain the Principal Amount
bearing interest at the Eurodollar Rate; then, in any of such events set forth
in clauses (i) through (iii) above, the Eurodollar Rate shall automatically
thereupon be converted to the Prime Rate, and Lender shall promptly notify
Borrower in writing of such conversion; provided, however, that the Eurodollar
Rate shall be reinstated, if, in the determination of Lender and its counsel,
the aforedescribed condition causing such termination shall cease to affect the
transactions contemplated herein.
2.3. Prepayments. Borrower shall have the right to prepay, without premium
or penalty, the Note, in whole but not in part, on any Payment Date upon not
less than ten (10) days' prior written notice to Lender; provided, however, that
Borrower shall pay to Lender at the time of such prepayment all accrued but
unpaid interest due hereunder, all Additional Eurodollar Interest, all
Additional Amounts and all charges, amounts, other sums then due and payable
under the note and the Loan Documents.
2.4. Invalidity of Payments. To the extent that Borrower makes any payment
or Lender receives any payment or proceeds for Borrower's benefit, which are
subsequently invalidated, declared to be fraudulent or, preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver, custodian
or any other party under any bankruptcy law, common law or equitable cause,
then, to such extent, the Obligations of Borrower hereunder intended to be
satisfied shall be revived and continue as if such payment or proceeds had not
been received by Lender.
<PAGE>
-5-
2.5. Default Rate. Time is of the essence with respect to the times set
forth herein for the repayment of the Principal Amount and the interest thereon.
During the continuance of an Event of Default, the rate of interest to be paid
on the Principal Amount and all such other amounts shall be increased to the
Default Rate. To the extent permitted by law, interest shall continue to accrue
at the Default Rate, notwithstanding the issuance of a judgment of foreclosure
and sale. The foregoing provisions shall not be construed as a waiver by Lender
of its right to pursue any other remedies available to it under the Mortgage or
any other Loan Document.
2.6. Payments and Computations. All payments made pursuant to the Note
shall be made by wire transfer to Lender's office, and with respect to any such
payment, the same shall be received by Lender before 1:00 p.m., Eastern Standard
Time, in order to be credited as a payment received that date. All payments
shall be in such freely transferable coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. All computations of interest under the Note shall be
made by Lender on the basis of a year of 360 days, as the case may be 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. Each determination
by Lender of an interest rate hereunder shall be conclusive and binding for all
Purposes, absent manifest error. All payments made to Lender shall be applied
against amounts then due and payable under this Agreement in the following order
or in such other order as Lender shall deem appropriate: (a) reimbursable
expenses; (b) any fee; (c) accrued interest on amounts in default; (d) accrued
interest on the Loan; and (e) repayment of the Loan.
2.7. Payment on Nonbusiness Days. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a Saturday, Sunday or a
public or bank holiday or the equivalent for banks generally under the laws of
the State of New York, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
(a) The execution, delivery and performance by Borrower of this
Agreement is within Borrower's powers and do not contravene any law or any
contractual restriction binding on or affecting Borrower, and do not result in
or require the creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto) upon or with respect to any of its
properties.
(b) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by Borrower of this Agreement.
(c) There is no pending or, to the best of their knowledge,
threatened action or proceeding affecting Borrower before any court,
governmental agency or arbitrator, which may
<PAGE>
-6-
materially adversely affect the financial condition of Borrower or which
purports to affect the legality, validity or enforceability of this Agreement or
any Loan Document to which Borrower will be a party.
SECTION 4. RIGHT OF SETOFF
Upon the occurrence and during the continuance of any Event of Default
Lender is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any account maintained with Lender
by the then owner of the Mortgaged Property against any and all of the
obligations of Borrower now or hereafter existing under the Loan Documents,
whether or not Lender shall have made any demand under such Loan Document and
although such obligations may be unmatured. Lender agrees promptly to notify
Borrower after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and application.
The rights of Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which Lender
may have.
SECTION 5. NOTICES
All notices and other communications provided for hereunder shall be in
writing (including telecopier, telegraphic, telex or cable communication) and
mailed first class, postage prepaid, sent by certified or registered mail,
return receipt requested, telecopied, telegraphed, telexed, cabled or delivered
by messenger or overnight courier to it, at the following addresses:
if to Borrower: 527 Madison Holdings
c/o Louis Dreyfus Property Group
405 Lexington Avenue
New York, New York 10174
Attention: David Shepherd
with a copy to: Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Kenneth J. Friedman, Esq.
Fax: (212) 856-7802
if to Lender: Bankers Trust Company
280 Park Avenue
21st Floor
New York, New York 10017
Attention: Alexander B.V. Johnson
Managing Director
Fax: (212) 454-1733
<PAGE>
-7-
with a copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attention: Monty Davis, Esq.
Fax: (212) 821-8111
or, as to any of such parties, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and other
communications shall, when mailed, telecopied, telegraphed, telexed or cabled,
or delivered by messenger or overnight courier, be effective three (3) days
after deposited in the mails, or when telecopied, delivered to the telegraph
company, confirmed by the telex answerback or delivered to the cable company, or
when delivered (or when proper delivery is refused), respectively.
SECTION 6. EXCULPATION; RELEASE OF BORROWER
6.1 Lender agrees that upon receipt of an assumption agreement in the form
of Exhibit C annexed hereto made by Borrower's transferee of the Mortgaged
Property and/or an affiliate of Borrower's transferee of the Mortgaged Property
(it being understood that the Mortgage may be assumed by Borrower's transferee
of the Mortgaged Property and that the Note may be assumed by an affiliate of
Borrower's transferee of the Mortgaged Property) which has been duly executed
and delivered, Borrower shall be released from any and all of its obligations
under the Note, the Mortgage and the Loan Documents. It is the intention of the
parties hereto that the foregoing release be self-operative without the need for
delivery of any instrument by Lender to Borrower but Lender shall execute a
release promptly upon the request of Borrower and deliver same to Borrower.
6.2 Notwithstanding any other provision of any of the Loan Documents to
the contrary, no recourse shall be had, whether by levy or execution or
otherwise, for the payment of the Indebtedness (as defined in the Mortgage),
including, without limitation, the principal of, premium, if any, or interest on
the Note, or for the performance of any obligation under or any claim for
damages or otherwise based on any of the Loan Documents or lm otherwise in
respect hereof, against Borrower or any of its assets, other than the Mortgaged
Property, or against any partner of Borrower or any officer, member, director,
partner or shareholder of any partner of Borrower (collectively, the "Released
Parties"), nor shall any of such parties be personally liable for any such
amounts or claims, or liable for any deficiency judgment based thereon or with
respect thereto, it being expressly understood that the sole remedies hereunder
or under any other Loan Document against such parties with respect to such
amounts and claims or the performance of Borrower's obligations hereunder or
under the other Loan Documents shall be against the Mortgaged Property and any
other security for the Indebtedness, and that all such liability of such parties
is and is to be by the acceptance hereof expressly waived and released as a
condition of, and as consideration for, the execution of this Agreement, and
Lender agrees that no action, case or proceeding shall be brought wherein any
judgment in the nature of a deficiency judgment or other judgment for the
payment of money shall be sought, collected or otherwise obtained against
<PAGE>
-8-
any Released Party, and Lender for itself and its successors and assigns
irrevocably waives any and all right to sue for, seek or demand any such
damages, money judgment, deficiency judgment or personal judgment against all
Released Parties under or by reason of or in connection with the Loan Documents.
Lender agrees that any fraud alleged against any transferee owner of the
Mortgaged Property will not give rise to any liability on the part of any
Released Party hereunder or under any of the other Loan Documents. Lender hereby
covenants and agrees not to name Borrower in any action pertaining to
enforcement of the Note or the Mortgage except to the extent required by law in
order to foreclose the Mortgage.
SECTION 7. MISCELLANEOUS
7.1. Amendments. No amendment or waiver of any provision of the Note or
this Agreement, nor consent to any departure by Borrower under the Note or this
Agreement therefrom, shall in any event be effective unless the same shall be in
writing and signed by Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
7.2. Amendment to Mortgage. At the request of Lender, Borrower shall
execute and deliver an amendment to the Mortgage, which amendment shall reflect
the modification of the maturity of the term of the Loan and contain such other
terms and provisions of the Note as Lender may reasonably request.
7.3. Further Assurances. Subject to the terms and conditions which govern
the Loan and the respective rights and obligations of Borrower under the Note,
the mortgagor under the Mortgage and Lender under the Note and the mortgagee
under the Mortgage, such parties shall use their best efforts to do, or cause to
be done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement as
expeditiously as possible, including, without limitation, the performance of
such further acts or the execution and delivery of such further acts or the
execution and delivery of any additional instruments or documents or amendment
of instruments or documents, including without limitation, promissory notes and
mortgages, as any party may reasonably request in order to carry out the
purposes of this Agreement and the transactions contemplated hereby; provided
that the foregoing shall not result in the increase of any obligation or
liability of Borrower under the Note, the Mortgage or any other Loan Document
and further, provided that from and after the date hereof, the actual
out-of-pocket expenses incurred by Borrower under this Section shall be borne by
Lender.
7.4. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Borrower and Lender and their respective successors and assigns,
except that Borrower shall not have the right to assign its rights hereunder or
any interest herein without the prior written consent of Lender.
7.5. Governing Law. This Agreement and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York.
<PAGE>
-9-
7.6. Severability. In case any one or more of the provisions contained in
this Agreement or any other Loan Document 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. The parties hereto agree to negotiate in good
faith either to replace any illegal, invalid or unenforceable provision so that,
to the extent possible, the economic bargain of this Agreement and the other
Loan Documents shall be preserved, or otherwise to amend this Agreement and/or
the other Loan Documents to achieve such result.
7.7. Successors and Assigns. If with Lender's consent, Borrower sells the
Mortgaged Property to any person or entity, Lender will accept performance by
Borrower's transferee of Borrower's obligations to Lender hereunder and under
the Mortgage and the other Loan Documents as if Borrower's transferee were
Borrower hereunder and notwithstanding that Borrower's transferee may not have
expressly assumed Borrower's obligations hereunder.
7.8. K Street Guaranty. All references in the Note to the "K Street
Guaranty" are hereby delete therefrom.
7.9. Reaffirmation. Except as modified and amended hereby, the Note shall
remain unmodified and in full force and effect, the parties hereby ratifying and
confirming the terms of the Note as modified and amended hereby.
7.10. Transfer of the Loan. Lender agrees that without the consent of
Borrower, which consent shall not be unreasonably withheld or delayed, Lender
shall not transfer or sell the Loan to an entity other than a commercial bank,
savings bank, insurance company or other financial institution. Without
otherwise limiting the generality of the foregoing, as used herein, the term
"financial institution" shall not include a pension fund manager or a real
estate investment trust or a subsidiary or investment vehicle of any such
entity. The foregoing agreement of Lender shall not be deemed to prohibit Lender
from selling participation interests in the Loan provided Lender retains control
of the management and administration of the Loan.
IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly
executed and delivered as of the date first above written.
BORROWER
527 MADISON HOLDINGS,
a New York general partnership
By: 527 MADISON AVENUE HOLDINGS INC.,
partner
By: [Signature Illegible]
Name:
<PAGE>
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Title: (Vice President)
LENDER
BANKERS TRUST COMPANY
a New York banking corporation,
By: /s/ Alexander B.V. Johnson
----------------------------
Name: Alexander B.V. Johnson
Title: (Managing Director)
<PAGE>
EXHIBIT A
The Amended and Restated Note
o Amended and Restated Demand Note, dated July 24, 1996, made by 527
Madison Holdings in favor of Property Equity Corp.
<PAGE>
EXHIBIT B
The Mortgage and the Assignment of Leases
o Amended and Restated Consolidated First Mortgage, Spreader,
Modification, Extension, Consolidation and Security Agreement and
Assignment of Rents, dated July 24, 1996, made by 527 Madison
Holdings, as mortgagor, to Property Equity Corp., as mortgagee.
o Amended and Restated Collateral Assignment of Income, Rents and
Leases, dated July 24, 1996, made by 527 Madison Holdings to
Property Equity Corp.
<PAGE>
EXHIBIT C
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT (the "Agreement") dated as of the 13th day of May,
1997 by CSTONE-527 MADISON, INC., having an office at c/o Cornerstone Properties
Inc., 126 East 56th Street, New York, New York 10022 ("CStone").
W I T N E S S E T H:
WHEREAS, 527 Madison Holdings ("527") is the obligor under that certain
Amended and Restated Demand Note, dated July, 24, 1996 from 527, as maker, in
favor of Property Equity Corp. ("PEC"), as payee, in the original principal
amount of $35,000,000, which Note was amended by that certain Note Modification
Agreement, dated as of February 13, 1997 between 527, as borrower, and Bankers
Trust Company ("Lender"), as lender (the "Note"). The Note is secured by, among
other things, that certain Amended and Restated Consolidated First Mortgage,
Spreader, Modification, Extension, Consolidation and Security Agreement and
Assignment of Rents, dated July 24, 1996, between 527 and PEC. recorded August
1, 1996 in the New York City Register's Office in Reel 2351, Page 221, which
Mortgage was amended by that certain Consolidated First Mortgage Modification
Agreement dated February 13, 1997, between 527 and Lender (collectively the
"Mortgage") which encumbers that certain property described on Exhibit A
attached hereto and known as 527 Madison Avenue, New York, New York (the
"Property"); and
WHEREAS, CStone is the owner of the Property; and
WHEREAS, CStone desires to assume the obligations of 527 under the Note
and the Mortgage.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
CStone agrees as follows:
Assumption. Effective as of the day of year first written above, CStone
hereby assumes all of the obligations of 527 Under the Note and the Mortgage.
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<PAGE>
IN WITNESS WHEREOF, this Agreement as been duly executed by CStone as
of the day and year first above written.
CSTONE-527 MADISON, INC.
By:
-----------------------
Name:
Title:
By:
-----------------------
Name:
Title:
-2-
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this 13th day of February, 1997 before me personally appeared
________________________ to me known, who, being by me duly sworn, did depose
and say that he resides at ________________________ that he is a
________________________ of CSTONE-527 MADISON, INC., the corporation which
signed the foregoing instrument and that he signed his name thereto as the act
and deed of said corporation for the use and purpose therein mentioned.
----------------------------------
Notary Public
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this 13th day of February, 1997 before me personally appeared
________________________, to me known, who, being by me duly sworn, did depose
and say that he resides at ________________________, that he is a
________________________ of CSTONE-527 MADISON. INC.. the corporation which
signed the foregoing instrument and that he signed his name thereto as the act
and deed of said corporation for the use and purpose therein mentioned.
----------------------------------
Notary Public
<PAGE>
Exhibit 10.124
LOAN PURCHASE AGREEMENT
THIS LOAN PURCHASE AGREEMENT ("Agreement"), is executed as of December 31,
1997 by and between Trust Company of the West, a California corporation, as
Trustee of TCW Realty Fund VA ("Fund VA"), and TCW Realty Fund VB, a California
limited partnership ("Fund VB"), as tenants in common, (collectively "Seller"),
and Cornerstone Properties, Inc., a Nevada corporation ("Purchaser").
RECITALS:
A. Seller holds legal title to a certain loan described on Exhibit A
attached hereto (the "Loan") made by Seller to 60 State Street Development
Company Limited Partnership, a Delaware limited partnership ("Borrower");
B. The Loan is secured, in party by real property and improvements located
at 60 State Street, Boston, Suffolk County, Massachusetts, more particularly
described on Exhibit B attached hereto (the "Property");
C. Seller also holds legal title to a loan made by Seller to Borrower in
the amount of $610,205.13 ("Additional Loan"), which is evidenced by a
promissory note dated May 23, 1995 ("Additional Note"); and
D. Purchaser desires to purchase all of Seller's right, title and interest
in and to the Loan and the Additional Loan on the terms and subject to the
conditions set forth herein;
AGREEMENT:
NOW THEREFORE, in consideration of Ten Dollars and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
Seller and Purchaser hereby agree as follows:
1. Sale and Purchase.
Seller agrees to sell, convey, and assign to Purchaser, and Purchaser
agrees to purchase and accept from Seller, for the Purchase Price (as
hereinafter defined), on the terms and conditions set forth in this Agreement,
(a) all of Seller's right, title and interest in and to (i) the Loan evidenced
and secured by the documents (the "Loan Documents") described on Exhibit C
attached hereto; and (ii) the Additional Loan evidenced by the Additional Note;
(b) any and all rights, remedies, privileges, causes of action or claims of
Seller (whether known or unknown) against any person or entity which in any way
are based upon, arise out of, or are related to the Loan, the Loan Documents or
the Additional Loan; and (iii) any and all present and future rights with
respect to cash, securities, escrow accounts, interest, dividends and other
property which may be exchanged for or distributed or collected in respect of
any of the foregoing, and the proceeds thereof, including without limitation
payments in respect of principal, accrued interest, fees, costs and expenses,
and distributions and payments obtained by or through redemption, consummation
of a plan of reorganization or otherwise.
<PAGE>
2. Purchase Price; Earnest Money.
(a) The purchase price ("Purchase Price") to be paid by Purchaser to
Seller for the Loan and the Additional Loan is (i) TWO HUNDRED TEN MILLION
and NO/100 DOLLARS ($210,000,000.00) less (ii) SEVENTY-EIGHT MILLION, FOUR
HUNDRED TWENTY THOUSAND ONE HUNDRED SEVENTY-SEVEN and 78/100 DOLLARS
$(78,420,177.78), being the outstanding principal balance of those certain
loans from Teachers Insurance and Annuity Association of America to John
A. Pirovano, William A. Halsey and Stanton H. Zarrow, not in their
individual capacity but solely as Trustees of Sixty State Street Trust,
under Declaration of Trust dated September 10, 1970 and recorded with the
Suffolk County Registry of Deeds at Book 8389, Page 286, as amended, and
which loans are secured, in part, by the Property.
(b) Purchaser shall pay the Purchase Price to Seller at the Closing
(as defined in Section 6 below) by wire transfer pursuant to the following
wiring instructions:
Wire Purchase Price to:
Wells Fargo Bank, N.A.
San Francisco, California
ABA #121000248
For credit to the account of TCW Realty Fund V
Account #4600-178743
(c) The payment of Base Interest (as defined in the Note,
hereinafter defined) which is due on the day of the Closing, shall not be
transferred to Purchaser but shall be the property of Seller and shall not
be credited against or in any way reduce the Purchase Price or be deemed
to constitute any portion of the Loan.
(d) At the Closing, Seller shall deliver to Purchaser all funds held
by Seller in escrow or otherwise for the payment of taxes, insurance or
security deposits for the Property.
3. Items to be Provided by Seller. Seller has made available to Purchaser,
for Purchaser's review, the following:
(a) Copies of the Loan Documents and the Additional Note, to the
extent the same are in Seller's possession.
(b) Such other information (the "Evaluation Material") in Seller's
actual possession and control as Seller has determined in its discretion
such as property operating statements, rent rolls, mortgagee title
insurance policies, and other material pertaining to the Loan to the
extent same (i) are not subject to any confidentiality agreement or
privilege, (ii) do not contain any valuations by Seller or third parties
retained by Seller or Seller's predecessors-in-interest, (iii) do not
relate to Seller's internal approval and review process and (iv) do not
contain information which is deemed proprietary or confidential by Seller,
in its sole discretion.
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<PAGE>
4. Inspection.
(a) Purchaser has made such examinations, studies, inspections and
investigations ("Inspections") regarding the Loan, the Loan Documents, the
Additional Loan and the Property as Purchaser desires.
(b) Any inspection fee, appraisal fee, engineering fee and other
expense of any kind incurred by Purchaser relating to, or in connection
with, any Inspections will be solely Purchaser's expense. Purchaser agrees
to indemnify and hold Seller, and its successors, assigns and
predecessors, parents, partners, beneficiaries, subsidiaries, and
affiliated organizations, and the officers, directors, shareholders,
employees, asset managers, partners, subasset managers, attorneys, agents,
members and servants of each of the foregoing (collectively, the "Seller
Parties"), harmless from any and all (i) liability for the payment of
damages, claims and judgments for personal injury or death to any person
and for property damage to the property of others, including, without
limitation, the Property, and for the amount of all losses, judgments,
costs, and expenses, (including reasonable attorneys' fees, court costs,
deposition and other discovery fees and expenses) of every kind suffered,
incurred, sustained by or threatened against any of the Seller Parties
which arose out of any Inspections by Purchaser or any person or entity
conducting such Inspections on behalf of Purchaser, and (ii) damages,
costs of repair and replacement suffered to the Property caused by
Purchaser or any employee, agent, representative, independent contractor
or other person on or at the Property at the request or direction of
Purchaser. The provisions of this Section 4(b) shall survive the Closing
and any termination of this Agreement.
(c) Purchaser has made such examination, review and investigation of
the facts and circumstances necessary to evaluate the Loan, the Loan
Documents, the Additional Loan and the Property as it deems necessary or
appropriate to form a basis for its evaluation of the purchase of the Loan
and the Additional Loan. Without limiting Seller's representations
expressly set forth in this Agreement, Purchaser is assuming all risk with
respect to the completeness, accuracy or sufficiency of the Loan, the Loan
Documents, the Additional Loan and any information pertaining to the
Property. Purchaser further acknowledges that in acquiring the Loan and
the Additional Loan, Purchaser is assuming the risk of full or partial
loss which is inherent with the credit, collateral and collectibility
risks associated with the quality and character of the Loan and the
Additional Loan.
5. Intentionally Omitted.
6. Closing.
(a) The Closing ("Closing") of the sale of the Loan by Seller to
Purchaser shall occur at the offices of Seller's attorneys, Brown,
Rudnick, Freed & Gesmer, P.C., One Financial Center, 18th Floor, Boston,
Massachusetts 02111, on December 31, 1997 (the "Closing Date").
(b) At the Closing, all of the following shall occur, all of which
shall be deemed concurrent conditions precedent:
(i) Seller, at Seller's sole cost and expense, shall deliver
or cause to be delivered to Purchaser the following:
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<PAGE>
A. The original executed promissory note evidencing the
Loan (the "Note"), and the original executed Additional Note,
each of which shall be endorsed "Pay to the order of
Purchaser, as is, where is, with all faults and without
representation, warranty or recourse, express or implied, of
any type, kind, character or nature, except as expressly
provided in the Loan Purchase Agreement dated as of December
31, 1997 between Seller and Purchaser".
B. An Assignment and Assumption of Liens and Documents
(the "Assignment") for the Loan Documents and related rights
and liens in the form of Exhibit D attached hereto with all
blanks appropriately completed.
C. One or more UCC-3 Assignment of Financing Statement
forms (the "UCC-3") evidencing the assignment to Purchaser of
all Seller's right, title and interest in and to any security
interests in personal property and fixtures created by the
Loan Documents and held by Seller which are in effect on the
Closing Date.
D. The originals, to the extent the same are in Seller's
actual possession and control on the date of Closing (or
certified copies if the originals are not in Seller's actual
possession and control), of the other Loan Documents.
(ii) Purchaser, at Purchaser's sole cost and expense, shall
deliver or cause to be delivered to Seller the following:
A. The Purchase Price.
B. Release of Seller (the "Release") executed by
Purchaser in the form attached hereto as Exhibit E, dated
effective as of the Closing Date.
C. The Assignment.
(iii) Seller and Purchaser shall pay their respective
attorneys' fees for the negotiation and drafting of this Agreement
and the documents described in Section 6(b)(i) and (ii). Purchaser
shall pay all recording fees, transfer taxes, mortgage taxes,
document stamp taxes and similar fees and taxes (if applicable) and
the cost of any title insurance coverage or endorsements that
Purchaser elects to obtain.
7. Intentionally Omitted.
8. Intentionally Omitted.
9. Representations, Covenants and Indemnifications of Seller.
(a) Seller hereby represents to Purchaser that:
(i) Trust Company of the West is a duly formed corporation,
validly existing and in good standing under the laws of the State of
California, is the Trustee of TCW
-4-
<PAGE>
Realty Fund VA, and its capacity as Trustee, has the complete powers
adequate for the making and performing of this Agreement, and has
taken all corporate action required to make all of the promises of
this Agreement the valid and enforceable obligations they purport to
be.
(ii) TCW Realty Fund VB, a California limited partnership, is
a duly formed limited partnership, validly existing and in good
standing under the laws of the State of California with partnership
powers adequate for the making and performing of this Agreement, and
has taken all partnership action required to make all of the
provisions of this Agreement the valid and enforceable obligations
they purport to be.
(iii) Each of Trust Company of the West, a California
corporation, as Trustee of TCW Realty Fund VA and TCW Realty Fund
VB, a California limited partnership, is a "United States person"
within the meaning of Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended.
(iv) Seller has not assigned, transferred, pledged or
hypothecated to any third party any portion of its interest in the
Note, any other Loan Documents or the Additional Note.
(v) Exhibit C is a complete and true list of all material
documents related to and instruments evidencing or securing the
Loan, including all material documents and instruments entered in to
between Seller and Borrower or between Seller and Teachers Insurance
and Annuity Association of America including all material amendments
and modifications thereto. (For purposes of this Section 9(a)(v), a
document or instrument shall not be "material" unless it (i)
individually, or in combination with other documents or instruments,
imposes upon the lender under the Loan a liability, cost or expense
in excess of $25,000; or (ii) imposes, in any material respect, or
invalidates, any material right or remedy, in any material respect,
of the lender under the documents executed in connection with the
Loan.
(vi) (A) as of the date hereof, the outstanding principal
balance of the Loan is $160,397,664.33; (B) as of the date hereof,
the amount held by Seller pursuant to Section 3.22 of the Mortgage
(as defined in the Loan Agreement) is $0; (C) as of the date hereof,
the amount held by Seller pursuant to Section 3.26 of the Mortgage
is $82,112.60; and (D) Applicable Amount of Net Cash Flow (as
defined in the Note) for each payment period from November, 1990
through November, 1997 is set forth on Exhibit F attached hereto.
Seller is not holding in escrow any other amounts with respect to
the Property.
(vii) Except as expressly set forth in the Loan Documents,
neither Borrower nor any of its affiliates has any right of first
refusal, right of first offer or other right to purchase or acquire
the Loan from Seller.
(viii) The Letter of Credit (as defined in that certain Fourth
Amended and Restated Capital Improvement and Tenant Improvement
Agreement dated December 14, 1994 between Seller and borrower) has
been terminated.
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<PAGE>
(ix) Seller has received no written notice from Borrower of a
default by Seller under the Loan Documents and Seller has delivered
no default notice to Borrower with respect to the Loan.
(x) The execution, delivery and performance of this Agreement
and all instruments and other documents to be executed and delivered
by Seller in connection herewith have been duly authorized by all
necessary action on the part of Seller and do not and will not (A)
require any consent or approval of its shareholders, beneficiaries
and/or partners, whichever is applicable, that has not been
obtained; or (B) violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award presently in
effect having applicability to Seller or any provision of Seller's
char-ter or bylaws, trust instrument and/or partnership agreement,
whichever is applicable.
(xi) This Agreement constitutes a legal, valid and binding
obligation of Seller enforceable against Seller in accordance with
its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability related to or affecting the enforcement of creditors'
rights and general equitable principles which may limit the
availability of equitable remedies.
(xii) Seller has not filed and is not planning to file any
petition seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any law relating to bankruptcy or insolvency, nor has
any such petition been filed against Seller. No general assignment
of Seller's property has been made for the benefit of creditors, and
no receiver, master, liquidator or trustee has been appointed for
Seller or any of its properties. Seller is not insolvent and the
consummation of the transactions contemplated by this Agreement
shall not render Seller insolvent. Seller has sufficient capital or
net worth to meet its obligations.
(xiii)The funding, advancement, payment and other monetary
obligations of Seller pursuant to (a) Sections 3D and 3E of that
certain Fourth Amended and Restated Capital Improvement and Tenant
Improvement Agreement between Borrower and Seller, dated as of
December 14, 1994 (the "Improvement Agreement"); and (b) Paragraphs
2, 4 and 7 of that certain TIAA Refinancing Agreement, dated as of
October 1, 1994, between Seller and Borrower (the "TIAA Refinancing
Agreement") have been fully satisfied and there are no further
obligations of Seller to make any further fundings, payments or
advances pursuant thereto. Seller did not advance any funds pursuant
to Paragraph 3(a) of the TIAA Refinancing Agreement or pursuant to
Paragraph 3 of that certain Tenant Improvement Funding Letter from
Seller to Teachers Insurance and Annuity Association of America and
Borrower dated December 14, 1994 (the " TIAA Funding Letter").
Seller has not advanced any amounts pursuant to Paragraph 4 of the
TIAA Funding Letter.
(b) The representations, consents and indemnifications of Seller set
forth in Section 9(a) hereof shall be deemed to be made as of the Closing
Date, and shall survive the Closing for a period of six (6) months.
(c) From and after the date of the Closing, if Seller shall receive
any payment from Borrower or other party on account of an obligation or
liability arising under the Loan Documents
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<PAGE>
or in connection with the Property (including, without limitation, the
$89,600 termination fee payable by Lahive and Cockfield in connection with
its lease at the Property), then Seller shall accept such payment on
behalf of Purchaser and shall promptly remit the same to Purchaser.
(d) (1) Seller hereby indemnifies, holds harmless and agrees to
defend Purchaser, from and against any and all losses, causes of action,
liabilities, claims, demands, obligations, damages, judgments, costs and
expenses, including reasonable attorneys' and accountants' fees and costs,
to which Purchaser may become subject on account of, arising out of, or
related to any act, omission, conduct or activity on or before the date
hereof, of Seller or any of its officers, directors, employees, agents,
servants, shareholders, beneficiaries, successors or assigns, on account
of, arising out of or related to (A) the Loan and the Additional Loan
hereunder; (B) the use, ownership, control, operation or condition of
Property securing the Loan, including without limitation, the presence or
release of any hazardous or toxic fluids, substances or materials on the
Property; and (C) the collection practices of Seller with respect to the
Loan and the Additional Loan.
(ii) Promptly after receipt by Purchaser of notice of the
commencement of any action to which this Section 9(d) shall apply,
Purchaser shall notify Seller in writing of the commencement of such
action and of the possibility of a claim by Purchaser against Seller
under this Section 9(d); however, failure of Purchaser to so notify
Seller will not relieve Seller of liability hereunder except to the
extent such failure increases the liability of Seller hereunder.
Seller shall be entitled to assume the defense of such action with
counsel selected by Seller with the approval of Purchaser, which
approval shall not be unreasonably withheld. After Seller's
assumption of the defense, Seller shall not be liable for any legal
expenses subsequently incurred by Purchaser in connection with the
defense of such action, unless (A) such expenses are incurred with
the prior written approval of Seller; or (B) Purchaser reasonably
determines that its interests may be adverse in whole or in part to
those of Seller and that there may be legal defenses available to
Purchaser that are different from, in addition to or inconsistent
with defenses available to Seller, in which case Purchaser may
retain its own counsel and be indemnified by Seller for all legal
and other expenses and costs reasonably incurred in connection with
the investigation and defense of the action.
(iii) Purchaser shall not be liable for the settlement of any
action effected without its express written consent. If any action
if settled without Purchaser's written consent or if there is a
final judgment against Purchaser in any action, Seller shall
indemnify, hold harmless and defend Purchaser from and against all
loss or liability incurred by reason of such settlement or judgment.
10. DISCLAIMER OF REPRESENTATIONS OR WARRANTIES BY SELLER. EXCEPT AS
EXPRESSLY SET FORTH IN SECTION 9(A) HEREOF, THE LOAN AND THE ADDITIONAL LOAN ARE
BEING SOLD "AS IS" WITHOUT ANY RECOURSE, REPRESENTATION OR WARRANTY OF ANY KIND
OR NATURE, EXPRESS OR IMPLIED. PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN SECTION 9(A), SELLER HAS NOT MADE, DOES NOT MAKE
AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES,
PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER
-7-
<PAGE>
WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR
FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE LOAN, THE LOAN DOCUMENTS,
THE ADDITIONAL LOAN, THE PROPERTY OR ITS CONDITION. PURCHASER ACKNOWLEDGES THAT
SELLER HAS NOT AUTHORIZED ANY EMPLOYEE, AGENT, REPRESENTATIVE, BROKER, THIRD
PARTY OR OTHER PARTY TO MAKE AND, TO THE EXTENT SO MADE, SPECIFICALLY NEGATES
AND DISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS
OR GUARANTIES. PURCHASER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY, IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, TO INSPECT THE
LOAN, THE LOAN DOCUMENTS, THE ADDITIONAL LOAN AND THE PROPERTY, PURCHASER IS
RELYING SOLELY ON SELLER'S REPRESENTATIONS EXPRESSLY SET FORTH IN SECTION 9(A)
AND ON ITS OWN INVESTIGATION OF THE LOAN, THE LOAN DOCUMENTS, THE ADDITIONAL
LOAN AND PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED,
DIRECTLY OR INDIRECTLY, BY SELLER. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER WITH RESPECT TO THE
LOAN, THE LOAN DOCUMENTS, THE ADDITIONAL LOAN OR THE PROPERTY WAS OBTAINED FROM
A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION
OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION. IT IS UNDERSTOOD AND AGREED THAT
THE LOAN AND THE ADDITIONAL LOAN ARE SOLD BY SELLER AND PURCHASED BY PURCHASER
SUBJECT TO THE FOREGOING. THE PROVISIONS OF THIS SECTION 10 SHALL SURVIVE THE
CLOSING.
11. Representations, Warranties, Covenants and Indemnifications of
Purchaser.
(a) Purchaser hereby represents and warrants to Seller that:
(i) Purchaser has all requisite power and authority to
execute, deliver, and perform all of its obligations under this
Agreement and all instruments and other documents executed and
delivered by Purchaser in connection herewith.
(ii) The execution, delivery and performance of this Agreement
and all instruments and other documents to be executed and delivered
by Purchaser in connection herewith have been duly authorized by all
necessary action on the part of Purchaser and do not and will not
(A) require any consent or approval of its shareholders and/or
partners, whichever is applicable, that has not been obtained; or
(B) violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect
having applicability to Purchaser or any provision of Purchaser's
charter or bylaws and/or partnership agreement, whichever is
applicable.
(iii) This Agreement constitutes a legal, valid and binding
obligation of Purchaser enforceable against Purchaser in accordance
with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting the enforcement of creditors'
rights and general equitable principles which may limit the
availability of equitable remedies.
-8-
<PAGE>
(iv) Purchaser has not filed and is not planning to file any
petition seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any law relating to bankruptcy or insolvency, nor has
any such petition been filed against Purchaser. No general
assignment of Purchaser's property has been made for the benefit of
creditors, and no receiver, master, liquidator or trustee has been
appointed for Purchaser or any of its properties. Purchaser is not
insolvent and the consummation of the transactions contemplated by
this Agreement shall not render Purchaser insolvent. Purchaser has
sufficient capital or net worth to meet its obligations. Purchaser
has liquidated financial resources adequate to consummate the
transactions contemplated herein.
(v) Purchaser has not received any portion of the Purchase
Price, either directly or indirectly, from Borrower, or any
affiliate or subsidiary thereof
(vi) Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and
risks relating to its purchase of the Loan and the Additional Loan
and making an informed purchase and investment decision in
connection therewith.
(vii) Purchaser has made such examination, review and
investigation of the facts and circumstances necessary to evaluate
the Loan as it has deemed necessary or appropriate to form a basis
for its evaluation of the purchase of the Loan. Without limiting
Seller's representations expressly set forth in this Agreement,
Purchaser is assuming all risk with respect to the completeness,
accuracy or sufficiency of the Loan Documents. Without limiting
Seller's representations expressly set forth in this Agreement,
Purchaser acknowledges that Seller has made no assurances as to the
collectibility of the Loan or the Additional Loan. Purchaser further
acknowledges that in acquiring the Loan and the Additional Loan,
Purchaser is assuming the risk of full or partial loss which is
inherent with the credit, collateral and collectibility risks
associated with the quality and character of the Loan and the
Additional Loan.
(viii)Without limiting Seller's representations expressly set
forth in this Agreement, Purchaser has agreed to the Purchase Price
on the basis of its own independent investigation and credit
evaluation of the Loan Documents and the Additional Note. Purchaser
acknowledges that the amount ultimately recovered by Purchaser under
the Loan Documents and the Additional Note may be less than the
Purchase Price, and Purchaser shall have no recourse to Seller for
any such deficiency.
(ix) Purchaser is a "United States person" within the meaning
of Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended.
(x) Purchaser is acquiring the Loan and the Additional Loan
for its own account and not as a broker, finder or similar agent for
any other person.
(b) Purchaser hereby covenants with Seller as follows:
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<PAGE>
(i) Notice of Purchase. Purchaser shall, promptly after the
Closing, notify the borrower and any other party liable for the Loan
and the Additional Loan or any portion thereof of Purchaser's
purchase of the Loan and the Additional Loan and direct that all
payments on and communications regarding the Loan and the Additional
Loan be sent to Purchaser after the Closing Date, and will provide
Seller with a copy of such notice.
(ii) Insurance. Purchaser shall be responsible for notifying
all companies providing hazard insurance, collision or any other
type of insurance for the protection of the Property, of the sale of
the Loan and the Additional Loan to Purchaser as may be required
under existing policies.
(iii) Informational Tax Reporting. Purchaser agrees to assume,
as of the Closing Date, all obligations with respect to federal and
state income tax informational reporting related to the Loan and the
Additional Loan purchased under this Agreement, including
obligations with respect to Forms 1099 and 1098 and back-up
withholding. Purchaser further agrees to cooperate with Seller to
the extent necessary to allow Seller to fulfill any obligations
which Seller may have with respect to such informational reporting
for the Loan and the Additional Loan for the period prior to the
Closing Date.
(iv) Servicing. From and after the Closing Date, Purchaser
shall assume all of Seller's obligations and duties, if any, with
respect to servicing the Loan and the Additional Loan purchased
hereunder.
(c) Indemnification.
(i) Purchaser hereby indemnities, holds harmless and agrees to
defend the Seller Parties, from and against any and all losses,
causes of action, liabilities, claims, demands, obligations,
damages, judgments, costs and expenses, including reasonable
attorneys' and accountants' fees and costs, to which any of the
Seller Parties may become subject on account of, arising out of, or
related to any act, omission, conduct or activity after the date
hereof of Purchaser or any of its officers, directors, employees,
agents, servants, shareholders, successors or assigns, on account
of, arising out of or related to (A) the Loan and the Additional
Loan hereunder; (B) the use, ownership, control, operation or
condition of Property securing the Loan, including without
limitation, the presence or release of any hazardous or toxic
fluids, substances or materials on the Property; and (C) the
collection practices of Purchaser with respect to the Loan and the
Additional Loan.
(ii) Promptly after receipt by any of the Seller Parties of
notice of the commencement of any action to which this Section 11(c)
shall apply, the Seller Party shall notify Purchaser in writing of
the commencement of such action and of the possibility of a claim by
the Seller Party against Purchaser under this Section 11(c);
however, failure of the Seller Party to so notify Purchaser will not
relieve Purchaser of liability hereunder except to the extent such
failure increases the liability of Purchaser hereunder. Purchaser
shall be entitled to participate in such action and may, with the
consent of the Seller Party, assume the defense of such action with
counsel selected by Purchaser with the approval of the Seller Party,
which approval shall not be unreasonably withheld. After Purchaser's
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<PAGE>
assumption of the defense, Purchaser shall not be liable for any
legal expenses subsequently incurred by the Seller Party in
connection with the defense of such action, unless (A) such expenses
are incurred with the prior written approval of Purchaser; or (B) if
the Seller Party reasonably determines that its interests may be
adverse in whole or in part to those of Purchaser and that there may
be legal defenses available to the Seller Party that are different
from, in addition to or inconsistent with defenses available to
Purchaser, in which case the Seller Party may retain its own counsel
and be indemnified by Purchaser for all legal and other expenses and
costs reasonably incurred in connection with the investigation and
defense of the action.
(iii) None of the Seller Parties shall be liable for the
settlement of any action effected without its express written
consent. If any action is settled without the Seller Party's written
consent or if there is a final judgment against any of the Seller
Parties in any action, Purchaser shall indemnify, hold harmless and
defend the Seller Parties from and against all loss or liability
incurred by reason of such settlement or judgment.
(d) The representations, warranties, covenants and indemnifications
of Purchaser contained in this Section 11 shall be deemed to be made both
as of the Closing Date and shall survive the Closing.
12. Brokers.
(a) Purchaser has not had any dealings with respect to the Loan, the
Loan Documents, the Additional Loan or the transactions contemplated
hereby with any mortgage or real estate advisor, broker, investment
advisory firm or salesman or any other person or corporation, whether
known or unknown to any of the parties hereto (each a "Broker") other than
Merrill Lynch, and Purchaser agrees to pay any and all commissions, fees
or other compensation which may become due and payable to Merrill Lynch as
a result of this Agreement or the Purchaser's actions. Purchaser hereby
indemnifies Seller and the Seller Parties against, and agrees to hold
Seller and the Seller Parties harmless from, any and all liability and
claims to pay commissions, fees or other compensation which may at any
time be asserted against Seller or any of the Seller Parties founded in
whole or in part upon (i) a claim that the aforesaid representation and
warranty of Purchaser is untrue; (ii) a claim that a Broker is owed any
such commissions, fees or other compensation due to the acts of Purchaser;
(iii) Purchaser's failure to pay any fee due to Merrill Lynch; and (iv) a
claim by any Broker that alleges it dealt with Purchaser in connection
with the Loan, the Additional Loan and the Loan Documents, in each case
together with any and all losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees, costs of depositions and
other discovery, court costs and disbursements) relating to such claims or
arising therefrom or incurred by Seller or any of the Seller Parties in
connection with the enforcement of this indemnification provision.
(b) Seller has not had any dealings with respect to the Loan, the
Loan Documents, the Additional Loan, or the transactions contemplated
hereby with any Broker other than Merrill Lynch. Seller hereby indemnities
Purchaser against, and agrees to hold Purchaser harmless from, any and all
liability and claims to pay commissions, fees or other compensation which
may at any time be asserted against Purchaser founded in whole or in part
upon (i) a claim that the aforesaid representation and warranty of Seller
is untrue; (ii) a claim that a Broker other than Merrill Lynch
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<PAGE>
is owed any such commissions, fees or other compensation due to the acts
of Seller; or (iii) a claim by any Broker other than Merrill Lynch that
alleges it dealt with Seller in connection with the Loan, the Additional
Loan and the Loan Documents, in each case together with an), and all
losses, damages, costs and expenses (including, without limitation,
reasonably attorneys' fees, costs of depositions and other discovery,
court costs and disbursements) relating to such claims or arising
therefrom or incurred Purchaser in connection with the enforcement of this
indemnification provision.
(c) The provisions of this Section 12 shall survive the Closing and
any termination of this Agreement.
13. Environmental Assessments. Purchaser expressly acknowledges that there
may be certain environmental issues and/or risks, with respect to the Property.
PURCHASER HAS BEEN EXPRESSLY ADVISED BY SELLER TO CONDUCT AN INDEPENDENT
INVESTIGATION AND INSPECTION OF THE PROPERTY TO DETERMINE TO ITS OWN
SATISFACTION WHETHER SUCH RISKS EXIST, UTILIZING EXPERTS AS PURCHASER DEEMS TO
BE NECESSARY, FOR AN INDEPENDENT ASSESSMENT OF ALL ENVIRONMENTAL LIABILITY AND
RISK WITH RESPECT TO THE PROPERTY.
14. Confidentiality. Seller and Purchaser acknowledge that certain of the
information being made available to Purchaser in connection with Purchaser's
acquisition of the Loan and the Additional Loan is of a confidential nature.
Seller and Purchaser agree to keep such information, and information concerning
the financial terms of the transactions which are the subject of this Agreement,
confidential until 4:00 p.m., Eastern Standard Time, on Monday, January 5, 1998.
Notwithstanding the foregoing, prior to 4:00 p.m., Eastern Standard Time, on
January 5, 1998, Seller and Purchaser may disclose such information to their
respective attorneys and consultants and/or as required by any court of
competent jurisdiction, any governmental agency having jurisdiction over them,
or any applicable statute. The provisions of this Section 14 shall survive the
Closing.
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<PAGE>
15. Notices. Any notice or other communications required or permitted
under or given in connection with this Agreement shall be in writing and shall
be addressed as follows:
If to Seller: c/o Westmark Realty Advisors
855 South Figueroa Street
Suite 3500
Los Angeles, California 90017
Attn: Michael J.N. Gray
Facsimile number: (212) 683-4201
with a copy to: Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, Massachusetts 02111
Attn: Edward S. Hershfield
Facsimile number: (617) 856-8201
If to Purchaser: Cornerstone Properties, Inc.
126 East 56th Street
New York, New York 10088
Attn: John S. Moody
Facsimile number: (212) 605-7199
with a copy to: Sherman & Sterling
599 Lexington Avenue
New York, New York
Attn: Mason C. Sleeper, Esq.
Facsimile number: (212) 848-7100
Any such notice or other communication shall be deemed given upon the occurrence
of any of the following: (a) the first business day following the day sent by
United States express mail, postage prepaid, return receipt requested; (b) on
the first business day following the day sent by an overnight carrier service
that operates on a nationwide basis; (c) on the third business day following the
day sent by United States certified mail, postage prepaid, return receipt
requested; or (d) on the date delivered by hand to the address above for which a
signed receipt is given, whether or not actually received by the person to whom
directed. From time to time either party may designate another address within
the continental United States for purposes of this Agreement by giving the other
party not less than ten (I 0) days advance written notice of such change of
address in accordance with the provisions of this Section 15. Facsimile numbers
are given for convenience only and delivery by facsimile or similar transmission
shall not constitute notice hereunder.
16. Waiver. Any term, condition or provision of this Agreement may be
waived in writing at any time by the party which is entitled to the benefits
thereof.
17. Governing Law. The terms and provisions hereof shall be governed by,
and construed in accordance with, the substantive laws of the Commonwealth of
Massachusetts without regard to conflict of law principles.
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<PAGE>
18. Binding Agreement. This Agreement shall be binding upon the heirs,
executors, administrators, personal representatives, successors and assigns of
the parties hereto; provided, however, the foregoing shall not be deemed or
construed to (a) permit the assignment of any of Purchaser's rights or
obligations hereunder except as permitted in Section 33 or (b) confer any right,
title, benefit, cause of action or remedy upon any person or entity not a party
hereto other than successors and permitted assigns of the parties.
19. Construction. Whenever the context hereof so requires, reference to
the singular shall include the plural and the plural shall include the singular;
words denoting gender shall be construed to mean the masculine, feminine or
neuter, as appropriate; and specific enumeration shall not exclude the general,
but shall be construed as cumulative of the general recitation. The headings
contained in this Agreement are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or any provision hereof.
20. Severability. If any clause or provision of this Agreement is held to
be illegal, invalid or unenforceable under any law applicable to the terms
hereof, then the remainder of this Agreement shall not be affected thereby, and
in lieu of each such clause or provision of this Agreement that is illegal,
invalid or unenforceable, such clause or provision shall be judicially construed
and interpreted to be as similar in substance and content to such illegal,
invalid or unenforceable clause or provision, as the context thereof would
reasonably suggest, so as to thereafter be legal, valid and enforceable.
21. Counterparts. To facilitate execution, this Agreement may be executed
in as many counterparts as may be convenient or required. It shall not be
necessary that the signature and acknowledgment of, or on behalf of, each party,
or that the signature and acknowledgment of all persons required to bind any
party, appear on each counterpart. All counterparts shall collectively
constitute a single instrument. It shall not be necessary in making proof of
this Agreement to produce or account for more than a single counterpart
containing the respective signatures and acknowledgments of each of the parties
hereto.
22. NO ORAL AGREEMENTS. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTION CONTEMPLATED HEREIN,
SUPERSEDES ANY AND ALL PRIOR DISCUSSIONS AND AGREEMENTS (WRITTEN OR ORAL)
BETWEEN SELLER AND PURCHASER WITH RESPECT TO THE TRANSACTION CONTEMPLATED HEREIN
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
23. Time of the Essence. Time is of the essence in the execution and
performance of this Agreement and of each provision hereof.
24. Attorneys' Fees. If either party shall default in the performance of
any of the terms and conditions of this Agreement, the non-defaulting party
shall be entitled to recover all costs, charges, and expenses of enforcing this
Agreement including reasonable attorneys' fees, paralegal fees, and costs,
'including, but not limited to, attorneys' and paralegal fees incurred in any
trial or appellate proceedings.
25. Rule of Construction. The parties acknowledge that each party and its
counsel has reviewed this Agreement, and the parties hereby agree that normal
rules of construction to the effect that
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<PAGE>
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or exhibits
hereto.
26. Saturday, Sunday or Legal Holiday. If any date set forth in this
Agreement for the performance of any obligation by Purchaser or Seller or for
the delivery of any document or notice should be on other than a Business Day,
the compliance with such obligation or delivery shall be deemed acceptable on
the next following Business Day. For purposes of this Agreement, the term
"Business Day" shall mean any day on which banks in Boston, Massachusetts are
required to be open for business.
27. Further Assurances. Seller will, whenever and as often as shall be
reasonably requested to do so by Purchaser, and Purchaser will, whenever and as
often as shall be reasonably requested so to do by Seller, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, any and all
conveyances, assignments and all other instruments and documents as may be
reasonably necessary to complete the transaction herein contemplated and to
carry out the intent and purposes of this Agreement.
28. Amendments. This Agreement shall not be amended except by a writing
signed on behalf of the party to be charged with such amendment.
29. No Third Party Beneficiaries. No person or entity not a party to this
Agreement shall have any third party beneficiary claim or other right hereunder
or with respect thereto.
30. Exhibits. Each exhibit referred to in this Agreement is attached
hereto and each such exhibit is hereby incorporated by reference and made a part
hereof as if fully set forth herein.
31. Intentionally Omitted.
32. Jury Waiver. SELLER AND PURCHASER DO HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THEIR RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ANY
ACTION OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER TO THIS
AGREEMENT, THE LOAN, THE LOAN DOCUMENTS, THE ADDITIONAL LOAN OR THE PROPERTY
(INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT
AND ANY CLAIMS OR DEFENSES ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY
INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT
FOR SELLER TO ENTER INTO THIS AGREEMENT AND SHALL SURVIVE THE CLOSING.
33. Assignment. Purchaser may not assign this Agreement or any right,
liability, or obligation hereunder without the prior written consent of Seller,
which consent may be withheld by Seller in its sole discretion, except that
Seller shall consent to an assignment by Purchaser to any entity which is wholly
owned by (i) a limited partnership in which Cornerstone Properties, Inc. is the
sole general partner; or (ii) Cornerstone Properties, Inc. Any purported
assignment in violation of this provision shall be null and void. Any assignment
to which Seller consents, which consent must be in writing, shall not release
Purchaser from any obligation or liability hereunder unless such release is
provided in writing signed by Seller.
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<PAGE>
34. Limitation on Recourse to Seller. Purchaser agrees to look solely to
the assets of Fund VA and Fund VB for the enforcement of any claims against
Seller, as neither the beneficiaries of Fund VA, the partners of Fund VB, Trust
Company of the West nor any of its affiliated entities (including, but not
limited to Westmark Realty Advisors, LLC and TCW Asset Management Company) nor
any investor or participant in the beneficiary of Fund VA or in Fund VB nor any
of their respective officers, directors, employees, partners or shareholders,
assume any personal, corporate or partnership liability for any of the
obligations entered into on behalf of Seller.
[This space is intentionally left blank]
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EXECUTED UNDER SEAL as of the date first above written.
SELLER:
TRUST COMPANY OF THE WEST, a
California corporation, as Trustee of
TCW Realty Fund VA
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
TCW REALTY FUND VB,
a California limited partnership
By: TCW ASSET MANAGEMENT
COMPANY,
its General Partner
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
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By: WESTMARK REALTY ADVISORS,
LLC,
its General Partner
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
PURCHASER:
CORNERSTONE PROPERTIES, INC.
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
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EXHIBIT A
DESCRIPTION OF LOAN
Loan evidenced by Promissory Note dated as of December 23, 1988, made by
60 State Street Development Company Limited Partnership, a Delaware limited
partnership ("Borrower"), to Trust Company of the West, a California
corporation, as Trustee of TCW Realty Fund VA, and TCW Realty Fund VB, a
California limited partnership, as tenants in common (collectively, "Lender");
as amended by First Allonge dated as of November 1, 1990, and executed by
Borrower and Lender; as further amended by Second Allonge dated as of May 20,
1991, and executed by Borrower and Lender; as further amended by Third Allonge
dated as of July 3, 1991, and executed by Borrower and Lender; as further
amended by Fourth Allonge dated as of March 10, 1993, and executed by Borrower
and Lender; as further amended by Fifth Allonge dated as of April 12, 1994, and
executed by Borrower and Lender; and as further amended by Sixth Allonge dated
as of December 14, 1994, and executed by Borrower and Lender.
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EXHIBIT B
PROPERTY DESCRIPTION
PARCEL 1
The land in Boston, Suffolk County, Massachusetts, shown on a plan
entitled "Plan of Land Showing Area to be Acquired, Boston, Mass. dated October
13, 1970, as revised to May 11, 1973, and drawn by Harry R. Feldman, Inc.,
Engineers and Surveyors, 112 Shawmut Avenue, Boston, Massachusetts," which plan
is recorded with Suffolk Deeds in Book 8691, Page 596, and is bounded and
described as follows:
Beginning at the southeasterly comer of the intersection of the easterly
sideline of Congress Street and the southerly sideline of Faneuil Hall Square
and running S82-27-55E by Faneuil Hall Square a distance of 112.53 feet to an
angle;
thence turning and running N82-24-06E by Faneuil Hall Square a distance of
106.32 feet to an angle;
thence turning and running S1O-43-40E by Faneuil Hall Square a distance of 2.00
feet to the comer of the 5 story brick building known as No. 6 Faneuil Hall
Square, now or formerly of Charles G. Crones;
thence running S10-43-40E by the westerly face of the said 5 story brick
building a distance of 67.27 feet to an angle;
thence turning and timing N79-40-00E by said land of Crones a distance of 61.81
feet to a point on the westerly sideline of Merchants Row, subject to the
existing southerly face of the building at number 28- 36 Merchants Row as shown
on sketch "C" of said plan;
thence turning and running S23-15-42E by the said westerly line of Merchants Row
a distance of 30.42 feet to an angle;
thence running S23-16-57E by said line of Merchants Row a distance of 17.50 feet
to an angle;
thence turning and running S83-31-29W by land now or formerly of Nath. R. Miller
Properties, Ltd. - 5th ("Miller") a distance of 73.22 feet to an angle;
thence turning and running N06-57-30W by said land of Miller a distance of 8.50
feet to an angle;
thence turning and running S88-41-40W by said land of Miller a distance of 30.30
feet to an angle;
thence turning and running S10-24-24E by said land of Miller a distance of 32.40
feet to an angle;
thence running S10-51-43E by a passageway shown on said land a distance of 21.61
feet to an angle;
thence turning and running N83-10-33E by said passageway a distance of 4.91 feet
to an angle;
thence turning and running S08-52-18E by said passageway a distance of 25.03
feet to an angle;
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thence turning and running N83-22-26E by said passageway a distance of 31.47
feet to an angle; thence turning and running S06-39-02E by said passageway a
distance of 20.89 feet to an angle;
thence turning and running N80-55-44E by said passageway a distance of 4.03 feet
to an angle;
thence turning and running S06-35-40E by said passageway a distance of 12.72
feet to an angle;
thence running S11-39-14E by said passageway a distance of 36.92 feet to a
point, said point being on the northerly sideline of State Street;
thence turning and running S78-29-12W by said northerly sideline of State Street
a distance of 4.10 feet to an angle;
thence running S78-46-35W by State Street 33.51 feet to an angle;
thence turning and running S78-46-38W by State Street a distance of 83.49 feet
to an angle;
thence running S78-45-36W by State Street a distance of 76.04 feet to an angle;
thence running S78-48-57W by State Street a distance of 15.84 feet to a point on
the intersection of sidelines of State and Congress Streets;
thence turning and running N12-11-09W by the easterly sideline of Congress
Street a distance of 292.92 feet to the point of beginning.
The above-described parcel contains 56,331 square feet (1.25 acres) as
shown on said plan, be said contents measurement more or less.
PARCEL 2
Also a certain parcel of land situated in the City of Boston, County of
Suffolk, Commonwealth of Massachusetts, shown as Lot A on a plan entitled "Plan
of Land Boston, Mass." prepared by Harry R Feldman, Inc., Surveyors, dated Jan.
26, 1978, recorded with said Deeds Book 9051, Page 175, and bounded and
described as follows:
Beginning at a point on the easterly sideline of Congress Street, said
point is N 12(degree) 11' 09" W a distance of 292.92 feet from the intersection
of Congress Street and State Street;
thence running along the southerly sideline of Faneuil Hall Square N 83(degree)
43' 18" E a distance of 139.40 feet to a point;
thence turning and running S 07(degree) 54' 01" E a distance of 26.17 feet to a
point;
thence turning and running S 82(degree) 24' 06" W a distance of 30.87 feet to a
point;
thence turning and running N 82(degree) 27' 55" W a distance of 112.53 feet to
the point of beginning.
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<PAGE>
Containing 2,276 square feet, according to said plan.
AS TO PARCEL I AND 2:
Together with the appurtenant easement over land of One Faneuil Hall
Square Partnership described in an Agreement and Grant of Easements by and among
Ronald M. Druker, et al, Trustees of Fifty State Street Trust, John M. Hines, et
al, Trustees of 60 State Street Trust, and One Faneuil Hall Square Partnership
recorded with Suffolk Deeds as Instrument No. 237 on August 1, 1986.
Also together with an appurtenant easement over land of One Faneuil Hall
Square Partnership described in the Modification of Restriction and Agreement
and Grant of Easement by and among Ronald M. Druker, et al, Trustees of Fifty
State Street Trust, John M. Hines, et al, Trustees of 60 State Street, and One
Faneuil Hall Square Partnership recorded as Instrument No. 236 with the Suffolk
Deeds on August 1, 1986.
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<PAGE>
EXHIBIT C
LOAN DOCUMENTS
As used in this Exhibit C, the following terms shall have the meanings set
forth below:
Associates shall mean 60 State Street Associates Limited Partnership, a
Delaware limited partnership.
Comprehensive Amendment Agreement shall mean the First Comprehensive
Amendment Agreement dated as of July 3, 1991 and executed by and between TCW,
DEVCO, Associates, Trust, CC&F, Field and Holding, recorded with the Suffolk
County Registry of Deeds at Book 17189, Page 280; as affected by the Second
Comprehensive Amendment Agreement dated as of March 10, 1993, and executed by
and between TCW, DEVCO, Associates, Trust, Executive, Field and Holding,
recorded with the Suffolk County Registry of Deeds at Book 18106, Page 85; as
affected by the Third Comprehensive Amendment Agreement dated as of April 12,
1994 by and between TCW, DEVCO, Associates and Trust, recorded with the Suffolk
County Registry of Deeds at Book 19026, Page 273; and as affected by the Fourth
Comprehensive Amendment Agreement dated as of December 14, 1994 by and between
TCW, Associates, DEVCO and Trust, recorded with the Suffolk County Registry of
Deeds at Book 19520, Page 297.
DEVCO shall mean 60 State Street Development Company Limited Partnership,
a Delaware limited partnership.
Executive shall mean CC&F Executive Associates Limited Partnership, a
Massachusetts limited partnership.
Field shall mean Field State Street Associates, a Massachusetts general
partnership.
Holding shall mean 60 State Street Holding Company Limited Partnership, a
Delaware limited partnership.
TCW shall mean Trust Company of the West, a California corporation, as
Trustee of TCW Realty Fund VA, and TCW Realty Fund VB, a California limited
partnership, as tenants-in-common.
Trust shall mean the Trustees, from time to time, of 60 State Street
Trust, under Declaration of Trust dated September 10, 1970 and recorded with the
Suffolk County Registry of Deeds at Book 8389, Page 286, as amended by First
Amendment of Declaration of Trust establishing 60 State Street Trust, dated as
of December 23, 1988 and recorded with the Suffolk County Registry of Deeds at
Book 15258, Page 66.
1. Promissory Note dated as of December 23, 1988 made by DEVCO to TCW, as
Amended by First Allonge dated as of November 1, 1990, and executed by TCW and
DEVCO; as further amended by Second Allonge dated as of May 20, 1991, and
executed by TCW and DEVCO; as further amended by Third Allonge dated as of July
3, 1991 and executed by TCW and DEVCO; as further amended by Fourth Allonge
dated as of March 10, 1993 and executed by TCW and DEVCO; as furtherr amended by
Fifth Allonge dated as of April 12, 1994 and executed by TCW and DEVCO; and as
further amended by Sixth Allonge dated as of December 14, 1994 and executed by
TCW and DEVCO.
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<PAGE>
2. Guaranty from Associates and Trust to TCW dated as of November 1, 1990,
as amended by the Comprehensive Amendment Agreement.
3. Mortgage and Security Agreement dated as of November 1, 1990 from Trust
to TCW and recorded with the Suffolk County Registry of Deeds at Book 16688,
Page 1, as amended by the Comprehensive Amendment Agreement.
4. Conditional Assignment of Leases and Rents dated as of November 1, 1990
from Trust to TCW recorded with the Suffolk County Registry of Deeds at Book
16688, Page 60 as amended by the Comprehensive Amendment Agreement.
5. Assignment of Licenses and Permits dated as of November 1, 1990 from
Trust and Associates to TCW, as amended by the Comprehensive Amendment
Agreement.
6. Amended and Restated Loan Agreement dated as of November 1, 1990
between TCW and DEVCO, as amended by the Comprehensive Amendment Agreement.
7. Uniform Commercial Code Financing Statements naming Trust, as debtor,
and TCW as secured party, filed with the Suffolk County Registry of Deeds at
Book 16688, Page 69, Book 16688, Page 80, Book 16688, Page 91, and Book 16688,
Page 102; with the Office of the Secretary of State of the Commonwealth of
Massachusetts on January 31, 1991 as File Nos. 6849, 6850, 6851 and 6852; and
with the Office of the City Clerk of Boston, Massachusetts on January 31, 1991
as File Nos. 350852, 350853, 350854 and 350855, as amended by the Comprehensive
Amendment Agreement.
8. Hazardous Materials and Indemnity Agreement dated as of November 1,
1990 from Trust and Associates to TCW, as amended by the Comprehensive Amendment
Agreement.
9. Fourth Amended and Restated Capital Improvement and Tenant Improvement
Agreement, dated as of December 14, 1994 by and between TCW and DEVCO.
10. Comprehensive Agreement and Release dated as of November 1, 1990 by
and between TCW, Associates, DEVCO, Trust, Executive, CC&F Investment Company
Limited Partnership, Executive, Field and Holding.
11. Estoppel Certificate and Agreement dated January 22, 1991 to TCW from
Trust and Trustees of Fifty State Street Trust, under Declaration of Trust dated
December 29, 1967 and recorded with the Suffolk County Registry of Deeds in Book
8188, Page 137.
12. Seven-Party Agreement dated as of July 3, 1991 by and between TCW,
Trust, Associates, DEVCO, 60 State Street, Inc., a Delaware corporation,
Holding, and Hale and Dorr, a Massachusetts general partnership.
13. Consent and Agreement dated as of July 3, 1991 from TCW.
14. General Side Letter from DEVCO to TCW dated January 23, 1991.
-24-
<PAGE>
15. Tenant Improvement Funding Letter from TCW to Teachers Insurance and
Annuity Association of America and DEVCO dated December 14, 1994.
16. Agreement of TCW for the benefit of DEVCO dated as of December 14,
1994 in connection with foreclosure bids.
17. Letter from Stanton H. Zarrow, on behalf of TCW, to John A. Pirovano,
on behalf of DEVCO, dated December 20, 1994 with respect to litigation involving
Raymond W. Miller.
18. Subordination Agreement dated December 14, 1994 by and between TCW and
Teachers Insurance & Annuity Association of America, recorded with the Suffolk
County Registry of Deeds at Book 19520, Page 267.
19. TIAA Refinancing Agreement dated as of October 1, 1994 and executed by
TCW and DEVCO.
20. Refinancing Agreement dated as of February 1, 1994 by and between TCW,
DEVCO and Marshall Field V.
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<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION OF LIENS AND DOCUMENTS
Trust Company of the West, a California corporation, as Trustee of TCW
Realty Fund VA, and TCW Realty Fund VB, a California limited partnership, as
tenants in common (collectively, "Assignor"), the legal and equitable owner of a
loan ("Loan") evidenced by (1) that Promissory Note dated as of December 23,
1988, made by 60 State Street Development Company Limited Partnership, a
Delaware limited partnership ("Borrower"), to Assignor; as amended by First
Allonge dated as of November 1, 1990, and executed by Borrower and Assignor; as
further amended by Second Allonge dated as of May 20, 199 1, and executed by
Borrower and Assignor; as further amended by Third Allonge dated as of July 3,
199 1, and executed by Borrower and Assignor; as further amended by Fourth
Allonge dated as of May IO, 1993, and executed by Borrower and Assignor; as
further amended by Fifth Allonge dated as of April 12, 1994, and executed by
Borrower and Assignor; and as further amended by Sixth Allonge dated as of
December 14, 1994, and executed by Borrower and Assignor (collectively, the
"Note"; (ii) that certain Mortgage and Security Agreement dated as of November
1, 1990, and recorded with the Suffolk County Registry of Deeds in Book 16688,
Page 1; as amended by the First Comprehensive Amendment Agreement, recorded with
the Suffolk County Registry of Deeds at Book 17189, Page 280; as further amended
by the Second Comprehensive Amendment Agreement, recorded with the Suffolk
County Registry of Deeds at Book 18106, Page 85; as further amended by the Third
Comprehensive Amendment Agreement, recorded with the Suffolk County Registry of
Deeds at Book 19026, Page 273; and as further amended by the Fourth
Comprehensive Amendment Agreement, recorded with the Suffolk County Registry of
Deeds at Book 19520, Page 297 (collectively, the "Mortgage") encumbering that
certain real property located in Boston, Massachusetts, as more particularly
described in Exhibit A attached hereto; and (iii) that certain Conditional
Assignment of Leases and Rents dated as of November 1, 1990, recorded with the
Suffolk County Registry of Deeds in Book 16688, Page 60; as amended by the First
Comprehensive Amendment Agreement, recorded with the Suffolk County Registry of
Deeds at Book 17189, Page 280; as further amended by the Second Comprehensive
Amendment Agreement, recorded with the Suffolk County Registry of Deeds at Book
18106, Page 85; as further amended by the Third Comprehensive Amendment
Agreement, recorded with the Suffolk County Registry of Deeds at Book 19026,
Page 273; and as further amended by the Fourth Comprehensive Amendment
Agreement, recorded with the Suffolk County Registry of Deeds at Book 19520,
Page 297 (collectively, the "Conditional Assignment"), for a good and valuable
consideration paid to Assignor by Cornerstone Properties, Inc., a Nevada
corporation, with an address of ("Assignee"), the receipt and sufficiency of
which is hereby acknowledged, has BARGAINED, SOLD, ASSIGNED, CONVEYED and
DELIVERED and by these presents does hereby BARGAIN, SELL, ASSIGN, CONVEY and
DELIVER unto Assignee, all of Assignor's right, title and interest in and to the
following described documents and property (collectively, the "Assigned
Assets"), to wit:
the Note;
the Mortgage;
the Conditional Assignment;
each of the other documents described on Exhibit B attached hereto
and any other documents executed by Assignor and Borrower or any
affiliate of Borrower in connection with the Loan (the "Loan
Documents"); and
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<PAGE>
all assignable rights, titles, benefits, privileges, liens, security
interests, and assignments owned, held, accruing, and to accrue to,
and for the benefit of the Assignor under the Note, the Mortgage and
the Loan Documents.
For the same consideration, Assignor has BARGAINED, SOLD, ASSIGNED,
CONVEYED and DELIVERED, and does hereby BARGAIN, SELL, ASSIGN, CONVEY and
DELIVER unto Assignee, all Assignor's rights, titles, interests, claims,
liens, and equities existing and to exist in connection with or as security
for the Note, including, but not limited to, all those existing and to exist
under the Mortgage and the Loan Documents.
Assignee hereby assumes each and every obligation and liability of the
Assigned Assets. This Assignment shall inure to the benefit of Assignee and
Assignee's heirs, legal representatives, successors and assigns. This Assignment
is subject to the terms of Section 10 of the Loan Purchase Agreement dated
December 31, 1997, between Assignor and Assignee, including the terms of
Assignor's disclaimer therein of any RECOURSE, REPRESENTATION, OR WARRANTY, of
any kind or character, express or implied, except as expressly provided in such
Loan Purchase Agreement.
EXECUTED UNDER SEAL this 31st day of December, 1997.
ASSIGNOR:
TRUST COMPANY OF THE WEST, a
California corporation, as Trustee of
TCW Realty Fund VA
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
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<PAGE>
TCW REALTY FUND VB,
a California limited partnership
By: TCW ASSET MANAGEMENT
COMPANY,
a California corporation, its General
Partner
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: WESTMARK REALTY ADVISORS, LLC,
a California general partnership,
its General Partner
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
ASSIGNEE:
CORNERSTONE PROPERTIES, INC.,
a Nevada corporation
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
By: /s/
----------------------------------
Name:
Title: Authorized Signatory
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<PAGE>
STATE OF_______________
County of______________
On the _________ day of December, 1997, before me personally came Michael
J. N. Gray to me known, who, being by me duly sworn, did depose and say that he
is an authorized signatory of TRUST COMPANY OF THE WEST, the California
corporation described in and which executed the foregoing instrument as Trustee
of TCW REALTY FUND VA, a California trust, and acknowledged that he executed the
same by order of directors of said corporation.
WITNESS my hand official seal.
/s/
-----------------------------
Notary Public
My Commission Expires:
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<PAGE>
STATE OF_______________
County of______________
On the day of December, 1997, before me personally came Timothy M. Shine
to me known, who, being by me duly sworn, did depose and say that he is an
authorized signatory of TRUST COMPANY OF THE WEST, the California corporation
described in and which executed the foregoing instrument as Trustee of TCW
REALTY FUND VA, a California trust, and acknowledged that he executed the same
by order of directors of said corporation.
WITNESS my hand official seal.
/s/
-----------------------------
Notary Public
My Commission Expires:
STATE OF_______________
County of______________
On December ______, 1997, before me, a notary public in and for the State of
personally appeared Michael J.N. Gray, to me known to me on the basis of
satisfactory evidence to the person who executed the within instrument as the
authorized signatory of TCW ASSET MANAGEMENT COMPANY, the corporation that
executed the foregoing instrument as a general partner of TCW REALTY FUND VB, a
California limited partnership, the limited partnership that executed the
foregoing instrument, and he acknowledged to me that said corporation executed
the same pursuant to its by-laws or a resolution of its board of directors and
as a general partner and on behalf of said limited partnership, and that said
limited partnership executed the same in accordance with its limited partnership
agreement.
WITNESS my hand official seal.
/s/
-----------------------------
Notary Public
My Commission Expires:
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<PAGE>
STATE OF_______________
County of______________
On December 1997, before me, a notary public in and for the State of personally
appeared Timothy M. Shine, to me known to me on the basis of satisfactory
evidence to the person who executed the within instrument as the authorized
signatory of TCW ASSET MANAGEMENT COMPANY, the corporation that executed the
foregoing instnunent as a general partner of TCW REALTY FLTND VB, a California
limited partnership, the limited partnership that executed the foregoing
instrument, and he acknowledged to me that said corporation executed the same
pursuant to its by-laws or a resolution of its board of directors and as a
general partner and on behalf of said limited partnership, and that said limited
partnership executed the same in accordance with its limited partnership
agreement.
WITNESS my hand official seal.
/s/
-----------------------------
Notary Public
My Commission Expires:
STATE OF_______________
County of______________
On December , 1997, before me, a notary public in and for the State of
personally appeared Michael J.N. Gray, to me known to me on the basis of
satisfactory evidence to the person who executed the within instrument as the
authorized signatory of WESTMARK REALTY ADVISORS, LLC, the limited liability
company that executed the foregoing instrument as a general partner of TCW
REALTY FUND VB, a California limited partnership, the limited partnership that
executed the foregoing instrument, and he acknowledged to me that said limited
liability company executed the same pursuant to its limited liability company
agreement as a general partner and on behalf of said limited partnership, and
that said limited partnership executed the same in accordance with its limited
partnership agreement.
WITNESS my hand official seal.
/s/
-----------------------------
Notary Public
My Commission Expires:
-31-
<PAGE>
STATE OF_______________
County of______________
On December , 1997, before me, a notary public in and for the State of
personally appeared Timothy M. Shine, to me known to me on the basis of
satisfactory evidence to the person who executed the within instrument as the
authorized signatory of WESTMARK REALTY ADVISORS, LLC, the limited liability
company that executed the foregoing instrument as a general partner of TCW
REALTY FUND VB, a California limited partnership, the limited partnership that
executed the foregoing instrument, and he acknowledged to me that said limited
liability company executed the same pursuant to its limited liability company
agreement as a general partner and on behalf of said limited partnership, and
that said limited partnership executed the same in accordance with its limited
partnership agreement.
WITNESS my hand official seal.
/s/
-----------------------------
Notary Public
My Commission Expires:
____________, ss. December ____, 1997
Then personally appeared before me the above-named _________________ and
_______________, the ______________ and ______________, respectively, of
Cornerstone Properties, Inc., and acknowledged the foregoing instrument to be
their free act and deed and the free act and deed of Cornerstone Properties,
Inc.
/s/
-----------------------------
Notary Public
My Commission Expires:
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<PAGE>
EXHIBIT E
RELEASE OF SELLER
This Release of Seller is entered into by Cornerstone Properties, Inc., a
Nevada corporation ("Purchaser") in favor of Trust Company of the West, a
California corporation, as Trustee of TCW Realty Fund VA, and TCW Realty Fund
VB, a California limited partnership, as tenants in common (collectively,
"Seller") and related entities, as set forth below, in accordance with the terms
of that Loan Purchase Agreement dated December 1, 1997 (the "Loan Purchase
Agreement"), by and between Purchaser and Seller.
Now, therefore, in consideration of Ten Dollars ($10.00), and certain
other obligations performed by Seller, and as accepted by Purchaser, Purchaser
agrees as follows:
1. Purchaser hereby releases Seller and its successors, assigns, and
predecessors, parents, partners, subsidiaries and affiliated organizations, and
the officers. directors, shareholders, employees, asset managers, partners,
subasset managers, attorneys, and agents of each of the foregoing (all of whom
are herein jointly and severally referred to as the "Released Parties") from any
and all liability, damages, losses, obligations, costs, expenses, suits, claims,
demands, causes of action for damages or any other relief, whether or not now
known or suspected, of any kind, nature, or character, at law or in equity,
which Purchaser now has or may ever have or shall have had against any of the
Released Parties (the "Claims"), including, but not limited to, those relating
to (i) allegations that a partnership existed between Purchaser and the Released
Parties, (ii) allegations of lack of good faith or fair dealing, lack of
commercial reasonableness or special relationships, such as fiduciary, trust or
confidential relationships, (iii) allegations of dominion, control, alter ego,
instrumentality, duress, coercion, undue influence, interference or negligence,
or (iv) allegations of tortious interference with present or prospective
business relationships or of violations of antitrust laws, all of which Claims
are hereby waived. Purchaser hereby agrees to indemnify and hold harmless the
Released Parties, from and against any and all (whether or not joint or several
or bona fide or groundless) Claims and all judgments, injuries, proceedings,
awards, assessments, fines, penalties, interests (including without limitation,
attorney's fees and disbursements, court costs, costs of investigation,
discovery and settlement costs) which may, directly or indirectly, result from
or arise out of any breach, inaccuracy, nonfulfillment, or the enforcement, of
any representation, warranty, covenant or agreement made by Purchaser in the
Loan Purchase Agreement, or in any agreement, instrument or document delivered
pursuant hereto or in connection herewith.
2. Purchaser represents and warrants that it has not sold, transferred,
assigned, hypothecated, encumbered or pledged any of the Claims and that it is
the sole owner and holder of the Claims.
3. Purchaser represents and warrants that it had the advice of counsel of
its own choosing in negotiating, preparing, reviewing the final provisions of
and executing this Release, and that Purchaser is fully aware of the contents
and legal effects of this Release.
4. This Release is accepted by Seller pursuant to the Loan Purchase
Agreement, and this Release shall not be construed as an admission of liability
on the part of Seller or any of the other Release Parties of any kind or nature
whatsoever as to any matter.
5. This Release shall be binding upon the Purchaser and its legal
representatives, successors and assigns and shall inure to the benefit of the
Released Parties and their successors and assigns.
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<PAGE>
6. This Release constitutes the entire agreement among the parties with
respect to the subject matter hereof. It is expressly understood and agreed that
this Release may not be altered, amended, modified or otherwise changed in any
respect whatsoever except by a writing duly executed by authorized Released
Parties. This Release shall be construed and interpreted in accordance with, and
governed and enforced in all respects by the laws of the Commonwealth of
Massachusetts without giving effect to the conflict of laws principles of such
state. This Release may be executed in counterparts, each of which shall be an
original and be fully effective as to the party or parties signing the
counterpart, but all such counterparts shall together constitute one instrument.
In any action to enforce or interpret this Release the prevailing party shall,
in addition to all other relief, be entitled to an award for its attorneys'
fees.
7. THE UNDERSIGNED DO HEREBY INTENTIONALLY, KNOWINGLY, VOLUNTARILY,
UNCONDITIONALLY AND IRREVOCABLY WAIVE THE RIGHT WHICH THEY MAY HAVE TO A TRIAL
BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS RELEASE (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO
RESCIND OR CANCEL THIS RELEASE OR ANY CLAIMS OR DEFENSES ASSERTING THAT THIS
RELEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THE
FOREGOING WAIVER BY THE UNDERSIGNED IS A MATERIAL INDUCEMENT FOR THE UNDERSIGNED
TO EXECUTE AND FOR THE RELEASED PARTIES TO ACCEPT THIS RELEASE.
8. Purchaser hereby acknowledges that it has not relied upon any
representation of any kind made by Seller in making the foregoing release.
9. Purchaser agrees that if it hereafter commences, joins in, or in any
manner seeks, relief through any suit arising out of, based upon, or relating to
any of the Claims or in any manner asserts against such Released Parties, or any
of them, any of the Claims, then Purchaser will pay to such Released Parties,
and each of them, in addition to any other damages caused to such Released
Parties thereby, all attorneys' fees incurred by such Released Parties in
defending or otherwise responding to said suit or claim.
10. Nothing set forth in this Release shall limit or modify Seller's
representations and warranties contained in Section 9(a) of the Loan Purchase
Agreement or Seller's indemnification obligations set forth in Section 9(d) of
the Loan Purchase Agreement.
-34-
<PAGE>
EXECUTED UNDER SEAL as of the 31st day of December, 1997.
PURCHASER:
CORNERSTONE PROPERTIES, INC.
By: /s/
----------------------------------
Name:
Title:
By: /s/
----------------------------------
Name:
Title:
__________________
____________, ss. December ____, 1997
Then personally appeared before me the above-named ______________________,
and ____________________, the _______________________ and _____________________,
respectively, of Cornerstone Properties, Inc., and acknowledged the foregoing
instrument to be their free act and deed and the free act and deed of
Cornerstone Properties, Inc.
/s/
-----------------------------
Notary Public
My Commission Expires:
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<PAGE>
EXHIBIT F
APPLICABLE AMOUNT OF NET CASH FLOW CALCULATIONS
-36-
<PAGE>
Exhibit 10.125
LOAN AGREEMENT, MORTGAGE AND NOTE MODIFICATION AGREEMENT
THIS LOAN AGREEMENT, MORTGAGE AND NOTE MODIFICATION AGREEMENT (this
"Agreement") is made as of this 31st day of December, 1997 by and between 60
State Street Development Company Limited Partnership, a Delaware limited
partnership, having an address c/o Cabot, Cabot & Forbes, 99 Summer Street,
Boston, Massachusetts 02110 ("Borrower"), John A. Pirovano, William A. Halsey
and John Moody, as the Trustees of 60 State Street Trust under a Declaration of
Trust dated September 10, 1970, recorded with Suffolk County Registry of Deeds
in Book 8389, Page 286, as amended by the First Amendment of Declaration of
Trust Establishing 60 State Street Trust dated as of December 23, 1988, recorded
with the Suffolk County Registry of Deeds at Book 15258, Page 66, having an
address c/o Cabot, Cabot & Forbes, 99 Summer Street, Boston, Massachusetts 02110
("Trust") and Cornerstone Properties Inc., a Nevada corporation, having an
address at 126 East 56th Street, New York, New York 10022 ("Lender").
W I T N E S S E T H
WHEREAS, Trust owns leasehold and fee interests in certain real
property located at 60 State Street, Boston, Massachusetts, and the improvements
situated thereon and more particularly described in Exhibit A annexed hereto
(the "Property"); and
WHEREAS, the sole beneficiary of the Trust is 60 State Street
Associates Limited Partnership, a Massachusetts limited partnership
("Associates"); and
WHEREAS, Borrower is the sole general partner in Associates; and
WHEREAS, Borrower is the borrower pursuant to (i) that certain
Amended and Restated Loan Agreement dated as of November 1, 1990, as amended and
restated (the "Loan Agreement"), between Borrower and Trust Company of the West,
as Trustee of TCW Realty Fund VA, and TCW Realty Fund VB, as lender ("TCW"); and
(ii) that certain Promissory Note from Borrower to TCW dated as of November 1,
1990, as amended (the "Note") evidencing and securing a certain loan (the
"Loan") in the original aggregate principal amount of $160,397,664.33; and
WHEREAS, the Note is secured, in part, by that certain guaranty made
by Trust and Associates dated November 1, 1990, in favor of TCW (as amended, the
"Guaranty"); and
WHEREAS, the Guaranty is secured, in part, by that certain Mortgage
and Security Agreement from Trust to TCW dated as of November 1, 1990 recorded
in the Suffolk County Registry of Deeds in Book 16888, Page 001 (as the same
hereafter may be amended from time to time in accordance with its terms, the
"Mortgage"; the Note, the Mortgage, the
<PAGE>
2
Loan Agreement, the Guaranty and other documents, instruments and agreements
executed or delivered from time to time with respect to the Loan being
hereinafter referred to as the "Loan Documents"); and
WHEREAS, as of this date Lender has succeeded to the interest of TCW
under the Loan Documents and Lender is the holder of the Mortgage (by Assignment
and Assumption of Liens and Documents dated of even date herewith and recorded
in the Suffolk County, Registry of Deeds in Book ____, Page ____), the Note, the
Loan Agreement and the other Loan Documents; and
WHEREAS, Borrower, Trust and Lender desire to amend the Mortgage,
the Note and Loan Agreement as of this date pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, of the
mutual covenants set forth herein, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree that the Loan Agreement, the Note and the Mortgage are amended as follows:
1. All capitalized terms used herein, and not defined herein, shall
have the meanings ascribed thereto in the Loan Agreement.
2. Effective as of the date hereof, the Loan Agreement, the Mortgage
and the Note shall be and hereby are amended as follows (and all references in
any Loan Document to any such document shall mean such document as amended
hereby):
(Al) 8.5% Future Value.
Lender and Borrower hereby agree that, notwithstanding anything to
the contrary in any of the Loan Documents, as of December 31, 1997 the 8.5%
Future Value (as defined in the Note) is $312,878,490.00.
(A) Property Management.
Section 3.20 of the Mortgage is hereby amended as follows: (i) Prior
to the date hereof Borrower and Trust have approved the property managers for
the management of the Property listed in Exhibit B attached hereto and made a
part hereof (the "Approved Property Managers"). The Property is currently
managed by CB Commercial/Whittier Partners, LP, as successor in interest to Koll
Management Services, Inc., pursuant to an existing management agreement.
<PAGE>
3
(ii) Borrower and Trust hereby agree to administer the current
management agreement and any and all future management agreements entered into
in connection with the Property as reasonably directed and instructed by Lender,
including, if directed by Lender, by terminating any management agreement to the
extent permitted by such agreement. If any management agreement is terminated
pursuant to the preceding sentence, Lender shall select a new property manager,
either from among the Approved Property Managers or such other property manager
as Lender shall select in its sole discretion, subject only to the approval
rights provided in Section 4.1.12 of that certain Lease dated July 3, 1991
between Hale and Dorr, L.L.P., as tenant and Trust, as landlord (as amended, the
"H&D Lease"). Upon the selection by Lender of a new property manager, if not
previously approved by Hale and Dorr, Borrower and Trust shall use reasonable,
good faith, efforts to obtain Hale and Dorr's approval of such new property
manager pursuant to the terms of the H&D Lease. Notwithstanding the provisions
of Section 3.20 of the Mortgage, Borrower and Trust hereby approve any property
manager designated by Lender which is an affiliate of Lender.
(iii) Borrower and Trust shall cooperate with and assist
Lender in obtaining a property management agreement with the property manager
selected by Lender in the manner provided in clause (ii) above. Such cooperation
shall include, without limitation, Borrower and/or Trust (or causing their
applicable Affiliates to do so) executing, acknowledging and delivering a
property management agreement in such form and upon such terms as Lender may
reasonably specify. In the event that Borrower and/or Trust (or any such
Affiliate) shall fail to execute any document required under this Section
(A)(iii) within five (5) days of receipt of such document accompanied by a
written request from Lender to execute same, Borrower and Trust hereby appoint
Lender as their true and lawful attomey-in-fact, such power to be deemed coupled
with an interest and irrevocable, to execute, acknowledge and deliver such
document in the name and on behalf of Borrower or Trust.
(B) Leases, Service Contracts and Capital Improvements.
(i) Borrower, Trust and Lender hereby agree that their
objective is to keep the Property fully occupied by tenants pursuant
to written leases on terms and at rental rates which reflect the
prevailing market at the time of execution of such leases.
Supplementing Sections 3.6, 4.8 and 5.3 of the Mortgage and Sections
5.08 and 6.07 of the Loan Agreement, Lender may from time to time
propose that Borrower and/or Trust, as applicable (1) enter into a
lease, service contract, tenant improvement construction contract,
commission agreement or any other agreement reasonably relating to
the leasing, management, operation, repair or maintenance of the
Property or (2) to the extent there is Net Cash Flow or Lender
advances of funds pursuant to Section 2(D) hereof are available to
make payment thereof, incur any expense reasonably relating to the
leasing, management, operation, repair or
<PAGE>
4
maintenance of the Property (including, without limitation, repaying
or prepaying the Senior Debt to the extent permitted under the
applicable Senior Debt documents) (each, a "Proposed Action").
Lender shall by written notice deliver to Borrower and/or Trust a
description of each such Proposed Action together, if applicable,
with a copy of any agreement relating thereto. All agreements
relating to a Proposed Action will contain a limitation of recourse
provision in favor of Borrower and/or Trust without material
deviation from Section 9.13 of the Loan Agreement.
(ii) Within five (5) business days after delivery of such
notice, Borrower and/or Trust may either approve or reject any
Proposed Action in Borrower's and/or Trust's reasonable judgment by
notice to Landlord. In the event that Borrower or Trust rejects the
Proposed Action, Borrower's or Trust's notice shall set forth in
reasonable detail the reasons for such determination. In the event
Lender disagrees with the reasonableness of Borrower's or Trust's
rejection of any Proposed Action, the dispute shall be resolved by
arbitration pursuant to Section 9.11 of the Loan Agreement. If
Borrower or Trust do not respond to such notice within said five (5)
business days, Borrower and Trust shall be deemed to have approved
such Proposed Action.
(iii) Borrower and Trust shall fully cooperate with Lender in
effectuating any Proposed Action which is approved by Borrower or
Trust, deemed approved by Borrower or Trust, or determined to be
approved by Borrower or Trust in accordance with the arbitration
provisions contained in Section 9.11 of the Loan Agreement. Promptly
upon the written request of Lender, Borrower and/or Trust shall (or
shall cause its applicable Affiliates to) execute, acknowledge and
deliver such documents as may reasonably be required in connection
with such Proposed Action and/or, if the Proposed Action requires
any other action on the part of Borrower, Trust or its Affiliates
(such as making a payment), Borrower or Trust shall take such action
within said five (5) day period. In the event Borrower or Trust (or
any such Affiliate) shall fail to execute any document or take any
other action required under this Section (B)(iii) within five (5)
days after receipt of such written request from Lender to take such
action, Borrower and Trust hereby appoint Lender as its true and
lawful attomey-in-fact, such power to be deemed coupled with an
interest and irrevocable, to take such action, including without
limitation, to execute, acknowledge and deliver such documents in
the name and on behalf of Borrower or Trust, and to make any
payments or to incur any expense with funds on deposit in any
Property-related account or with funds advanced by Lender.
<PAGE>
5
(C) Termination of Agreement.
That certain Agreement, dated as of December 14, 1994 by Trust
Company of the West, as Trustee of TCW Realty Fund VA, and TCW Realty Fund VB
for the benefit of Borrower (a copy of which is annexed hereto as Exhibit C) is
hereby terminated and void and of no further force and effect as of the date
hereof. In the event of any foreclosure sale under the Mortgage, there shall be
no maximum required bid for Lender, or any Affiliate of Lender.
(D) Lender's Future Advances.
In the event that Lender reasonably determines that additional sums
are required (i) in order to implement a Business and Marketing Plan, (ii)
pursuant to a schedule of planned Capital Expenditures or (iii) for any other
expenditure or cost reasonably related to the leasing, management, operation,
repair or maintenance of the Property, including as may be required in order to
undertake a Proposed Action undertaken in accordance with Section (B) of this
Agreement, Lender shall have the option to advance any such amounts to the
extent that there is insufficient Net Cash Flow to pay such costs. All such
amounts advanced by Lender shall be promptly applied by Borrower or Trust to pay
the costs for which such amounts were advanced by Lender, and Lender reserves
the right to pay such costs directly if Borrower or Trust fail to do so. Any
amounts advanced by Lender pursuant to this Section (D) shall be added to the
principal amount of the Loan, and shall accrue interest and be payable on the
same terms and conditions as set forth in the Note. At Lender's option, from
time to time, as amounts are advanced by Lender pursuant to this Section (D),
Borrower shall execute separate notes and mortgages evidencing and securing any
such amounts so advanced.
(E) Representations and Warranties.
Borrower and Trust represent and warrant to Lender as of the date
hereof that:
(a) Attached hereto as Exhibit D is a complete list of all of the
Loan Documents and any other documents and instruments entered into
between TCW (or its Affiliates) and Borrower (or its Affiliates) or Trust
(or its Affiliates) which are in force and effect on the date hereof and
all of the documents related to and instruments evidencing or securing the
Senior Debt (the "Senior Loan Documents"); none of the documents listed on
Exhibit D have been modified or amended except pursuant to documents set
forth in Exhibit D.
(b) (I) as of the date hereof, the amount of outstanding principal
of the Loan is $160,397,664.33, (II) as of the date hereof, the amount of
outstanding principal of the Senior Debt is $78,420,177.80, (III) as of
the date hereof, the amount held by Seller pursuant to Section 3.22 of the
Mortgage is -0-, (IV) as of the date hereof, the
<PAGE>
6
amount held by Seller pursuant to Section 3.26 of the Mortgage is
$82,112.60 and (V) as of November 28, 1997, there was no accrued and
unpaid interest or contingent interest due or payable in respect of the
Senior Debt.
(c) The direct and indirect ownership interests in Borrower, Trust
and Associates are as set forth in Exhibit E annexed hereto. Hale and Dorr
LLP has no direct or indirect partner or other ownership interest in
Borrower, Trust, Associates or any Person set forth in Exhibit E, except
as set forth in Exhibit E.
(d) Neither Borrower, Trust nor any of its Affiliates has any right
of first refusal, right of first offer or other right to purchase or
acquire the Loan from Lender.
(e) To the best of Borrower's and Trust's knowledge, the funding
obligations of Lender pursuant to (a) that certain Capital Improvement and
Tenant Improvement Agreement between TCW and Borrower dated as of November
1, 1990, as amended and restated, (b) that certain Tenant Improvement
Funding Letter by TCW to Senior Lender and Borrower dated December 14,
1994, (c) that certain Seven Party Agreement dated as of July 1, 1991 and
(d) any other Loan Documents or other documents or agreements executed and
delivered in connection with the Loan have been fully satisfied, and there
is no further obligation of Lender to make any further disbursements or
advances pursuant to any such agreements.
(f) The Letter of Credit (as defined in that certain Fourth Amended
and Restated Capital Improvement and Tenant Improvement Agreement dated
December 14, 1994 between TCW and Borrower) has been terminated.
(g) To the best of Borrower's and Trust's knowledge, no Event of
Default (as defined in the Loan Documents or the Senior Loan Documents)
has occurred or is continuing under the Loan Documents or the Senior Loan
Documents, and no condition currently exists which with notice or the
passage of time or both would constitute an Event of Default.
(h) There is no defense, offset, claim or counterclaim by or in
favor of Borrower or Trust against Lender under the Loan Documents or the
Senior Loan Documents or against the obligations of Borrower or Trust
under the Loan Documents or the Senior Loan Documents.
(F) Senior Debt Refinancing.
(i) Borrower and Trust acknowledges that Borrower, Trust and Lender
desire to refinance the Senior Debt on or before the maturity thereof on January
1, 2005.
<PAGE>
7
Borrower and Trust also acknowledge that Lender may desire to have the Senior
Debt refinanced prior to its maturity. In furtherance of the foregoing, Lender
shall have the right at any time and from time to time to cause Borrower or
Trust to refinance the Senior Debt one or more times with another loan or loans
(each, a "Refinancing Loan") in accordance with this Section (F).
(ii) Each Refinancing Loan shall satisfy the following conditions:
(1) The principal amount of the Refinancing Loan shall equal the
outstanding principal amount of the Senior Debt on the date of
refinancing.
(2) The interest payable (including any contingent or additional
interest) under the Refinancing Loan shall be on market terms as
determined by Lender in its reasonable judgment.
(3) The maturity date of the Refinancing Loan shall be determined by
Lender in its sole judgment; provided, however, that the maturity date of
the Refinancing Loan shall not be earlier than December 31, 2008.
(4) The Refinancing Loan shall otherwise be on market terms as
determined by Lender in its reasonable judgment.
(5) The lender ("Refinancing Lender") of the Refinancing Loan shall
be (a) Lender (or any Affiliate thereof designated by Lender), (b) any
reputable institutional lender, such as a life insurance company,
commercial bank, investment bank, pension fund or other financial
institution or (c) any lender which will securitize the Refinancing Loan,
either alone or together with other loans (or transfer the Refinancing
Loan to a Person which will so securitize the Refinancing Loan).
(6) Lender shall have approved in its reasonable discretion all
documents evidencing, securing or executed in connection with the
Refinancing Loan).
(7) No Affiliate of Borrower, other than the Trust and Associates,
shall be required to guaranty the Refinancing Loan.
(8) All documents executed by Borrower or Trust in connection with
the Refinancing Loan shall contain a limitation of recourse provision in
favor of Borrower or Trust, as applicable, without material deviation from
Section 9.13 of the Loan Agreement.
<PAGE>
8
(iii) Borrower and Trust shall fully cooperate with Lender in
obtaining each Refinancing Loan whenever Lender, in its sole discretion, shall
so request by written notice to Borrower or Trust (a "Lender Refinancing
Notice"). Promptly upon request of Lender, Borrower or Trust shall (and shall
cause its applicable Affiliates to) execute, acknowledge and deliver such
documents as may reasonably be required in connection with each Refinancing
Loan, including one or more loan agreements, promissory notes, mortgages,
security agreements, assignments of leases, financing statements, intercreditor
agreements, estoppel agreements, certificates, partnership consents, corporate
resolutions, title affidavits, settlement statements and similar documents. In
the event that Borrower or Trust (or any such Affiliate) shall fail to execute
any document required under this Section (F) within five (5) days of receipt of
such document accompanied by a written request from Lender to execute the same,
Borrower and Trust hereby appoints Lender as its true and lawful
attomey-in-fact, such power to be deemed coupled with an interest and
irrevocable, to execute, acknowledge and deliver such document in the name and
on behalf of Borrower and Trust.
(iv) In the event that a Refinancing Loan shall be obtained pursuant
to this Section (F), (1) Borrower and Trust shall perform and comply with all
terms, conditions and covenants set forth in the documents evidencing and/or
securing such Refinancing Loan, (2) Borrower and Trust shall deliver to Lender
copies of any notice or written communication received by Borrower or Trust from
the applicable Refinancing Lender promptly upon receipt of the same by Borrower
or Trust, (3) Neither Borrower nor Trust shall prepay prior to the date when due
any principal, interest or other charges under such Refinancing Loan without the
prior written consent of Lender, which consent may be granted or withheld in
Lender's sole discretion and (4) Lender shall have the right to cure any default
under such Refinancing Loan and any amounts expended or expenses incurred in
connection with curing such default shall be added to the principal amount of
the Loan.
(v) With respect to each Refinancing Loan, provided that Lender
shall not have theretofore delivered a Lender Refinancing Notice to Borrower or
Trust, Borrower or Trust shall have the right to select the Refinancing Lender
and enter into the Refinancing Loan which satisfies the terms and provisions of
Section (F)(ii) of this Agreement; provided, that Borrower or Trust give Lender
not less than forty-five (45) days' advance written notice (each, a "Borrower's
Refinancing Notice") thereof, which notice shall (1) set forth the terms and
conditions of the proposed Refinancing Loan and the identity of the proposed
Refinancing Lender and (2) include a copy of a signed binding commitment letter
from the proposed Refinancing Lender. Within fifteen (15) business days after
the delivery of a Borrower's Refinancing Notice to Lender, Lender shall have the
right to give written notice to Borrower or Trust (each, a "Lender's Response
Notice") that Lender desires to make (or to cause an Affiliate of Lender to
make) the Refinancing Loan on the same terms and conditions as set forth in the
loan commitment contained in Borrower's Refinancing Notice. If Lender fails to
give Lender's Response Notice as aforesaid within such fifteen (15) business day
period, then
<PAGE>
9
Borrower or Trust may obtain the Refinancing Loan from the same Refinancing
Lender specified in, and on the same terms and conditions as set forth in, the
loan commitment contained in Borrower's Refinancing Notice. In the event Lender
shall elect in Lender's Response Notice to make (or cause its Affiliate to make)
the Refinancing Loan, then, at such time as Lender shall elect (but in no event
later than the maturity date of the Senior Debt), Borrower or Trust shall obtain
the Refinancing Loan from Lender (or such Affiliate of Lender) on the same terms
and conditions as set forth in the loan commitment contained in Borrower's
Refinancing Notice.
(vi) If Lender elects not to exercise its right of first refusal
contained in clause (v) above, and Borrower and Trust shall fail to consummate
the Refinancing Loan within ninety (90) days after delivery of Borrower's
Refinancing Notice upon the terms and conditions set forth in the loan
commitment contained in Borrower's Refinancing Notice, then Borrower and Trust
shall be required to re-offer any Refinancing Loan (including the Refinancing
Loan which was the subject of Borrower's Refinancing Notice) to Lender in
accordance with clause (v) above if Borrower or Trust intend to obtain a
Refinancing Loan.
(vii) All costs and expenses incurred by Lender and Borrower or
Trust in connection with the securing of any Refinancing Loan (including, any
points, loan fees, and legal fees) shall be expenses of the Property payable out
of Net Cash Flow.
(viii) Any dispute with respect to whether a proposed Refinancing
Loan satisfies the conditions specified in Section (F)(ii) above shall be
resolved by arbitration in accordance with Section 9.11 of the Loan Agreement.
(G) Successor Trustee.
The provisions of Section 5.14 of the Loan Agreement are hereby
amended as follows: (i) the phrase "who is a partner of Westmark Real Estate
Investment Services, a California general partnership" is deleted in its
entirety and replaced by the phrase "an officer of Cornerstone Properties, Inc.,
a Nevada corporation"; and (ii) the references to "Stanton H. Zarrow" shall be
deleted and replaced with "John Moody". Borrower acknowledges receipt of notice
from Lender in full satisfaction of the requirements of Section 5.14 of the Loan
Agreement nominating John Moody as a successor to Stanton H. Zarrow as trustee
under the Declaration of Trust. Borrower represents to Lender that Borrower has,
as of the date hereof, caused Associates to appoint John Moody as a successor
trustee to Stanton H. Zarrow under the Declaration of Trust.
<PAGE>
10
(H) Loan Acceleration.
Borrower and Trust represent to Lender that TCW as lender under the
Loan Documents has, prior to the date hereof, sent a notice to Borrower
accelerating the entire outstanding principal amount of the Note pursuant to
Section 3(c) of the Note. Lender hereby rescinds such notice and Borrower, Trust
and Lender hereby agree and acknowledge that the maturity of the Note is not
accelerated and that such notice from TCW is of no further force and effect.
Borrower and Lender agree that the provisions of Section 3(c) of the Note are
hereby deleted in their entirety.
(I) Interest.
(i) Notwithstanding Sections 2(b)(i)(A)(x) or (y), or Annex I of the
Note, on the Maturity Date (as defined in the Note) or on any earlier date on
which there is a Disposition (as defined in the Note) (the "Pay-Off Date") of
all or substantially all of the Property, Borrower shall be obligated to pay to
Lender, in addition to the entire outstanding principal amount of the Note,
additional interest equal to the sum of (x) the 8.5% Future Value (the "Primary
Pay-Off Amount") on the Pay-Off Date, plus (y) 49.9% of Secondary Excess
Disposition Proceeds (as defined in the Note) on the Pay-Off Date, if any (the
"Secondary Pay-Off Amount"). The parties hereby agree and acknowledge that
payment of the Primary Pay-Off Amount is not contingent, shall be payable in
full on the Pay-Off Date and shall not be calculated by determining the lesser
of (A) the Primary Excess Disposition Proceeds (as defined in the Note) plus the
Secondary Pay-Off Amount and (B) the Maximum Amount (as defined in the Note).
(ii) On the Pay-Off Date, Lender may, in its sole discretion and by
notice to Borrower, elect to forego and forgive the night to receive the
Secondary Pay-Off Amount. If Lender delivers such notice to Borrower on or prior
to the Pay-Off Date electing to forego and forgive the right to receive the
Secondary Pay-Off Amount then (i) Lender shall not be entitled to receive the
Secondary Pay-Off Amount and (ii) notwithstanding anything to the contrary in
the Note, no appraisal of the Property shall be required for any reason,
including, without limitation, to determine the Appraised Value of the Property,
the fair market value of the Property or the amounts due under the Note and the
Maturity Date shall not be extended in accordance with the proviso in the
definition of "Maturity Date" contained in the Note.
(iii) The second sentence of Section I in Annex I to the Note is
hereby deleted in its entirety and the following sentence is hereby added at the
end of such Section 1:
"If the Monthly Inflation Rate as determined in the foregoing manner
is negative then it shall be deemed to be zero."
<PAGE>
11
(iv) The second sentence of Section 2 in Annex I to the Note is
hereby amended and restated as follows:
"The 8.5 Target Rate may not be negative."
(v) The second sentence of Section 3 in Annex I to the Note is
hereby amended and restated as follows:
"The 12% Target Rate may not be negative."
(J) Qualified Appraiser.
The definition of "Qualified Appraiser" in the Note is hereby
amended by inserting at the end of the third (3rd) sentence thereof the
following:
"If the two appraisers so appointed shall fall or refuse to agree on
the selection and appointment of a third qualified independent appraiser within
10 Business Days after the second of the two appraisers so appointed have been
appointed, then the third qualified independent appraiser shall be appointed by
the American Arbitration Association or its successor in accordance with the
rules and regulations for commercial matters then pertaining at the request of
either party."
(K) Arbitration.
SECTION 9.11 of the Loan Agreement is hereby amended and restated in
its entirety as follows:
"SECTION 9.11. Arbitration. (a) The parties hereto shall not be
deemed to have agreed to determine any dispute arising out of this Agreement by
arbitration unless specifically provided herein.
(b) In any circumstance for which arbitration is specifically
provided for hereunder, the party desiring arbitration shall give notice to that
effect to the other party and shall in such notice appoint a person as
arbitrator on its behalf. Within fifteen (15) days after the giving of such
notice, the other any by notice to the original party shall appoint a second
person as arbitrator on its behalf. The arbitrators thus appointed shall appoint
a third person, and such three arbitrators shall as promptly as possible
determine such matter, provided, however, that:
(i) if the second arbitrator shall not have been appointed within
the fifteen (15) day period as aforesaid, the first arbitrator shall
proceed to determine such matter
<PAGE>
12
and shall render his decision and award in writing within thirty (30) days
after the expiration of said fifteen (15) day period; and
(ii) if the two arbitrators are appointed by the parties and shall
be unable to agree within ten (10) days after the appointment of the
second arbitrator, upon the appointment of a third arbitrator, they shall
give written notice to the parties of such failure to agree, and, if the
parties fail to agree upon the selection of such third arbitrator within
ten (10) days after the arbitrators appointed by the parties give notice
as aforesaid, then within five (5) days thereafter either of the parties
upon notice to the other party may request such appointment by the
American Arbitration Association (or any successor organization), or in
its absence, refusal, failure or inability to act, may apply to the
Federal District Court for the District of Massachusetts sitting in Boston
for a court appointment of such arbitrator.
(c) Each arbitrator shall be a qualified and impartial person who
shall have had at least ten (10) years' experience in a calling connected to the
matter of the dispute.
(d) The arbitration shall be conducted, to the extent consistent
with this Section, in accordance with the then prevailing commercial arbitration
rules of the American Arbitration Association (or any successor organization).
The arbitrators, if more than one, shall render their decision and award in
writing, upon the concurrence of at least two (2) of their number, within thirty
(30) days after the appointment of the third arbitrator. Such decision and award
shall be final and conclusive on the parties, and counterpart copies thereof
shall be delivered to each of the parties. In rendering such decision and award,
the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Agreement. Judgment may be had on the decision and award of
the arbitrators so rendered in any court of competent jurisdiction.
(e) Each party shall pay the fees and expenses of the original
arbitrator appointed by or for such party and the fees and expenses of the third
arbitrator and all other expenses of the arbitration (other than the fees and
disbursements of attorneys or witnesses for each party) shall be borne by the
parties equally."
(L) Notices.
Notices sent pursuant to Section 9.01 of the Loan Agreement, Section
5 of the Note, and Section 9.3 of the Mortgage shall be sent, as the case may
be, as follows:
(i) if to Lender Cornerstone Properties Inc.
or 126 East 56th Street
<PAGE>
13
Mortgagee: New York, New York 10022
Attention: Mr. John S. Moody
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Mason C. Sleeper, Esq.
(ii) if to Borrower: 60 State Street Development Company Limited Partnership
c/o Cabot, Cabot & Forbes
99 Summer Street
Boston, Massachusetts 02110
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Kevin J. Grehan, Esq.
(iii) if to Mortgagor: 60 State Street Trust
c/o Cabot, Cabot & Forbes
99 Summer Street
Boston, Massachusetts 02110
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Kevin J. Grehan, Esq.
(M) Loan Documents.
The definition of "Loan Documents" in the Loan Agreement is hereby
amended to include this Agreement, that certain agreement relating to payments
to the Independent
<PAGE>
14
Associates Partners between CFF Investment Company and Lender, of even date
herewith and that certain Seven Party Agreement (the "Seven Party Agreement")
dated July 3, 1991 between TCW, Trust, Associates, Borrower, 60 State Street,
Inc., 60 State Street Holding Company Limited Partnership, and Hale and Dorr.
(N) Permitted Investments.
The definition of "Permitted Investments" in the Mortgage is hereby
amended and restated in its entirety as follows:
"Permitted Investments" shall mean any investments reasonably
selected by Lender.
(O) Note.
The definition of "Note" in the Loan Agreement is hereby amended to
include the Second, Third, Fourth, Fifth, and Sixth Allonges executed and
delivered as of May 20, 1991, July 3, 1991, March 10, 1993, April 12, 1994 and
December 14, 1994, respectively, and the Seventh Allonge executed and delivered
as of even date herewith.
(P) Lender Cash Flow.
The third sentence of Section 4 in Annex I to the Note is hereby
amended and restated as follows:
"The "Lender Cash Flow" with respect to any date shall be an amount
equal to (x) the aggregate amount transferred by Lender to Borrower pursuant to
any of the Loan Documents, including, without limitation, the Improvements
Agreement and the Seven Party Agreement, in the period from and including the
first day of the calendar month in which such date occurs to and including such
date minus (y) all payments of principal of this Note, Base Interest and
Contingent Interest made by Borrower in such period."
(Q) Grant of Easement.
Section 2.9 of the Mortgage is hereby amended and restated in its
entirety as follows:
"2.9 Grant of Easement.
Mortgagor represents to Mortgagee that it is the holder of a right
of first refusal with respect to any sale of the premises adjacent to the
Property known as 28-36 Merchants
<PAGE>
15
Row, Boston, Massachusetts (the "Subject Property"), pursuant to a certain
Agreement and Grant of Easement, dated July 11, 1989 between the trustees of 50
State Street Trust, Mortgagor and One Faneuil Hall Square Limited Partnership
(the "Easement"). Mortgagor agrees that in the event that it receives an Offer
(as defined in the Easement), Mortgagor shall within two business days
thereafter deliver the Offer to Mortgagee and Mortgagee shall have, in its sole
discretion, the right to elect either to accept or reject the Offer. In the
event that the Offer is accepted by Mortgagee, at the closing of the purchase of
the Subject Property, Mortgagor shall designate any entity designated by
Mortgagee to take title to the Subject Property and Mortgagee shall pay the
purchase price for the Subject Property. Mortgagor acknowledges that its right
of first refusal under the Easement is subject to Mortgagee's security interest
under this Mortgage."
3. Terms of Loan Agreement, Mortgage and Note.
Except as amended hereby, the Loan Agreement, the Mortgage and the
Note shall remain unmodified and shall remain in full force and effect and are
hereby ratified and confirmed.
4. Amendments.
This Agreement may not be changed orally but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
5. No Joint Venture or Partnership.
Borrower and Trust hereby confirm that Lender is not and shall not
be deemed to be a joint venturer or partner with Borrower or Trust or a
mortgagee in possession by virtue of the rights granted to Lender pursuant to
this Agreement or any other Loan Documents.
6. Miscellaneous.
This Agreement (i) shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, (ii) may be executed in
multiple counterparts, each of which shall constitute an original, and (iii)
shall be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns.
* * *
<PAGE>
16
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
60 STATE STREET DEVELOPMENT
COMPANY LIMITED PARTNERSHIP
By: 60 State Street Holding Company Limited
Partnership, General Partner
By: 60 State Street, Inc., General Partner
By: /s/ John A. Pirovano
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
/s/ John A. Pirovano
-----------------------------------------
John A. Pirovano,
Trustee as aforesaid and not individually
/s/ William A. Halsey
-----------------------------------------
William A. Halsey, Trustee as aforesaid
and not individually
-----------------------------------------
Stanton H. Zarrow, Trustee as aforesaid
and not individually
/s/ John S. Moody, Trustee
-----------------------------------------
John S. Moody, Trustee as aforesaid
and not individually
<PAGE>
17
LENDER:
CORNERSTONE PROPERTIES INC.
By:
----------------------------
Name:
Title:
By: /s/ [Illegible]
----------------------------
Name:
Title:
<PAGE>
18
LENDER:
CORNERSTONE PROPERTIES INC.
By: /s/ [Illegible]
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
<PAGE>
State of New York ) December 30, 1997
: ss.
County of New York )
Then personally appeared before me the above-named John A. Pirovano
and acknowledged the foregoing instrument to be his free act and deed as Trustee
as aforesaid.
/s/ Paula A. Hansen
-------------------------------
Notary Public
State of New York ) December 30, 1997
: ss. Paula Hansen
County of New York ) Notary Public, State of New York
No. 24-4697606
Commission Expires
November 30, 1999
Then personally appeared before me the above-named William A. Halsey
and acknowledged the foregoing instrument to be his free act and deed as Trustee
as aforesaid.
/s/ Paula A. Hansen
-------------------------------
Notary Public
State of New York ) December 30, 1997
: ss. Paula Hansen
County of New York ) Notary Public, State of New York
No. 24-4697606
Commission Expires
November 30, 1999
Then personally appeared before me the above-named Stanton H. Zarrow
and acknowledged the foregoing instrument to be his free act and deed as Trustee
as aforesaid.
-------------------------------
Notary Public
<PAGE>
State of New York ) December 30, 1997
: ss.
County of New York )
Then personally appeared before me the above-named John A. Pirovano,
President of 60 State Street, Inc., and acknowledged the foregoing instrument to
be his free act and deed as Trustee as aforesaid.
/s/ Paula A. Hansen
-------------------------------
Notary Public
Paula Hansen
Notary Public, State of New York
No. 24-4697606
Commission Expires
November 30, 1999
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
On this 31st day of December, 1997, before me, the undersigned
officer, personally appeared Rodney C. Dimock , and personally known and
acknowledged himself to me (or proved to me on the basis of satisfactory
evidence) to be the Executive Vice President of Cornerstone Properties Inc. (the
"Corporation") and that as such officer, being duly authorized to do so pursuant
to its bylaws or a resolution of its board of directors, executed, subscribed
and acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself in his authorized capacity as
such officer as his free and voluntary act and deed and the free and voluntary
act and deed of said Corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ [Illegible]
----------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF MANHATTAN )
On this 31st day of December, 1997, before me, the undersigned
officer, personally appeared Kevin P. Mahoney (residing at ), and personally
known and acknowledged himself to me (or proved to me on the basis of
satisfactory evidence) to be the Treasurer of Cornerstone Properties Inc. (the
"Corporation") and that as such officer, being duly authorized to do so pursuant
to its bylaws or a resolution of its board of directors, executed, subscribed
and acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself in his authorized capacity as
such officer as his free and voluntary act and deed and the free and voluntary
act and deed of said Corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Theodore Schweitzer
------------------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
Theodore Schweitzer
Notary Public, State of New York
No. 31-5051082
Commission Expires October 23, 1999
<PAGE>
STATE OF COLORADO )
) ss.:
COUNTY OF SOUTHPORT )
On this, 30th day of October, 1997, before me, the undersigned
officer, personally appeared John S. Moody (residing at [Illegible]), personally
known and acknowledged himself to me (or proved to me on the basis of
satisfactory evidence) to be the Trustee of 60 State Street Trust (the "Trust")
and that as such Trustee, being duly authorized to do so, executed, subscribed
and acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the Trust by himself in his authorized capacity as such
Trustee as his free and voluntary act and deed and the free and voluntary act
and deed of said Trust.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Sharon Helwig-Miller
-------------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
[Signature Illegible]
-------------------------------
Sharon Helwig Miller
Notary Public
State of Colorado
<PAGE>
EXHIBIT A
Legal Description of the Property
PARCEL 1
The land in Boston, Suffolk County, Massachusetts, shown on a plan
entitled "Plan of Land Showing Area to be Acquired, Boston, Mass., dated October
13, 1970, as revised to May 11, 1973, and drawn by Harry R. Feldman, Inc.,
Engineers and Surveyors, 112 Shawmut Avenue, Boston, Massachusetts, "which plan
is recorded with Suffolk Deeds in Book 8691, Page 596, and is bounded and
described as follows:
Beginning at the southeasterly corner of the intersection of the easterly
sideline of Congress Street and the southerly sideline of Faneuil Hall Square
and running S82-27-55E by Faneuil Hall Square a distance of 112.53 feet to an
angle;
thence turning and running N82-24-06E by Faneuil Hall Square a distance of
106.32 feet to an angle;
thence turning and running S10-43-40E by Faneuil Hall Square a distance of 2.00
feet to the corner of the 5 story brick building known as No. 6 Faneuil Hall
Square, now or formerly of Charles G. Crones;
thence running S10-43-40E by the westerly face of the said 5 story brick
building a distance of 67.27 feet to an angle;
thence turning and running N79-40-00E by said land of Crones a distance of 61.81
feet to a point on the westerly sideline of Merchants Row, subject to the
existing southerly face of the building at number 28-36 Merchants Row as shown
on sketch "C" of said plan;
thence turning and running S23-15-42E by the said westerly line of Merchants Row
a distance of 30.42 feet to an angle;
thence turning and running S23-16-57E by the said line of Merchants Row a
distance of 17.50 feet to an angle;
thence turning and running S83-31-29W by land now or formerly of Nathan R.
Miller Properties, Ltd. - 5th ("Miller") a distance of 73.22 feet to an angle;
thence turning and running N06-57-30W by said land of Miller a distance of 8.50
feet to an angle;
<PAGE>
thence turning and running S88-41-40W by said land of Miller a distance of 30.30
feet to an angle;
thence turning and running S10-24-24E by said land of Miller a distance of 32.40
feet to an angle;
thence running S10-51-43E by a passageway shown on said land a distance of 21.61
feet to an angle;
thence turning and running N83-10-33E by said passageway a distance of 4.91 feet
to an angle;
thence turning and running S08-52-18E by said passageway a distance of 25.03
feet to an angle;
thence turning and running N83-22-36E by said passageway a distance of 31.47
feet to an angle;
thence turning and running S06-39-02E by said passageway a distance of 20.89
feet to angle;
thence turning and running N80-55-44E by said passageway a distance of 4.03 feet
to an angle;
thence turning and running S06-35-40E by said passageway a distance of 12.72
feet to an angle;
thence running S11-39-14E by said passageway a distance of 36.92 feet to a
point, said point being on the northerly sideline of State Street;
thence turning and running S78-29-12W by said northerly sideline of State Street
a distance of 4.10 feet to an angle;
thence running S78-46-35W by State Street 33.51 feet to an angle;
thence running S78-46-38W by State Street a distance of 83.49 feet to an angle;
thence running S78-45-36W by State Street a distance of 76.04 feet to an angle;
thence running S78-48-57W by State Street a distance of 15.84 feet to a point on
the intersection of sidelines of State and Congress Streets;
thence turning and running N12-11-09W by the easterly sideline of Congress
Street a distance of 292.92 feet to the point of beginning.
<PAGE>
The above-described parcel contains 56,331 square feet (1.293 acres as
shown on said plan), be said contents measurement more or less.
PARCEL 2
Also a certain parcel of land situated in the City of Boston, County of
Suffolk, Commonwealth of Massachusetts, shown as Lot A on a plan entitled, "Plan
of Land Boston, Mass." prepared by Harry R. Feldman, Inc., Surveyors, dated Jan.
26, 1978, recorded with said Deeds Book 9051, Page 175, and bounded and
described as follows:
Beginning at a point on the easterly sideline of Congress Street,
said point is N 12o 11' 09" W a distance of 292.92 feet from the
intersection of Congress Street and State Street;
thence running along the southerly sideline of Faneuil Hall Square N
83o 43' 18" E a distance of 139.40 feet to a point;
thence turning and running S 07o 54' 01" E a distance of 26.17 feet
to a point;
thence turning and running S 82o 24' 06" W a distance of 30.87 feet
to a point;
thence turning and running N 82o 27' 55" W a distance of 112.53 feet
to the point of beginning.
Containing 2,276 square feet, according to said plan.
AS TO PARCEL 1 AND 2:
Together with the appurtenant easement over land of One Faneuil Hall Square
Partnership described in an Agreement and Grant of Easements by and among Ronald
M. Druker, et al., Trustees of Fifty State Street Trust, John M. Hines, et al.,
Trustees of 60 State Street Trust, and One Faneuil Hall Square Partnership
recorded with Suffolk Deeds as Instrument No. 237 on August 1, 1986.
Also together with an appurtenant easement over land of One Faneuil Hall Square
Partnership described in the Modification of Restriction and Agreement and Grant
of Easement by and among Ronald N. Drucker, et al., Trustees of Fifty State
Street Trust, John M. Hines, et al., Trustees of 60 State Street, and One
Faneuil Hall Square Partnership recorded as Instrument No. 236 with the Suffolk
Deeds on August 1, 1986.
<PAGE>
EXHIBIT B
Approved Property Managers
Corpro Real Estate Management, Inc.
c/o Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
Hines Interests Limited Partnership
222 Berkeley Street
Suite 1420
Boston, Massachusetts 02116
CB Commercial/Whittier Partners, LP
60 State Street
Suite 3600
Boston, Massachusetts 02109
Spaulding and Slye
125 Cambridge Park Drive
Cambridge, Massachusetts 02140
<PAGE>
EXHIBIT C
Agreement re: Foreclosure Bids
This Agreement (the "Agreement) is executed as of the 14th day of
December, 1994, by Trust Company of the West, a California corporation, as
Trustee of TCW Realty Fund VA and TCW Realty Fund VB, a California limited
partnership, as tenants in common (collectively "TCW") for the benefit of 60
State Street Development Company Limited Partnership, a Delaware limited
partnership ("Devco").
W I T N E S S E T H :
WHEREAS, John Pirovano, William A. Halsey and Stanton H. Zarrow, not in
their individual capacity but solely as Trustees of 60 State Street Trust, under
Declaration of Trust dated September 10, 1970 and recorded with the Suffolk
County Registry of Deeds at Book 8389, Page 286, as amended by First Amendment
of Declaration of Trust Establishing 60 State Street Trust, dated as of December
23, 1988 and recorded with the Suffolk County Registry of Deeds at Book 15258,
Page 66 (the "Trust") own leasehold and fee interests in certain real property
located at 60 State Street, Boston, Massachusetts, and the improvements situated
thereon (the Property); and
WHEREAS, the sole beneficiary of the Trust is 60 State Street Associates
Limited Partnership, a Massachusetts limited partnership ("Associates"); and
WHEREAS, Devco is the sole general partner and principal owner of
partnership interest in Associates; and
WHEREAS, TCW and Devco previously have executed a certain Amended and
Restated Loan Agreement dated as of November 1, 1990, as amended by a First
Comprehensive Amendment Agreement dated as of July 3, 1991, as further amended
by a Second Comprehensive Amendment Agreement dated as of March 10, 1993, as
further amended by a Third Comprehensive Amendment Agreement dated as of April
12, 1994 and as further amended by a Fourth Comprehensive Amendment Agreement of
even date herewith (collectively, the "Amended Loan Agreement").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, TCW hereby agrees as follows:
1. At any foreclosure sale under the mortgage (as defined in the Amended
Loan Agreement), neither TCW nor any Affiliate (as defined in the Amended Loan
Agreement) of TCW will bid more than the fair market value of the Property.
<PAGE>
2. This Agreement shall be binding an TCW and its successors and assigns
and shall inure to the benefit of Devco and its successors and assigns under the
Amended Loan Agreement.
<PAGE>
IN WITNESS WHEREOF, TCW has executed this instrument under seal as of
the date first above written.
TCW: TRUST COMPANY OF WEST, a
California corporation, as
Trustee of TCW Realty Rund VA
By: /s/ [Illegible]
-----------------------------------
Authorized Signatory
By: /s/ [Illegible]
-----------------------------------
Authorized Signatory
TCW REALTY FUND VB, a
California limited partnership
By: TCW Asset Management
Company, a California
corporation, its General
Partner
By: /s/ [Illegible]
-----------------------------------
Authorized Signatory
By: /s/ [Illegible]
-----------------------------------
Authorized Signatory
By: Westmark Realty Advisors,
a California general
partnership, its
General Partner,
By: /s/ [Illegible]
-----------------------------------
Authorized Signatory
By: Stanton H. Zarrow,
Inc., its General Partner
By: /s/ Stanton H. Zarrow
-----------------------------------
Stanton H. Zarrow,
President
<PAGE>
EXHIBIT D
List of (i) Loan Documents, (ii) other documents and instruments between Lender
and Borrower or Trust and (iii) documents relating to the Senior Debt
(i) Loan Documents
1. Promissory Note dated December 23, 1988 in the initial principal amount of
$95,000,000.00 made by 60 State Street Development Company Limited
Partnership, a Delaware limited partnership ("Devco") to Trust Company of
the West, a California Corporation, as trustee of TCW Realty Fund VA, and
TCW Realty Fund VB, a California Limited Partnership, as tenants in common
("TCW"), as amended by First Allonge dated as of November 1, 1990, by
Second Allonge dated May 20, 1991, by Third Allonge dated March 10, 1993,
by Fourth Allonge dated March 10, 1993, by Fifth Allonge dated December
14, 1994, and by Sixth Allonge dated December 14, 1994 (the "Note").
2. Guaranty dated November 1, 1990 from 60 State Street Associates Limited
Partnership, a Massachusetts limited partnership ("Associates") and
Stanton H. Zarrow, Christopher F. Clancy and Stephen G. Kasnet, Trustees
of 60 State Street Trust, under Declaration of Trust dated September 10,
1970, as amended by First Amendment of Declaration of Trust dated as of
December 23, 1988 (the "Trust") to TCW.
3. Mortgage and Security Agreement between the Trust and TCW dated November
1, 1990.
4. Amended and Restated Loan Agreement dated as of November 1, 1990 between
Devco and TCW.
5. Conditional Assignment of Leases and Rents from Trust to TCW dated as of
November 1, 1990.
6. Assignment of Licenses and Permits dated as of November 1, 1990 from Trust
to TCW.
7. Hazardous Materials and Indemnity Agreement dated as of November 1, 1990
between Associates, Trust and TCW.
8. Fourth Amended and Restated Capital Improvement and Tenant Improvement
Agreement dated as of December 14, 1994 between TCW and Devco.
9. Comprehensive Agreement and Release dated as of November 1, 1990 by and
between TCW, Trust, Associates, Devco, CC&F Investment Company Limited
Partnership
<PAGE>
("CC&F Investment"), 60 State Street Holding Company Limited Partnership
("Holding"), CC&F Executive Associates Limited Partnership ("CC&F
Executive"), and Field State Street Associates Limited Partnership ("Field
Associates ").
10. Amended and Restated Guaranty, dated as of November 1, 1990, by Holding,
CC&F Executive & Field Associates.
11. Amended and Restated Pledge and Security Agreement dated as of November 1,
1990 by and between Holding CC&F Executive and Field Associates.
12. Amended and Restated Hazardous Materials and Indemnity Agreement dated as
of November 1, 1990 by and between Devco, Holding and TCW.
13. Fourth Comprehensive Amendment Agreement dated December 14, 1994 by and
between TCW, Devco, Associates and Trust.
14. Third Comprehensive Amendment Agreement dated April 12, 1994 by and
between TCW, Devco, Associates and Trust.
15. Second Comprehensive Amendment Agreement dated March 10, 1993 by and
between TCW, Devco, Associates and Trust.
16. First Comprehensive Amendment Agreement dated July 3, 1991 by and between
TCW, Devco, Associates and Trust.
17. Seven-Party Agreement dated July 3, 1991 by and between TCW, Trust,
Associates, Devco, 60 State Street, Inc., a Delaware corporation ("SSI"),
Holding and Hale & Dorr, a Massachusetts general partnership.
18. Subordination Agreement dated December 14, 1994 by and between TCW and
Teachers Insurance and Annuity Association of America, a New York
corporation ("TIAA").
19. Subordination Agreement dated July 3, 1991 by and among TIAA, TCW and Hale
& Dorr.
20. Side Letter from Devco to TCW dated January 23, 1991.
21. Agreement dated December 14, 1994 by and between TCW and Devco re:
Foreclosure Bids.
22. Side Letter from TCW to TIAA and Devco dated December 14, 1994 re: certain
TCW funding obligations.
<PAGE>
23. Side Letter from TCW Realty Advisors to John A. Pirovano dated December
20, 1994 re: Miller litigation.
24. TIAA Refinancing Agreement by and between Devco and TCW dated as of
October 1, 1994.
25. Refinancing Agreement dated as of February 1, 1994 by and between Devco,
Marshall Field V and TCW.
(ii) other documents and instruments between Lender and Borrower or Trust
None.
(iii) Senior Loan Documents
1. Note Modification Agreement with respect to Note No. 1, Note No. 2, Note
No. 3, Note No. 4 and Note No. 5, dated December 14, 1994 from Sixty to
TIAA;
2. Mortgage Modification Agreement with respect to Mortgage No. 1 and
Mortgage No. 3 as Consolidated, Supplemented and Modified, Mortgage No. 2
as Supplemented, Modified and Consolidated and Mortgage No. 4 as
Consolidated, dated December 14, 1994 from Sixty to TIAA recorded with the
Suffolk County Registry of Deeds (hereafter "Registry") in Book 19520,
Page 115 (hereafter "Registry") in Book 19520, Page 115 (hereafter "1994
Mort-age Modification Agreement");
3. Supplemental Assignment to Assignment of Lessor's Interest in Lease(s) No.
1, Assignment of Lessor's Interest in Lease(s) No. 2, Assignment of
Lessor's Interest in Lease(s) No. 3 and Assignment of Lessor's Interest in
Lease(s) No. 4 dated December 14, 1994 from Sixty to TIAA recorded in said
Registry in Book 19520, Page 163;
4. Note No. 6 in the original principal amount of $8,083,362.90 dated
December 14, 1994 from Sixty to TIAA;
5. Mortgage No. 5 dated December 14, 1994 from Sixty to TIAA recorded with
said Registry in Book 19520, Page 184;
6. Assignment of Lessor's Interest in Lease(s) No. 5 dated December 14, 1994
recorded with said Registry in Book 19520, Page 225;
7. Termination Statements and Secured Party, Copies of UCC-1 Financing
Statements with Sixty and Debtor and TIAA as Secured Party, recorded with
said Registry, in Book 19520, Pages 241, 247, 253 and 259; filed with the
Secretary of State of
<PAGE>
Massachusetts as Document No. 282937, 282938, 282939 and 282940; and filed
with the City Clerk's Office, City of Boston as Document No. 378396,
379397, 379398, and 379399;
8. Letter of Sixty to TIAA dated December 14, 1994 relating to the status of
the Ground Lease;
9. Certificate of Sixty to TIAA dated December 14, 1994 relating to Leases;
10. Letter of Sixty to TIAA dated December 14, 1994 relating to no notice of
violation of law with respect to the Premises;
11. Ground Lessor's Estoppel letter to TIAA dated December 16, 1994 as
recorded with said Registry in Book 19520, page 112;
12. The Bank of New York Letter of Credit No. 500031821 with TIAA as
Beneficiary;
13. Letter of Credit Agreement dated December 14, 1994 between Sixty and TIAA;
14. Tenant Improvement Funding letter from TCW to TIAA dated December 14,
1994;
15. Environmental Indemnity dated December 14, 1994 from Sixty to TIAA;
16. Subordination Agreement dated December 14, 1994 between TCW and TIAA as
recorded with said Registry in Book 19520, Page 267;
17. Fifth Allonge dated as of December 14, 1994 to Promissory Note dated as of
November 1, 1990 from 60 State Street Associates Limited Partnership
("Associates") to TCW;
18. Sixth Allonge dated as of December 14, 1994 to Promissory Note dated as of
December 23, 1988 from 60 State Street Development Company Limited
Partnership ("Devco") to TCW;
19. Agreement executed as of December 14, 1994 between TCW and Devco regarding
foreclosure bids;
20. Fourth Comprehensive Amendment Agreement executed as of December 14, 1994
between TCW, Devco, Associates and Sixty as recorded with said Registry in
Book 19520, Page 267;
21. Fourth Amended and Restated Capital Improvement and Trust Improvement
Agreement made as of December 14, 1994 between TCW and Devco;
<PAGE>
22. Side Letter from TCW to Devco and Teachers Insurance and Annuity
Association of America dated December 14, 1994.
23. Seven Party Agreement by and between TCW, Sixty, Associates, Devco, 60
State Street, Inc., 60 State Street Holding Company Limited Partnership,
and Hale and Dorr dated July 3, 1991.
<PAGE>
Exhibit 12.1
Statement of Computation of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements for the twelve month periods ended December 31, 1997
and December 31, 1997
<TABLE>
<CAPTION>
For the twelve months ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Net income $ 37,547 $ 9,096
Interest expense 33,997 31,734
--------------- ----------------
Earnings before interest 71,524 40,830
Interest expense 33,977 31,734
Preferred dividends 10,160 2,625
--------------- ----------------
Fixed charges 44,137 34,359
Earnings to fixed charges and
preferred stock dividend requirements 1.62 1.19
--------------- ----------------
--------------- ----------------
</TABLE>
<PAGE>
EXHIBIT 21
CORNERSTONE PROPERTIES INC.
LIST OF SUBSIDIARIES
At December 31, 1997 the subsidiaries of the Company were as follows:
<TABLE>
<S> <C>
One United Realty Corporation Delaware
NWC Funding Corporation Delaware
TULP Funding Corporation Delaware
ARICO-Denver, Inc. Delaware
ARICO-Minneapolis, Inc. Delaware
ARICO-Seattle, Inc. Delaware
1700 Lincoln Inc. Delaware
CORPRO Real Estate Management, Inc. Delaware
CStone-Boston Inc. Delaware
CStone-New York Inc. Delaware
CStone-Oakbrook, Inc. Delaware
CStone-Pittsburgh Trust Maryland
CStone-527 Madison, Inc. Delaware
Charlotte Plaza Properties, Inc. Georgia
Balsam Mountain, Inc. Georgia
DIHC Boylston Corp. Georgia
DIHC Boylston Back Bay Corp. Georgia
DIHC Berkeley Corp. Georgia
DIHC Berkeley Back Bay Corp. Georgia
DIHC of Georgia, Inc. Georgia
DIHC Management Corp. Georgia
Canal Center Properties, Inc. Georgia
Bryce Mountain, Inc. Georgia
Transcanal Properties, Inc. Georgia
DIHC Finance Corporation Georgia
DIHC Properties I, Inc. Georgia
DIHC Peachtree, Inc. Georgia
DIHC Atlanta, Inc. Georgia
DIHC Marble Place Properties, Inc. Georgia
DIHC Dearborn Properties, Inc. Georgia
</TABLE>
<PAGE>
In January 1998, the Company formed an UPREIT structure pursuant to which as
of the date of this filing the subsidiaries of the Company are as follows:
<TABLE>
<S> <C>
ARICO-Denver, Inc. Delaware
1700 Lincoln Inc. Delaware
CORPRO Real Estate Management, Inc. Delaware
CStone-Pittsburgh Trust Maryland
Cornerstone Charlotte Plaza LLC. Delaware
Cornerstone TransPotomac Plaza LLC. Delaware
Cornerstone Peachtree LLC. Delaware
Cornerstone 200 Galleria LLC. Delaware
Cornerstone Dearborn LLC. Delaware
Cornerstone Oakbrook LLC. Delaware
Cornerstone 527 Madison LLC. Delaware
Cornerstone Minneapolis LLC. Delaware
Cornerstone Denver LLC. Delaware
Cornerstone Seattle LLC. Delaware
Cornerstone New York LLC. Delaware
Cornerstone 11 Canal Center LLC. Delaware
Cornerstone 99 Canal LLC. Delaware
500 Boylston Cornerstone LLC. Delaware
222 Berkeley Cornerstone LLC. Delaware
Cornerstone Market Square LLC. Delaware
125 Summer Street Cornerstone LLC. Delaware
Cornerstone Deerfield LLC. Delaware
60 State Street Cornerstone LLC. Delaware
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Cornerstone Properties Inc.
and Subsidiaries' previously filed Registration Statements File Nos. 333-47149
and 333-18303 of our report dated February 24, 1998, on our audits of the
consolidated financial statements and financial statement schedules of
Cornerstone Properties Inc. and Subsidiaries as of December 31, 1997 and 1996,
and for the years ended December 31, 1997, 1996, and 1995, which report is
included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
New York, New York
March 27, 1998
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Cecil D. Conlee, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Cecil D. Conlee
---------------------------------------------------------
Cecil D. Conlee
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, George Abbott Davis, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ George Abbott Davis
--------------------------------------------------------------
George Abbott Davis
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Blake Eagle, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Blake Eagle
-------------------------------------------------------
Blake Eagle
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Karl-Ludwig Hermann, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Karl-Ludwig Hermann
-----------------------------------------------------------------
Karl-Ludwig Hermann
<PAGE>
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, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Hans C. Mautner
-------------------------------------------------------------
Hans C. Mautner
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Lutz Mellinger, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Lutz Mellinger
-----------------------------------------------------------
Lutz Mellinger
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Gerald Rauenhorst, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Gerald Rauenhorst
--------------------------------------------------------------
Gerald Rauenhorst
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Michael J.G. Topham, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Michael J.G. Topham
----------------------------------------------------------------
Michael J.G. Topham
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Dick van den Bos, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Dick van den Bos
-------------------------------------------------------------
Dick van den Bos
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Jan van der Vlist, a director of Cornerstone Properties Inc. (the
"Company"), do hereby constitute and appoint John S. Moody, Kevin P. Mahoney 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, 1997 (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 18th day of March, 1998.
/s/ Jan van der Vlist
-------------------------------------------------------------
Jan van der Vlist
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 24,730
<SECURITIES> 0
<RECEIVABLES> 47,767
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,217
<PP&E> 1,819,627
<DEPRECIATION> 229,652
<TOTAL-ASSETS> 2,051,481
<CURRENT-LIABILITIES> 222,898
<BONDS> 0
1,048,187
0
<COMMON> 50,000
<OTHER-SE> (2,188)
<TOTAL-LIABILITY-AND-EQUITY> 2,051,481
<SALES> 0
<TOTAL-REVENUES> 173,911
<CGS> 0
<TOTAL-COSTS> 134,041
<OTHER-EXPENSES> 2,269
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<INTEREST-EXPENSE> 33,977
<INCOME-PRETAX> 37,547
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<EXTRAORDINARY> 54
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<EPS-PRIMARY> 0.63
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</TABLE>
