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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
J.C. NICHOLS COMPANY
(Exact name of registrant as specified in its charter)
Missouri 44-0371610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
310 Ward Parkway, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 561-3456
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.01 per share.
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TABLE OF CONTENTS
PAGE NO.
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 3. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 33
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY . . . . . . . . . 35
ITEM 6. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . 37
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . 39
ITEM 8. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 40
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . 42
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . . 43
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED . . . . . 43
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . 46
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . 46
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE . . . . . . .. . . . . . . . . . . . . . . . 47
ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS,
AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . 47
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THE COMPANY HAS RECENTLY COMPLETED AN 80-TO-1 STOCK SPLIT. AS A RESULT,
THE COMPANY HAS 4,852,400 SHARES OF ITS COMMON STOCK OUTSTANDING. ALL SHARE
AND PER SHARE INFORMATION CONTAINED HEREIN AND IN THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO HAS BEEN ADJUSTED TO REFLECT THE IMPACT OF THIS
SPLIT UNLESS OTHERWISE INDICATED.
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE
SUBJECT TO FUTURE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY
DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN. SOME OF THE IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHER THINGS, CHANGES FROM THE COMPANY'S ANTICIPATED LEVELS OF
RENTAL INCOME OR PROPERTY-RELATED EXPENSES, WHETHER DUE TO FUTURE NATIONAL OR
REGIONAL ECONOMIC AND COMPETITIVE CONDITIONS, AN ADVERSE TREND IN THE REAL
ESTATE MARKETS IN WHICH THE COMPANY OWNS PROPERTIES, LACK OF SUCCESS OF ANY OF
THE COMPANY'S DEVELOPMENTS, A LACK OF TENANT ACCEPTANCE OF THE PROPERTIES OF THE
COMPANY, CHANGES IN TAX RATES OR INTEREST RATES, OR OTHER UNCERTAINTIES, ALL OF
WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE
COMPANY.
ITEM 1. BUSINESS
The J.C. Nichols Company (the "Company" or "JCN") is a real estate
operating company engaged in the acquisition, development, ownership, and
management of a diversified portfolio of real estate properties, principally
located in the Kansas City, Missouri metropolitan area. The Company's real
estate development activities were initiated in 1902. The Company was
incorporated in Missouri in 1908 and its principal office has been at 310 Ward
Parkway, Kansas City, Missouri since July 1930.
The Company is best known for its development, ownership, and management of
the Country Club Plaza area (the "Plaza"), a prestigious shopping,
entertainment, and office district of Spanish architecture containing
approximately 1,100,000 square feet of retail space (including basement space)
and approximately 1,100,000 square feet of office space. The Plaza is
surrounded principally by single family residences, condominiums, and upscale
apartments, many of which are owned by the Company. The Plaza is generally
regarded as the oldest major suburban shopping center in the United States.
At December 31, 1995, the portfolio of real estate assets of JCN and
consolidated subsidiaries included 54 retail, office and industrial properties
with over 4.6 million square feet of leasable space, approximately 2,400
residential apartment units, three residential subdivisions under development,
and over 1,000 acres of land held for development.
In addition, the Company owns equity interests in twelve active
partnerships whose holdings are not consolidated with the financial statements
of JCN. The largest of these interests relates to property in the Des Moines,
Iowa area, which, at December 31, 1995, consisted of approximately 600,000
square feet of office space, 200,000 square feet of industrial space, and 110
acres to be developed.
Management estimates the Company's real estate holdings had a total fair
market value of approximately $494.4 million at December 31, 1995, including the
Company's percentage interest in the real estate holdings of consolidated and
unconsolidated subsidiaries, but exclusive of any related liabilities or
potential liquidation costs. See Item 3, "Properties" for an explanation of
this estimate.
Senior management of the Company has changed significantly since May 1995.
This change occurred as a result of a number of factors described below under
"Development of the Business" and in Item 8, "Legal Proceedings." The new
management team is focusing on reducing the Company's financial leverage,
enhancing the condition and revenue stream of the Company's existing properties,
developing
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selected strategic properties, and generally returning the Company to its
historically successful mission of creating value for its shareholders through
the development, ownership, and management of high quality, diverse real estate
properties. Management expects to concentrate primarily on the development,
ownership, and management of the retail and residential segments of the real
estate industry. See "Description of the Business" in this Item.
DEVELOPMENT OF THE BUSINESS.
The Company was founded by Mr. J.C. Nichols, who began developing real
estate in the Kansas City area following his return from Harvard University in
1902. Mr. Nichols was captivated by the real estate development theories of
landscape architect Frederick Law Olmsted, a designer of New York's Central
Park. To pursue these theories, Mr. Nichols formed a syndicate to purchase land
for development in 1904 and incorporated the Company as a Missouri corporation
on December 8, 1908.
Mr. J.C. Nichols died in 1950 and management of the Company passed to his
son, Miller Nichols, who led the Company until his retirement as Chairman of the
Board in July 1988. During the management tenure of Miller Nichols, the Company
followed a strategy of completing "Quality of Life" mixed use community
developments that combined shopping, recreation (generally golf courses), and
upscale residences. From 1950 until the late 1980s (approximating the date of
Miller Nichols' retirement), the Company continued its aggressive purchase,
development and management of Kansas City area properties, as well as hotels in
Chicago and San Francisco. During this period, the Company developed
approximately 50 subdivisions, 15 shopping centers, and 30 office buildings and
built or acquired over 2,000 apartment units, several hotels, and two industrial
parks. Most of these shopping centers and office buildings are still owned by
the Company today. Following Miller Nichols' sale of shares to the Company's
Employee Stock Ownership Trust ("ESOT") and subsequent retirement, the
Company's development activities slowed significantly.
In 1987, a subsidiary of the Company entered into various contracts with
the City of St. Petersburg, Florida (the "City") for the redevelopment and
construction of certain parking, commercial and retail facilities to be known as
Bay Plaza. Due to a delay in significant development activities, the Company
ceased capitalization of interest, property taxes, insurance, and other
development costs in 1990, and reduced the properties' carrying value by $23.8
million to $3.0 million at December 31, 1994. In November 1995, the Company
informed the City that it had ceased plans to develop the properties and on
December 31, 1995, management reduced the carrying value of the Bay Plaza
assets, net of liabilities, to $0. JCN intends to sell and has listed for sale
properties owned by it within the Bay Plaza development.
The Company sold its hotel division in 1989, but retained its leasehold
interest in the Raphael Hotel of San Francisco. The underlying lease of the
Raphael Hotel of San Francisco expires on September 30, 1996, and will not be
renewed. In the opinion of management, the impact of this lease expiration will
not be material to the Company's consolidated financial position or results of
operations.
In 1991, the Company purchased a 5% limited partnership interest in Raphael
Hotel Group, L.P, the partnership to which the hotel division was originally
sold. At the same time, the Company also purchased a 50% interest in a
management agreement for a hotel in Kansas City managed by the limited
partnership. The contract has provided revenues to the Company of approximately
$259,000 and $304,000 for the years ended December 31, 1995 and 1994,
respectively, and expires in December 1997.
In 1989, the Company acquired a 50% interest in a joint venture, Kantel,
L.P. (the "Venture"), with an affiliate of The Ritz-Carlton Hotel Company (the
"Ritz") to convert an existing hotel owned by the Company to a Ritz-Carlton.
The Company borrowed $70.0 million on a non-recourse basis using the assets of
the hotel as collateral and advanced funds to the Venture for the conversion.
As a result of low
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occupancy, the hotel did not meet expected operating results or cash flows, and,
accordingly, the Venture was unable to meet its obligations under the debt and
lease agreements. In September 1993, the Company acquired an additional 49%
interest in the Venture from the Ritz.
On February 22, 1994, the lender foreclosed on the hotel, and the Company
was released from its obligations under the non-recourse debt and from its
interest payable obligation aggregating approximately $14.1 million which had
been accrued through December 31, 1993. In 1994, the Company recognized a gain
(net of taxes) of approximately $29.1 million as an extraordinary item related
to gain on extinguishment of debt. The transaction also resulted in the
reduction of the Company's revenue producing properties by approximately $23.9
million ($10.6 million, net of accumulated depreciation) and the segregation of
$5.6 million and $1.7 million of operating losses in 1993 and 1994,
respectively, related to the hotel's operation into a separate classification in
the Company's consolidated statements of operations.
The 5% ownership in Raphael Hotel Group, L.P. and the 50% interest in the
hotel management agreement for the Kansas City hotel that expires in 1997, as
discussed above, will represent the Company's only remaining involvement after
September 1996 in either the ownership or management of hotels.
In 1987, the Company formed an Employee Stock Ownership Trust ("ESOT"). In
1988, the ESOT purchased 133,684 shares (pre-split) of the Company's stock (69%
of the then outstanding shares), the majority of which was acquired from
descendants of the Company's founder (including Mr. Miller Nichols) and his
business associates. These shares were purchased for $98.2 million, with $50.0
million borrowed from an outside source and guaranteed by the Company and $48.2
million borrowed directly by the Company and advanced to the ESOT. At December
31, 1987 (prior to the management transition and ESOT transaction), the
Company's interest bearing debt was approximately $198.8 million. By December
31, 1988, the Company's direct and guaranteed interest bearing debt had
increased by approximately $129.9 million to $328.7 million, while the Company's
assets had increased by $26.3 million, of which $15.0 million were classified as
assets related to discontinued operations. In January 1991, the Company
effected the retirement of the remaining $45.8 million of the ESOT's debt to
outside lenders, although the ESOT remained indebted to the Company.
In May 1992, a limited partnership (the "Bowser Partnership") controlled by
the Company's former president, acquired 125,242 unallocated shares (pre-split)
of the Company's common stock from the ESOT for $124.5 million by the
assumption of existing principal indebtedness of $94.3 million and accrued
interest and other advances of $30.2 million owed by the ESOT to the Company.
These shares were later conveyed back to the Company as treasury stock and the
debt to the Company extinguished as a part of the settlement agreement (the
"Settlement Agreement") referred to in Item 8, "Legal Proceedings."
In late 1994, various shareholders attempted to restructure the Company and
the Company's shares were the subject of various purchase offers. The then
current management and board of directors did not accept any of these offers.
Concurrently, as a result of certain transactions occurring among JCN, former
executive officers, the ESOT, and others, JCN became involved in various legal
actions as plaintiff and defendant. In May 1995, the long time chief executive
officer and chief financial officer each resigned. In addition, by virtue of
certain directors resigning, others not standing for re-election, appointment of
new directors to the Board, and election of new directors by the shareholders at
the Company's December 13, 1995 annual meeting, a majority of the Company's
directors, following the meeting, were new to the Board.
As a result of the litigation and certain transactions among JCN, former
executive officers, the ESOT, and others, JCN and other parties entered into the
Settlement Agreement. The result of the litigation and this agreement was the
installation of a new management team, the conveyance to the Company from the
Bowser Partnership of 125,242 shares (pre-split) of the Company's common
stock (approximately 64%
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of the then outstanding shares) as treasury stock in exchange for extinguishment
of a $94.3 million note receivable and accrued interest and advances thereon,
and the rescinding and unwinding of several transactions and conveyances
involving the exchange of properties and stock as described in the Settlement
Agreement.
Following this settlement, the new management team is initially focusing on
reducing the Company's financial leverage, enhancing the condition and revenue
stream of the Company's existing properties, developing selected strategic
properties and generally returning the Company to its historically successful
mission of creating value for its shareholders through the aggressive ownership,
management and development of high quality, diverse real estate properties.
Management expects to concentrate primarily on the development, ownership, and
management of the retail and residential segments of the real estate industry.
See "Description of the Business" in this Item.
DESCRIPTION OF THE BUSINESS.
JCN is a diversified real estate operating company engaged in the
acquisition, development, ownership, and management of income producing
properties located primarily in the Kansas City, Missouri metropolitan area.
These properties include retail centers, apartments, office buildings,
industrial properties, and mixed-use projects. The Company is also engaged in
the development and sale of land for residential and commercial use.
At December 31, 1995, JCN and consolidated subsidiaries owned 18 retail
centers consisting of approximately 2,600,000 square feet of retail space
occupied by approximately 550 tenants, 14 apartment communities (including a
majority interest in a partnership owning a Des Moines, Iowa area apartment
complex) representing approximately 2,400 residential apartment units, 33 office
properties (including majority interests in partnerships owning seven Des
Moines, Iowa area office buildings) consisting of approximately 1,629,000 square
feet of office space occupied by over 500 tenants, three industrial and
warehouse properties consisting of approximately 379,000 square feet of
industrial and warehouse space occupied by approximately 150 tenants, three
developments containing approximately 200 lots available for sale, and over
1,000 acres available for residential and commercial development, as well as
complete or partial ownership in several other minor properties. JCN also owns
15 unsold units in its Alameda Towers condominium project, and continues to own
assets now held for sale which are a part of the Company's discontinued Bay
Plaza project in St. Petersburg, Florida.
The Company owns an equity interest in twelve active partnerships whose
holdings are not consolidated with the financial statements of JCN. The largest
of these holdings are the Company's approximately 50% interest in six
partnerships in the Des Moines, Iowa area. At December 31, 1995, these
partnerships owned nine buildings containing approximately 600,000 square feet
of offices, 200,000 square feet of industrial space and 110 acres to be
developed. One of the Company's twelve partnership interests is a 40% interest
in J.C. Nichols Real Estate, a residential sales and brokerage business. J.C.
Nichols Real Estate also has an interest in an entity which owns a mortgage
origination company.
Management estimates that the Company's real estate holdings had a total
fair market value of approximately $494.4 million at December 31, 1995, as
compared to a $238.5 million depreciated cost basis (including the Company's
percentage interest in the real estate holdings of consolidated and
unconsolidated subsidiaries, but exclusive of any related liabilities or
potential liquidation costs). Of the estimated $494.4 million of real estate
value held by the Company, approximately $172.5 million is in retail properties,
$99.4 million is in office and industrial properties, $74.9 million is in
apartments, $68.5 million is in its Iowa investments, $54.8 million is in land
awaiting sale or development and $24.3 million is in other miscellaneous real
estate assets of the Company. See Item 3, "Properties," for an explanation of
these estimates.
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For the years 1993, 1994, and 1995, the Company derived approximately $73.7
million (76.6%), $75.0 million (79.6%), and $79.8 million (80.4%), respectively,
of its consolidated revenues from rental income and $6.1 million (6.4%), $10.7
million (11.4%), and $6.0 million (6.1%) from property sales.
RETAIL PROPERTIES.
The Company owns and manages 18 retail centers consisting of approximately
2,600,000 square feet of retail space, of which approximately 1,100,000 square
feet (42%) is located in the Plaza (including basement space) and the balance is
in suburban shopping centers. The Company's retail properties are leased to
over 500 tenants and management does not believe the Company is dependent upon
any single tenant. Management estimates the fair market value of its retail
properties was approximately $172.5 million at December 31, 1995. Consolidated
rental income from these properties was approximately $24.2 million in 1993,
$25.2 million in 1994 and $27.4 million in 1995.
The Plaza is a mixed-use area of Spanish architecture composed of upscale
specialty stores (such as Halls, Saks Fifth Avenue, Williams-Sonoma, Talbots,
Brooks Brothers, and Eddie Bauer), restaurants, art galleries, and two movie
theaters containing a total of seven screens. The shopping and entertainment
area is bordered on its south side by a contained waterway, Brush Creek, and
surrounded principally by single family residences, condominiums, and upscale
apartments, many of which are owned by the Company. Development of the Plaza
began in 1922, and it is regarded as one of the oldest suburban shopping centers
in the United States. In 1993, the Plaza received the Urban Land Institute
Heritage Award for Excellence, in only its second presentation, the first being
to Rockefeller Center in New York City. In 1994, the Plaza received a special
award for Shopping Center Excellence at the International Property Market in
Cannes, France.
The Company's suburban shopping centers are generally located in
relatively affluent areas and contain a mix of grocery stores, local department
stores, restaurants, and smaller shops. The average retail tenant, including
both Plaza and suburban centers, leases approximately 5,000 square feet. Rents
at both the Plaza and suburban centers typically include minimum annual rents,
contingent rentals based on a percentage of the lessee's sales, and, in many
instances, the tenant's proportionate share of real estate taxes, insurance, and
maintenance. These leases generally have a term of three to five years, or
longer in the case of most major tenants.
The Company's services related to its retail properties include initial
market and consumer research, evaluating tenant mix and consumer demographics,
identifying potential tenants, negotiating lease terms, renovating and expanding
its retail properties, and the ongoing management of those properties.
Management believes that managing the Company's properties enables the Company
to better control operating expenses and establish long-term relationships with
its retail tenants.
Over the last five years, the Company's retail properties, particularly the
Plaza, have reflected national trends in retailing with a changing mix of
operations. For example, in 1991 the Company signed a number of new tenants for
the Plaza such as the Jayne Gallery, the Body Shop, Circle Gallery and KC
Masterpiece BBQ. In that same year, the retailing division of Hallmark Cards
made the decision to close its women's clothing store, Swansons, and combine its
operation with Halls, the division's larger specialty store in the Plaza. The
majority of the space vacated by Swansons was leased promptly to another upscale
clothing store. In 1992, Woolf Brothers, an upscale clothing store that had
maintained a store in Kansas City continuously since 1927, announced the closing
of its Plaza store, among other of its store closings. The Company quickly
replaced it with one of the world's largest premier Eddie Bauer stores.
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An older Dillard's store closed in 1993 and the space was quickly leased to
Barnes and Noble for a major book store. Also in 1993, many of the Plaza's
restaurants were remodeled and older style restaurants replaced with newer ones.
Existing properties performed well in 1994 and important new tenants such as FAO
Schwarz were brought to the Plaza.
The retail industry met with mixed performance in 1995, as certain retail
types performed better than others and the continuing difficulties of major
retailers emphasized the competitiveness within the retail environment. While
the overall retail vacancy rate in the Kansas City market was approximately 10%,
as compared to the national average of 8.4%, the Company maintained a vacancy
rate of approximately 3% in the retail division. The Company's tenants also did
well in 1995 with average sales at the Company's retail tenants up 5.5% over
1994.
Several new leases were signed in 1995 with local and national retailers
such as The Cheesecake Factory. Also, late in 1995 construction began on a new
building located on the Plaza's central parking lot which is now home for The
Great Train Store and will also soon be home for the Store of Knowledge, a store
affiliated with public television.
Management believes the "repositioning" of the Company's tenant mix is
critical and niche marketing will be necessary to move with the changing
demographics of an aging society. These changes require retailers to re-
merchandise to meet the makeup of local submarkets. Management believes the
Company, by virtue of its first-hand knowledge of growth patterns and local
economics in the Kansas City market, is especially well positioned to assist
retailers as they work to meet the needs of the changing Midwest market place.
Management intends to increase the value of the Company's portfolio of
retail income producing properties by increasing revenues from existing
properties through improved tenant mix, improved tenant relations and
communication, completion of deferred maintenance, and improved services to
tenants from its team of experienced management and service personnel. In 1996,
the primary emphasis has been and will continue to be on improving the
performance of the Company's existing properties. Specifically, management
expects to increase revenues from the Company's retail properties division by
focusing on the following:
- Expanding and renovating retail properties
- Increasing minimum rents for new and existing leases
- Negotiating contractual rent escalations
The Company seeks to require tenants to pay 100% of their pro rata share of
operating expenses, real estate taxes, and promotional expenses in addition to
an administrative charge. Many of the Company's older leases require only a
fixed contribution to these expenses, which often is significantly below the
tenants' pro rata share. As the older leases expire or are terminated, the
Company will seek to recover a higher percentage of these expenses.
In the past, the Company has developed suburban retail centers primarily
for ownership. No significant retail center developments are now underway.
In the future, the Company will seek to take advantage of opportunities to
develop or acquire additional retail properties both on the Plaza and in
suburban areas.
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OFFICE AND INDUSTRIAL PROPERTIES.
At December 31, 1995, JCN and its consolidated subsidiaries owned and
managed 33 office properties containing approximately 1,629,000 square feet.
The largest portion of this space, approximately 700,000 square feet (43%), is
located in the Plaza area of Kansas City, with the balance located in suburban
Kansas City and the Des Moines area. Consolidated rental income from the
Company's office and industrial properties division was $26.1 million in 1993,
$26.2 million in 1994, and $27.9 million in 1995.
In addition to the Company's consolidated office properties, the Company
owns an equity interest in partnerships whose office holdings are not
consolidated with the financial statements of JCN. These holdings include nine
buildings containing approximately 600,000 square feet of office space in the
Des Moines, Iowa area and two buildings in the Plaza area of Kansas City,
containing approximately 400,000 square feet of office space.
The Company leases the majority of its space to smaller tenants, although
it has entered into a long term lease for 175,000 square feet with a major
tenant. At December 31, 1995, the average lease for the Company's over 500
office tenants was 2,877 square feet.
Office rental rates in the Kansas City area ranked in the bottom third of
rates nationwide during 1995. Vacancy rates, however, are slightly lower than
the national average. According to Valuation International, an independent
valuation source, the Kansas City metropolitan area experienced office occupancy
rates of approximately 85% during 1995. Occupancy rates for the Company's
office properties were 94% in 1993, 90% in 1994, and 89% in 1995. During 1995,
occupancy rates for the Company's Plaza properties were 92% and for its suburban
properties were 83%. Approximately 60% of the Company's suburban vacancy rate
was due to one building which was vacant during 1995. Management is attempting
to lease or sell this building.
At December 31, 1995, the Company owned three industrial properties
containing approximately 379,000 square feet, 96% of which was occupied by 153
tenants. The Company's industrial properties generated consolidated revenues of
approximately $2.0 million in 1993, $2.1 million in 1994, and $1.9 million in
1995. The Company also has an interest in an unconsolidated partnership in the
Des Moines, Iowa area, which owns an industrial property containing 200,000
square feet.
The Company's office and industrial properties contribute positive cash
flows to the Company. However, primarily due to the recurring nature of capital
contributions required for tenant finish and the relatively low rental rates in
the Kansas City market, not all of the Company's office properties are meeting
management's return objectives. Management is evaluating each of its office
properties with the goal of improving its return. If management determines that
a property is unlikely to meet its return objectives or does not fit within its
long term strategy, it will consider its options, including disposal, regarding
that property.
APARTMENTS.
At December 31, 1995, JCN and consolidated subsidiaries owned and managed
14 apartment communities with 2,437 units. These units experienced occupancy
of approximately 97% in 1993, 98% in 1994, and 96% in 1995. During 1995, 26
units near the Plaza were razed to make way for additional surface parking.
Consolidated revenue from the Company's apartments was $17.8 million in 1993,
$17.7 million in 1994, and $18.6 million in 1995.
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The Company seeks to distinguish itself by providing high quality customer
service to both prospective and existing residents by training and motivating
its management teams to surpass industry standards in all areas. In an effort
to give the Company's properties an advantage over their competition, close
attention is paid to marketing requirements such as drive-by appeal, physical
appearance, signage, clubhouse amenities, model apartments and brochures. As a
result of this focus on service and appearance, the Company believes that its
resident retention rate is higher than industry averages and, as a result,
turnover and capital improvement cost are lower.
During past years, the market for the Company's apartment units has been
strong, although there has been some pressure in recent years from newer
suburban units. The strength of the Kansas City area market is confirmed by a
recent survey presented by a major real estate valuation and vacancy survey
firm, which indicated 1995 apartment vacancy rates in the Kansas City area
market of 5%. As market occupancies exceed 95%, there is an upward pressure on
rental rates that typically grows faster than the median income levels. The
Company attempts to balance rent increases with high occupancy and controlled
turnover costs. The Company believes that its customer service program allows
for increases in market rental rates while maintaining lower overall resident
turnover, resulting in lower operating expenses than most of the competition.
The Company is currently seeking to expand its apartment operations and
looking for opportunities to buy or develop new apartments. The Company is also
evaluating plans to develop a new residential community ("Kirkwood Circle") on
approximately 10 acres it owns near the Plaza.
The Company generally will seek to acquire or develop multifamily
properties that are similar to those in its existing portfolio and are (i) no
more than ten years old at the time of acquisition; (ii) strategically located
in the Company's market; (iii) capable of enhanced performance through intensive
management and cosmetic improvements; and (iv) capable of producing a high
component of anticipated total return derived from current income. In
connection with its acquisition and development of multifamily properties, the
Company will consider such factors as: (i) the geographic location and type of
property; (ii) the age, construction quality and cost, condition, and design of
the property; (iii) the current and projected cash flow of the property and the
ability to increase cash flow; (iv) the potential for capital appreciation of
the property; (v) the terms of tenant leases, including the potential for rent
increases; (vi) the potential for economic growth and the tax and regulatory
environment in the area in which the property is located; (vii) the occupancy
and demand by tenants for properties of similar type in the vicinity; and (viii)
the prospects for liquidity through sale, financing, or refinancing of the
property.
RESIDENTIAL PROPERTIES.
At December 31, 1995, the Company had three residential subdivisions
("Woodsonia," "Green Meadows," and "White Horse") under development with
approximately 200 lots platted for sale and over 500 acres yet to be developed.
All of the subdivisions are within the Kansas City metropolitan area. The
Company sold 92 lots in 1993, 138 lots in 1994, and 101 lots in 1995. Revenues
from sales of lots were $3.4 million in 1993, $4.6 million in 1994, and $3.5
million in 1995.
The Company acquires land periodically in order to provide an adequate and
optimally located supply for its residential subdivisions. In evaluating
possible opportunities to acquire land, the Company considers such factors as
the feasibility of development, proximity to developed areas, population growth
patterns, customer preferences, estimated cost of development, and availability
and cost of financing.
The Company engages in many phases of development activity, including land
and site planning, obtaining environmental and other regulatory approvals, and
contracting for the construction of roads, sewer, water, and drainage
facilities, recreation facilities, and other amenities.
8
<PAGE>
The Company agreed to sell the 812 acre residential portion of its
LionsGate property in 1994, while keeping 88 acres for the future development of
offices and a shopping center. Management remains committed to quality
developments and dedicated to planned communities and will continue to consider
the purchase of additional land for future development of planned communities.
The Company also continues to market the 15 remaining condominium units in
its upscale Alameda Towers project. The project was completed and sales
commenced in September 1989. The project was originally conceived as having two
connected towers with approximately 120 units. However, the Company currently
has no plans to complete the second tower. Revenues from sales of condominiums
were $2.6 million in 1993, $5.6 million in 1994, and $2.5 million in 1995.
FUTURE ACQUISITIONS AND DEVELOPMENT.
Management's objective is to earn a normalized annual cash flow rate of
return of at least 10% on new acquisitions of income producing properties and
higher rates of return on properties that the Company develops. Management
believes that the Company's reputation for quality and its extensive knowledge
and thorough understanding of the Kansas City market gives it a distinct
advantage in purchasing, developing, and managing properties compared to many
other real estate entities operating in the area.
DEVELOPMENT FOR THIRD PARTIES.
JCN has in the past engaged in the development of retail, apartment,
office, and mixed-use projects primarily for ownership. The activities involved
in the development, renovation, and expansion of retail centers and mixed use
projects include: initial market and consumer research, land site evaluation
and acquisition, public and governmental approval, oversight of project design,
cost control, contractor selection and supervision, acquisition of financing,
identification of tenants, negotiation of lease terms, negotiation of
partnership and other combination agreements, and promoting completed projects.
Third parties have requested JCN to consider performing various of these
services on their behalf. Management will consider such requests on a case-by-
case basis, and the Company may in the future develop properties or provide
services on behalf of third parties.
MANAGEMENT OF PROPERTIES FOR OTHERS.
JCN also operates and manages six properties in which it does not own a
controlling interest. The largest of these is the Plaza West building, a
257,932 square foot office building in which the Company owns a 12.5% interest.
The Company also manages the 147,642 square foot Board of Trade building in
which the Company owns a 49% interest. The remaining properties managed by the
Company, in which the Company has no ownership interest, are primarily
residential in nature and generally include communities or projects developed by
the Company. Management of the Company is considering expanding its third
party real estate management services.
OTHER BUSINESS LINES.
In addition to owning, operating, and managing real property, JCN, through
partnerships and other business combinations, is involved in real estate
brokerage services and providing other services incidental to ownership,
management, and development of real property. A wholly-owned subsidiary of JCN
has a 40% equity interest in J.C. Nichols Real Estate, a residential sales and
brokerage business. J.C. Nichols Real Estate also has an interest in an entity
which owns a mortgage origination company.
9
<PAGE>
BUSINESS STRATEGY.
Management intends to operate the Company as a real estate operating
company and, as such, retain the majority of the Company's funds from operations
in the business. These funds will be used to reduce indebtedness and to improve
and increase the value of the Company's portfolio of revenue producing
properties. The Board of Directors of the Company has not determined if, when,
or in what amount future dividends will be declared or paid, but expects that
the primary factor in the Company's total return to shareholders will be the
increase in the Company's equity value per share.
Management will strive to increase the equity value of the Company's income
producing portfolio by increasing the net operating income from existing
properties, increasing the number of properties in its portfolio, and by
reducing the amount of debt associated with its existing properties. The number
of properties in the Company's portfolio is expected to increase by both the
acquisition and development of revenue producing properties, as well as by the
acquisition of land for development and resale principally in the Midwest, and
predominately in the Kansas City metropolitan area.
In management's opinion, the Kansas City metropolitan area represents a
stable and growing market for the Company's properties. According to Valuation
International, during the period 1991-1996, the Kansas City metropolitan area
population grew at an annual rate of approximately .9%, 24th among the 45 major
metropolitan statistical areas in the United States, while average household
income during the period grew at a rate of 1.8%, 17th among this same group of
cities.
Management believes the Company's strategy of enhancing its existing
portfolio of properties and focusing initially on acquisitions and developments
in Kansas City and surrounding markets allows the Company to best capitalize on
its reputation for quality and its employees' in-depth knowledge and experience
in those markets. Management also believes that by developing, owning, and
managing a diverse portfolio of properties in a relatively small geographic
area, it can better control the overall character of the Company's developments
and thus create greater value than were it to concentrate on a single type of
property over a wider geographic area.
In management's opinion, the success of this strategy is more appropriately
measured by changes in the underlying value of the assets, less related
liabilities, than by "Net Income," as defined by generally accepted accounting
principles. For this reason, management has estimated the fair market value of
the Company's real estate assets at December 31, 1995 and expects to develop
similar estimates at subsequent year end periods. Management may consider
involving independent third party appraisers in this process, but has not yet
determined the relative cost versus the benefit of doing so.
COMPETITION.
Substantially all of the Company's properties are located in the Kansas
City metropolitan area, except those held in its Iowa investment partnerships.
The Kansas City market area is a highly competitive one for real estate and real
estate services. The Company's retail properties face increasing competition
from newer upscale shopping centers, discount shopping centers, outlet malls,
catalogues, discount shopping clubs, and telemarketing. All of the Company's
retail properties overlap to some degree with the trade area of other shopping
centers. Renovations and expansions at existing competing centers as well as
the development of new centers in the Company's market area could negatively
affect revenues of the Company.
The Company's office building properties compete for tenants principally
with office buildings in the same general geographic location. In many areas
where the Company's office buildings are located, there have been new office
buildings built and planned office building construction which have and will
continue to increase the supply of rentable office space, potentially placing
downward pressure on market rental rates.
10
<PAGE>
With respect to its apartment properties, there are numerous other
apartment properties within the market area of each of the Company's properties
which could have a material effect on the rental rates charged at the
properties, as well as the Company's ability to rent its apartment properties.
JCN competes directly with developers and other buyers with respect to the
acquisition of development sites for retail, office, and apartment development
and for financing sources.
With respect to all of its real estate operations, the Company competes for
tenants and property acquisitions with others who may have greater resources
than the Company and whose management may have more experience in operating and
acquiring properties than the Company's management.
REGULATION AND LEGISLATION.
Federal, state, and local statutes and regulations relating to
environmental protection have not had a material impact on the businesses of
JCN. However, existing properties and future development of other opportunities
by JCN may require additional capital and other expenditures in order to comply
with such statutes and regulations. It is impossible at this time to predict
with any certainty the magnitude of any such expenditures or the long range
affect, if any, on JCN's operations. JCN is currently not aware of any material
violation of any applicable environmental statute or regulation with respect to
any of its properties owned, managed, or held for development.
The federal government and the states in which JCN operates have adopted
handicapped facilities and energy laws and regulations impacting the use and
development of real estate. These laws and regulations may operate to reduce
the number, attractiveness, and investment potential of properties and
developments available to JCN. JCN has reviewed the properties it owns or in
which it has an interest to determine the extent and amount of capital
expenditures necessary to comply with the aforementioned laws and regulations.
These expenditures will be incurred by the Company over the course of the next
several years as modifications to such properties are undertaken. The
expenditures to be incurred by the Company as a result of such modifications are
not expected to be material in any single year.
GENERAL CONDITIONS.
General economic conditions and trends, including interest rates,
inflation, availability of credit, real estate trends, construction costs,
income tax laws, governmental regulations and legislation, increases or
decreases in operating expenses, zoning laws, population trends, and the ability
of JCN to attract tenants and purchasers for its properties, among other
factors, will affect JCN's success.
Generally, JCN's business and that of the industry is not seasonal in
nature.
RELIANCE ON CUSTOMERS OR TENANTS.
None of JCN's business segments depends upon a sole customer or tenant or a
few customers or tenants, the loss of which would materially adversely effect
the business or financial condition of JCN. No single customer or tenant
accounts for 5% or more of the consolidated revenues of JCN.
EMPLOYEES.
JCN and consolidated subsidiaries directly employed 320 full or part-time
employees as of December 31, 1995. Overall, management believes JCN has good
employee relations.
11
<PAGE>
STOCK SPLIT.
On May 29, 1996, the shareholders of JCN approved a resolution to amend the
Articles of Incorporation of JCN to increase from 225,000 to 10,000,000 the
number of shares of common stock authorized for issuance by the Company and to
decrease the par value per share of common stock from $20.00 to $.01.
Additionally, the Board of Directors of JCN approved, in conjunction with such
increase in the authorized number of shares and decrease in the par value, an
80-for-1 stock split of the Company's common stock for all issued and
outstanding shares not then held in the Company's treasury. The Company
currently has 4,852,400 shares of common stock outstanding.
The increase in the number of shares authorized, decrease in par value, and
stock split described above had offsetting effects on the shareholders' equity
section of JCN's consolidated balance sheet. The common stock, par value line
of the shareholders' equity section of JCN's consolidated balance sheet
decreased from $4,500,000 to $100,000, with an offsetting increase in the
additional paid in capital line of the consolidated balance sheet from
$2,679,000 to $7,079,000.
Unless otherwise indicated in this Form 10, all references to per share
data shall be on a post-stock split basis.
12
<PAGE>
ITEM 2. FINANCIAL INFORMATION
The following table contains certain selected historical consolidated financial
information and is supplemented by the more detailed Consolidated Financial
Statements and Notes presented elsewhere in this Registration Statement on Form
10. The selected consolidated financial information has been derived from the
Company's audited consolidated financial statements for each of the five
consecutive years ended December 31, 1995, and from the Company's unaudited
consolidated financial statements for the six months ended June 30, 1996 and
1995. The information below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Registration Statement on Form 10.
SELECTED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
-------------------
Total properties $224,053 $236,052 $229,524 $244,105 $239,008 $258,785 $271,053
Total assets 314,422 355,759 328,695 350,302 362,112 410,897 406,994
Mortgage indebtedness 310,817 335,186 326,349 339,881 327,354 400,539 381,784
Treasury stock 117,427 13,872 117,427 14,582 23,058 22,306 16,139
Total stockholders' equity (deficit) (34,681) (20,360) (36,725) (25,821) (31,568) (29,526) (25,109)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -----------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
---------------
Sales and revenues $ 80,825 $ 48,880 $ 99,305 $ 94,213 $ 96,204 $112,554 $108,896
S,G & O expenses 23,023 22,826 46,118 43,203 44,615 46,769 46,418
Interest expense 12,062 13,863 27,696 27,049 26,693 33,832 34,699
Income (loss) before income taxes
and extraordinary gain and
cumulative effect of change in
accounting principle 35,362 1,291 (16,498) (44,698) 26 5,483 (3,033)
Net income (loss) 22,137 791 (10,752) (14,534) 510 3,663 1,961
PER SHARE DATA:
---------------
Income (loss) before extraordinary
gain and cumulative effect of
change in accounting principle $4.53 $.05 $(.74) $(2.89) $.04 $.25 $(.13)
Net income (loss) 4.53 .05 (.74) (.96) .04 .25 (.13)
Dividends 0 0 0 .13 .13 .13 .13
Weighted average common shares
outstanding (in thousands) 4,884 15,850 14,469 15,136 14,408 14,574 15,168
</TABLE>
13
<PAGE>
As part of the settlement resulting from the 1995 litigation (which is described
in Item 8 below), the Company received from the Bowser Partnership 125,242
shares ( pre-split) and became obligated to convey 8,500 shares (680,000 shares
post-split) of the Company's common stock and $2.0 million cash to the ESOT or
to beneficiaries of the ESOT. The receipt by the Company of shares from the
Bowser Partnership, which was reflected in the Company's consolidated financial
statements in November 1995, significantly reduced the weighted average common
shares outstanding for the year ended December 31, 1995 and subsequent periods.
The conveyance to the ESOT has not occurred and will not occur until certain
related issues are addressed by the Internal Revenue Service (the "IRS").
Conveyance of the 680,000 shares of the Company's common stock will result in a
decrease in shareholders' deficit of $11.1 million, which, together with the
$2.0 million cash contribution to be made, have already been reflected as
expenses in the Company's 1995 consolidated statement of operations and as
liabilities in the Company's 1995 consolidated balance sheet. The following
table provides pro-forma data for the six months ended June 30, 1996, and the
year ended December 31, 1995, had the conveyance occurred on December 31, 1995:
PRO FORMA FOR CONVEYANCE TO ESOT
--------------------------------
SIX MONTHS YEAR ENDED
ENDED JUNE 30, 1996 DECEMBER 31, 1995
------------------- -----------------
Weighted average common shares
outstanding (in thousands) 5,564 14,469
Net income (loss) (in thousands) $22,137 $(10,752)
Net income (loss) per share $3.98 $(.74)
AS OF AS OF
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
Total shareholders' equity (deficit) $(23,631) $(25,675)
(in thousands)
See Item 9, "Market Price Of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters" for additional Information on the outstanding
shares of the Company's common stock.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW.
The Company's operating results depend primarily upon income from
the rental of its retail, office, industrial, and residential properties.
This income is substantially influenced by the demand for the Company's
rental space in the Kansas City metropolitan area and, to a lesser degree,
the Des Moines, Iowa metropolitan area. The ability of the Company to
increase its rental income is dependent upon its ability to increase either
or both of its occupancy rates and rental rates, control expenses on its
existing properties, and to acquire or develop additional rental properties.
The Company's operating results are also dependent on the demand
for lots in its residential subdivisions. Demand for these lots is
influenced by a number of factors, including population growth in the Kansas
City metropolitan area, availability of existing housing stock, interest
rates, tax rates, and the number and financial health of home builders in the
area.
The Company's primary markets in the Midwest have continued to
offer strong and stable local economies. Management believes this will
continue and the markets will offer attractive new acquisition and
development opportunities because of their central location, established
business and industrial base, skilled work force, and moderate labor cost.
In 1995, the occupancy rate for the Company's retail properties was
97%, 92% for its Plaza office properties and 83% for its suburban office
properties (the lower percentage being due principally to one vacant
property), 96% for its industrial properties, and 96% for its multi-family
residential properties.
Prior to 1995, the Company typically declared and paid an annual
cash dividend of $10.00 on each share of its common stock ($.125 per share
post-split). No dividend was declared or paid on common stock in 1995 or
during the first half of 1996.
15
<PAGE>
RESULTS OF OPERATIONS
Following is a summary of the Company's sales and revenues and
costs and expenses for the three years ended December 31, 1995 and the six
months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
SALES AND REVENUES ($000)
-----------------------------------------------------
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ---------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rents $40,150 $39,787 $79,818 $74,973 $73,662
Property sales 4,289 3,352 6,047 10,694 6,094
Commissions and fees 557 631 1,459 1,862 2,483
Dividends and interest 2,050 1,879 4,806 4,053 5,989
Gains on sale of investments and
other assets 33,072 2,827 5,711 727 6,268
Other 707 404 1,464 1,904 396(1)
------- ------- ------- ------- -------
Total sales and revenues $80,825 $48,880 $99,305 $94,213 $94,892
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
COSTS AND EXPENSES ($000)
-----------------------------------------------------
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ---------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selling, general, and operating $23,023 $22,826 $46,118 $43,203 $44,115(2)
expenses
Cost of property sales 3,486 1,989 3,944 8,822 5,566
Interest 12,062 13,863 27,696 27,049 26,693
Depreciation and amortization 6,892 7,124 14,355 18,488 12,855(2)
ESOT contribution - 1,787 1,787 - -
Valuation allowances - - 2,350 39,699 -
Litigation settlement - - 19,553 - -
Net operations of property subject
to debt extinguishment - - - 1,650 5,637
-------- -------- -------- -------- -------
Total costs and expenses $45,463 $47,589 $115,803 $138,911 $94,866
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
</TABLE>
(1) Certain amounts in the "Other" line item for 1993 have been reclassified
to be consistent with the 1995 and 1994 presentation.
(2) Reflects a reclassification of $500,000 from "Selling, general, and
operating expenses" to "Depreciation and amortization" to be consistent
with the 1995 and 1994 presentation.
16
<PAGE>
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED JUNE 30, 1995
SUMMARY. Net income increased by $21.3 million from $791,000 for the six months
ended June 30, 1995 to $22.1 million for the six months ended June 30, 1996,
primarily as a result of the gains from disposition of the Company's marketable
equity securities portfolio.
RENTS. Rental income increased by $363,000 (.9%) to $40.2 million for the six
months ended June 30, 1996. This increase occurred even though one of the
Company's larger office buildings was substantially vacant during the six months
ended June 30, 1996 while the Company made significant tenant improvements for a
new tenant that is now leasing all of the vacant space. This vacancy resulted
in a $1.4 million reduction in rental income for the six months ended June 30,
1996, compared to the six months ended June 30, 1995. During the six months
ended June 30, 1996, the Company collected approximately $700,000 in rents from
apartment properties obtained in the Settlement Agreement. The remainder of the
$1.1 million increase over the six months ended June 30, 1995 is due to $400,000
of certain nonrecurring items and $700,000 in improved base rents.
PROPERTY SALES. Property sales primarily represent sales of residential lots in
subdivisions developed by the Company, sales of condominiums in the Alameda
Towers project, and sales of villas in the Corinth Place Villas project.
Property sales increased by $937,000 (28.0%) to $4.3 million for the six months
ended June 30, 1996 and included lot sales of $1.1 million, condominium sales of
$2.6 million, and villa sales of approximately $600,000. Property sales of $3.4
million for the six months ended June 30, 1995 included $1.8 million of lot
sales and condominium sales of $1.6 million.
DIVIDENDS AND INTEREST. Dividends are received on marketable equity securities
held by the Company for investment purposes. Interest income is received on the
Company's cash balances held in banks and on notes receivable. Interest income
fluctuates with interest rates, the level of the Company's excess cash, and the
level of notes receivable. Despite the sale by the Company of its entire
portfolio of marketable equity securities, the amount of dividends and interest
received by the Company in the six-month period ended June 30, 1996 increased
over the six-month period ended June 30, 1995 because the proceeds from such
sales were invested in interest-earning assets.
GAINS ON SALES OF INVESTMENTS AND OTHER ASSETS. Gains on sales of investments
and other assets represent gains associated with the sales of revenue producing
properties, property held for future development, marketable equity securities,
and other assets used in the business. The magnitude of these gains fluctuates
with the volume of asset dispositions and the magnitude of the difference
between sales proceeds and carrying value. In early 1996, the Company
liquidated for $38.6 million its entire investment in marketable equity
securities held at December 31, 1995, recognizing a pre-tax gain of
approximately $33.0 million.
SELLING, GENERAL, AND OPERATING EXPENSES. Selling, general, and operating
expenses (S, G & O) represent the expenses directly associated with operating
the Company's real estate assets and expenses that are considered to be
overhead. These expenses increased by $197,000 (.9%) to $23.0 million for the
six months ended June 30, 1996, principally due to $1.4 million in costs
incurred to secure a new management team (including stock options) and $311,000
of operating expenses related to the apartment properties obtained in the
Settlement Agreement as discussed above. These increases were partially offset
by a decline of approximately $900,000 in operating expenses related to the
discontinued Bay Plaza project and a decline in legal and professional fees. S,
G & O for the six months ended June 30, 1995, included significant legal and
professional fees related to the litigation that resulted in the Settlement
Agreement.
COST OF PROPERTY SALES. Cost of property sales represents the Company's cost
basis in residential lots, condominium units, and villas sold during the year.
The cost of property sales is a function of the number of lots, condominium
units, and villas sold and their underlying cost basis. Cost of property sales
increased by $1.5 million (75.3%) for the six months ended June 30, 1996 from
$2.0 million to $3.5 million. Of this
17
<PAGE>
$1.5 million increase, the cost of condominium sales increased by $1.4
million, the cost of lots sold decreased by approximately $500,000, and the
cost of villa sales increased by approximately $600,000. The gross margin
percentage on lot sales was 41% for the six months ended June 30, 1996, as
compared to 32% for the six months ended June 30, 1995. The increase in gross
margin percentage on lot sales for the six months ended June 30, 1996
resulted from a change in sales mix, as sales for the six months ended June
30, 1996 contained a larger percentage of sales from higher margin
subdivisions. The gross margin percentage on condominium sales was 13% for
the six months ended June 30, 1996, as compared to 50% for the six months
ended June 30, 1995. The decrease in gross margin percentage on condominium
sales for the six months ended June 30, 1996, resulted from the Company
incurring more finishing cost on condominium sales in the six months ended
June 30, 1996, than in the six months ended June 30, 1995. The gross margin
percentage on villa sales in 1996 was less than 5%.
INTEREST EXPENSE. Fluctuations in interest expense occur due to the level of
the Company's interest bearing indebtedness and the effect changes in interest
rates have on the Company's variable rate indebtedness. Interest expense
declined by $1.8 million (13.0%) to $12.1 million for the six months ended June
30, 1996. The primary reason for this decline is a decrease of approximately $1
million related to a mortgage note that was restructured as discussed in Note 9
to the Company's 1995 consolidated financial statements and the payoff of
certain notes and mortgages during the six months ended June 30, 1996.
DEPRECIATION AND AMORTIZATION. Depreciation of the Company's revenue producing
properties is computed using the straight-line method over the estimated useful
lives of the assets, generally seven to thirty-one years. Depreciation expense
fluctuates to some degree as properties are bought and sold. In addition,
certain financing charges and certain lease related costs are amortized over the
term of the associated loan or lease as applicable. The Company experienced no
significant change in depreciation and amortization for the six months ended
June 30, 1996 as compared to the six months ended June 30, 1995.
EMPLOYEE STOCK OWNERSHIP TRUST CONTRIBUTION. The Company maintains an ESOT to
which it has the right to make annual contributions in amounts determined by the
Board of Directors. The Company made no contributions during the first six
months of 1996.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
SUMMARY. Net loss after extraordinary items decreased by $3.7 million from
$14.5 million to $10.8 million principally due to increased rental income and
gains on sale of investments and other assets, decreased depreciation and
amortization expense, and decreased valuation allowances. These reductions to
net loss were partially offset by increased selling, general, and operating
expenses and litigation settlement expenses, and the reduction in extraordinary
gain.
RENTS. Rental income increased by $4.8 million (6.5%) to $79.8 million in 1995
due principally to increases in the occupancy and rental rates for the Company's
retail properties and increased rental income of approximately $2.2 million
associated with having a full year of operations in 1995 for an office property
that was acquired in late 1994. Retail occupancy increased from 88% in 1994 to
97% in 1995, while office occupancy rates declined slightly to 89% in 1995 from
90% in 1994. The Company's rental income from apartments increased by 5.1% in
1995 to $18.6 million from $17.7 million in 1994. Contingent rental income, or
percentage rents, remained flat from 1995 to 1994 at approximately $4.2 million.
PROPERTY SALES. Property sales decreased by $4.6 million (43.5%) to $6.0
million in 1995. Property sales of $6.0 million in 1995 included lot sales of
$3.5 million and condominium sales of $2.5 million. Property sales of $10.7
million in 1994 included lot sales of $4.6 million, condominium sales of $5.6
million, and villa sales of approximately $500,000.
18
<PAGE>
SELLING, GENERAL, AND OPERATING EXPENSES. Selling, general, and operating
expenses (S, G & O) increased by $2.9 million (6.7%) from $43.2 million in 1994
to $46.1 million in 1995 due principally to a refund of property taxes of
approximately $800,000 received in 1994 and credited against S, G & O, legal and
professional fees of approximately $500,000 incurred in 1995 during the
transition of management and the board of directors, and additional operating
expenses associated with the growth in the portfolio of revenue producing
properties.
COST OF PROPERTY SALES. Cost of property sales decreased by $4.9 million
(55.3%) from $8.8 million in 1994 to $3.9 million in 1995. Of this $4.9 million
decrease, the cost of condominium sales decreased by $3.4 million, the cost of
lots sold decreased by approximately $800,000, and the cost of villa sales
decreased by approximately $700,000. The gross margin percentage on lot sales
was 33% in 1995 as compared to 31% in 1994. The gross margin percentage on
condominium sales was 37% in 1995 as compared to 11% in 1994. The increase in
gross margin percentage on condominium sales in 1995 resulted from the Company
incurring less finishing cost on condominium sales in 1995 than in 1994.
DEPRECIATION AND AMORTIZATION. In 1995, depreciation and amortization declined
by $4.1 million (22.4%) to $14.4 million principally due to a special one time
expense in 1994 of approximately $4.0 million for accelerated depreciation
related to tenant improvements.
EMPLOYEE STOCK OWNERSHIP TRUST CONTRIBUTION. In 1995, the Company contributed
1,375 shares (or 110,000 post-split shares) of the Company's common stock valued
at $1.8 million to the ESOT. The Company made no contributions to the ESOT
during 1994.
VALUATION ALLOWANCES. The Company's assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset
is in excess of its net realizable value. If the carrying value of an asset is
determined, in the opinion of management, to be in excess of its net realizable
value, a charge to expense is recognized in the form of a valuation allowance.
In 1994, the Company recorded a charge of $39.7 million resulting
from valuation allowances, principally due to a reduction in carrying value
of $23.8 million on the Company's Bay Plaza project, $6.0 million on various
notes and accounts receivable of the Company, and $4.6 million on the
Company's Alameda Towers condominium project. The Company recorded a charge
of $2.3 million in valuation allowances in 1995 principally due to further
reductions in carrying value of the Bay Plaza project and various notes and
accounts receivable not related to Bay Plaza.
The Company's development activities on the Bay Plaza Project have
ceased, and its carrying value net of liabilities was reduced to zero at
December 31, 1995. The Company plans to dispose of all Bay Plaza properties
as soon as practical. The various notes and accounts receivable for which
the Company's carrying value was reduced were related principally to business
activities in which the Company is no longer actively involved. The 1994
valuation allowance related to the Company's Alameda Towers condominium
project reflects the write-off of the costs associated with Phase II of the
project, which has been postponed indefinitely.
LITIGATION SETTLEMENT. In 1995, the Company recorded a one time charge of $19.6
million as "Litigation Settlement" in its consolidated statement of operations
as a result of the Settlement Agreement. The circumstances leading to and the
impact of the Settlement Agreement are described in Note 16
"Litigation and Settlements"of the Company's 1995 consolidated financial
statements.
NET OPERATIONS OF PROPERTY SUBJECT TO DEBT EXTINGUISHMENT. On February 22,
1994, a lender foreclosed on a hotel owned by a venture in which the Company
owned a 99% interest. Because of the non-recourse nature of the debt, the
Company was released from its obligations and, as a result, recognized a gain in
1994 of approximately $29.1 million. See "Extraordinary item" below. Operating
expenses relating to the hotel
19
<PAGE>
property of $1.7 million in 1994 were reclassified and included in the
Company's consolidated statement of operations as "Net operations of property
subject to debt extinguishment."
EXTRAORDINARY ITEM. The company recorded an extraordinary item gain of $29.1
million in 1994. This gain stemmed from a lender's foreclosure on non-recourse
debt secured by a hotel property owned by Kantel L.P., a 99%-owned joint venture
(the "Venture") of the Company and an affiliate of the Ritz-Carlton Hotel
Company ("Ritz").
In 1989, the Company borrowed $70.0 million on a non-recourse basis
using the assets of the hotel as collateral. The hotel did not meet expected
operating results or cash flows, and the Venture was unable to meet its
obligations under the debt and lease agreements.
On February 22, 1994, the lender foreclosed on the hotel, and the
Company was released from its obligations under the non-recourse debt. In
addition to being released from obligations for the principal balance,
interest payable aggregating $14.1 million had been accrued and was included
in the release. As a result of this release, the Company recognized, as an
extraordinary item, a gain of approximately $29.1 million on extinguishment
of debt ($38.3 million net of $9.2 million of income taxes).
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
SUMMARY. The net loss after extraordinary item of $14.5 million in 1994 as
compared to net income of $510,000 in 1993 is primarily the result of increased
depreciation and amortization expense and valuation allowances, and decreased
gains on sales of investments and other assets, partially offset by the
extraordinary gain in 1994.
RENTS. Rental income increased by $1.3 million (1.8%) in 1994 to $75.0 million
due to improved base rents in both the retail and office divisions and an
increase in contingent rental income to $4.2 million from $3.9 million (7.7%).
Despite the sale of two apartment complexes that resulted in a rental income
reduction of $700,000 in 1994, apartment rental income only declined to $17.7
million in 1994 from $17.8 million in 1993.
PROPERTY SALES. In 1994, total property sales increased by $4.6 million (75.5%)
to $10.7 million, including lot sales of $4.6 million, condominium sales of $5.6
million, and villa sales of approximately $500,000. Property sales of $6.1
million in 1993 included lot sales of $3.4 million, condominium sales of $2.6
million, and villa sales of approximately $80,000.
SELLING, GENERAL, AND OPERATING EXPENSES. Selling, general, and operating
expenses (S, G & O) decreased by $912,000 from $44.1 million in 1993 to $43.2
million in 1994 due principally to a refund of property taxes of approximately
$800,000 which was received in 1994 and credited against S, G & O.
COST OF PROPERTY SALES. Cost of property sales increased by $3.2 million
(58.5%) in 1994 from $5.6 million to $8.8 million. Of this $3.2 million
increase, the Company's cost of condominium sales increased by $2.0 million, its
cost of lots sold increased by $600,000, and its cost of villa sales increased
by approximately $600,000. The gross margin percentage on lot sales was 31% in
1994 as compared to 28% in 1993. The increase in gross margin percentage on lot
sales in 1994 resulted from a change in sales mix, as 1994 sales contained a
larger percentage of sales from higher margin subdivisions. The gross margin
percentage on condominium sales was 11% in 1994 as compared to (16%) in 1993.
The increase in gross margin percentage on condominium sales in 1994 resulted
from the Company incurring less finishing costs on condominium sales in 1994
than in 1993.
20
<PAGE>
DEPRECIATION AND AMORTIZATION. In 1994, depreciation and amortization increased
by $5.6 million (43.8%) to $18.5 million principally due to a special one time
charge in 1994 of approximately $4.0 million for accelerated depreciation
expense for tenant improvements.
VALUATION ALLOWANCES. In 1994, the Company recorded a charge of $39.7 million
related to valuation allowances, principally due to a reduction in carrying
value of $23.8 million recognized on the Company's Bay Plaza project, $6.0
million on various notes and accounts receivable of the Company, and $4.6
million on the Company's Alameda Towers condominium project. There were no
valuation allowances recorded in 1993.
NET OPERATIONS OF PROPERTY SUBJECT TO DEBT EXTINGUISHMENT. On February 22,
1994, a lender foreclosed on a hotel owned by a venture in which the Company
owned a 99% interest. Because of the non-recourse nature of the debt, the
Company was released from its obligations and recognized a gain in 1994 of
approximately $38.3 million. See "Extraordinary item" above. Operating
expenses relating to the hotel property of $1.7 million in 1994 and $5.6 million
in 1993 were reclassified and are included as "Net operations of property
subject to debt extinguishment."
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, permanent mortgage
financing, and short term notes payable to banks represent the Company's
primary sources of liquidity to fund recurring capital costs associated with
renovating and renewing leases of the Company's properties, payments on the
Company's outstanding indebtedness, and distributions to shareholders. In
January 1996, the Company replaced its previous lines of credit with a $10
million unsecured line of credit bearing interest at the prime rate. At June
30, 1996, there were no outstanding borrowings on this line of credit.
Management anticipates that cash generated before debt payments and
capital expenditures, together with the bank line of credit, will provide
adequate liquidity to conduct the Company's operations, fund its recurring
capital costs and interest expense, and permit normal amortization payments
on outstanding indebtedness.
In addition to recurring capital expenditures, management estimated
at the end of 1995 that the Company should plan to expend approximately $15
million for "deferred maintenance" items over the next five years in order to
maintain and restore the Company's properties to the condition and quality
standards established by management.
At June 30, 1996, the total of the Company's consolidated interest
bearing debt was $312.8 million. Such amount, with certain exceptions
discussed below, bears interest at rates ranging from 4% to 10.5%. Of the
Company's consolidated debt at that date, $2.0 million was a note payable to
the ESOT and $310.8 million was mortgage indebtedness. Approximately $288.8
million of the Company's $310.8 million of mortgage indebtedness at June 30,
1996, was non-recourse to the Company. By including the Company's percentage
interest in the indebtedness of unconsolidated subsidiaries and excluding the
minority interest percentage in the indebtedness of consolidated subsidiaries
of the Company, the interest-bearing debt of the Company at June 30, 1996
would be $315.5 million.
Of the Company's $312.8 million in consolidated debt at June 30,
1996, approximately $220 million accrued interest at fixed rates and $92.8
million was floating rate debt of various types. Interest expense of the
Company in future periods may be expected to fluctuate with short term
interest rates.
As discussed in Note 9 to the Company's 1995 consolidated financial
statements, the Company has restructured two significant debt agreements. At
June 30, 1996, the Company has classified as mortgage indebtedness
approximately $11.2 million in debt that will be forgiven if the Company
complies with certain
21
<PAGE>
conditions established by the lenders. This treatment is in compliance with
Generally Accepted Accounting Principles (GAAP) as the sum of the future
undiscounted debt service payments exceeded the face value of the debt
obligations at the time of the restructurings. The $11.2 million in forgiven
debt will be amortized into income over the life of the mortgages through
monthly credits to interest expense. This amortization reduces the effective
rate to the Company on restructured debt to approximately 3% for financial
statement purposes.
Also, as discussed in Note 9 to the Company's 1995 consolidated
financial statements, certain agreements to which the Company is a party
provide for a 50% sharing of positive and negative cash flows from operations
and certain capital expenditures. Interest expense recognized for such
sharing arrangements was $479,000 and $709,000 for 1995 and 1994,
respectively, and was $582,000 for the six months ended June 30, 1996. In
addition, at June 30, 1996, mortgage indebtedness includes a non-interest
bearing preference item of $4.0 million related to these agreements. The
Company's liability is contingent upon certain conditions being met upon the
sale or refinancing of the mortgaged properties.
At December 31, 1995, the Company's consolidated interest bearing
debt of $332.0 million was equal to approximately 67% of management's
estimated value of the Company's real estate assets as of that date. Through
June 30, 1996, consolidated interest bearing debt has been reduced to $312.8
million. Management intends, over a substantial period of time, to continue
to reduce the amount of indebtedness in relation to the fair value of its
existing real estate assets to approximately 50%.
On June 30, 1996, the ESOT held 825,280 shares of the Company's
common stock. As a part of the Settlement Agreement referred to in Item 8
below, the Company has committed to convey from its treasury an additional
680,000 shares (8,500 shares pre-split) of its common stock to the ESOT.
Until such time as shares distributed by the ESOT to its beneficiaries can be
readily traded on an established securities market, the Company is obligated
to repurchase such shares for a specified period of time at a price
determined by a qualified appraiser. The most recent appraisal of the common
stock held by the ESOT was made as of December 31, 1995, and established a
price of $28.75 per share.
An unusually large percentage of ESOT beneficiaries may have the
right to receive a distribution of their interest in the ESOT over a two year
period beginning in 1996. Such beneficiaries currently have a right to
request that their interest be distributed in cash. The ESOT does not have
sufficient cash to satisfy all such potential requests. The Company may loan
to the ESOT an amount to permit the ESOT to meet its 1996 obligations, which
may be up to $2.4 million, without selling shares of the common stock of the
Company now held by the ESOT. The Company may have to loan additional funds
to the ESOT in future years. For instance, if the common stock of the
Company is not readily tradable on an established securities market, the
ESOT's 1997 obligation could be $2.9 million. ESOT obligations after 1997
should be lower. All such loans are unsecured and are non-interest bearing.
The Company expects such loans to be repaid in full.
Management is taking actions, including the filing of this
Registration Statement, to attempt to develop a liquid market for shares of
the Company's common stock. However, it can give no assurance that such a
market will develop. In the absence of a liquid market, the Company's
obligation to repurchase approximately 1.5 million shares of its common stock
that will in the future be distributed to beneficiaries of the ESOT could
constrain the Company's liquidity. Given expected retirement trends,
management expects it can meet anticipated stock repurchase requirements with
funds generated from operations or additional borrowings.
22
<PAGE>
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED JUNE 30, 1995
Net cash provided by operating activities increased by approximately
$600,000 to $15.1 million for the six months ended June 30, 1996. The primary
reasons for such increase are discussed above under "Results of Operations."
Net cash provided by investing activities increased by $12.0 million to
$13.5 million for the six months ended June 30, 1996. This increase in net cash
provided by investing activities was due primarily to the liquidation of the
Company's marketable equity securities portfolio, which was partially offset by
the Company's purchase of temporary investments.
Net cash used by financing activities increased by $14.6 million to $19.2
million for the six months ended June 30, 1996. The principal use of cash in
financing activities for the six months ended June 30, 1996 and 1995 was for
payments on mortgage and notes payable indebtedness of $23.4 million and $6.7
million, respectively. Of the $23.4 million in payments on mortgage and notes
payable indebtedness during the six months ended June 30, 1996, approximately
$16.6 million represents pay-off or significant pay-down of indebtedness outside
of normal principal amortization.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Net cash provided by operating activities increased by $16.7 million to
$22.0 million in 1995. The primary reasons for such increase are discussed
above under "Results of Operations." Additionally, the timing of income tax
payments and refunds relating to the Company's $38 million extraordinary gain on
extinguishment of debt and nonrecurring losses, made net cash provided by
operating activities higher in 1995 as compared to 1994.
Net cash used in investing activities increased by approximately $1.5
million in 1995 to $1.7 million, which amount was principally a result of
issuing an additional $6.2 million of notes receivable, investing $7.9 million
for additions to revenue producing properties, and purchasing $3.0 million of
marketable equity securities. These investments were substantially offset by
the receipt of $6.9 million of payments on notes receivable, sales of capital
assets of $5.3 million, and the maturing of marketable securities of $2.4
million. In 1994, the Company's net cash used in investing activities of
approximately $230,000 was principally a result of issuing an additional $19.5
million of notes receivable and investing $11.9 million for additions to revenue
producing properties. These investments were substantially offset by the
receipt of $18.9 million of payments on notes receivable, sales of capital
assets of $4.0 million, and a decrease of $7.9 million in the Company's
temporary investments.
Net cash used by financing activities increased by approximately $5.8
million in 1995 to $27.3 million. The principal use of cash in financing
activities in 1995 and 1994 was a net reduction of mortgage and notes payable
indebtedness of $22.8 million and $18.7 million, respectively.
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
Net cash provided by operating activities decreased by $13.4 million to
$5.3 million in 1994. The primary reasons for such decrease are discussed above
under "Results of Operations." Additionally, the timing of income tax payments
and refunds relating to the Company's $38 million extraordinary gain on
extinguishment of debt and nonrecurring losses, made net cash provided by
operating activities lower in 1994 as compared to 1993.
Net cash used in investing activities decreased by $16.6 million in 1994 to
approximately $230,000, which amount was principally a result of issuing an
additional $19.5 million of notes receivable and investing
23
<PAGE>
$11.9 million for additions to revenue producing properties. These investments
were substantially offset by the receipt of $18.9 million of payments on notes
receivable, sales of capital assets of $4.0 million, and a decrease of $7.9
million in the Company's temporary investments. In 1993, the Company's net cash
used in investing activities of $16.8 million was principally a result of
issuing an additional $10.2 million of notes receivable, investing $7.0 million
for additions to revenue producing properties, investing $6.6 million in
unconsolidated affiliates, and investing an additional $12.3 million in
temporary investments. These expenditures were partially offset by receipt of
$14.0 million of payments on notes receivable and the receipt of $5.5 million
from sales of capital assets.
Net cash used by financing activities increased by approximately $20.5
million in 1994 to $21.4 million. In 1994, the net reduction of mortgages and
notes payable indebtedness was $18.7 million. In 1993, the net addition of
mortgages and notes payable indebtedness was $1.6 million.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION
It is management's intent, as described in Item 1 "Business--Business
Strategy," to apply the majority of the Company's operating cash flows to reduce
indebtedness and to improve and increase the Company's portfolio of revenue
producing properties. The Company is organized as a "Subchapter C" corporation
and as such pays income taxes on its taxable income and is generally not subject
to distribution requirements based on net income. Management believes that the
Company's core operations are best measured by its earnings before interest and
dividend income, interest expense, income taxes, depreciation and amortization,
gains or losses from debt restructuring and sales of assets, and valuation
allowances, and after adjustments needed to similarly convert the earnings of
minority interests and unconsolidated partnerships. Earnings, as so computed,
are referred to herein as "EBITDA". This is a supplemental performance measure
used along with net income to report operating results. EBITDA is not a measure
of operating results or cash flows from operating activities as defined by
generally accepted accounting principles. Additionally, EBITDA is not
necessarily indicative of cash available to fund operating needs and should not
be considered as an alternative to cash flow as a measure of liquidity.
However, the Company believes that EBITDA provides relevant information about
its operations and, along with net earnings (loss), facilitates understanding of
its operating results.
24
<PAGE>
Following is a summary of the Company's EBITDA for the three years ended
December 31, 1995, 1994, and 1993, and the six months ended June 30, 1996 and
1995:
EBITDA
$(000)
<TABLE>
<CAPTION>
Six Months
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------- -----------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income (loss) $22,137 $791 $(10,752) $(14,534) $510
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO EBITDA:
Interest and dividend income (2,050) (1,879) (4,806) (4,053) (5,989)
Interest expense 12,062 13,863 27,696 27,049 26,693
Income tax expense (benefit) 13,225 500 (5,746) (1,028) (484)
Depreciation and amortization 6,892 7,124 14,355 18,488 12,855
Net operations of property subject
to debt extinguishment - - - 1,650 5,637
Gain on extinguishment of debt, net of income taxes - - - (29,136) -
Gain on investments and other assets (33,072) (2,827) (5,711) (727) (6,268)
Valuation allowances - - 2,350 39,699 -
Minority interest portion of add-backs (1,378) (1,523) (3,081) (2,296) (1,968)
Unconsolidated subsidiaries' portion of add-backs 1,927 1,967 3,997 3,892 3,831
--------- --------- --------- --------- ---------
EBITDA $ 19,743 $ 18,016 $ 18,302 $ 39,004 $ 34,817
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Because of the number and size of non-recurring transactions included in
the Company's consolidated financial statements during the last three years,
management believes it is important to also present a reconciliation of the
foregoing EBITDA to "adjusted" EBITDA, as described below, which represents
EBITDA exclusive of certain non-recurring transactions. Management believes
adjusted EBITDA is more representative of the Company's underlying operations.
25
<PAGE>
Adjusted EBITDA
$(000)
Six Months
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -----------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
EBITDA $19,743 $18,016 $18,302 $39,004 $34,817
NON-RECURRING ITEMS:
Litigation settlement
expense - 2,200 19,553 - -
Costs of securing
new management
(including stock
options) 1,400 - - - -
Property tax refund, net - - - (800) -
ESOT contribution - 1,787 1,787 - -
Other, net (25) (428) (28) - -
------- ------- ------- ------- -------
Adjusted EBITDA $21,118 $21,575 $39,614 $38,204 $34,817
------- ------- ------- ------- -------
------- ------- ------- ------- -------
The above adjusted EBITDA amounts illustrate the Company's EBITDA if
certain non-recurring items had been eliminated from the Company's statements of
operations. These amounts are not necessarily indicative of future performance.
However, management does believe that, when read in conjunction with the
Company's consolidated financial statements, they assist the reader in better
understanding the Company's underlying business operations. The adjustments
made to arrive at adjusted EBITDA are explained as follows: "Litigation
settlement expense" reflects the expenses incurred by the Company in connection
with the Settlement Agreement. The $2.2 million amount reflected for the six
months ended June 30, 1995 includes legal and other professional fees incurred
by the Company that were subsequently reclassified as part of "litigation
settlement expense." The $19.6 million amount reflected for the year ended
December 31, 1995 includes the expense to the Company of implementation of
substantially all of its obligations set forth in the Settlement Agreement and
the related legal and other professional expenses. "Costs of securing new
management (including stock options)" reflects the expense to the Company in
1996 of obtaining the new members of its senior management. "Property tax
refund, net" reflects an $800,000 property tax refund received by the Company
in 1994 for excess property taxes paid under protest in prior years on Missouri
apartments owned by the Company. "ESOT contribution" reflects the contribution
by the Company to the ESOT of 1,375 shares (or 110,000 post-split) of common
stock of the Company for the six months ended June 30, 1995. The value of the
contributed shares was established at $1,300 (or $16.25 post-split), determined
as the then prevailing market price of a share of common stock of the Company.
"Other, net" for the six months ended June 30, 1996 and 1995, and for the year
ended December 31, 1995, reflects the net of other less significant, non-
recurring adjustments.
26
<PAGE>
ACCOUNTING PRINCIPLES
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of," was adopted by the
Company beginning January 1, 1996. This pronouncement requires that long-lived
assets, including real estate projects, and certain identifiable assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the entity should estimate the future cash flows
expected to result from the use of the asset and its eventual disposition. If
the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment is
recognized. Management of the Company does not believe adoption of SFAS No. 121
will have a significant impact on the Company's financial position or results of
operations.
Also, SFAS No. 123, "Accounting for Stock-Based Compensation," will require
pro forma disclosures in 1996 of net income and earnings per share as if the
accounting method based on the estimated fair value of employee stock options
had been adopted. The Company has not decided if the optional accounting
treatment allowed by SFAS No. 123 will be adopted.
SUBSEQUENT EVENTS
Since June 30, 1996, the Company has resolved certain claims both by and
against the Company that have resulted in a net current benefit to the Company
of approximately $3.7 million. That amount is subject to certain claims that
may or may not reduce materially the amount ultimately retained by the Company.
In addition, the Company recently received approximately $378,000 as a result of
a claim it filed in the National Gypsum bankruptcy proceeding now pending in the
United States Bankruptcy Court. See, Item 8, "Legal Proceedings."
ITEM 3. PROPERTIES
Management has estimated the market value of the Company's real estate
holdings, including the properties itemized below, to be approximately $494.4
million as of December 31, 1995 (including the Company's percentage interest in
the real estate holdings of consolidated and unconsolidated subsidiaries, but
exclusive of any related liabilities or potential liquidation costs). This
estimation is primarily based upon the value of these assets as an investment
and is not intended to present the current liquidation value of real estate
holdings. Such an estimation requires significant and subjective judgments to
be made by management. These estimates are based on information and assumptions
considered by management to be adequate and appropriate under the then existing
circumstances. The estimates are not based on technical appraisals and may
change from time to time as economic and market factors change, and as
management evaluates those and other factors.
27
<PAGE>
<TABLE>
<CAPTION>
LAND RENTABLE PERCENT
---- -------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
RETAIL
- ------
KANSAS CITY, MISSOURI
County Club Plaza (Retail Only,
includes basement space)
Millcreek Block Fee 100% 1920 1906-1910 0.971 51,114 100%
Triangle Block Fee 100% 1925 1906-1910 0.435 25,634 94%
Balcony Block Fee 100% 1925 1906-1910 1.068 38,571 100%
Macy Building Fee 100% 1926 1906-1910 0.555 71,365 85%
Esplanade Block Fee 100% 1928 1906-1910 1.838 145,694 100%
Plaza Central Fee 100% 1958 1906-1910 1.478 9,653 100%
Theatre Block Fee 100% 1928 1906-1910 1.223 99,699 96%
Swanson Block Fee 100% 1967 1906-1910 1.373 78,020 100%
Halls Building Fee 100% 1964 1906-1910 1.346 73,680 100%
Nichols Block Fee 100% 1930 1906-1910 1.161 59,085 100%
Time Block Fee 100% 1929 1906-1910 2.8592 49,844 97%
48th & Penn Fee 100% 1948 1906-1910 0.560 37,654 92%
Seville Shops West Fee 100% 1980 1906-1910 2.972 19,517 100%
Plaza Savings South Fee 100% 1948 1906-1910 0.853 39,967 100%
Court of the Penguins Fee 100% 1945 1975 0.678 28,707 100%
Seville Square Fee 100% 1945 1975 0.832 70.426 94%
Colonial Shops Fee 100% 1907 1907 0.517 14,160 100%
Crestwood Shops Fee 100% 1932 1923 1.079 20,261 100%
Brookside Shops (Retail Only) Fee 100% 1919 1920 10.000 159,254 100%
Romanelli Shops Fee 100% 1925 1925 1.500 24,360 100%
Red Bridge Shops (Retail Only) Fee 100% 1959 1959 21.592 153,015 97%
Romanelli Annex (Retail Only) Fee 100% 1963 1993 1.000 4,500 100%
GRANDVIEW, MISSOURI
Grandview Shops Fee 100% 1987 1987 2.623 34,140 97%
SHAWNEE MISSION, KANSAS
Westwood Shops Fee 100% 1926 1926 0.626 5,773 100%
Fairway Shops Fee 100% 1940 1940 3.558 49,582 100%
Prairie Village Shops (Retail Only) Fee 100% 1948 1948 21.375 363,311 100%
Corinth Square Shops Fee 100% 1962 1955 24.987 231,550 100%
95th & Mission Shops Fee 100% 1965 1972 1.788 13,136 82%
Corinth Shops South Fee 100% 1953 1953 6.880 86,390 100%
Trailwood Shops Fee 100% 1968 1972 8.855 57,583 100%
Trailwood III Shops Fee 100% 1986 1972 2.946 25,279 90%
96th & Nall Shops Fee 100% 1976 1981 1.027 7,202 100%
Shannon Valley Shops Fee 100% 1988 1988 11.378 98,127 98%
Oak Park Mall Land Lease Fee 100% 1959 1959 109.000 N/A 100%
Georgetown Market Place Fee 100% 1974 1965 12.191 101,613 95%
28
<PAGE>
LAND RENTABLE PERCENT
---- -------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OLATHE, KANSAS
119th Plaza Fee 100% 1994 1992 7.261 47,623 100%
INDUSTRIAL
- ----------
KANSAS CITY, MISSOURI
Bannister Business Center Fee 100% 1985 1985 4.365 32,346 96%
Surface Warehouse I Fee 100% 1973 1973 1.740 20,848 100%
Surface Warehouse II Fee 100% 1975 1975 1.740 21,042 100%
SHAWNEE MISSION, KANSAS
Quivira Business Park
Building A Fee 100% 1975 1973 1.695 20,848 100%
Building B Fee 100% 1973 1973 2.064 12,960 100%
Building C Fee 100% 1973 1973 1.589 20,778 100%
Building D Fee 100% 1973 1973 1.597 20,798 100%
Building E Fee 100% 1973 1973 2.156 28,797 100%
Building F Fee 100% 1973 1973 2.346 29,876 100%
Building G Fee 100% 1973 1973 1.913 21,136 100%
Building H Fee 100% 1973 1973 2.485 26,060 100%
Southwestern Bell Fee 100% 1973 1973 3.127 58,644 100%
Building J Fee 100% 1973 1973 2.953 46,764 100%
Building K Fee 100% 1985 1965 1.179 9,017 100%
Building L Fee 100% 1985 1965 1.223 8,891 100%
URBANDALE, IOWA
Meredith Drive Fee 49.5% (1) 1986 1985 13.910 200,000 100%
OFFICE
- ------
KANSAS CITY, MISSOURI
Country Club Plaza (Office Only)
Millcreek Block Fee 100% 1925 1925 N/A 11,463(2) 90%
Balcony Block Fee 100% 1928 1928 N/A 10,096(2) 97%
Esplanade Block Fee 100% 1945 1945 N/A 37,133(2) 94%
Theatre Block Fee 100% 1928 1928 N/A 29,740(2) 100%
Nichols Block Fee 100% 1938 1938 N/A 13,310(2) 100%
Time Block Fee 100% 1945 1945 N/A 25,964(2) 100%
Seville Square Fee 100% 1962 1962 N/A 20,412(2) 100%
Parkway Building Fee 100% 1906-1910 1955 0.588 26,365(2) 96%
Brookside (Office Only) Fee 100% 1919 1919 N/A 6,796(2) 100%
Romanelli Annex (Office Only) Fee 100% 1963 1993 N/A 7,948 89%
Two Brush Creek Fee 100% 1983 1983 1.500 63,325 96%
One Ward Parkway Fee 100% 1980 1980 1.500 54,580(2) 100%
Red Bridge Professional Fee 100% 1972 1976 1.428 40,693(2) 96%
Park Plaza Fee 100% 1983 1983 0.952 80,315 86%
4900 Main Fee 100% 1986 1985 5.000 182,153 100%
Board of Trade Fee 49% (1) 1966 1966 3.000 147,642(2) 84%
29
<PAGE>
LAND RENTABLE PERCENT
---- --------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Park Central Fee 51% (1) 1988-1990 1994 1.500 110,413 96%
Park Central II Fee 51% (1) 1994 1994 2.500 37,718 100%
Plaza West Fee 12.5%(1) 1988 1989 3.000 257,932 84%
SHAWNEE MISSION, KANSAS
Prairie Village (Office Only) Fee 100% 1956 1956 1.500 9,265(2) 92%
Corinth Office Building Fee 100% 1960 1984 2.142 45,600(2) 88%
Corinth Executive Building Fee 100% 1973 1986 3.638 44,441(2) 96%
Nichols Building Fee 100% 1978 1979 3.941 37,964(2) 86%
Prairie Village Office Center Fee 100% 1960 1981 4.443 69,002(2) 87%
Brymar Building Fee 100% 1968 1984 1.500 55,890 0%
Hartford Fee 100% 1978 1975 4.322 44,441(2) 100%
Fairway West Fee 100% (3) 1983 1948 5.483 67,519 98%
Fairway North Fee 100% (3) 1985 1948 4.141 61,225 96%
Oak Park National Bank Fee 100% 1976 1978 4.038 28,555(2) 97%
DES MOINES, IOWA
Terrace Place Fee 50% (1) 1987 1987 1.500 51,058 81%
WEST DES MOINES, IOWA
Crestwood Building Fee 90% (1) 1987 1987 3.208 29,967 93%
Highland Building Fee 90% (1) 1987 1987 6.120 72,637 76%
Waterford Building Fee 60% (1) 1990 1988 4.414 51,793 100%
Edgewater Fee 60% (1) 1989 1988 8.629 102,400 93%
Veridian Fee 60% (1) 1989 1988 7.480 78,116 90%
Sunset Building Fee 60% (1) 1989 1988 1.763 10,727 100%
Norwest Day Care Center Fee 50% (1) 1994 1994 1.030 6,500 100%
Wedgewood Building Fee 50% (1) 1994 1994 5.170 51,400 85%
Coronado Building Fee 50% (1) 1994 1994 2.500 25,512 31%
Ashford Building I Fee 50% (1) 1993 1993 3.990 41,400 100%
Bristol Building I Fee 50% (1) 1992 1992 5.210 51,400 99%
Ashford Building II Fee 50% (1) 1994 1994 4.110 41,400 100%
Augusta Building I Fee 50% (1) 1994 1994 4.930 50,800 73%
Neptune Building Fee 85% (1) 1986 1986 6.530 61,430 98%
Norwest Card Services Building Fee 50% (1) 1993 1993 35.250 272,490 100%
APARTMENTS
- ----------
KANSAS CITY, MISSOURI
Coach House South Fee 100% (3) 1986-1987 1986-1987 35.276 489 units 100%
Wornall Road Fee 100% 1918 1968 0.220 17 units 100%
Coach House Fee 100% (3) 1984 1984 8.930 160 units 99%
Coach Lamp Fee 100% 1961 1962 8.500 158 units 98%
Saint Charles Fee 100% 1922 1971 0.150 12 units 100%
Alta Loma Fee 100% 1918 1983 0.210 18 units 100%
Biscayne Towers Fee 100% 1918 1975 0.200 24 units 100%
Santa Ana Fee 100% 1960's 1987 0.160 11 units 100%
30
<PAGE>
LAND RENTABLE PERCENT
---- --------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Valencia Fee 100% 1918 1983 0.320 19 units 100%
La Solana Fee 100% 1918 1986 0.210 18 units 100%
Neptune Fee 100% 1988 1988 N/A 96 units 96%
Regency Fee 100% 1960 1976 1.150 131 units 99%
Sulgrave Fee 100% 1967 1976 1.410 144 units 99%
Park Lane Fee 100% 1924 1975 0.300 89 units 100%
Penn Wick Fee 100% 1960's 1987 0.150 6 units 100%
Cole Gardens Fee 100% 1960 1986 0.200 8 units 100%
Tama Fee 100% 1960's 1979 0.140 6 units 100%
Wornall Point Fee 100% 1950 1987 0.200 24 units 92%
SHAWNEE MISSION, KANSAS
Corinth Gardens Fee 100% 1961 1995 3.722 52 units 100%
Kenilworth Fee 100% 1965 1972 17.219 246 units 98%
Corinth Place Fee 100% (3) 1987 1987 7.888 76 units 96%
Mission Valley Fee 100% 1964 1972 5.300 89 units 97%
Corinth Paddock Fee 100% 1973 1995 10.128 126 units 98%
JOHNSTON, IOWA
Winwood Apartments Fee 65% (1) 1986-1987 1985 31.237 418 units 92%
REAL ESTATE LOTS
- ----------------
AND MISCELLANEOUS
- -----------------
SHAWNEE MISSION, KANSAS
Whitehorse (Residential) Fee 100% 1994 1983 29.444 N/A N/A
Whitehorse (unplatted) Fee 100% N/A 1984 16.598 N/A N/A
Whitehorse (Commercial and Multifamily) Fee 100% N/A 1983 26.600 N/A N/A
Green Meadows Fee 100% 1986-1995 1984 20.670 N/A N/A
Green Meadows (unplatted) Fee 100% N/A 1983 83.000 N/A N/A
LionsGate (Residential-under contract) Fee 100% N/A 1989 569.000 N/A N/A
Lions Gate (Commercial) Fee 100% N/A 1989 88.000 N/A N/A
Woodsonia (Commercial and Residential) Fee 100% 1985-1994 1981 401.360 N/A N/A
Waterford (1 lot) Fee 100% 1985-1994 1983 0.480 N/A N/A
KANSAS CITY, MISSOURI
Alameda Towers (Condominiums) Fee 100% 1988-1995 1988 18 Units N/A N/A
54 Rental Houses Fee 100% N/A 1928-1989 10.800 N/A 95%
Vacant Commercial Land and Fee 100% 1974 1954-1972 49.400 N/A 100%
Land Leases (See exhibit F-8.1
for detail)
Building Lease
(see exhibit F-8.1
for detail) Fee 100% N/A 9129 2.928 1,200 100%
RAYMORE, MISSOURI
Ridgway Drive - 9 Duplexes Fee 100% 1985 1990 2.000 N/A 89%
LEE'S SUMMIT, MISSOURI
Lakewood Sales Office Fee 100% 1975 1993 8.738 1,363 100%
31
<PAGE>
LAND RENTABLE PERCENT
---- -------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS
Vacant Commercial Land and
Land Leases (See exhibit
F-8.1 for detail) Fee 100% 1956-1972 1956-1972 238.000 N/A 100%
Corinth Place Villas Fee 100% 1989 1957 0.400 N/A 100%
9 rental condominiums)
Farm Houses and Buildings Fee 100% 1940 1981-1983 N/A N/A N/A
OLATHE, KANSAS
Land Leases (See Exhibit F-8.1
for detail) Fee 100% 1960 1995 1.070 N/A 100%
OSAGE CITY, KANSAS
Manufactured Homes Plant Fee 100% (4) 1985 1985 29.800 N/A 100%
SAN FRANCISCO, CALIFORNIA
Raphael Hotel of San Francisco Leasehold 100% 1908 1971 1.000 152 rooms N/A
STONE COUNTY, MISSOURI
Ozark Mountain Village Lots Fee 100% 1986-1995 1986 60.000 N/A N/A
MIAMI COUNTY, KANSAS
810 Acre Farm (Someday, Inc.) Fee 100% N/A 1994 810.000 N/A 100%
Vacant Land Fee 100% N/A 1983 33.000 N/A N/A
DES MOINES, IOWA
Vacant Commercial Land Fee 50% (1) NA 1984-1985 98.000 N/A N/A
Vacant Commercial Land Fee 49.5% (1) N/A 1985 13.000 N/A N/A
SANTA FE, NEW MEXICO
Sun Mountain Village Partners Fee 44.1% (1) 1986 1986 6.000 74 lots N/A
ST. PETERSBURG, FLORIDA
Bay Plaza Shops Fee 100% 1992 1990 5.211 N/A N/A
Tropicana Fee 100% 1914 1992 1.000 39,690 95%
Women's Tennis Association Fee 50% (1) 1990 1990 0.750 13,367 96%
South Core Parking Garage Fee 50% (1) 1991 1991 1.520 132,343 0%
</TABLE>
(1) The indicated percentage interest in the property reflects the
interest of the Company in the entity that owns the property.
(2) This square footage represents useable rather than rentable square
footage.
(3) The Company shares 50% of the cash flow from this property with an
outside entity providing credit enhancement support related to the
financing of such property.
(4) The Company owns a 99% profit sharing interest and a 100% loss sharing
interest in the partnership that owns this facility.
32
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
MANAGEMENT
The information set forth below does not reflect the impact of
the future conveyance by the Company of the 680,000 shares of the Company's
common stock to be conveyed to the ESOT or beneficiaries of the ESOT. See Item
2, "Financial Information - Selected Financial Information."
TABLE A - BENEFICIAL OWNERSHIP OF THOSE OWNING MORE THAN FIVE PERCENT OF THE
OUTSTANDING SHARES OF THE COMPANY(a)
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNER ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cede & Co. Cede & Co.
P.O. Box 20
Bowling Green Station
New York, NY 10274 1,258,349(b) 25.9%
- --------------------------------------------------------------------------------------------
AHI Metnall, L.P. AHI Metnall, L.P.
c/o Allen & Company
Incorporated
Attn: James W. Quinn
711 Fifth Avenue
New York, NY 10022 948,880(c) 19.6%
- --------------------------------------------------------------------------------------------
BANK IV, as Trustee BANK IV, Trustee
Attn: Diane Summers
P.O. Box 41903
Kansas City, MO 64183 880,640(d) 18.1%
- --------------------------------------------------------------------------------------------
The Miller Nichols Miller Nichols, Jeannette Nichols
Living Trust and Clarence Roeder, Trustees
400 West 49th Terrace
Alameda Towers
Kansas City, MO 64112 569,760(e) 11.7%
- --------------------------------------------------------------------------------------------
Kay N. Callison Kay N. Callison
55 Lemans Court
Shawnee Mission, KS 66208 277,440(f) 5.7%
- --------------------------------------------------------------------------------------------
</TABLE>
(a) All information obtained from the shareholder register of the Company and
Officer and Director Questionnaires as of September 16, 1996 and August 22,
1996, respectively.
(b) All of these shares are owned of record by Cede & Co. for other persons,
none of whom, to the knowledge of the Company, own beneficially 5% or more
of the outstanding shares.
(c) Mr. John Simon and Mr. James W. Quinn, directors of the Company, are
directors of Allen Holding Inc., a 100% owner of AHI Kansas, Inc., which is
in turn the sole general partner of AHI Metnall, L.P. Mr. Simon and Mr.
Quinn are also limited partners of AHI Metnall, L.P. Mr. Simon directly or
indirectly owns approximately 29.9% of AHI Metnall, L.P. and Mr. Quinn
directly or indirectly owns approximately 1% of AHI Metnall, L.P., which is
the beneficial owner of 948,000 shares of the Company. Although Mr. Simon
and Mr. Quinn each, as an officer and director of AHI Kansas, Inc. and
companies related to and affiliated with AHI Metnall, L.P., may be deemed
beneficial owners of such shares, each disclaims personal beneficial
ownership of such shares.
(d) Of the 880,640 shares held by BANK IV as trustee, 825,280 of those shares
are held by BANK IV as Trustee of the J.C. Nichols Company Employee Stock
Ownership Trust. The remainder are held by BANK IV as trustee for others.
Although: (i) Boatmen's Bancshares, Inc. recently acquired Fourth Financial
Corporation, the parent company of BANK IV, and (ii) NationsBank
Corporation agreed recently to acquire Boatmen's Bancshares, Inc., BANK IV
is still the trustee of the Company's ESOT. BANK IV and Boatmen's
Bancshares disclaim beneficial ownership of all such shares.
(e) Shares reflected include shares beneficially owned by the Miller Nichols
Living Trust. Miller Nichols and Clarence Roeder, Chairman Emeritus and
Director of the Company, respectively, and Ms. Jeanette Nichols are
trustees of the Miller Nichols Living Trust, none of whom have sole voting
or investment powers.
(f) Ms. Callison is a director of the Company. Of the shares reported by Ms.
Callison, 115,440 shares are held individually by Ms. Callison and she has
sole voting and investment power over such shares. Additionally, 36,240
shares are held in trusts for which Ms. Callison's spouse has sole voting
and dispositive power. Ms. Callison is the trustee and has sole investment
and voting power for two trusts for the benefit of her children, Mark
Callison and Elizabeth Callison. Such trusts hold 103,280 shares. Ms.
Callison is co-trustee with Ann Nichols and UMB Bank, N.A. of Kansas City
of the Nancy Nichols Lopez Trust, which owns 7,680 shares. Ms. Callison,
Ms. Nichols, and UMB Bank share investment and voting power over such
shares. Ms. Callison is the co-trustee with Commerce Bank of the Miller
Nichols Trust, which owns 14,800 shares for the benefit of Ms. Ann Nichols.
Ms. Callison and Commerce Bank share investment and voting power over such
shares.
33
<PAGE>
The information set forth below does not reflect the impact of the
future conveyance by the Company of the 680,000 shares of the Company's common
stock to be conveyed to the ESOT or beneficiaries of the ESOT. See Item 2,
"Financial Information - Selected Financial Information."
TABLE B - MANAGEMENT OWNERSHIP(a)
AMOUNT AND NATURE OF PERCENTAGE OF
NAME, TITLE BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- -------------------------------------------------------------------------------
Barrett Brady, Director, President
Chief Executive Officer 62,000(b) 1.3%
John Simon, Director (See James W. Quinn) 948,880(c) 19.6%
James W. Quinn, Director (See John Simon) 948,880(c) 19.6%
John A. Ovel, Director Nominee 880,640(d) 18.1%
Clarence Roeder, Director 569,760(e) 11.7%
Kay N. Callison, Director 277,440(f) 5.7%
William K. Hoskins, Director 240 less than .1%
Beneficial Ownership of Directors and
Executive Officers as a Group 2,738,960(g) 56.4%
(a) All information obtained from the shareholder register of the Company
and Officer and Director Questionnaires of the Company as of September 16, 1996
and August 22, 1996, respectively.
(b) Of the 62,000 shares reported by Mr. Brady, 2,400 shares are held
individually by Mr. Brady's spouse. Mr. Brady disclaims beneficial ownership of
such shares. Additionally, shares reflected as beneficially owned by Mr. Brady
include 8,000 shares held by the Fred Brady Trust dated December 5, 1985.
Mr. Brady is a Trustee of such trust and has sole voting and investment power
over such shares. An additional 32,000 shares reported by Mr. Brady are
attributable to an unexercised but vested stock option from the Company that can
be exercised at any time prior to December 31, 2010.
(c) Mr. John Simon and Mr. James W. Quinn are directors of Allen Holding
Inc., a 100% owner of AHI Kansas, Inc., which is in turn the sole general
partner of AHI Metnall, L.P. Mr. Simon and Mr. Quinn are also limited partners
of AHI Metnall, L.P. AHI Metnall, L.P. is the beneficial owner of 948,880
shares of the Company, ownership of which is reported above. Although Mr. Simon
and Mr. Quinn each, as an officer and director of AHI Kansas, Inc. and companies
related to and affiliated with AHI Metnall, L.P., may be deemed beneficial
owners of such shares, each disclaims personal beneficial ownership of such
shares.
(d) John A. Ovel is the Regional President of Boatmen's Trust Company, a
subsidiary of Boatmen's Bancshares, Inc. Although: (i) Boatmen's Bancshares,
Inc., recently acquired Fourth Financial Corporation, the parent company of BANK
IV, and (ii) NationsBank Corporation agreed recently to acquire Boatmen's
Bancshares, Inc., Bank IV is still the trustee of the Company's ESOT. In such
capacity, BANK IV is still the record owner of 825,280 shares held by the
Company's ESOT. The other 55,360 shares reported here are held by BANK IV and
Boatmen's Trust Company as trustee for other parties. Mr. Ovel, BANK IV, and
Boatmen's Trust Company disclaim all beneficial ownership of such shares.
(e) All 569,760 shares reported by Mr. Roeder are held by the Miller
Nichols Living Trust. Mr. Roeder, Ms. Jeannette Nichols, and Mr. Miller
Nichols, Chairman Emeritus, are co-trustees of the Miller Nichols Living Trust.
Mr. Roeder does not have sole voting or investment powers for such shares. Mr.
Roeder disclaims all beneficial ownership of such shares.
(f) Ms. Callison is a director of the Company. Of the shares reported by
Ms. Callison, 115,440 shares are held individually by Ms. Callison and she has
sole voting and investment power over such shares. Additionally, 36,240 shares
are held in trusts for which Ms. Callison's spouse has sole voting and
dispositive power. Ms. Callison is the trustee and has sole investment and
voting power for two trusts for the benefit of her children, Mark Callison and
Elizabeth Callison. Such trusts hold 103,280 shares. Ms. Callison is co-
trustee with Ann Nichols and UMB Bank, N.A. of Kansas City of the Nancy Nichols
Lopez Trust, which owns 7,680 shares. Ms. Callison, Ms. Nichols, and UMB Bank
share investment and voting power over such shares. Ms. Callison is the co-
trustee with Commerce Bank of the Miller Nichols Trust, which owns 14,800 shares
for the benefit of Ms. Ann Nichols. Ms. Callison and Commerce Bank share
investment and voting power over such shares.
(g) See individual ownership footnotes above for voting and investment
powers and disclaimers of beneficial ownership and general disclosures. The
shares reflected for Mr. Quinn and Mr. Simon are only included once in this
total.
34
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by this item with respect to directors and
officers is set forth below.
EXECUTIVE OFFICERS.
The following are the executive officers of the Company, all of whose
term of office expires at the Annual Meeting of the Board of Directors and all
of whom serve at the will of the Board of Directors.
BARRETT BRADY - Age 49. Mr. Brady is the President and Chief Executive
Officer of the Company and has been acting in those
capacities since September of 1995. Mr. Brady has served
as a director of the Company since December 1995. For
more than five years prior to becoming President and
Chief Executive Officer of the Company, Mr. Brady served
as President of Dunn Industries, Inc., an investment
holding company in the primary business of regional
commercial and industrial general contracting. Mr. Brady
is also a Director of North American Savings Bank. Mr.
Brady is the brother-in-law of Mr. John Fox, Vice
President of Special Projects for the Company.
G. REID TEANEY - Age 50. Mr. Teaney is Senior Vice President of the Company
and has served in that capacity since July 1996. For
more than five years prior to becoming Senior Vice
President of the Company, Mr. Teaney served as Senior
Vice President and Executive Managing Officer of the
Kansas City office of CB Commercial Group, a commercial
real estate marketing, sales, leasing, and brokerage
company. From January 1988 through March 1996, Mr.
Teaney served as a director of Columbia Trust Company.
EDWARD A. de AVILA - Age 41. Mr. de Avila is Senior Vice President of
Development of the Company and has been acting in that
capacity since August 1996. Since November 1993, Mr. de
Avila has been Managing Director of Centertainment, Inc.,
an indirect wholly-owned subsidiary of AMC Entertainment,
Inc., one of the largest motion picture exhibitors in the
United States. Centertainment, Inc. pursued the
development of entertainment based retail centers with
AMC Multiscreen Theatres as major anchors. From March
1988 through May 1993, Mr. de Avila was Vice President,
Director of Retail for Reston Town Center Associates, a
major developer of retail space in Reston, Virginia.
JOHN H. FOX - Age 51. Mr. Fox is a Vice President of the Company with
primary responsibility for special projects, and has been
acting in that capacity for more than five years. Mr.
Fox is the brother-in-law of Mr. Brady.
BRIAN G. SHANAHAN - Age 58. Mr. Shanahan is a Vice President of the Company
with primary responsibility for apartment leasing and
related operations, and has been acting in that capacity
for more than five years.
MICHAEL T. SHIELDS - Age 57. Mr. Shields is a Vice President of the Company
with primary responsibility for retail and industrial
leasing and related operations, and has been acting in
that capacity for more than five years.
DONNELL J. DIXON - Age 53. Mr. Dixon is a Vice President of the Company with
primary responsibility for office leasing and related
operations, and has been acting in that capacity for more
than five years.
35
<PAGE>
WILLIAM E. BELL - Age 61. Mr. Bell is the Vice President of Administration
for the Company and has been acting in that capacity for
more than five years.
MARK A. PETERSON - Age 32. Mr. Peterson is the Vice President, Treasurer, and
Chief Financial Officer of the Company and has been
acting in that capacity since June 1995. For more than
five years prior to that time, Mr. Peterson acted in
levels of increasing responsibility, concluding as senior
audit manager for Donnelly Meiners Jordan Kline, P.C., a
certified public accounting firm that has provided
services to the Company.
PRICE A. SLOAN - Age 33. Mr. Sloan is the Secretary and General Counsel
of the Company and has been acting in that capacity since
March 1996. For more than five years prior to that time
Mr. Sloan was an attorney with Blackwell Sanders Matheny
Weary & Lombardi L.C., the law firm that has acted and
continues to act as legal counsel to the Company.
DIRECTORS.
WILLIAM K. HOSKINS - Age 61. For more than five years Mr. Hoskins has
served as Vice President, General Counsel, and Secretary
to the entity now named Hoechst Marion Roussel, Inc. and
which was formerly known both as Marion Merrell Dow, Inc.
and Marion Laboratories, Inc., a major pharmaceutical
company. Mr. Hoskins is currently the Chairman of the
Board of Directors of the Company and has served in that
capacity since May 1996. Mr. Hoskins is also a Director
of the Company and has served in that capacity since
December 1995. Mr. Hoskins's term as a Director of the
Company expires in 1999.
BARRETT BRADY - Information relating to Mr. Brady can be found above
under Executive Officers. Mr. Brady's term as a Director
of the Company expires in 1997.
KAY N. CALLISON - Age 53. Ms. Callison has served as a Director of the
Company since 1982. For more than five years, Ms.
Callison has been active in charitable activities in the
Kansas City metropolitan area. Ms. Callison's term as a
Director of the Company expires in 1997.
MARK C. DEMETREE - Age 39. Since February 1993, Mr. Demetree has been the
President of North American Salt Company, a company that
is the second largest producer of salt in the United
States and Canada and is a unit of Harris Chemical Group,
Inc. From 1989 through January 1993, Mr. Demetree was a
Senior Vice President of D.G. Harris & Associates, Inc.
From 1991 through February 1993, Mr. Demetree was also
President of the Trona Railway Company. Mr. Demetree is
also a member of the Board of Directors of Advanced Radio
Telecom Corp., NAMSCO, Inc. and Sifto Canada, Inc. and is
a member of the Board of Governors of the Chamber of
Maritime Commerce for the Great Lakes and St. Lawrence
Seaway. Mr. Demetree's term as a Director of the Company
expires in 1999.
JOHN A. OVEL - Age 49. For more than five years Mr. Ovel has served as
Regional President of Boatmen's Trust Company, a
subsidiary of Boatmen's Bancshares, Inc. Mr. Ovel's term
as a Director of the Company expires in 1999.
JAMES W. QUINN - Age 39. Mr. Quinn has served as a Director of the Company
since December 1995. For more than five years, Mr. Quinn
has served as the Chief Financial Officer and, for the
last one and a half years, as a Director of Allen &
Company Incorporated, an investment banking and
securities brokerage firm. Mr. Quinn's term as a
Director of the Company expires in 1998.
36
<PAGE>
JOHN SIMON - Age 53. Mr. Simon has served as a Director of the
Company since August 1995. For more than five years, Mr.
Simon has been a Managing Director of Allen & Company
Incorporated, an investment banking and securities
brokerage firm. Mr. Simon is also a member of the Board
of Directors of T Cell Sciences Incorporated, Neurogen
Corporation, Lunn Industries, Inc., Batteries Batteries,
Inc., and The Immune Response Corporation. Mr. Simon's
term as a Director of the Company expires in 1997.
CLARENCE L. ROEDER - Age 62. Mr. Roeder has served as a Director of the
Company since 1974. For more than five years prior to
July 1995, Mr. Roeder was Secretary of the Company. For
more than five years prior to January 1993, Mr. Roeder
was Vice President and General Counsel of the Company.
Mr. Roeder is also a member of the Board of Directors of
Mercantile Bank of Kansas and Mercantile Bank of Kansas
City. Mr. Roeder's term as a Director of the Company
expires in 1998.
THOMAS J. TURNER, III - Age 52. Mr. Turner has served as a Director of the
Company since December 1995. For more than five years,
Mr. Turner has served as President of Charter American
Mortgage Company, a business that operates as a
correspondent, and originates and services commercial
loans, for institutional mortgage lenders. Mr. Turner is
an advisory director of BANK IV Kansas City. Mr.
Turner's term as a Director of the Company expires in
1998.
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE OFFICER COMPENSATION.
The following table sets forth the compensation of certain executive
officers of the Company for the last three fiscal years.
SUMMARY COMPENSATION TABLE(a)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
OTHER ANNUAL ALL OTHER
NAME AND SALARY BONUS COMPENSATION COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Barrett Brady, CEO 1995 110,000 N/A N/A N/A
- --------------------------------------------------------------------------------------
Jack Frost, CEO 1995 61,025 N/A N/A $6,975(b)
- --------------------------------------------------------------------------------------
1995 83,334 50,000 1,080(e) 9,721(f)
Lynn L. McCarthy, CEO(c) 1994 237,304(d) 10,000 1,508(e) 25,718(g)
1993 175,000 N/A 1,476(e) 12,268(h)
- --------------------------------------------------------------------------------------
</TABLE>
(a) No officers of the Company during 1995 other than those serving
as Chief Executive Officer meet the threshold criteria for reporting.
(b) The amount reported includes $6,975 paid to Mr. Frost as director
fees.
(c) The amounts reflected for Mr. McCarthy in 1995 do not attempt to
adjust for the value of cash and property received by Mr. McCarthy
pursuant to the Settlement Agreement that resolved the significant
shareholder litigation that occurred in 1995.
(d) The amount reported includes $62,304 deferred at the election of
Mr. McCarthy.
(e) The amount reflects the value of the personal use of a Company-
owned automobile attributable to Mr. McCarthy.
(f) The amount reported includes $1,050 paid to Mr. McCarthy as
director fees, $4,338 paid as premiums under supplemental split dollar
life insurance policies for Mr. McCarthy, and $4,333 contributed by
the Company for Mr. McCarthy under the Company's 401(K) savings plan.
(g) The amount reported includes $2,575 paid to Mr. McCarthy as
director fees, $6,547 paid as premiums under supplemental split dollar
life insurance policies for Mr. McCarthy, $5,663 contributed by the
Company for Mr. McCarthy under the Company's 401(K) savings plan, and
$10,933 contributed by the Company for Mr. McCarthy to the J.C.
Nichols Company Employee Stock Ownership Plan.
(h) The amount reported includes $1,375 paid to Mr. McCarthy as
director fees, $6,018 paid as premiums under supplemental split dollar
life insurance policies for Mr. McCarthy, and $4,875 contributed by
the Company for Mr. McCarthy under the Company's 401(K) savings plan.
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OUTSIDE DIRECTOR COMPENSATION.
Directors attending, whether by telephone or in person, any regular or
special meeting of the Board of Directors of the Company are paid $1,000 per
meeting. Directors who are members of committees of the Board of Directors
attending, whether by telephone or in person, any regular or special meeting of
a committee of the Board of Directors are paid $500 per meeting. Directors who
are also employees of the Company are not paid Director's fees. Director and
committee member fees were increased in early 1996 from $400 per meeting.
EMPLOYMENT AGREEMENTS.
The Company has an employment agreement with its President and
Chief Executive Officer, Mr. Barrett Brady. The principal terms of Mr.
Brady's employment agreement provide that for a period of five years ending
on December 31, 2000, Mr. Brady shall receive a base salary of $225,000 per
year subject to annual review and adjustment at the discretion of the
Company's Board of Directors. Additionally, Mr. Brady shall be entitled to
an annual incentive discretionary bonus based upon achieving goals to be set
annually, with an opportunity to receive up to 80% of his base salary as
annual incentive discretionary bonus. Moreover, Mr. Brady shall be entitled
to fixed supplemental retirement benefits of $78,000 per year payable for 15
years commencing upon the earlier of his disability or reaching the age of
60. Such supplemental retirement benefits vest at a rate of 40% on January
1, 1996, 20% on December 31, 1996, and 10% annually on December 31st for the
years 1997, 1998, 1999, and 2000. Mr. Brady has been granted a stock option
to purchase 64,000 shares, or their equivalent, at a price of $.0125 per
share, which option vested 50% on January 1, 1996 and the remaining 50% will
vest on January 1, 1997. Mr. Brady has also been granted an option to
purchase 160,000 shares of common stock of the Company, or their equivalent,
at a price of $19.375 per share. Such option vesting at a rate of 10% on
December 31, 1996, 15% on December 31, 1997, and 25% annually on December
31st for the years 1998, 1999 and 2000. Mr. Brady shall be subject to a
confidentiality and non-competition agreement during the term of the
agreement and for a period of one year after termination.
Mr. Brady's employment agreement provides for termination by the
Company for cause, by voluntary resignation of Mr. Brady, or by the Company
without cause. The agreement also provides Mr. Brady the right to terminate the
agreement upon a change in control of the Company, which is defined as the
acquisition by any entity or affiliated group of 35% or more of the combined
voting power of the outstanding securities of the Company. Upon termination of
the agreement by either party as a result of a change of control or by the
Company without cause, Mr. Brady shall be entitled to certain rights, including,
but not limited to, immediate vesting of all stock options and the right to
receive his salary and normal employee benefits for the longer of twenty-four
months or the remainder of the agreement's term.
The Company has an employment agreement with its Senior Vice President
of Development, Mr. Edward A. de Avila. The principal terms of Mr. de Avila's
employment agreement provide that for a period of three years ending on August
12, 1999, Mr. de Avila shall receive a base salary of $200,000 per year subject
to annual review and increase at the discretion of the Company's Board of
Directors. Additionally, Mr. de Avila shall be entitled to an annual incentive
discretionary bonus, with an opportunity to receive up to 40% of his base salary
as annual incentive discretionary bonus. Mr. de Avila's employment agreement
provides for termination by the Company for cause, by voluntary resignation of
Mr. de Avila, or by the Company without cause. Upon termination of the
Agreement by the Company without cause, Mr. de Avila shall be entitled to
certain rights, including, but not limited to, the right to receive his annual
salary and normal employee benefits from the date of termination until August
12, 1999.
The Company has an employment agreement with its Senior Vice
President, Mr. G. Reid Teaney. The principal terms of Mr. Teaney's employment
agreement provide that for a period of three years ending on July 14, 1999,
Mr. Teaney shall receive a base salary of $160,000 per year subject to annual
review and increase at the discretion of the Company's Board of Directors.
Additionally, Mr. Teaney shall be entitled to an annual incentive discretionary
bonus with an opportunity to receive up to 60% of his base salary as
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annual incentive discretionary bonus. Mr. Teaney's employment agreement
provides for termination by the Company for cause, by voluntary resignation
of Mr. Teaney, or by the Company without cause. Upon termination of the
Agreement by the Company without cause, Mr. Teaney shall be entitled to
certain rights, including, but not limited to, the right to receive his
annual salary and normal employee benefits from the date of termination until
July 14, 1999.
The Company has an employment agreement with its Chief Financial
Officer, Mr. Mark A. Peterson. The principal terms of Mr. Peterson's
employment agreement provide that for a period of three years ending on
December 31, 1998, Mr. Peterson shall receive a base salary of $100,000 per
year subject to annual review and increase at the discretion of the Company's
Board of Directors. Additionally, Mr. Peterson shall be entitled to an annual
incentive discretionary bonus set by the Company's Board of Directors. Mr.
Peterson's employment agreement provides for termination by the Company for
cause, by voluntary resignation of Mr. Peterson, or by the Company without
cause. Upon termination of the Agreement by the Company without cause, Mr.
Peterson shall be entitled to certain rights, including, but not limited to,
the right to receive his annual salary and normal employee benefits for a
period of not less than twelve months following the date of termination.
The Company has an employment agreement with its General Counsel and
Secretary, Mr. Price A. Sloan. The principal terms of Mr. Sloan's employment
agreement provide that for a period of three years ending on March 19, 1999, Mr.
Sloan shall receive a base salary of $100,000 per year subject to annual review
and increase at the discretion of the Company's Board of Directors.
Additionally, Mr. Sloan shall be entitled to an annual incentive discretionary
bonus set by the Company's Board of Directors. Mr. Sloan's employment agreement
provides for termination by the Company for cause, by voluntary resignation of
Mr. Sloan, or by the Company without cause. Upon termination of the Agreement
by the Company without cause, Mr. Sloan shall be entitled to certain rights,
including, but not limited to, the right to receive his annual salary and normal
employee benefits for a period of not less than twelve months following the date
of termination.
STOCK OPTION PLAN.
The Board of Directors of the Company on March 28, 1996 adopted the 1996
Stock Option Plan ("Plan") that allowed the granting of stock options to
eligible Plan Participants. The Shareholders of the Company approved the Plan
at their 1996 Annual Meeting on May 29, 1996. An amendment and restatement of
the plan was approved subsequently by the Board of Directors to reflect recent
changes in the federal securities regulations relevant to the Plan. The Plan
authorizes the Board to issue up to 240,000 shares of the Company's common
stock. If an option granted under the Plan expires or is canceled without
having been exercised or vested, the shares subject to the unvested and canceled
options will be available thereunder for grants of options. The type, amount,
and conditions of any options granted under the Plan are determined by the
Compensation Committee, or such other committee as the Board of Directors
determines.
COMPENSATION COMMITTEE.
The Board of Directors of the Company recently appointed a Compensation
Committee to recommend compensation guidelines and policies for the Company and
compensation for the senior officers of the Company and to administer the Plan.
The Compensation Committee is currently composed of Thomas J. Turner, III,
Chairman, Mark C. Demetree and James W. Quinn. Mr. Brady, the President and
Chief Executive Officer of the Company, served on the Compensation Committee
from December 13, 1995 until his resignation from the committee as of February
1, 1996.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Thomas J. Turner, III is a Director of the Company and is president and
principal shareholder of Charter American Mortgage Company, a business that
prepares and presents mortgage loan applications to institutional mortgage
lenders. Charter American Mortgage Company has from time to time been asked to
provide services to the Company, and the Company has obtained loans as a result
of loan applications taken by Charter American Mortgage Company. Such loans
were obtained by the Company at rates
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competitive with the rates charged by other mortgage lenders. Charter American
Mortgage Company has earned approximately $63,000 in the last year in loan
origination fees as the result of mortgage financing obtained by the Company as
a result of services provided by Charter American Mortgage Company.
Mr. John A. Ovel is Director of the Company and is Regional President of
Boatmen's Trust Company, a subsidiary of Boatmen's Bancshares, Inc. In January
of 1996, Boatmen's Bancshares, Inc. acquired Fourth Financial Corporation, the
parent company of BANK IV, trustee of the ESOT. As trustee, BANK IV is record
owner of the shares beneficially owned by the ESOT. Boatmen's Trust Company
provides administrative services for the ESOT under an agency agreement with
BANK IV, and will continue to do so until Boatmen's Trust Company is appointed
as successor trustee of the ESOT. BANK IV receives a fee for serving as
trustee of the ESOT. The fee currently is determined by the number of shares
held by the ESOT, the amount of cash held by the ESOT, the appraised value of
the shares held by the ESOT, and the level of service requested by the ESOT. In
1996, that fee is likely to exceed $100,000.
Mr. Clarence L. Roeder and Ms. Kay N. Callison are Directors of the
Company. Mr. Roeder and Mr. Miller Nichols, father of Ms. Callison, are each a
director of Westport Today, Inc. In addition, Mr. Roeder is a vice president of
that entity. Westport Today, Inc. entered into a Supplemental Settlement
Agreement with the Company in September 1995 pursuant to which Westport Today,
Inc. agreed to retire outstanding indebtedness of approximately $3,250,000 to
the Company. Approximately $273,000 remains due from Westport Today, Inc. to
the Company. Neither Mr. Roeder nor Ms. Callison has any personal obligation to
the Company as a result of the obligation owed by Westport Today, Inc.
ITEM 8. LEGAL PROCEEDINGS
During 1995, the Company was involved in various legal actions as both
plaintiff and defendant that were brought on behalf of or against former
officers and directors, representatives of the Employee Stock Ownership Trust,
minority shareholders, and others. The most significant of such legal actions
were consolidated in the Federal District Court, Western District of Missouri,
where certain litigants requested, among other things, that the District Court
rescind certain transactions, including several 1992 transactions among the
Company and former executive officers of the Company, the Employee Stock
Ownership Trust, and others.
Such legal actions ended when the Company and the other parties thereto
entered into a Mutual Release and Settlement Agreement dated as of June 30, 1995
("Settlement Agreement"), which required the conveyance of common stock of the
Company, payment of cash, and extinguishment of amounts due to and from the
Company in consideration of releases from certain present and future claims by,
among, and between the parties to the Settlement Agreement. Additional detail
regarding the Settlement Agreement is set forth in the notes to the accompanying
1995 consolidated financial statements of the Company. Except for those
involving the ESOT, nearly all transactions, conveyances, payments, and
extinguishments required by the Settlement Agreement were completed by November
30, 1995. As part of the Settlement Agreement, the Company was given the option
to submit to the IRS a request for a private letter ruling on matters related to
the ESOT's duties pursuant to the Settlement Agreement. The private letter
ruling request may result in JCN entering into a closing agreement with the IRS,
and the Company may be requested to pay to the IRS some amount in order to
obtain such a closing agreement.
The Company has filed a complaint against its former attorney, Charles
Schleicher, and the law firm of Schleicher Latz, P.C. alleging certain breaches
of fiduciary duties and obligations as an attorney and the attorneys for the
Company, and alleging certain failures in performance of duties as attorney and
attorneys for the Company. The suit against Mr. Schleicher and his law firm was
filed in December 1995 in the Circuit Court of Jackson County, Missouri. The
Settlement Agreement described above limits the potential recovery realizable by
the Company to $2.0 million. The actual amount recovered by the Company, by
settlement or otherwise, may be substantially less than such amount.
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The Company has filed a $3.0 million proof of claim in the National Gypsum
bankruptcy proceeding pending in United States Bankruptcy Court, Northern
District of Texas. The Company recently received an initial payment of
approximately $378,000. Total payments received by the Company under the
National Gypsum plan of reorganization will not equal the full amount of the
proof of claim originally filed by the Company. However, counsel for the
Company has advised management that such plan does provide for two additional
payments on the Company's claim that are expected to total approximately
$800,000.
The Company has filed a complaint against National United Investment Group,
Inc. and Mr. Thomas W. Mahoney for failure by the entity to make payments due on
a promissory note held by the Company and failure by Mr. Mahoney to make
payments due as a result of his guarantee of the equity's obligations. The
amount currently outstanding on the note is approximately $850,000. The suit
against the entity and Mr. Mahoney was filed in April 1996 in the United States
District Court, Western District of Missouri. The amount actually recovered by
the Company, by settlement or otherwise, is likely to be substantially less than
such amount.
Nichols Equity, Inc., a wholly-owned subsidiary of JCN, received a
complaint filed by Justin Management, Inc. ("Justin") and Winstead's Restaurant,
Inc. ("Winstead's") in August 1996 in the United States District Court, Western
District of Missouri. The suit seeks to compel Nichols Equity to participate in
an arbitration hearing allegedly required by an agreement allegedly entered into
among Nichols Equity, Justin, and Winstead's. It is anticipated that if
plaintiffs are successful in compelling compliance with the arbitration
provision, they will request an arbitration hearing to compel enforcement of a
separate provision of the agreement purporting to require Nichols Equity to
forfeit its interest in 47th Street Development Corporation, Grand Street
Partners I, L.P., and Creekview Partners II, L.P. An adverse outcome in this
litigation is not expected to have a material adverse impact on the financial
condition of the Company or results of operations.
Aside from the foregoing, the Company has no claims pending against it and
no claims pending by it against others that relate to the matters covered by the
Settlement Agreement, arise out of events or circumstances that gave rise to the
Settlement Agreement, or involve former officers, former directors, or
professionals providing services to the Company prior to the Settlement
Agreement.
The Company and its subsidiaries are parties to certain legal proceedings
incident to their business. In the opinion of management, none of these
matters, either individually or in the aggregate, is material to the Company's
financial condition or results of operations.
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ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET.
Although there is currently no established trading market for shares of
common stock of the Company, such shares have for many years been traded over-
the-counter very infrequently through inter-broker bulletin boards trading under
the symbol "NCJC.BB." The high and low bid information reflecting inter-dealer
bulletin board prices without retail mark-up, mark-down or commission, for each
quarter during the two most recent fiscal years is as follows:
1994 HIGH LOW
- ------------------------------------------------------------------------------
1st Quarter $6.25 $5.625
- ------------------------------------------------------------------------------
2nd Quarter $6.25 $5.625
- ------------------------------------------------------------------------------
3rd Quarter $7.375 $7.3125
- ------------------------------------------------------------------------------
4th Quarter $9.375 $7.1875
- ------------------------------------------------------------------------------
1995 HIGH LOW
- ------------------------------------------------------------------------------
1st Quarter $11.41 $9.375
- ------------------------------------------------------------------------------
2nd Quarter $10.3125 $10
- ------------------------------------------------------------------------------
3rd Quarter No Trades No Trades
- ------------------------------------------------------------------------------
4th Quarter $21.875 $14.375
- ------------------------------------------------------------------------------
1996 HIGH LOW
- ------------------------------------------------------------------------------
1st Quarter $21.0625 $20.00
- ------------------------------------------------------------------------------
2nd Quarter $36.50 $32.00
- ------------------------------------------------------------------------------
These quotations merely reflect the prices at which transactions were
proposed, and do not necessarily represent actual transactions. The quotations
on September 12, 1996, were Bid $27.00 and Ask $32.00.
The Company has 32,000 shares of its common stock that are subject to a
vested option held by Mr. Brady, President and Chief Executive Officer. Other
than 1,253,200 shares of common stock held by the Company's Employee Stock
Ownership Trust, AHI Metnall, L.P., and various other shareholders, the
4,852,400 currently outstanding shares of common stock of the Company may be
sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The Company has entered into no agreements to register any
shares of its common stock pursuant to the Securities Act and is not publicly
offering, and has not publicly proposed to offer, any of its shares of common
stock.
The number of shares reflected in the foregoing paragraph does not include
the 680,000 shares awaiting conveyance to the ESOT or ESOT beneficiaries and
does not include any shares subject to options granted to management of the
Company, but not yet exercised.
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HOLDERS.
As of September 23, 1996, there were approximately 175 record holders of
common stock and including those individuals and entities for whom shares are
held in nominee or street name by brokers, there were approximately 324 holders
of the common stock.
DIVIDEND POLICY.
Prior to 1995, the Company typically declared and paid an annual cash
dividend of $10.00 on each share of its common stock (or approximately $.125 per
post-split share). No dividend was paid on common stock in 1995 or in the first
half of 1996. The Board of Directors of the Company has not determined if,
when, or in what amount future dividends will be declared or paid. The Company
is not currently under any dividend payment prohibition or restriction.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On January 31, 1994, the Company sold 12,956 shares (or 1,036,480 post-
split shares) of its common stock to AHI Metnall, L.P. These shares were sold
in exchange for a 50% partnership interest then held by AHI Metnall, L.P. in the
partnership Metnall Associates. This negotiated transaction was made in
reliance on the exemption from registration set forth in Section 4(2) of the
Securities Act, as this isolated transaction with a single investor did not
involve any public offering of the common stock of the Company.
On December 31, 1994, the Company sold 5,524 shares (or 441,920 post
split shares) of its common stock to Mr. Lynn L. McCarthy, the individual who
was then the Chief Executive Officer of the Company. These shares were sold
in exchange for a 51% partnership interest then held by Mr. McCarthy in a
Kansas general partnership, World Resources Company. This negotiated
transaction was made in reliance on the exemption from registration set forth
in Section 4(2) of the Securities Act, as this isolated transaction with a
single investor did not involve any public offering of the common stock of
the Company. The sale of stock to Mr. McCarthy was unrelated to the sale of
stock to AHI Metnall, L.P. The stock sold to Mr. McCarthy was returned to
the Company as part of the 1995 litigation settlement.
In addition to the two stock sales set forth above, in March 1995 the
Company contributed 375 shares and 1,000 shares (or 30,000 and 80,000
post-split shares, respectively) to the Company's Employee Stock Ownership
Trust, representing the 1994 and 1995 contributions, respectively, by the
Company to that Trust.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The capital stock of the Company is Common Stock, par value $0.01 per share
(the "Common Stock"). The Bylaws of the Company (the "Bylaws"), the Articles of
Incorporation of the Company (the "Articles"), and Missouri law provide the
following with respect to the Common Stock and holders thereof:
DIVIDEND RIGHTS.
The bylaws provide that dividends upon the outstanding shares of Common
Stock may be declared by the Board of Directors at any meeting and that such
dividends may be paid in cash, in property, or in shares of the Company's stock.
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REDEMPTION PROVISIONS.
Shares of Common Stock are not subject to redemption.
VOTING RIGHTS.
Shares of Common Stock possess general voting powers. The Bylaws provide
that in the election of directors, shareholders vote cumulatively unless
cumulative voting is unanimously waived by all shareholders present.
Accordingly, unless such right is unanimously waived, each shareholder may
cast as many votes in the aggregate as shall equal the number of voting
shares held by such shareholder, multiplied by the number of directors to be
elected at such election, and such votes may all be cast for one candidate or
may be distributed among two or more candidates. The Bylaws otherwise grant
each holder of Common Stock one vote for each share of Common Stock entitled
to vote and registered in the name of such holder on the books of the
Company. Pursuant to the Bylaws, every shareholder entitled to vote at a
meeting may vote either in person or by proxy executed in writing by the
shareholder or his duly authorized attorney in fact.
The Bylaws provide that the vote of the holders of a majority of shares
of a quorum constitutes a valid corporate act, except in those specific
instances in which a larger vote is required by law or by the Articles. Under
the Bylaws, a quorum consists of the holders of a majority of the outstanding
shares entitled to vote at a meeting of shareholders, present in person or by
proxy.
With respect to certain actions, authorization by the shareholders
requires an affirmative vote by the holders of a majority of the outstanding
shares of stock of the Company entitled to vote thereon, whether or not
present at the meeting at which the vote is held. Such actions include, under
the Articles, the amendment of the Articles and the amendment of the Bylaws.
Under Missouri law, such actions include the amendment of the Articles, the
restatement of the Articles and the approval of certain business
combinations. Under the Bylaws, such actions include the removal of a
director, unless the vote of a greater number of shares is required by law.
Missouri law requires the affirmative vote by the holders of two-thirds
of the outstanding shares entitled to vote for any reduction in the stated
capital of the Company, the sale of substantially all of the Company's assets
not in the ordinary course of business, the merger or consolidation of the
Company, or the dissolution of the Company.
So long as the directors of the Company are elected through cumulative
voting, Missouri law provides, with respect to the number of directors, that
such number may not be reduced to less than three if the number of shares
voting against such a decrease would be sufficient to elect a director at an
election of three directors, and, with respect to the removal of a director,
that if less than the entire board is to be removed, no one of the directors
may be removed if the votes cast against his or her removal would be
sufficient to elect such person if cumulatively voted at an election of the
class of directors of which such person is a part.
Pursuant to the Bylaws, any action required to be taken or which may be
taken upon a vote of the holders of Common Stock at a meeting of the
shareholders may be taken without a meeting if consents in writing, setting
forth the action so taken, shall be signed by all of the holders of Common
Stock.
CLASSIFICATION OF THE BOARD OF DIRECTORS.
The Articles provide for a nine (9) member Board of Directors (the
"Board"). The Bylaws provide for such board to be divided into three classes,
with one-third of the total number of the full Board elected by the
shareholders at each annual meeting.
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LIQUIDATION RIGHTS.
In the event that the Company is dissolved, Missouri law provides that
the property of the Company remaining after the Company has discharged or
made provisions for discharging its liabilities will be distributed among the
Company's shareholders according to their interests. Currently, the
liquidation rights of the holders of Common Stock are not subordinate to
those of the holders of any other class of stock.
PREEMPTION RIGHTS.
Pursuant to the Articles, no holder of Common Stock is entitled as such,
as a matter of right, to purchase or subscribe for any shares of stock of the
Company of any class, whether now or hereafter authorized or whether issued
for cash, property or services or as a dividend or otherwise, or to purchase
or subscribe for any obligations, bonds, notes, debentures, other securities
or stock convertible into shares of stock of the Company or carrying or
evidencing any right to purchase shares of stock of any class.
LIABILITIES.
Holders of Common Stock are not liable to further calls or to assessment
by the Company. Under Missouri law, the holders of shares of Common Stock
have no liability to the Company or its creditors with respect to such
shares other than the obligation to pay the Company the full consideration
for which such shares were issued or to be issued.
PROVISIONS DISCRIMINATING AGAINST SUBSTANTIAL SHAREHOLDERS.
Pursuant to the Articles, the terms, provisions and procedures of the
Missouri Control Share Acquisition Statute do not apply to acquisitions of
shares of Common Stock. No Article or Bylaw provision discriminates against
any existing or prospective holder of Common Stock as a result of such
shareholder owning a substantial amount of securities.
MODIFICATION OF RIGHTS.
Rights granted to holders of Common Stock by the Articles or the Bylaws
may be modified through amendment to the Articles or Bylaws, respectively.
Pursuant to the Articles, Article provisions may be amended only upon the
affirmative vote of a majority of the shares of stock entitled to vote
thereon, or, in the event the laws of Missouri require a separate vote by
classes of shares, upon the affirmative vote of the holders of a majority of
the shares of each class whose separate vote is required thereon. Pursuant to
the Articles, the Bylaws may be altered, amended, suspended or repealed, or
new Bylaws may be adopted, in any of the following ways: (i) by the
affirmative vote, at any annual or special meeting of the shareholders, of
the holders of a majority of the outstanding shares of stock of the Company
entitled to vote; (ii) by resolution adopted by a majority of the full Board
at a meeting thereof; or (iii) by unanimous written consent of all the
shareholders or all the directors in lieu of a meeting; provided, however,
that the power of the Directors to alter, amend, suspend or repeal the Bylaws
or any portion thereof may be denied as to any Bylaws or any portion thereof
enacted by the shareholders if at the time of such enactment the shareholders
so expressly state. This restriction on the power of directors to modify
Bylaws enacted by shareholders has not been stated with respect to any
currently existing Bylaw.
SUBORDINATION TO OTHER SECURITIES.
The rights evidenced by, or amounts payable with respect to, Common
Stock are not materially limited or qualified by the rights of any other
authorized class of securities.
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IMPEDIMENTS TO A CHANGE IN CONTROL.
The Company has not opted out of the Missouri Business Combination
Statute. The statute restricts the ability of the Company to enter into
certain "Business Combinations" with an "Interested Shareholder" or with any
"Affiliates" and "Associates" of the Company (as defined therein). A
"Business Combination" is defined to include, generally, a merger or
consolidation, certain sales, leases, exchanges, pledges and similar
dispositions of corporate assets or stock and any reclassification,
recapitalization or reorganization that increases the proportionate voting
power of the Interested Shareholder. An "Interested Shareholder" includes,
generally, any person or entity that beneficially owns or controls 20% or
more of the outstanding voting shares of the corporation. Pursuant to the
statute, the Company may at no time engage in a Business Combination with an
Interested Shareholder other than (i) a Business Combination approved by the
Board prior to the date on which the Interested Stockholder acquired such
status; (ii) a Business Combination approved by the holders of a majority of
the outstanding voting stock not beneficially owned by the Interested
Shareholder or its Affiliates or Associates at a meeting called no earlier
than five years after the date on which the Interested Shareholder acquired
such status; or (ii) a Business Combination that satisfies certain detailed
fairness requirements. Notwithstanding the foregoing, unless the
Board of the Company approved such Business Combination prior to the date on
which the Interested Shareholder acquired such status or approved the
transaction by which the Interested Shareholder acquired such status, no such
Business Combination may be engaged in for a period of five years after the
date the Interested Shareholder acquired such status.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The officers and directors of the Company: (i) are insured against
personal liability by a directors' and officers' insurance policy that has a
maximum policy limit of $10,000,000 per claim and per year purchased pursuant
to Missouri statutory law, and (ii) have entered into an Indemnification
Agreement with the Company. Officers and directors are also indemnified for
actions taken while performing as officers and directors of the Company by
the Bylaws of the Company and by Missouri law.
The Bylaws, Missouri law and the Indemnification Agreement as it relates
to directors and certain officers of the Company provide that the Company
shall indemnify an officer or director of the Company who is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
or to any threatened, pending or completed action or suit by or in the right
of the Company to procure a judgment in its favor, by reason of the fact that
such person is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding.
Indemnification is limited to those cases where an officer's or
director's conduct is not finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited consolidated financial statements of the Company for the
years ended December 31, 1995 and 1994, and the report thereon, the related
financial statement schedules and the report thereon, and the unaudited
consolidated financial statements of the Company for the six months ended
June 30, 1996 and 1995, are set forth below, beginning on page F-1.
46
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The prior auditors for the Company were dismissed by the Board of
Directors on May 26, 1995. The prior auditors qualified their report on the
consolidated financial statements of the Company for the 1993 and 1992 fiscal
years. The prior auditors stated their qualification resulted from their
inability to obtain sufficient evidence to evaluate whether certain
capitalized cost balances as of December 31, 1993 and 1992 were in excess of
recoverable amounts. To the knowledge of current management of the Company,
there was not during 1994 or at any time prior to 1994 any disagreement with
the prior auditors on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. However,
current management of the Company has, since the date the prior auditors were
dismissed, expressed to the prior auditors concern relating to certain of the
matters discussed in the preceding sentence. The decision to change
accountants was made by the Board of Directors of the Company. KPMG Peat
Marwick LLP was engaged as auditors for the Company on May 26, 1995.
ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS, AND FINANCIAL
STATEMENT SCHEDULES
Exhibit
Number
--------
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
1. Years Ended December 31, 1995 and 1994
Independent Auditors' Report [F-1]
FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31,
1995 and 1994 [F-2]
Consolidated Statements of Operations For the
Years Ended December 31, 1995 and 1994 [F-3]
Consolidated Statements of Stockholders' Equity
(Deficit) For the Years Ended December 31,
1995 and 1994 [F-4]
Consolidated Statements of Cash Flows For the Years
Ended December 31, 1995 and 1994 [F-5]
Notes to Consolidated Financial Statements [F-6]
Independent Auditors' Report [F-7]
FINANCIAL STATEMENT SCHEDULES:
Schedule of Real Estate and Accumulated
Depreciation at December 31, 1995 [F-8.1]
Schedule of Real Estate and Accumulated
Depreciation Rollforwards For the Year
End December 31, 1995 [F-8.2]
47
<PAGE>
Schedule of Real Estate and Accumulated
Depreciation Rollforwards For the Year Ended
December 31, 1994 [F-8.3]
Schedule of Mortgage Loans on Real Estate at
December 31, 1995 [F-9.1]
Schedule of Rollforward of Mortgage Loans on Real
Estate For the Year Ended December 31, 1995 [F-9.2]
Schedule of Rollforward of Mortgage Loans on Real
Estate For the Year Ended December 31, 1994 [F-9.3]
Schedule of Valuation and Qualifying Accounts For
the Year Ended December 31, 1995 [F-10.1]
Schedule of Valuation and Qualifying Accounts For
the Year Ended December 31, 1994 [F-10.2]
2. Six Months Ended June 30, 1996 and 1995
FINANCIAL STATEMENTS:
Consolidated Balance Sheets at June 30, 1996
(Unaudited) and December 31, 1995 [F-11]
Consolidated Statements of Operations For the
Six Months Ended June 30, 1996 and 1995
(Unaudited) [F-12]
Consolidated Statement of Stockholders' Equity
(Deficit) For the Six Months Ended June 30,
1996 (Unaudited) [F-13]
Consolidated Statements of Cash Flows For the
Six Months Ended June 30, 1996 and 1995
(Unaudited) [F-14]
Notes to Unaudited Consolidated Financial Statements [F-15]
(b) EXHIBITS
The Articles of Incorporation of the Company [3.1]
The Bylaws of the Company [3.2]
The Articles of Incorporation of the Company (Included
in Exhibit 3.1 [4.1]
The Bylaws of the Company (Included in Exhibit 3.2) [4.2]
Amendment to and Restatement of J.C. Nichols Company
Employee Stock Ownership Plan [10.1(a)]
First Amendment to the Amended and Restated J.C. Nichols
Company Employee Stock Ownership Plan [10.1(b)]
Third Amendment to the Amended and Restated J.C. Nichols
Company Employee Stock Ownership Plan [10.1(c)]
48
<PAGE>
Amendment to and Restatement of J.C. Nichols Company
Employee Stock Ownership Trust [10.2(a)]
First Amendment to the Amended and Restated J.C.
Nichols Company Employee Stock Ownership Trust [10.2(b)]
Real Estate Contract of Sale (between J.C. Nichols
Company and Synergy Development Alliance, L.C.) [10.3(a)]
Amendment to Real Estate Contract of Sale [10.3(b)]
Second Amendment to Real Estate Contract of Sale [10.3(c)]
April 25, 1995 Letter Agreement [constituting third
amendment to Real Estate Contract of Sale] [10.3(d)]
May 11, 1995 Letter Agreement [constituting fourth
amendment to Real Estate Contract of Sale] [10.3(e)]
Secured Promissory Note - Note A [10.4(a)]
Secured Promissory Note - Note B [10.4(b)]
Deed of Trust, Security Agreement and Assignment of
Rents [10.4(c)]
Assignment of Leases and Rents [10.4(d)]
Hotel Management Fee Participation Sale Agreement [10.5]
Restated Joint Venture Agreement [10.6]
J.C. Nichols Company 1996 Stock Option Plan, Amended
and Restated Effective May 30, 1996 [10.7]
Form of Indemnification Agreement entered into between
the Company and each of the members of the Board
of Directors and certain Officers [10.8]
Form Employment Agreement between the Company and
certain Officers [10.9]
Employment Agreement between the Company and Mr.
Brady, President and Chief Executive Officer of
the Company [10.10]
Settlement Agreement [Filed separately with the
Securities and Exchange Commission, Confidential
Treatment of Entire Agreement Sought] [10.11]
List of Subsidiaries and Affiliates of the Company [21.1]
Power of Attorney for the members of the Board of
Directors and certain Officers of the Company
(included in Signature Pages to the Registration
Statement) [24.1]
Financial Data Schedule [27.1]
Settlement Agreement and Mutual Releases as of
June 30, 1995 [99.1]
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 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.
J.C. NICHOLS COMPANY
By: /s/ BARRETT BRADY
--------------------------
Barrett Brady
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Barrett Brady, William K. Hoskins, and Mark A. Peterson
and each of them, his/her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him/her and in his/her name,
place and stead, in any and all capacities including his/her capacity as a
director and/or officer of J.C. Nichols Company, to sign any and all amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE POSITION DATE
--------- -------- ----
/s/ WILLIAM K. HOSKINS Chairman of the Board September 27, 1996
- ------------------------ and Director
William K. Hoskins
/s/ BARRETT BRADY President, Chief Executive September 27, 1996
- ------------------------ Officer and Director
Barrett Brady
/s/ KAY N. CALLISON Director September 23, 1996
- ------------------------
Kay N. Callison
/s/ MARK C. DEMETREE Director September 27, 1996
- ------------------------
Mark C. Demetree
/s/ JOHN A. OVEL Director September 27, 1996
- ------------------------
John A. Ovel
/s/ JAMES W. QUINN Director September 27, 1996
- ------------------------
James W. Quinn
<PAGE>
/s/ CLARENCE L. ROEDER Director September 23, 1996
- ------------------------
Clarence L. Roeder
/s/ JOHN SIMON Director September 27, 1996
- ------------------------
John Simon
/s/ THOMAS J. TURNER, III Director September 20, 1996
- ------------------------
Thomas J. Turner, III
/s/ MARK A. PETERSON Vice President,
- ------------------------ Chief Financial September 27, 1996
Mark A. Peterson Officer and
Treasurer (Principal
Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
3.1 The Articles of Incorporation of the Company
3.2 The Bylaws of the Company
4.1 The Articles of Incorporation of the Company
(Included in Exhibit 3.1)
4.2 The Bylaws of the Company (Included in Exhibit 3.2)
10.1(a) Amendment to and Restatement of J.C. Nichols Company
Employee Stock Ownership Plan
10.1(b) First Amendment to the Amended and Restated
J.C. Nichols Company Employee Stock
Ownership Plan
10.1(c) Third Amendment to the Amended and Restated
J.C. Nichols Company Employee Stock
Ownership Plan
10.2(a) Amendment to and Restatement of J.C. Nichols
Employee Stock Ownership Trust
10.2(b) First Amendment to the Amended and Restated
J.C. Nichols Company Employee Stock
Ownership Trust
10.3(a) Real Estate Contract of Sale (between J.C. Nichols
Company and Synergy Development Alliance, L.C.)
10.3(b) Amendment to Real Estate Contract of Sale
10.3(c) Second Amendment to Real Estate Contract of Sale
10.3(d) April 25, 1995 Letter Agreement [constituting third
amendment to Real Estate Contract for Sale]
10.3(e) May 11, 1995 Letter Agreement [constituting fourth
amendment to Real Estate Contract of Sale]
10.4(a) Secured Promissory Note - Note A
10.4(b) Secured Promissory Note - Note B
10.4(c) Deed of Trust, Security Agreement and Assignment of
Rents
10.4(d) Assignment of Leases and Rents
10.5 Hotel Management Fee Participation Sale Agreement
10.6 Restated Joint Venture Agreement
<PAGE>
Exhibit No.
- -----------
10.7 J.C. Nichols Company 1996 Stock Option Plan,
Amended and Restated Effective May 30, 1996
10.8 Form of Indemnification Agreement entered into between
the Company and each of the members of the Board
of Directors and certain Officers
10.9 Form Employment Agreement between the Company and
Certain Officers
10.10 Employment Agreement between the Company and
Mr. Brady, President and Chief Executive Officer
of the Company
10.11 Settlement Agreement [Filed separately with the
Securities and Exchange Commission, Confidential
Treatment of Entire Agreement Sought]
21.1 List of Subsidiaries and Affiliates of the Company
24.1 Power of Attorney for the members of the Board of
Directors and certain Officers of the Company
(Included in Signature Pages to the Registration
Statement)
27.1 Financial Data Schedule
99.1 Settlement Agreement and Mutual Releases as
of June 30, 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
J. C. Nichols Company
Kansas City, Missouri:
We have audited the accompanying consolidated balance sheets of J. C. Nichols
Company and subsidiaries (the Company) as of December 31, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries as
of December 31, 1995 and 1994, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
As discussed in note 1, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" as of January 1, 1994.
/s/ KPMG Peat Marwick LLP
Kansas City, Missouri
March 22, 1996, except as to note 17,
which is as of May 29, 1996
F-1
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Revenue-producing properties (note 5) $ 195,688,000 200,606,000
Land and improvement inventories 32,344,000 41,655,000
Property held for future development 1,492,000 1,844,000
----------- -----------
Total properties 229,524,000 244,105,000
Cash and cash equivalents 7,209,000 14,186,000
Temporary investments 4,606,000 4,404,000
Marketable equity securities available for sale (note 3) 38,114,000 26,686,000
Accounts receivable (note 13) 4,205,000 5,936,000
Prepaid expenses 9,992,000 10,952,000
Income taxes receivable 4,192,000 5,629,000
Notes receivable (notes 4 and 13) 24,032,000 31,814,000
Investments in real estate partnerships (note 6) 1,857,000 889,000
Minority interest in consolidated partnerships 4,284,000 4,926,000
Other assets, net 680,000 775,000
----------- -----------
$ 328,695,000 350,302,000
----------- -----------
----------- -----------
(Continued)
F-2
</TABLE>
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1995 1994
---------------------------------------------- ---- ----
<S> <C> <C>
Mortgage indebtedness (note 9) $ 326,349,000 339,881,000
Notes payable to banks and others (note 7) 5,658,000 13,329,000
Accounts payable and tenants' deposits (note 13) 6,266,000 6,805,000
Accrued expenses and other liabilities 9,597,000 9,237,000
Accrued contribution to Employee Stock Ownership Trust
(note 14) 11,050,000 -
Dividends payable - 1,180,000
Deferred gains on the sale of property 552,000 1,127,000
Deferred income taxes 5,948,000 4,564,000
----------- -----------
365,420,000 376,123,000
----------- -----------
Stockholders' equity (deficit):
Common stock, par value $.01 per share; 10,000,000
shares authorized and 5,016,745 shares issued
(note 17) 100,000 100,000
Additional paid-in capital 7,079,000 6,002,000
Unrealized gain on marketable equity securities available
for sale, net of income taxes of $11,466,000 and
$7,485,000 21,023,000 13,755,000
Retained earnings 52,500,000 63,252,000
----------- -----------
80,702,000 83,109,000
Less:
Treasury stock, at cost (164,345 and 28,251 shares
of common stock) 117,427,000 14,582,000
Note receivable secured by company stock - 94,348,000
----------- -----------
Total stockholders' equity (deficit) (36,725,000) (25,821,000)
Commitments and contingencies (notes 5, 12 and 16)
----------- -----------
$ 328,695,000 350,302,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Sales and revenues:
Rents $ 79,818,000 74,973,000
Property sales 6,047,000 10,694,000
Commissions and fees 1,459,000 1,862,000
Dividends and interest 4,806,000 4,053,000
Gains on sales of investments and other assets 5,711,000 727,000
Equity in earnings of unconsolidated affiliates 157,000 411,000
Other 1,307,000 1,493,000
----------- -----------
99,305,000 94,213,000
----------- -----------
Costs and expenses:
Selling, general and operating expenses 46,118,000 43,203,000
Cost of property sales 3,944,000 8,822,000
Interest 27,696,000 27,049,000
Depreciation and amortization 14,355,000 18,488,000
Employee Stock Ownership Trust contribution (note 14) 1,787,000 -
Valuation allowances 2,350,000 39,699,000
Litigation settlement (note 16) 19,553,000 -
Net operations of property subject to debt extinguishment
(note 10) - 1,650,000
----------- -----------
115,803,000 138,911,000
----------- -----------
Loss before income taxes and extraordinary gain (16,498,000) (44,698,000)
Income tax benefit (note 11) 5,746,000 1,028,000
----------- -----------
Loss before extraordinary gain (10,752,000) (43,670,000)
Extraordinary gain on extinguishment of debt, net of income taxes
of $9,175,000 (note 10) - 29,136,000
----------- -----------
Net loss $ (10,752,000) (14,534,000)
----------- -----------
----------- -----------
Per share data (note 17):
Loss before extraordinary gain $ (.74) (2.89)
Extraordinary gain on extinguishment of debt - 1.93
----------- -----------
Net loss $ (.74) (.96)
----------- -----------
----------- -----------
Dividends $ - .125
----------- -----------
----------- -----------
Average number of shares outstanding (note 17) 14,469,360 15,135,520
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Common stock:
Balance at beginning and end of year (note 17) $ 100,000 100,000
------------ ------------
Additional paid-in capital (note 17):
Balance at beginning of year 6,002,000 6,002,000
Contribution of 110,000 shares to Employee Stock Ownership Trust
(note 14) 1,077,000 -
------------ ------------
Balance at end of year 7,079,000 6,002,000
------------ ------------
Unrealized gain on marketable equity securities available for sale, net of
income taxes:
Balance at beginning of year 13,755,000 -
Unrealized gain upon adoption of Statement of Financial Accounting
Standards No. 115 on January 1, 1994, net of income taxes of
$8,185,000 - 15,053,000
Unrealized gain (loss) net of income taxes of $4,165,000 and $700,000 7,612,000 (1,298,000)
Realized loss from sale of securities, net of income taxes of $23,000 42,000 -
Realized gain from sale of securities, net of income taxes of $208,000 (386,000) -
------------ ------------
Balance at end of year 21,023,000 13,755,000
------------ ------------
Retained earnings:
Balance at beginning of year 63,252,000 79,736,000
Net loss (10,752,000) (14,534,000)
Cash dividends ($.125 per share in 1994) - (1,950,000)
------------ ------------
Balance at end of year 52,500,000 63,252,000
------------ ------------
Treasury stock:
Balance at beginning of year (14,582,000) (23,058,000)
Contribution of 110,000 shares to Employee Stock Ownership Trust
(notes 14 and 17) 710,000 -
Issuances of 1,478,400 shares (note 17) - 9,392,000
Receipt of 12,227 shares in litigation settlement (note 16) (9,207,000) -
Purchases of 1,295 shares - (916,000)
Receipt of 125,242 shares previously securing note receivable (note 16) (94,348,000) -
------------ ------------
Balance at end of year (117,427,000) (14,582,000)
------------ ------------
Note receivable secured by the Company's common stock:
Balance at beginning of year (94,348,000) (94,348,000)
Transfer of 125,242 shares to treasury stock in settlement of note
receivable (note 16) 94,348,000 -
------------ ------------
Balance at end of year - (94,348,000)
------------ ------------
Total stockholders' deficit $ (36,725,000) (25,821,000)
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C>
Operating activities:
Net loss $ (10,752,000) (14,534,000)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation of properties 13,316,000 17,502,000
Amortization of deferred costs 1,039,000 986,000
Extraordinary gain - (29,136,000)
Valuation allowances 2,350,000 39,699,000
Noncash portion of litigation settlement 13,588,000 -
Deferred income taxes (2,597,000) (9,752,000)
Equity in earnings of unconsolidated affiliates (157,000) (411,000)
Employee Stock Ownership Trust contribution 1,787,000 -
Gains on sales of investments and other assets (5,182,000) (809,000)
(Gains) losses on sales of marketable equity securities (529,000) 82,000
Net operations of property subject to debt extinguishment - 1,650,000
Changes in:
Land and improvement inventories 7,280,000 3,253,000
Accounts receivable 577,000 160,000
Minority interest in consolidated partnerships (430,000) (385,000)
Accounts payable and tenants' deposits (539,000) (160,000)
Accrued expenses and other liabilities (640,000) (451,000)
Deferred gains on the sale of property 38,000 (46,000)
Other, net 2,868,000 (2,309,000)
------------ ------------
Net cash provided by operating activities 22,017,000 5,339,000
------------ ------------
Investing activities:
Net (increase) decrease in temporary investments (202,000) 7,882,000
Payments on notes receivable 6,927,000 18,870,000
Issuance of notes receivable (6,174,000) (19,531,000)
Additions to revenue-producing properties (7,862,000) (11,915,000)
Purchase of marketable equity securities (3,021,000) (162,000)
Proceeds from sales of capital assets 5,269,000 4,031,000
Return of capital from unconsolidated affiliates 420,000 389,000
Proceeds from sales of marketable equity securities 925,000 215,000
Maturities of marketable securities 2,359,000 -
Investments in and advances to unconsolidated affiliates (394,000) -
Other, net 30,000 (10,000)
------------ ------------
Net cash used in investing activities $ (1,723,000) (231,000)
------------ ------------
(Continued)
</TABLE>
F-5
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Financing activities:
Payments on mortgage indebtedness $ (11,825,000) (11,459,000)
Issuance of mortgage indebtedness - 2,448,000
Purchases of treasury stock (4,901,000) (916,000)
Issuance of notes to banks and others 11,356,000 11,236,000
Payments on notes to banks and others (22,362,000) (20,904,000)
Dividends paid (1,180,000) (1,847,000)
Capital contributions from minority partners 1,641,000 -
------------ ------------
Net cash used in financing activities (27,271,000) (21,442,000)
------------ ------------
Net decrease in cash and cash equivalents (6,977,000) (16,334,000)
Cash and cash equivalents, beginning of year 14,186,000 30,520,000
------------ ------------
Cash and cash equivalents, end of year $ 7,209,000 14,186,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of J. C. Nichols
Company and its majority controlled affiliates (the Company).
Significant intercompany profits, transactions and balances have been
eliminated.
Minority interest in consolidated partnerships represents the cumulative
losses, after capital contributions, attributable to minority
interests in consolidated general partnership investments of the
Company.
REVENUE-PRODUCING PROPERTIES
Revenue-producing properties are carried at cost less accumulated
depreciation. All direct and indirect costs clearly associated with
the acquisition and development of real estate projects are
capitalized. Interest and certain indirect costs are capitalized
during periods in which activities necessary to ready the property for
its intended use are in progress. Depreciation is generally computed
using the straight-line method over the estimated useful lives of the
assets, generally seven to thirty-one years.
Real estate projects are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset may
not be recoverable. If the sum of the expected future cash flows
(undiscounted and without interest changes) of the asset is less than
the carrying amount of the asset, an impairment loss would be
recognized.
Leases for office and warehouse space provide for fixed monthly rents and
may contain provisions for rent escalations, utility charges and other
adjustments. Retail leases generally provide for minimum annual
rents, contingent rentals based on a percentage of the lessee's sales
and, in many instances, the tenant's proportionate share of real
estate taxes, insurance and maintenance. These leases generally have
a term of three to five years or longer in the case of most major
tenants. Apartment leases provide for a fixed monthly rental
primarily for a term of one year. All leases are accounted for as
operating leases.
LAND AND IMPROVEMENT INVENTORIES
Land and improvement inventories includes residentially zoned land, land
improvements and building improvements, and are carried at the lower
of average cost or market. Revenues from property sales are recorded
when sufficient funds are received from the buyer and all conditions
precedent to the sale are completed, generally when the property is
deeded to the buyer. Improvement costs are allocated to the parcels
benefited on the basis of estimated relative sales value.
(Continued)
F-6
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEFERRED GAINS ON THE SALE OF PROPERTY
Gains on the sale of property are deferred until such time as the Company
is no longer required to perform significant activities related to the
property sold, has no continuing involvement and has transferred the
risks and rewards of ownership. Additionally, the buyer must have
evidenced a substantial initial and continuing investment in the
property.
Gains on the sale of property to unconsolidated affiliates are deferred to
the extent of the Company's ownership interest in such affiliates.
INVESTMENTS IN REAL ESTATE PARTNERSHIPS
Investments in real estate partnerships primarily consist of investments in
and advances to unconsolidated affiliates. Investments in real estate
partnerships are accounted for on the equity method and reflect the
Company's share of income or loss of the partnerships, reduced by
distributions received and increased by contributions made.
TEMPORARY INVESTMENTS AND CASH EQUIVALENTS
Temporary investments are marketable securities which are callable within
30 to 150 days of purchase and are carried at the lower of amortized
cost or market value. Cash equivalents include money market funds,
certificates of deposit and debt securities acquired with an original
maturity of three months or less.
MARKETABLE EQUITY SECURITIES
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) 115, "Accounting for Certain Investments in Debt and
Equity Securities." Under SFAS 115, the Company classifies marketable
securities as either available for sale, held to maturity, or trading.
Held to maturity securities are those securities in which the Company
has the ability and intent to hold the security to maturity. Trading
securities are those securities that are bought and held principally
for the purpose of selling them in the near term. All other
securities are classified as available for sale.
Held to maturity securities are recorded at amortized cost. Available for
sale and trading securities are recorded at fair value. Unrealized
holding gains and losses, net of related tax effect, on available for
sale securities are excluded from earnings and are reported as a
separate component of stockholders' equity until realized. Unrealized
holding gains and losses for trading securities are included in
earnings.
The Company classifies all investments in marketable equity securities as
available for sale. The impact of adopting SFAS 115 on January 1,
1994 resulted in an increase in stockholders' equity of approximately
$15,053,000, net of income taxes of $8,185,000. The Company computes
the cost of securities sold using the specific identification method.
(Continued)
<PAGE>
3
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
Deferred tax assets and liabilities are recognized for temporary
differences between the financial reporting basis and the income tax
basis of the Company's assets and liabilities. The impact on deferred
taxes of changes in tax rates and laws is reflected in the financial
statements in the period of change.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
INCOME (LOSS) PER SHARE
Income (loss) per share has been computed based on the average number of
shares outstanding during the year (see note 17).
RECLASSIFICATIONS
Certain amounts in the 1994 consolidated financial statements have been
reclassified to conform with the 1995 presentation.
(2) SUPPLEMENTAL CASH FLOW INFORMATION
During 1994, the Company assumed debt of $18,316,000 in exchange for a 51%
interest in three separate consolidated partnerships. The assets of
these partnerships consisted of revenue-producing properties with a
cost basis of approximately $18,472,000.
In 1994, the Company issued 1,036,480 shares of common stock to acquire the
remaining 50% interest in a partnership. Upon acquisition of the
remaining partnership interest, the Company dissolved the partnership
and assumed its assets and liabilities. The net assets transferred
had a carrying value of approximately $12,795,000.
(Continued)
<PAGE>
4
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) MARKETABLE EQUITY SECURITIES
The following table summarizes the cost, fair value and gross unrealized
gains and losses of the Company's investment in marketable equity
securities at December 31, 1995 and 1994:
1995 1994
---- ----
Cost $ 5,625,000 5,446,000
Fair value 38,114,000 26,686,000
Unrealized gains 32,551,000 21,383,000
Unrealized losses 62,000 143,000
During 1995, the Company sold equity securities for $3,284,000 resulting in
gross realized gains of $594,000 and gross realized losses of $65,000.
During the first quarter of 1996, the Company liquidated its investment in
marketable equity securities held at December 31, 1995 for
$38,617,000, realizing a gain, net of income taxes, of $21,343,000.
(4) NOTES RECEIVABLE
Notes receivable at December 31, 1995 and 1994 consisted of:
1995 1994
---- ----
Promissory notes, collateralized by
real estate, due 1996 to 2012 $ 16,448,000 20,558,000
Notes receivable - miscellaneous 4,163,000 7,882,000
First mortgage and construction loans
on residential property 3,421,000 3,374,000
------------ ------------
$ 24,032,000 31,814,000
------------ ------------
------------ ------------
At December 31, 1995, the Company has valuation reserves of approximately
$3,453,000 related to notes receivable.
(5) REVENUE-PRODUCING PROPERTIES
Revenue-producing properties at December 31, 1995 and 1994 consisted of:
1995 1994
---- ----
Land and improvements $ 32,546,000 30,976,000
Buildings and improvements 302,585,000 300,105,000
Furnishings and equipment 6,361,000 6,010,000
Construction in progress 507,000 592,000
------------ ------------
341,999,000 337,683,000
Less accumulated depreciation 146,311,000 137,077,000
------------ ------------
$ 195,688,000 200,606,000
------------ ------------
------------ ------------
(Continued)
<PAGE>
5
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 1995, future minimum lease payments receivable under
noncancelable operating leases, excluding apartments, are as follows:
Year Amount
---- ------
1996 $ 38,749,000
1997 32,449,000
1998 26,682,000
1999 22,139,000
2000 16,959,000
Thereafter 135,528,000
-----------
Total future minimum lease payments $ 272,506,000
-----------
-----------
Contingent rents amounted to $4,162,000 and $4,201,000 for 1995 and 1994,
respectively. Apartment rentals under leases of one year or less
aggregated $18,681,000 and $17,806,000 for 1995 and 1994,
respectively.
In 1987, a subsidiary of the Company entered into various contracts with
the City of St. Petersburg, Florida (the City) for the redevelopment
and construction of certain parking, commercial and retail facilities
known as Bay Plaza. Due to a delay in significant development
activities, the Company ceased capitalization of interest, property
taxes, insurance and other development costs on December 31, 1990. On
June 30, 1995, the Company and the City agreed to extend the
Redevelopment Agreement for an initial period of six months. In
November 1995, the Company informed the City that it had ceased plans
to develop the properties. The Company expects to dispose of the
properties as soon as practicable.
Based on its assessment of the feasibility of developing Bay Plaza under
the existing cost structure, management determined that the value of
Bay Plaza had declined, and a reduction in its carrying value of
$18,600,000 was recorded to reduce the carrying value of the assets to
$3,000,000 at December 31, 1994. The method used for estimating the
property value of Bay Plaza requires making certain assumptions
regarding market and economic conditions. The carrying value of Bay
Plaza assets, net of liabilities, has been reduced to zero at December
31, 1995.
(Continued)
<PAGE>
6
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INVESTMENTS IN REAL ESTATE PARTNERSHIPS
At December 31, 1995, the Company had an equity interest in the following
unconsolidated entities:
Percent Owned
-------------
Center Court Partners 50.0%
Dallas County Partners 50.0
Dallas County Partners II 50.0
Dallas County Partners III L.C. 50.0
Fountain Three 50.0
Terrace Place Partners 50.0
Meredith Drive Associates L.P. 49.5
Board of Trade Investment Company 49.0
Sun Mountain Village Partners L.P. 44.1
J. C. Nichols Real Estate 40.0
4600 Madison Associates, L.P. 12.5
Raphael Hotel Group L.P. 5.0
Selected aggregate financial data for unconsolidated affiliates for 1995
and 1994, is presented below:
1995 1994
---- ----
Total assets $ 117,763,000 134,145,000
----------- -----------
----------- -----------
Total liabilities $ 129,954,000 143,140,000
----------- -----------
----------- -----------
Net income $ 759,000 2,435,000
----------- -----------
----------- -----------
(7) NOTES PAYABLE TO BANKS AND OTHERS
The Company's short-term borrowings include lines of credit with banks of
$2,500,000 and $7,756,000 as of December 31, 1995 and 1994,
respectively. These lines are generally extended at prime rates and,
as of December 31, 1994, were secured by certain marketable equity
securities.
In January 1996, the Company replaced its previous lines of credit with a
$10 million unsecured line of credit with a bank. Interest on the
line's outstanding borrowings are at the prime rate and are due on
demand.
As of December 31, 1995 and 1994, notes payable also includes $1,008,000
and $5,363,000 of borrowings from certain individuals or entities who
are generally related to the Company through employment or stock
ownership. Such borrowings are demand in nature and bear interest at
rates fluctuating with or below the prime interest rate. As discussed
in note 16, the Company also has a $2,000,000 note payable to the
Employee Stock Ownership Trust at December 31, 1995, which bears
interest at the prime rate (8.5% as of December 31, 1995).
(Continued)
<PAGE>
7
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) DEFERRED COMPENSATION
The Company accrues deferred compensation for certain key personnel to be
paid over a five or ten-year period following retirement or death.
Charges to operations, including interest, amounted to $275,000 and
$482,000 for 1995 and 1994, respectively, with the accrued liability
as of December 31, 1995 and 1994 aggregating $3,561,000 and
$4,192,000, respectively. As part of the settlement described in note
16, the deferred compensation of one former officer amounting to
$814,000 will be paid according to the plan agreement, and another
former officer waived his rights to $243,000 in deferred compensation.
(9) MORTGAGE INDEBTEDNESS
Mortgage indebtedness consists principally of first mortgage notes on
revenue-producing properties. These obligations, with minor
exceptions, bear annual interest at rates ranging from 4% to 10.5% and
mature from 1996 to 2021. Substantially all of the Company's revenue-
producing properties are pledged to secure this debt.
Aggregate annual principal payments applicable to mortgage indebtedness
subsequent to December 31, 1995 are:
1996 $ 26,236,000
1997 28,368,000
1998 8,503,000
1999 25,455,000
2000 7,670,000
Thereafter 230,117,000
-----------
$ 326,349,000
-----------
-----------
As a result of the bankruptcy of a primary tenant, the Company ceased
making debt service payments on the underlying loan in 1991 and began
negotiations with the lender to restructure the debt agreement. As of
December 31, 1993, this nonrecourse debt had a principal balance of
$7,149,000 and accrued interest of $1,818,000. In March, 1994, the
Company and the lender agreed to restructure the loan which required a
cash payment of $1,649,000 to reduce the loan balance to $5,500,000.
Accrued interest through February 1994 was waived under the agreement.
The restructuring reduced the effective interest rate, for financial
statement purposes, from 12% to approximately 3%.
Due to the loss of a primary tenant in an office building that had an
underlying mortgage, the Company began negotiations with the lender to
restructure the debt agreement. As of December 31, 1995, this
nonrecourse debt had a principal balance of $22,500,000 and accrued
interest of $3,720,000. In January 1996, the Company and the lender
agreed to restructure the loan, which required a cash payment by the
Company of $2,500,000. In addition, the Company has the option to
retire the outstanding indebtedness prior to maturity for $14,000,000
less future principal payments thereon. The restructuring reduced the
effective interest rate beginning in 1996, for financial statement
purposes, from 10.5% to approximately 3%.
(Continued)
<PAGE>
8
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain debt agreements provide for a 50% sharing of positive and negative
cash flows from operations and capital expenditures as defined between
the parties. Interest expense recognized for such sharing was
$479,000 and $709,000 for 1995 and 1994, respectively. Additionally,
as of December 31, 1995 and 1994, mortgage indebtedness includes a
$3,963,000 preference item related to these agreements. The Company's
liability is contingent upon certain conditions being met upon the
sale or refinancing of the mortgaged properties.
Interest payments (net of capitalized interest of $114,000 and $289,000,
respectively) aggregated $28,274,000 and $26,977,000 for 1995 and
1994, respectively.
(10) NET LIABILITIES SUBJECT TO EXTINGUISHMENT
The Company had a 50% interest in a joint venture, Kantel, L.P. (the
Venture), with an affiliate of The Ritz-Carlton Hotel Company (Ritz)
to convert and operate an existing hotel owned by the Company. To
finance the conversion, the Company, through a wholly-owned
subsidiary, borrowed $70,000,000 on a nonrecourse basis using the
assets of the hotel as collateral, and through another wholly-owned
subsidiary, also leased the land and building to the Venture. The
hotel did not meet expected operating results or cash flows, and the
Venture was unable to meet its obligations under the debt and lease
agreements.
On February 22, 1994, the lender foreclosed on the hotel, and the Company
was released from its obligations under the nonrecourse debt. The
Company recognized a gain of $38,311,000 as a result of this debt
extinguishment, which is presented as an extraordinary item, net of an
allocation of income taxes of $9,175,000.
Operations relating to the hotel property and related debt are included in
"net operations of property subject to debt extinguishment" and
consist of the following in 1994:
Rent and interest income $ 504,000
Interest expense (206,000)
Depreciation and amortization (114,000)
General and administrative expenses (135,000)
Equity in loss of Kantel, L.P. (1,699,000)
-----------
$ (1,650,000)
-----------
-----------
(Continued)
<PAGE>
9
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) INCOME TAXES
Income tax expense (benefit) is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current $ (3,149,000) (3,762,000)
Deferred (2,597,000) 11,909,000
----------- ----------
Total income tax expense (benefit) (5,746,000) 8,147,000
----------- ---------
----------- ---------
Income tax benefit before
extraordinary item (5,746,000) (1,028,000)
Income tax expense on extraordinary item - 9,175,000
----------- -----------
Total income tax expense (benefit) $ (5,746,000) 8,147,000
----------- -----------
----------- -----------
Deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities for financial reporting
purposes and such amounts measured by tax laws and regulations.
Deferred income taxes are comprised of the following:
1995 1994
---- ----
Deferred tax assets:
Property and receivable allowances $ 14,047,000 15,484,000
Litigation settlement issues 15,715,000 15,715,000
Deferred compensation 1,211,000 1,474,000
ESOT contributions 4,437,000 -
Gains recognized for tax purposes,
deferred for book purposes 1,949,000 1,725,000
Other 26,000 26,000
----------- -----------
Total gross deferred tax assets 37,385,000 34,424,000
Less valuation allowance (15,715,000) (15,715,000)
----------- -----------
Total deferred tax assets 21,670,000 18,709,000
----------- -----------
Deferred tax liabilities:
Accelerated depreciation (11,825,000) (11,059,000)
Gains recognized for book purposes,
deferred for tax purposes (4,288,000) (4,557,000)
Investment securities valuation adjustment (11,466,000) (7,485,000)
Other (39,000) (172,000)
----------- -----------
Total deferred tax liabilities (27,618,000) (23,273,000)
----------- -----------
Net deferred tax liabilities $ (5,948,000) (4,564,000)
----------- -----------
----------- -----------
</TABLE>
(Continued)
<PAGE>
10
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total income tax expense (benefit) differs from expected income tax benefit
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Expected income tax benefit at 34% $ (5,609,000) (2,172,000)
Tax exempt income (26,000) (113,000)
Valuation allowance for deferred tax assets
related to ESOT contributions and deferred
interest income - 15,715,000
Difference in tax basis on partnership interest - (5,000,000)
State income tax items - (161,000)
Dividend exclusion (170,000) (167,000)
Excess fair value of contributions - (8,000)
Other, net 59,000 53,000
----------- -----------
Total income tax expense (benefit) $ (5,746,000) 8,147,000
----------- -----------
----------- -----------
</TABLE>
Net cash refunds (payments) for income taxes during 1995 and 1994 were
$4,588,000 and $(8,297,000), respectively.
(12) CONCENTRATION OF CREDIT RISK
Several of the Company's consolidated general partnerships and subsidiaries
have revenue-producing real estate. During the initial lease-up
phase, this real estate generated net operating losses, which upon
consolidation resulted in minority obligations to the Company of
$4,284,000 and $4,926,000 at December 31, 1995 and 1994, respectively.
If the outside partners fail to perform their obligations, such
amounts may not be realized by the Company.
As of December 31, 1995 and 1994, the aggregate of the liabilities of
unconsolidated partnerships in which the Company is a general partner,
excluding nonrecourse debt, is approximately $6,238,000 and
$6,983,000, respectively. The Company could become liable for such
amounts in the event of default by the various partnerships and
nonperformance by the outside partners.
The collection of principal and interest balances secured by revenue-
producing properties and real estate under development is dependent
upon sufficient cash flows from operations of the properties,
refinancing, capital infusions from outside parties or the sale of the
related property. All such property is principally located in the
metropolitan Kansas City, Missouri area.
(Continued)
<PAGE>
11
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) AFFILIATED PARTY BALANCES AND TRANSACTIONS
Included in the consolidated financial statements are the following
affiliated party balances:
1995 1994
---- ----
Notes receivable $ 3,336,000 12,538,000
Accounts receivable 1,207,000 3,459,000
Notes payable 1,008,000 6,144,000
Accounts payable - 921,000
Subsequent to December 31, 1995, affiliated notes and accounts receivable
were reduced by payments of approximately $2,588,000.
The Company established a valuation allowance of $2,467,000 at December 31,
1994 related to notes and accounts receivable from former executive
officers and directors of the Company who were removed from their
positions on May 26, 1995 by action of the Board of Directors. The
Company entered settlement agreements in August 1995 with certain
former executive officers and directors (see note 16).
Effective January 1, 1994, the Company sold a controlling interest in its
wholly-owned subsidiary, Plaza Insurers, Inc., to the President of
Plaza Insurers and a minority interest to an officer of the Company.
This officer was removed from his position with the Company on May 26,
1995 by action of the Board of Directors. The Company has an
exclusive insurance brokerage agreement with Plaza Insurers through
December 31, 1996. As part of the settlement agreement described in
note 16, the former officer has relinquished his rights to any profits
from Plaza Insurers, and future distributions in excess of the former
officer's tax liability on profits, if any, from Plaza Insurers will
be made to the Company.
The Company also entered into a service agreement with Plaza Insurers
whereby the Company will continue to provide certain management and
clerical personnel to Plaza Insurers and will be reimbursed for all
related costs. In addition, Plaza Insurers will pay service and
stability fees to the Company equal to 45% of the gross commissions
received by Plaza Insurers for all insurance business effected,
renewed or brokered by the Company through Plaza Insurers. The
service agreement remains in effect for the same period as the
exclusive insurance brokerage agreement.
(14) EMPLOYEE STOCK OWNERSHIP TRUST
The Company has an Employee Stock Ownership Plan (ESOP) related to the
Employee Stock Ownership Trust (ESOT). The cost of the ESOP is borne
by the Company through annual contributions to the ESOT in amounts
determined by the Board of Directors .
As of December 31, 1995, the ESOT held 825,280 shares of common stock of
the Company which were allocated to participants.
(Continued)
<PAGE>
12
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1995, the Company contributed 110,000 shares of the Company's common
stock to the ESOT which were valued at $1,787,500.
As part of the settlement described in note 16, the Company will convey
680,000 shares of the Company's common stock and $2,000,000 cash to
the ESOT. The conveyance will occur upon receipt of approval from the
Internal Revenue Service. The transfer of the 680,000 shares of
Company common stock held in treasury to the ESOT will result in a
decrease in stockholders' deficit of $11,050,000.
(15) FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No.
107, "Disclosures About Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company,
using available market information and appropriate valuation
methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company might realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated
fair value amounts.
NOTES RECEIVABLE - Fair value for notes receivable was estimated
utilizing discounted cash flow calculations based on interest rates
currently offered for notes with similar terms and credit risk.
Nonaccrual notes were valued at face value adjusted for potential
credit loss.
TEMPORARY INVESTMENTS AND MARKETABLE EQUITY SECURITIES - Fair values
for temporary investments and marketable equity securities were based
upon quoted market prices.
NOTES PAYABLE TO BANKS AND OTHERS - The carrying value of these
financial instruments approximates fair value as interest rates change
with market conditions.
MORTGAGE INDEBTEDNESS - The carrying value of variable rate mortgages
approximates fair value. Fair value for fixed rate mortgage
indebtedness was estimated utilizing discounted cash flow calculations
based on the Company's incremental borrowing rates for similar types
of borrowing arrangements.
OFF-BALANCE SHEET INSTRUMENTS - Fair value of commitments to extend
credit, guarantees of debt and letters of credits is based on the
estimated fees which would be charged for similar arrangements or the
estimated cost to terminate or otherwise settle the obligations with
the counterparties at the reporting date. The aggregate amount of the
fees are not material to the consolidated financial statements.
(Continued)
<PAGE>
13
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial assets:
Temporary investments $ 4,606,000 4,606,000 4,404,000 4,404,000
Notes receivable 24,032,000 22,316,000 31,814,000 28,227,000
Marketable equity securities 38,114,000 38,114,000 26,686,000 26,686,000
Financial liabilities:
Notes payable to banks
and others 5,658,000 5,658,000 13,329,000 13,329,000
Mortgage indebtedness 326,349,000 301,568,000 339,881,000 314,219,000
</TABLE>
The fair value estimates presented are based on information available to
management as of December 31, 1995 and 1994. Although management is
not aware of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been revalued for purposes
of these consolidated financial statements since the balance sheet
date, and current estimates may differ significantly from the amounts
presented above.
(16) LITIGATION AND SETTLEMENTS
The Company was involved in various legal actions as plaintiff and
defendant against former officers and directors, representatives of
the Employees Stock Ownership Trust, minority shareholders and others.
The Company had requested, among other things, that the District Court
rescind certain transactions (including the 1992 transactions
described below) between the Company and former executive officers,
the Employee Stock Ownership Plan and others.
The Company and various other parties entered settlement agreements in
August 1995 which require conveyance of Company common stock, payment
of cash, and extinguishment of amounts due to and from the Company in
consideration of releases from all present and future claims by, among
and between the parties to the settlements. At December 31, 1995,
the Company had 4,852,400 shares of common stock outstanding and
164,345 shares held as treasury stock.
During 1992, the Company entered into a transaction with the Company's
former president, whereby properties with aggregate carrying values of
$2,592,000 and marketable equity securities with aggregate carrying
values of $1,103,000 were exchanged for 517,920 shares of common stock
of the Company and a note receivable for $2,700,000. The fair values
of the properties received, based on current appraisals, aggregated
$5,907,000. The quoted market values of the marketable equity
securities aggregated $2,781,000. The purchase price of the common
stock was equivalent to the former president's basis in such shares.
The Company recognized a gain on the transaction of $4,993,000 in
1992. As part of the 1995 settlement, the common stock was retained
by the Company, the properties were returned to the Company and the
note receivable was canceled.
(Continued)
<PAGE>
14
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 1992, a limited partnership owned in part by the Company's former
president, acquired 125,242 unallocated shares of common stock of the
Company from J. C. Nichols Company Employee Stock Ownership Trust
(ESOT). These shares were acquired for $124,529,000 through the
assumption of existing principal indebtedness of $94,348,000 and
accrued interest and other advances of $30,181,000 owed by the ESOT to
the Company. The Company had previously recorded, as contribution
expense, the accrued interest and other advances to the ESOT. At the
time the shares were sold, the $30,181,000 was deferred and recorded
as a reduction of the contractual note receivable from the limited
partnership. The $94,348,000 note receivable, secured by Company
stock as of December 31, 1994, was comprised of the contractual note
receivable from the limited partnership of $124,529,000 net of the
$30,181,000 deferrals. Contractual interest of $12,291,000 on the
note receivable from the limited partnership was deferred as of
December 31, 1993. Pursuant to a Pledge Agreement, the shares of
common stock were pledged as collateral to secure the note receivable
from the limited partnership. The related note receivable was due in
ten annual equal installments beginning December 31, 1994 and had a
stated interest rate of prime (6.0% as of December 31, 1993) payable
annually beginning December 31, 1994. As part of the 1995 settlement,
the unallocated 125,242 shares were conveyed to the Company as
treasury stock in exchange for extinguishment of the $94,348,000 note
receivable and all defeased interest amounts. This portion of the
settlement had no impact on the 1995 statement of operations.
In 1994, the Company provided valuation allowances of $2,502,000 on notes
and accounts receivable that were part of the 1995 litigation
settlement. The impact of the litigation settlement included in the
1995 statement of operations was as follows:
ESOT contribution $ 13,050,000
Settlement of notes and accounts
receivable, net of related
obligations and receipt of 12,227
shares of Company common stock 7,201,000
Legal expenses, net of insurance reimbursement 1,490,000
Receipt of real estate properties (2,188,000)
----------
$ 19,553,000
----------
----------
(17) STOCK SPLIT
On May 29, 1996, the Company approved an increase from 225,000 to
10,000,000 in the number of shares of common stock authorized for
issuance by the Company and to decrease the par value per share of
common stock from $20.00 to $.01. Additionally, the Company approved
an 80-for-1 stock split of the Company's common stock for all issued
and outstanding shares not then held in the Company's treasury.
Accordingly, the common stock par value decreased from $4,500,000 to
$100,000 with an off-setting increase in additional paid-in capital
from $2,679,000 to $7,079,000. All periods presented have been
restated to reflect the effect of the Company's stock split.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
J. C. Nichols Company
Kansas City, Missouri:
Under date of March 22, 1996, except as to note 17, which is as of May 29, 1996,
we reported on the consolidated balance sheets of J. C. Nichols Company and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended, as contained in the 1995 annual report to stockholders. These
consolidated financial statements and our report thereon are included in the
registration statement on Form 10. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedules in the registration statement
on Form 10. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statement schedules based on our audits.
In our opinion, these consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
- -------------------------
Kansas City, Missouri
March 22, 1996
F-7
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
SCHEDULE REAL ESTATE AND ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
REVENUE-PRODUCING PROPERTIES
KANSAS CITY, MISSOURI
COUNTRY CLUB PLAZA MILLCREEK BLOCK OFFICE & RETAIL 2,743,640.61 73,342.82
COUNTRY CLUB PLAZA TRIANGLE BLOCK RETAIL 1,806,787.71 32,856.98
COUNTRY CLUB PLAZA BALCONY BLOCK OFFICE & RETAIL 3,948,165.76 80,669.55
COUNTRY CLUB PLAZA MACY BUILDING RETAIL 41,920.97
COUNTRY CLUB PLAZA ESPLANADE BLOCK OFFICE & RETAIL 8,097,085.73 138,830.18
COUNTRY CLUB PLAZA PLAZA CENTRAL RETAIL 1,606,033.51 111,638.19
COUNTRY CLUB PLAZA THEATRE BLOCK OFFICE & RETAIL 5,821,871.57 92,377.21
COUNTRY CLUB PLAZA SWANSON BLOCK RETAIL 3,814,329.63 103,707.20
COUNTRY CLUB PLAZA HALLS BUILDING RETAIL 1,739,869.64 101,667.80
COUNTRY CLUB PLAZA NICHOLS BLOCK OFFICE & RETAIL 3,345,903.17 87,694.14
COUNTRY CLUB PLAZA TIME BLOCK OFFICE & RETAIL 12,446,759.89 215,949.66
COUNTRY CLUB PLAZA 48th & PENN RETAIL 1,873,705.79 42,298.64
COUNTRY CLUB PLAZA SEVILLE SHOPS WEST RETAIL 2,409,050.32 224,484.92
COUNTRY CLUB PLAZA PLAZA SAVINGS SOUTH RETAIL 2,074,459.99 64,429.89
COUNTRY CLUB PLAZA COURT OF THE PENGUINS RETAIL 2,810,558.68 51,211.57
COUNTRY CLUB PLAZA SEVILLE SQUARE OFFICE & RETAIL 6,357,216.06 62,843.69
COUNTRY CLUB PLAZA PLAZA PARKING PARKING 370,188.63
COUNTRY CLUB PLAZA COMMON AREAS SIDEWALKS, FOUNTAINS, STATUES 0.00
4620 NICHOLS PARKWAY PARKWAY BUILDING OFFICE 44,413.58
300-320 EAST 51st ST. COLONIAL SHOPS RETAIL 6,804.88
301-337 EAST 55th ST. CRESTWOOD SHOPS RETAIL 18,204.54
63rd & BROOKSIDE BROOKSIDE SHOPS OFFICE & RETAIL 4,515,846.80 128,392.11
7100-7126 WORNALL RD. ROMANELLI SHOPS RETAIL 4,656.10
7140 WORNALL ROAD ROMANELLI ANNEX OFFICE & RETAIL 1,403.95
RED BRIDGE & HOLMES RED BRIDGE SHOPS RETAIL 14,933.61
TWO BRUSH CREEK BLVD. TWO BRUSH CREEK PLAZA OFFICE 7,245,439.92 6,539.16
ONE WARD PARKWAY ONE WARD PARKWAY OFFICE 10,755.20
400 EAST RED BRIDGE RD. RED BRIDGE PROF. BLDG. OFFICE 728,828.29 2,367.58
801 WEST 47th ST. PARK PLAZA OFFICE 6,022,625.76 132,572.17
4900 MAIN 4900 MAIN BLDG. OFFICE 26,219,600.54 2,138,450.69
(1) 4717 & 4740 GRAND AVENUE PARK CENTRAL OFFICE 18,028,401.03 436,553.00
400 EAST BANNISTER RD. BANNISTER BUSINESS CENTER INDUSTRIAL 1,311,428.49 5,839.43
414-428 EAST BANNISTER RD. SURFACE WAREHOUSE I INDUSTRIAL 2,327.59
430-444 EAST BANNISTER RD. SURFACE WAREHOUSE II INDUSTRIAL 2,327.59
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
REVENUE-PRODUCING PROPERTIES
KANSAS CITY, MISSOURI
COUNTRY CLUB PLAZA 82,819.59 4,847,490.27 73,342.82 4,930,309.86 5,003,652.68
COUNTRY CLUB PLAZA 284,950.97 691,163.79 32,856.98 976,114.76 1,008,971.74
COUNTRY CLUB PLAZA 4,755,505.89 1,712,939.83 80,669.55 6,468,445.72 6,549,115.27
COUNTRY CLUB PLAZA 140,668.53 2,083,298.85 41,920.97 2,223,967.38 2,265,888.35
COUNTRY CLUB PLAZA 883,230.10 2,133,373.11 138,830.18 3,016,603.21 3,155,433.39
COUNTRY CLUB PLAZA 818,483.56 1,502,132.62 111,638.19 2,320,616.18 2,432,254.37
COUNTRY CLUB PLAZA 796,865.22 1,513,289.04 92,377.21 2,310,154.26 2,402,531.47
COUNTRY CLUB PLAZA 83,719.74 5,126,584.26 103,707.20 5,210,304.00 5,314,011.20
COUNTRY CLUB PLAZA 3,209,722.71 337,687.07 101,667.80 3,547,409.78 3,649,077.58
COUNTRY CLUB PLAZA 349,267.35 2,145,089.22 87,694.14 2,494,356.57 2,582,050.71
COUNTRY CLUB PLAZA 1,907,745.67 2,560,230.79 215,949.66 4,467,976.46 4,683,926.12
COUNTRY CLUB PLAZA 177,782.33 250,233.68 42,298.64 428,016.01 470,314.65
COUNTRY CLUB PLAZA 572,083.60 163,525.65 224,484.92 735,609.25 960,094.17
COUNTRY CLUB PLAZA 1,949,328.02 49,179.81 64,429.89 1,998,507.83 2,062,937.72
COUNTRY CLUB PLAZA 2,744,638.62 145,791.14 51,211.57 2,890,429.76 2,941,641.33
COUNTRY CLUB PLAZA 1,969,500.00 7,212,082.63 62,843.69 9,181,582.63 9,244,426.32
COUNTRY CLUB PLAZA 204,290.80 0.00 370,188.63 204,290.80 574,479.43
COUNTRY CLUB PLAZA 336,921.67 744,254.08 744,254.08 336,921.67 1,081,175.75
F-8.1
4620 NICHOLS PARKWAY 858,939.42 209,185.54 44,413.58 1,068,124.96 1,112,538.54
300-320 EAST 51st ST. 139,679.88 6,575.38 6,804.88 146,255.26 153,060.14
301-337 EAST 55th ST. 114,195.77 71,004.20 36,356.57 167,047.94 203,404.51
63rd & BROOKSIDE 521,791.88 726,953.32 142,843.61 1,234,293.70 1,377,137.31
7100-7126 WORNALL RD. 87,628.86 22,407.00 4,656.10 110,035.86 114,691.96
7140 WORNALL ROAD 8,351.00 0.00 1,403.95 8,351.00 9,754.95
RED BRIDGE & HOLMES 1,717,885.47 1,734,783.94 538,696.66 2,928,906.36 3,467,603.02
TWO BRUSH CREEK BLVD. 7,327,125.19 219,848.67 6,539.16 7,546,973.86 7,553,513.02
ONE WARD PARKWAY 5,946,412.67 251,920.95 10,755.20 6,198,333.62 6,209,088.82
400 EAST RED BRIDGE RD. 1,382,757.68 301,908.49 2,367.58 1,684,666.17 1,687,033.75
801 WEST 47th ST. 6,769,352.14 760,198.33 132,572.17 7,529,550.47 7,662,122.64
4900 MAIN 18,977,119.61 32,572.83 2,138,450.69 19,009,692.44 21,148,143.13
(1) 4717 & 4740 GRAND AVENUE 17,977,602.41 0.00 436,553.00 17,977,602.41 18,414,155.41
400 EAST BANNISTER RD. 1,553,689.17 181,353.63 177,540.66 1,563,341.57 1,740,882.23
414-428 EAST BANNISTER RD. 241,768.94 114,175.00 2,327.59 355,943.94 358,271.53
430-444 EAST BANNISTER RD. 332,433.23 57,047.00 2,327.59 389,480.23 391,807.82
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
REVENUE-PRODUCING PROPERTIES
KANSAS CITY, MISSOURI
COUNTRY CLUB PLAZA 1,733,728.18 1920 1906-1910 20-40
COUNTRY CLUB PLAZA 358,566.66 1925 1906-1910 20-50
COUNTRY CLUB PLAZA 2,576,399.07 1925 1906-1910 20-50
COUNTRY CLUB PLAZA 725,930.51 1926 1906-1910 20-50
COUNTRY CLUB PLAZA 1,962,133.98 1928 1906-1910 20-50
COUNTRY CLUB PLAZA 1,768,134.86 1958 1906-1910 20-40
COUNTRY CLUB PLAZA 1,231,256.06 1928 1906-1910 20-45
COUNTRY CLUB PLAZA 2,309,874.78 1967 1906-1910 20-55
COUNTRY CLUB PLAZA 2,475,024.25 1964 1906-1910 20-60
COUNTRY CLUB PLAZA 1,912,621.43 1930 1906-1910 20-45
COUNTRY CLUB PLAZA 3,038,537.24 1929 1906-1910 20-45
COUNTRY CLUB PLAZA 293,356.78 1948 1906-1910 20-40
COUNTRY CLUB PLAZA 240,831.09 1980 1906-1910 20-45
COUNTRY CLUB PLAZA 538,413.55 1948 1906-1910 20-40
COUNTRY CLUB PLAZA 2,605,026.36 1945 1975 10-20
COUNTRY CLUB PLAZA 6,579,918.28 1945 1975 10-39
COUNTRY CLUB PLAZA 126,170.29 1920-1964 1906-1910 15
COUNTRY CLUB PLAZA 746,565.53 1920-1964 1906-1910 10-20
4620 NICHOLS PARKWAY 813,171.82 1955 1906-1910 20-45
300-320 EAST 51st ST. 139,975.36 1907 1907 20-25
301-337 EAST 55th ST. 140,335.83 1932 1923 15-50
63rd & BROOKSIDE 884,055.43 1919 1920 10-50
7100-7126 WORNALL RD. 97,300.77 1925 1925 10-49
7140 WORNALL ROAD 0.00 1963 1993 20
RED BRIDGE & HOLMES 2,675,911.42 1959 1959 10-50
TWO BRUSH CREEK BLVD. 4,104,834.94 1983 1983 10-45
ONE WARD PARKWAY 3,540,170.54 1980 1980 10-45
400 EAST RED BRIDGE RD. 1,080,037.63 1972 1976 10-31.5
801 WEST 47th ST. 3,242,027.31 1983 1983 10-45
4900 MAIN 7,241,549.34 1986 1985 10-50
(1) 4717 & 4740 GRAND AVENUE 590,434.65 1988-1990 1994 39
400 EAST BANNISTER RD. 965,447.53 1985 1985 10-40
414-428 EAST BANNISTER RD. 219,120.18 1973 1973 10-45
430-444 EAST BANNISTER RD. 288,629.53 1975 1975 10-35
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
KANSAS CITY,MISSOURI (cont.)
6310 TROOST RETAIL SHOPS LAND LEASE 13,763.66
11049 HOLMES BURGER KING LAND LEASE 100,465.40
135th & HOLMES (18.6 ACRES) GOLF DRIVING RANGE LAND LEASE 5,074.28
BANNISTER & RAYTOWNRD 2.928 ACRES BLDG. LEASE 1,588.90
(7) 655 EAST MINOR DRIVE COACH HOUSE SOUTH 489-UNIT APARTMENT COMPLEX 23,680,882.91 54,753.88
(7) 11230 OAK COACH HOUSE 160-UNIT APARTMENT COMPLEX 8,067,386.48 16,284.96
11209 McGEE DRIVE COACH LAMP 158-UNIT APARTMENT COMPLEX 16,374.35
4509 WORNALL RD. WORNALL ROAD 17-UNIT APARTMENT BLDG. 5,188.00
4517 WORNALL RD. ST. CHARLES 12-UNIT APARTMENT BLDG. 4,200.00
420 WEST 46th TERR. ALTA LOMA 18-UNIT APARTMENT BLDG. 50,000.00
426 WEST 46th TERR. BISCAYNE TOWERS 24-UNIT APARTMENT BLDG. 17,000.00
406 WEST 46th TERR. SANTA ANA 11-UNIT APARTMENT BLDG. 3,317.18
408-410 WEST 46th TERR. VALENCIA 19-UNIT APARTMENT BLDG. 8,250.00
414 WEST 46th TERR. LA SOLANA 18-UNIT APARTMENT BLDG. 5,475.00
221 WEST 48th ST. REGENCY HOUSE 131-UNIT APARTMENT BLDG. 3,634,000.00 35,263.51
121 WEST 48th ST. SULGRAVE 144-UNIT APARTMENT BLDG. 5,446,000.00 240,000.00
4600 NICHOLS PARKWAY PARK LANE 89-UNIT APARTMENT BLDG. 55,960.00
4417 PENNSYLVANIA PENN WICK 6-UNIT APARTMENT BLDG. 4,108.00
4424-4426 PENNSYLVANIA COLE GARDENS 8-UNIT APARTMENT BLDG. 225,530.51 4,521.00
4419 PENNSYLVANIA TAMA 6-UNIT APARTMENT BLDG. 15,951.53
333 WEST 46th TERR. NEPTUNE 96-UNIT APARTMENT BLDG. 3,601,538.02 0.00
4921 WORNALL RD. WORNALL POINT 24-UNIT APARTMENT BLDG. 18,750.00
PLAZA AREA 54 RENTAL HOUSES SINGLE FAMILY 28,735.83 177,323.62
95th & NOLAND ROAD VACANT LOT 2.72 ACRES 6,000.00
72nd & WYANDOTTE MAINTENANCE SHOP 1,243.59
26 MISCELLANEOUSVACANT LOTS,
LESS THAN 1 ACRE EACH 38,377.97 1,406,939.63
46th TERR. & PENNSYLVANIA SURFACE PARKING CONST. IN PROGRESS
VARIOUS LOCATIONS TENANT IMPROVEMENTS, ETC. CONST. IN PROGRESS
GRANDVIEW, MISSOURI
11900 SO. BLUERIDGE EXT. GRANDVIEW SHOPS RETAIL 675,000.00
LEE'S SUMMIT,MISSOURI
211 N. E. LAKEWOOD BLVD. SALES OFFICE OFFICE 150,000.00 267,122.00
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
KANSAS CITY,MISSOURI (cont.)
6310 TROOST 0.00 44,034.27 57,797.93 0.00 57,797.93
11049 HOLMES 0.00 0.00 100,465.40 0.00 100,465.40
135th & HOLMES (18.6 ACRES) 1.00 0.00 5,074.28 1.00 5,075.28
BANNISTER & RAYTOWN RD 1.00 0.00 1,588.90 1.00 1,589.90
(7) 655 EAST MINOR DRIVE 23,400,786.69 2,947,451.70 2,980,304.04 23,422,688.23 26,402,992.27
(7) 11230 OAK 6,474,534.86 1,131,179.87 854,239.52 6,767,760.17 7,621,999.69
11209 McGEE DRIVE 1,989,363.01 565,500.13 189,645.44 2,381,592.05 2,571,237.49
4509 WORNALL RD. 93,720.03 13,735.78 5,188.00 107,455.81 112,643.81
4517 WORNALL RD. 57,600.00 16,137.63 4,200.00 73,737.63 77,937.63
420 WEST 46th TERR. 450,000.00 18,559.94 50,000.00 468,559.94 518,559.94
426 WEST 46th TERR. 150,000.00 17,299.19 17,000.00 167,299.19 184,299.19
406 WEST 46th TERR. 95,169.25 16,701.70 3,317.18 111,870.95 115,188.13
408-410 WEST 46th TERR. 329,149.95 0.00 8,250.00 329,149.95 337,399.95
414 WEST 46th TERR. 629,525.00 20,869.11 5,475.00 650,394.11 655,869.11
221 WEST 48th ST. 3,085,365.24 3,044,766.99 35,263.51 6,130,132.23 6,165,395.74
121 WEST 48th ST. 5,145,372.69 2,264,701.40 240,000.00 7,410,074.09 7,650,074.09
4600 NICHOLS PARKWAY 554,839.89 311,885.89 55,960.00 866,725.78 922,685.78
4417 PENNSYLVANIA 208,509.21 5,227.00 4,108.00 213,736.21 217,844.21
4424-4426 PENNSYLVANIA 287,843.77 0.00 4,521.00 287,843.77 292,364.77
4419 PENNSYLVANIA 1.00 0.00 15,951.53 1.00 15,952.53
333 WEST 46th TERR. 5,987,039.83 99,099.13 94,557.30 5,991,581.66 6,086,138.96
4921 WORNALL RD. 656,250.00 1,931.37 20,681.37 656,250.00 676,931.37
PLAZA AREA 3,339,090.68 4,587.60 177,323.62 3,343,678.28 3,521,001.90
95th & NOLAND ROAD 0.00 0.00 6,000.00 0.00 6,000.00
72nd & WYANDOTTE 684,964.29 0.00 1,243.59 684,964.29 686,207.88
26 MISCELLANEOUS VACANT LOTS,
LESS THAN 1 ACRE EACH 0.00 105,913.24 1,483,407.87 29,445.00 1,512,852.87
46th TERR. & PENNSYLVANIA 0.00 212,485.66 0.00 212,485.66 212,485.66
VARIOUS LOCATIONS 0.00 190,995.71 0.00 190,995.71 190,995.71
GRANDVIEW, MISSOURI
11900 SO. BLUERIDGE EXT. 1,370,892.36 413,708.24 898,923.85 1,560,676.75 2,459,600.60
LEE'S SUMMIT,MISSOURI
211 N. E. LAKEWOOD BLVD. 133,333.00 0.00 267,122.00 133,333.00 400,455.00
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
KANSAS CITY,MISSOURI (cont.)
6310 TROOST 44,034.27 1974 1971 20
11049 HOLMES 0.00 -- 1954 --
135th & HOLMES (18.6 ACRES) 0.00 -- 1972 --
BANNISTER & RAYTOWN RD 0.00 -- 1929 --
(7) 655 EAST MINOR DRIVE 9,451,099.01 1986 1986 10-35
(7) 11230 OAK 3,497,638.23 1984 1984 10-45
11209 McGEE DRIVE 1,970,524.89 1961 1963 10-50
4509 WORNALL RD. 107,453.81 1918 1968 15
4517 WORNALL RD. 58,043.94 1922 1972 15-27.5
420 WEST 46th TERR. 371,049.17 1918 1983 15-27.5
426 WEST 46th TERR. 165,985.58 1918 1975 14-15
406 WEST 46th TERR. 96,926.57 1960 1980 8-31.5
408-410 WEST 46th TERR. 279,334.96 1918 1983 15
414 WEST 46th TERR. 402.614.78 1918 1986 15-31.5
221 WEST 48th ST. 4,509,042.86 1960 1961 10-40
121 WEST 48th ST. 3,887,868.79 1967 1976 10-31
4600 NICHOLS PARKWAY 826,779.63 1924 1971 8-21
4417 PENNSYLVANIA 208,810.17 1960 1987 7-31.5
4424-4426 PENNSYLVANIA 287,843.77 1960 1987 7
4419 PENNSYLVANIA 0.00 1960 1979 15
333 WEST 46th TERR. 1,960,744.74 1988 1910 10-40
4921 WORNALL RD. 205,290.49 1950 1987 31.5
PLAZA AREA 1,608,519.27 1920's & 1930's 1929-1989 10-31.5
95th & NOLAND ROAD 0.00 -- 1956 --
72nd & WYANDOTTE 230,374.83 1986 1983 10-40
26 MISCELLANEOUS VACANT LOTS,
LESS THAN 1 ACRE EACH 42,252.70 -- 1930-1985 --
46th TERR. & PENNSYLVANIA 0.00 -- N/A --
VARIOUS LOCATIONS 0.00 -- N/A --
GRANDVIEW, MISSOURI
11900 SO. BLUERIDGE EXT. 544,859.15 1987 1987 10-39
LEE'S SUMMIT,MISSOURI
211 N. E. LAKEWOOD BLVD. 13,703.55 1975 1993 15-31.5
<PAGE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
RAYMORE, MISSOURI
RIDGWAY DRIVE 9 DUPLEXES RESIDENTIAL 876,138.38 180,000.00
VALUATION RESERVE
SHAWNEE MISSION, KANSAS
5000-5012 STATELINE WESTWOOD SHOPS RETAIL 2,469.58
2700-2812 W. 53rd STREET FAIRWAY SHOPS RETAIL 1,099.01
MISSION ROAD & TOMAHAWK PRAIRIE VILLAGE SHOPS RETAIL & OFFICE 11,500,000.00 30,888.91
83rd & MISSION ROAD CORINTH SQUARE SHOPS RETAIL 7,398,513.68 43,329.48
3910-4024 W. 95th STREET 95 & MISSION ROAD SHOPS RETAIL 3,041.37
9507-9541 NALL TRAILWOOD SHOPS RETAIL 4,232.31
9555-9563 NALL 96 & NALL SHOPS RETAIL 508.98
5205-5287 W. 95th STREET TRAILWOOD III SHOPS RETAIL 928,928.49 1,459.41
4101-4117 W. 83rd STREET CORINTH SHOPS SOUTH RETAIL 2,086,760.25 11,930.82
75th STREET & I-35 GEORGETOWN SHOPS RETAIL 11,335.48
8340 MISSION ROAD CORINTH OFFICE BUILDING OFFICE 1,428,292.09 3,714.75
4121 W. 83rd STREET CORINTH EXECUTIVE BUILDING OFFICE 503,906.24 6,309.20
7315 FRONTAGE ROAD HARTFORD OFFICE BUILDING OFFICE 5,003.67
4200 SOMERSET NICHOLS BUILDING OFFICE 1,666,340.74 6,833.98
11111 W. 95th STREET OAK PARK BANK BUILDING OFFICE 554,994.02 4,912.28
7301 MISSION ROAD PRAIRIE VILLAGE OFFICE CTR OFFICE 2,221,787.68 44,254.01
(7) 4350 SHAWNEE MSN PKWAY FAIRWAY WEST OFFICE CTR OFFICE 4,775,000.00 68,829.26
2400 W. 75th STREET BRYMAR BUILDING OFFICE 793,495.60 0.00
(7) 4330 SHAWNEE MSN PKWAY FAIRWAY NORTH OFFICE 4,557,338.78 109,738.65
11836-50 W. 85th STREET QUIVIRA BUS PARK - BLDG A INDUSTRIAL 50,687.34 24,605.05
8441-8457 QUIVIRA QUIVIRA BUS PARK - BLDG B INDUSTRIAL 29,967.49
8419-8433 QUIVIRA QUIVIRA BUS PARK - BLDG C INDUSTRIAL 50,687.34 23,078.94
8403-8417 QUIVIRA QUIVIRA BUS PARK - BLDG D INDUSTRIAL 50,687.34 23,189.30
8347-8363 QUIVIRA QUIVIRA BUS PARK - BLDG E INDUSTRIAL 179,327.62 31,309.18
11835-55 W. 83rd STREET QUIVIRA BUS PARK - BLDG F INDUSTRIAL 185,920.55 34,060.83
8605-8619 QUIVIRA QUIVIRA BUS PARK - BLDG G INDUSTRIAL 131,858.54 27,279.24
11730-11748 W. 86th TERRACE QUIVIRA BUS PARK - BLDG H INDUSTRIAL 162,186.03 36,082.09
11705 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG WE INDUSTRIAL 142,631.83 45,411.53
11531-11621 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG J INDUSTRIAL 1,396,000.00 4,962.42
11633-11647 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG K INDUSTRIAL 304,000.00 1,981.54
11505-11517 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG L INDUSTRIAL 300,000.00 2,055.81
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
RAYMORE, MISSOURI
RIDGWAY DRIVE 1,126,000.00 0.00 180,000.00 1,126,000.00 1,306,000.00
(205,000,000) (205,000,000) (205,000,000)
SHAWNEE MISSION, KANSAS
5000-5012 STATELINE 21,235.73 200.00 2,469.58 21,435.73 23,905.31
2700-2812 W. 53rd STREET 243,393.58 1,363,598.94 29,748.12 1,578,343.41 1,608,091.53
MISSION ROAD & TOMAHAWK 2,150,388.48 3,698,579.35 147,327.98 5,732,528.76 5,879,856.74
83rd & MISSION ROAD 2,033,397.41 3,810,913.30 519,634.88 5,368,005.31 5,887,640.19
3910-4024 W. 95th STREET 110,784.72 71,487.42 63,253.95 122,059.56 185,313.51
9507-9541 NALL 567,657.15 6,919.43 4,232.31 574,576.58 578,808.89
9555-9563 NALL 151,582.59 12,102.31 2,358.11 161,835.77 164,193.88
5205-5287 W. 95th STREET 1,473,876.95 1,250.00 1,459.41 1,475,126.95 1,476,586.36
4101-4117 W. 83rd STREET 191,765.49 2,523,472.27 116,998.94 2,610,169.64 2,727,168.58
75th STREET & I-35 1,548,724.51 1,043,700.63 69,784.00 2,533,976.62 2,603,760.62
8340 MISSION ROAD 1,121,969.53 263,711.42 3,714.75 1,385,680.95 1,389,395.70
4121 W. 83rd STREET 1,117,443.04 352,791.56 6,309.20 1,470,234.60 1,476,543.80
7315 FRONTAGE ROAD 1,344,996.63 360,546.84 64,376.48 1,646,170.66 1,710,547.14
4200 SOMERSET 1,849,885.15 181,596.23 25,135.39 2,013,179.97 2,038,315.36
11111 W. 95th STREET 1,025,675.81 43,574.02 13,202.36 1,060,959.75 1,074,162.11
7301 MISSION ROAD 443,776.10 359,491.16 65,022.18 782,499.09 847,521.27
(7) 4350 SHAWNEE MSN PKWAY 3,771,257.18 233,707.36 147,318.97 3,926,474.83 4,073,793.80
2400 W. 75th STREET 1,634,057.96 70,802.25 12,115.75 1,692,744.46 1,704,860.21
(7) 4330 SHAWNEE MSN PKWAY 3,809,023.27 327,277.05 209,650.61 4,036,388.36 4,246,038.97
11836-50 W. 85th STREET 246,154.19 137,984.66 105,800.85 302,943.05 408,743.90
8441-8457 QUIVIRA 284,610.40 30,284.28 29,967.49 314,894.68 344,862.17
8419-8433 QUIVIRA 235,350.87 70,474.69 23,078.94 305,825.56 328,904.50
8403-8417 QUIVIRA 256,012.59 45,549.66 23,189.30 301,562.25 324,751.55
8347-8363 QUIVIRA 304,367.65 85,714.18 31,309.18 390,081.83 421,391.01
11835-55 W. 83rd STREET 463,200.18 103,179.69 34,060.83 566,379.87 600,440.70
8605-8619 QUIVIRA 244,255.93 4,349.50 27,279.24 248,605.43 275,884.67
11730-11748 W. 86th TERRACE 324,805.22 44,923.28 36,082.09 369,728.50 405,810.59
11705 W. 83rd TERRACE 516,014.72 163,690.84 45,411.53 679,705.56 725,117.09
11531-11621 W. 83rd TERRACE 1,064,466.89 364,385.86 351,273.76 1,082,541.41 1,433,815.17
11633-11647 W. 83rd TERRACE 364,696.36 82,694.58 77,886.82 371,485.66 449,372.48
11505-11517 W. 83rd TERRACE 400,516.67 77,746.77 77,935.78 402,383.47 480,319.25
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
RAYMORE, MISSOURI
RIDGWAY DRIVE 225,201.00 1985 1990 27.5
SHAWNEE MISSION, KANSAS
5000-5012 STATELINE 21,433.73 1926 1926 48
2700-2812 W. 53rd STREET 309,085.36 1940 1940 10-39
MISSION ROAD & TOMAHAWK 3,279,262.29 1948 1948 10-50
83rd & MISSION ROAD 3,497,235.94 1962 1955 10-50
3910-4024 W. 95th STREET 142,497.92 1965 1972 15-50
9507-9541 NALL 455,345.96 1968 1972 10-50
9555-9563 NALL 125,534.85 1976 1981 15-35
5205-5287 W. 95th STREET 679,493.90 1986 1972 10-40
4101-4117 W. 83rd STREET 1,194,941.49 1953 1953 10-55
75th STREET & I-35 1,371,994.79 1974 1965 10-40
8340 MISSION ROAD 932,631.85 1960 1984 15-20
4121 W. 83rd STREET 848,736.55 1973 1986 10-55
7315 FRONTAGE ROAD 1,118,538.58 1978 1975 10-45
4200 SOMERSET 1,228,794.41 1978 1979 10-45
11111 W. 95th STREET 731,437.83 1976 1978 15-40
7301 MISSION ROAD 469,315.41 1960 1981 15-20
(7) 4350 SHAWNEE MSN PKWAY 1,936,510.30 1983 1948 15-32
2400 W. 75th STREET 1,469,987.21 1968 1984 15-20
(7) 4330 SHAWNEE MSN PKWAY 1,929,532.24 1985 1948 10-45
11836-50 W. 85th STREET 246,829.95 1973 1973 15-45
8441-8457 QUIVIRA 217,016.96 1975 1973 15-35
8419-8433 QUIVIRA 167,878.18 1973 1973 15-45
8403-8417 QUIVIRA 175,173.05 1973 1973 15-45
8347-8363 QUIVIRA 231,963.42 1973 1973 10-45
11835-55 W. 83rd STREET 298,993.76 1973 1973 15-45
8605-8619 QUIVIRA 143,468.90 1973 1973 15-45
11730-11748 W. 86th TERRACE 187,931.78 1973 1973 15-45
11705 W. 83rd TERRACE 343,769.74 1973 1973 15-45
11531-11621 W. 83rd TERRACE 769,783.47 1983 1965 10-35
11633-11647 W. 83rd TERRACE 260,030.63 1985 1965 15-35
11505-11517 W. 83rd TERRACE 282,926.87 1985 1965 15-35
<PAGE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS (cont.)
11100-11200 ANTIOCH SHANNON VALLEY SHOPS RETAIL 5,443,497.62 1,800,000.00
SHAWNEE MISSION PKWY & BUENA VISTA RETAIL & IND. 1,265.94
8201 MISSION ROAD FIRST BANK OFFICE BUILDING LAND LEASE 276,648.00
4010 SOMERSET INTRUST BANK BUILDING LAND LEASE 2,165.69
I-35 & 75th ST. (1.1 ACRES) PERKINS RESTAURANT LAND LEASE 1,302.97
I-35 & 75th ST. (.45 ACRES) BANK DRIVE-IN LAND LEASE 537.31
I-35 & 75th ST. (.86 ACRES) CONVENIENCE STORE LAND LEASE 1,019.61
I-35 & 75th ST. (.64 ACRES) VACANT LAND 390.44
5301 WEST 95th ST. (.31 ACRES) SAVINGS & LOAN LAND LEASE 155.00
75th & REINHARDT SERVICE STATION LAND LEASE 12,825.00
8100-8300 QUIVIRA VACANT LAND 45 ACRES 81,308.30
99TH & NIEMAN ROAD VACANT LAND 22 ACRES 26,830.15
3541 SOMERSET DRIVE MAINTENANCE SHOP 849.70
151st & NALL 11.214 ACRES LAND 32,079.05
JOHNSON DRIVE & HWY. 7 FARM HOUSE & BLDGS. 0.00
135th -143rd, METCALF TO NALL FARM HOUSES & BLDGS. 0.00
VARIOUS LOCATIONS TENANT IMPROVEMENTS, ETC. CONST. IN PROGRESS 0.00
3617-3737 SOMERSET DRIVE CORINTH PLACE VILLAS 9 RENTAL CONDOMINIUMS 2,322.78
84th & MISSION ROAD CORINTH GARDENS 52-UNIT APARTMENT COMPLEX 43,000.00
4120 WEST 94th TERR. KENILWORTH 246-UNIT APARTMENT COMPLEX 6,008,417.88 63,527.39
(7) 3815 SOMERSET DRIVE CORINTH PLACE 76-UNIT APARTMENT COMPLEX 4,657,380.12 27,100.81
3518 WEST 83rd ST. MISSION VALLEY 89-UNIT APARTMENT COMPLEX 1,825,039.89 38,191.65
8037 MOHAWK CORINTH PADDOCK 126-UNIT APARTMENT COMPLEX 694,440.49 205,500.00
OLATHE, KANSAS
LOTS ON SANTA FE 1.07 ACRES LAND LEASE 44,441.00
11912-11950 STRANGLINE RD 119 PLAZA RETAIL SHOPS RETAIL 1,366,385.71
MIAMI COUNTY,KANSAS
247th & FARLEY (BUCYRUS, KS) 810 ACRE FARMLAND LAND LEASE 1,173,082.50
OSAGE CITY, KANSAS
(2) EAST HIWAY 31 MANUFACTURED HOMES PLANT BUILDING LEASE (30-ACRE SITE) 4,800,000.00 47,840.00
VALUATION RESERVE
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS (cont.)
11100-11200 ANTIOCH 5,649,764.48 2,462,327.96 2,457,244.77 7,454,847.67 9,912,092.44
SHAWNEE MISSION PKWY & BUENA VISTA 12,695.26 3,284.00 1,265.94 15,979.26 17,245.20
8201 MISSION ROAD 0.00 0.00 276,648.00 0.00 276,648.00
4010 SOMERSET 0.00 0.00 2,165.69 0.00 2,165.69
I-35 & 75th ST. (1.1 ACRES) 0.00 0.00 1,302.97 0.00 1,302.97
I-35 & 75th ST. (.45 ACRES) 0.00 0.00 537.31 0.00 537.31
I-35 & 75th ST. (.86 ACRES) 0.00 0.00 1,019.61 0.00 1,019.61
I-35 & 75th ST. (.64 ACRES) 0.00 0.00 390.44 0.00 390.44
5301 WEST 95th ST. (.31 ACRES) 0.00 0.00 155.00 0.00 155.00
75th & REINHARDT 0.00 0.00 12,825.00 0.00 12,825.00
8100-8300 QUIVIRA 0.00 0.00 81,308.30 0.00 81,308.30
99TH & NIEMAN ROAD 0.00 210,627.96 237,458.11 0.00 237,458.11
3541 SOMERSET DRIVE 266,120.49 0.00 849.70 266,120.49 266,970.19
151st & NALL 159,770.00 11,945.38 44,024.43 159,770.00 203,794.43
JOHNSON DRIVE & HWY. 7 53,106.00 0.00 0.00 53,106.00 53,106.00
135th -143rd, METCALF TO NALL 467,986.81 0.00 0.00 467,986.81 467,986.81
VARIOUS LOCATIONS 0.00 96,642.51 0.00 96,642.51 96,642.51
3617-3737 SOMERSET DRIVE 1,403,220.87 0.00 2,322.78 1,403,220.87 1,405,543.65
84th & MISSION ROAD 228,396.00 16,920.61 47,979.00 240,337.61 288,316.61
4120 WEST 94th TERR. 4,085,514.60 2,483,507.22 347,301.65 6,285,247.56 6,632,549.21
(7) 3815 SOMERSET DRIVE 3,868,981.82 648,655.84 650,565.04 3,894,173.43 4,544,738.47
3518 WEST 83rd ST. 930,038.99 865,441.32 93,437.21 1,740,234.75 1,833,671.96
8037 MOHAWK 986,170.00 228,766.27 307,897.00 1,112,539.27 1,420,436.27
OLATHE, KANSAS
LOTS ON SANTA FE 0.00 0.00 44,441.00 0.00 44,441.00
11912-11950 STRANGLINE RD 2,566,613.12 426,980.68 1,793,366.39 2,566,613.12 4,359,979.51
MIAMI COUNTY,KANSAS
247th & FARLEY (BUCYRUS, KS) 357,950.00 0.00 1,173,082.50 357,950.00 1,531,032.50
OSAGE CITY, KANSAS
(2) EAST HIWAY 31 3,866,625.30 682,582.50 730,422.50 3,866,625.30 4,597,047.80
0.00 (1,333,180.00) 0.00 (1,333,180.00) (1,333,180.00)
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS (cont.)
11100-11200 ANTIOCH 3,639,060.88 1988 1988 10-48
SHAWNEE MISSION PKWY & BUENA VISTA 13,419.30 1956 1928 20-25
8201 MISSION ROAD 0.00 -- 1957 --
4010 SOMERSET 0.00 -- 1955 --
I-35 & 75th ST. (1.1 ACRES) 0.00 -- 1953 --
I-35 & 75th ST. (.45 ACRES) 0.00 -- 1953 --
I-35 & 75th ST. (.86 ACRES) 0.00 -- 1953 --
I-35 & 75th ST. (.64 ACRES) 0.00 -- 1953 --
5301 WEST 95th ST. (.31 ACRES) 0.00 -- 1972 --
75th & REINHARDT 0.00 -- 1950 --
8100-8300 QUIVIRA 0.00 -- 1955 --
99TH & NIEMAN ROAD 169,792.55 1966-1995 1959 15-20
3541 SOMERSET DRIVE 108,479.64 1987 1957 10-40
151st & NALL 135,176.33 1940's 1983 15
JOHNSON DRIVE & HWY. 7 51,926.02 1940's 1981 15
135th -143rd, METCALF TO NALL 121,905.57 1950's 1989 20-27.5
VARIOUS LOCATIONS 0.00 -- 1995 --
3617-3737 SOMERSET DRIVE 56,017.54 1989 1957 15-27.5
84th & MISSION ROAD 5,266.74 1961 1995 15-27.5
4120 WEST 94th TERR. 4,318,520.28 1965 1972 10-40
(7) 3815 SOMERSET DRIVE 1,595,307.22 1987 1987 10-40
3518 WEST 83rd ST. 912,235.71 1964 1972 10-40
8037 MOHAWK 27,907.60 1973 1995 15-27.5
OLATHE, KANSAS
LOTS ON SANTA FE 0.00 -- 1995 --
11912-11950 STRANGLINE RD 167,192.00 1994 1992 15-30
MIAMI COUNTY,KANSAS
247th & FARLEY (BUCYRUS, KS) 16,601.62 1940's-50's 1994 5-30
OSAGE CITY, KANSAS
(2) EAST HIWAY 31 2,138,141.92 1985 1985 5-35
0.00
<PAGE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
WEST DES MOINES, IOWA
(3) 4201 WESTOWN PARK WAY HIGHLAND BUILDING OFFICE 6,430,107.97 322,206.34
(3) 4200 CORPORATE DRIVE CRESTWOOD BUILDING OFFICE 2,378,259.11 171,121.39
(4) 4344 CORPORATE DRIVE SUNSET BUILDING OFFICE 932,508.37 93,758.60
(4) 4601 WESTOWN PARK WAY VERIDIAN BUILDING OFFICE 7,415,661.83 396,386.65
(4) 4200 UNIVERSITY AVE. EDGEWATER BUILDING OFFICE 9,169,665.68 458,901.10
(4) 4445 CORPORATE DRIVE WATERFORD BUILDING OFFICE 4,684,744.45 234,529.32
(5) 4401 WESTOWN PARKWAY NEPTUNE BUILDING OFFICE 6,000,000.00 624,327.00
JOHNSTON, IOWA
(6) 6031 MEADOW CREST DRIVE WINWOOD APARTMENTS 418-UNIT APARTMENT COMPLEX 23,000,000.00 1,299,865.00
SAN FRANCISCO, CALIFORNIA
386 GEARY STREET RAPHAEL HOTEL (152 ROOMS) LEASEHOLD IMPROVEMENTS
ST.PETERSBURG, FLORIDA
2nd ST. SOUTH & CENTRAL BAY PLAZA SHOPS RETAIL 3,382,200.00 6,940,488.09
25 2nd ST. NORTH TROPICANA BUILDING OFFICE 525,000.00 500,000.00
VALUATION RESERVE
TOTAL REVENUE-PRODUCING
PROPERTIES 299,432,466.56 25,176,798.77
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
WEST DES MOINES, IOWA
(3) 4201 WESTOWN PARK WAY 4,462,463.32 817,238.60 916,426.87 4,685,481.39 5,601,908.26
(3) 4200 CORPORATE DRIVE 1,918,468.87 290,736.81 320,937.24 2,059,389.83 2,380,327.07
(4) 4344 CORPORATE DRIVE 834,073.21 176,590.97 93,758.60 1,010,664.18 1,104,422.78
(4) 4601 WESTOWN PARK WAY 5,530,002.53 526,712.06 396,386.65 6,056,714.59 6,453,101.24
(4) 4200 UNIVERSITY AVE. 6,699,068.74 1,072,847.44 679,183.47 7,551,633.81 8,230,817.28
(4) 4445 CORPORATE DRIVE 3,977,761.07 0.00 234,529.32 3,977,761.07 4,212,290.39
(5) 4401 WESTOWN PARKWAY 3,915,102.43 2,277,913.00 1,161,419.48 5,655,922.95 6,817,342.43
JOHNSTON, IOWA
(6) 6031 MEADOW CREST DRIVE 18,100,057.71 1,105,295.20 2,303,504.26 18,201,713.65 20,505,217.91
SAN FRANCISCO, CALIFORNIA
386 GEARY STREET 363,472.67 1,490,001.20 0.00 1,853,473.87 1,853,473.87
ST.PETERSBURG, FLORIDA
2nd ST. SOUTH & CENTRAL 6,309,613.62 3,461,626.95 6,940,488.09 9,771,240.57 16,711,728.66
25 2nd ST. NORTH 1,333,070.23 18,593.65 500,000.00 1,351,663.88 1,851,663.88
VALUATION RESERVE (15,441,963.00) (5,641,963.00) (9,800,000.00) (15,441,963.00)
TOTAL REVENUE-PRODUCING
PROPERTIES 248,930,061.53 67,891,846.33 32,672,654.54 309,326,052.09 341,998,706.63
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
WEST DES MOINES, IOWA
(3) 4201 WESTOWN PARK WAY 2,015,863.60 1987 1987 10-40
(3) 4200 CORPORATE DRIVE 747,936.60 1987 1987 10-40
(4) 4344 CORPORATE DRIVE 206,735.92 1989 1988 5-39
(4) 4601 WESTOWN PARK WAY 1,226,896.25 1989 1988 7-39
(4) 4200 UNIVERSITY AVE. 1,556,987.41 1989 1988 7-39
(4) 4445 CORPORATE DRIVE 746,876.29 1990 1988 31.5
(5) 4401 WESTOWN PARKWAY 2,422,303.44 1986 1986 10-50
JOHNSTON, IOWA
(6) 6031 MEADOW CREST DRIVE 7,515,745.10 1986-87 1985 5-28
SAN FRANCISCO, CALIFORNIA
386 GEARY STREET 1,767,059.95 1908 1971 7-25
ST.PETERSBURG, FLORIDA
2nd ST. SOUTH & CENTRAL 1,155,100.43 1992 1990 31.5
25 2nd ST. NORTH 162,916.66 1914 1992 15-31.5
VALUATION RESERVE 0.00
TOTAL REVENUE-PRODUCING
PROPERTIES 146,310,937.23
</TABLE>
(1) The Company owns a 51.3% interest in the partnership owning these two
office buildings.
(2) The Company owns a 99% profit-sharing interest and a 100% loss-sharing
interest in the partnership owning this facility.
(3) The Company owns a 90% interest in the partnership owning these two office
buildings.
(4) The Company owns a 60% interest in the partnership owning these four office
buildings.
(5) The Company owns an 85% interest in the partnership owning this office
building.
(6) The Company owns a 65% interest in the partnership owning this apartment
complex.
(7) The Company shares 50% of the cash flow from these properties with an
outside company providing credit enhancement support related to the
financing of these properties.
<PAGE>
<TABLE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
LAND AND IMPROVEMENT INVENTORIES
KANSAS CITY, MISSOURI
400 WEST 49th TERR. ALAMEDA TOWERS CONDMINIUMS 37 UNITS SOLD 7,916,240.59 0.00
(19-STORY BUILDING) 18 UNITS REMAINING FOR SALE
VALUATION RESERVE
STONE COUNTY, MISSOURI
TABLE ROCK LAKE (20 MILES 257-LOT SUBDIVISION (104 ACRES) 148 LOTS REMAINING FOR SALE 1,229,735.58
WEST OF BRANSON, MO.)
VALUATION RESERVE (425,000.00)
SHAWNEE MISSION, KANSAS
135th & MISSION ROAD 67 ACRES VACANT LAND 3,163,034.98
JOHNSON DR. & MONTICELLO RD. 371 ACRES VACANT LAND 293,265.19
(1) 135th -151st, METCALF TO NALL 657 ACRES VACANT LAND 13,637,758.24
RESIDENTIAL SUBDIVISIONS:
151st & NALL (S.W. CORNER) GREEN MEADOWS 62 LOTS AVAILABLE FOR SALE 193,987.36
13200 HOWE WATERFORD 1 LOT REMAINING FOR SALE 5,499.65
148th & NALL WHITE HORSE 64 LOTS AVAILABLE FOR SALE 65,698.83
JOHNSON DR. & HWY. K-7 WOODSONIA 85 LOTS AVAILABLE FOR SALE 111,170.85
------------------------------
TOTAL LAND AND IMPROVEMENT
INVENTORIES 7,916,240.59 18,275,150.68
PROPERTY HELD FOR FUTURE DEVELOPMENT
VARIOUS LAND PARCELS KANSAS CITY,
MISSOURI; JOHNSON COUNTY,
KANSAS AND MIAMI COUNTY, KANSAS
HELD FOR FUTURE DEVELOPMENT 19,000,000.00 1,491,879.16
------------------------------
TOTAL PROPERTIES AND MORTGAGE
INDEBTEDNESS PER BALANCE SHEET 326,348,707.15 44,943,828.61
------------------------------
------------------------------
LESS ACCUMULATED DEPRECIATION
TOTAL PROPERTIES, NET OF
ACCUMULATED DEPRECIATION
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED -------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
LAND AND IMPROVEMENT INVENTORIES
KANSAS CITY, MISSOURI
400 WEST 49th TERR. 13,008,412.56 0.00 13,008,412.56 13,008,412.56
(4,558,443.00) 0.00 (4,558,443.00) (4,558,443.00)
STONE COUNTY, MISSOURI
TABLE ROCK LAKE (20 MILES 0.00 1,229,735.58 0.00 1,229,735.58
WEST OF BRANSON, MO.)
(425,000.00) 0.00 (425,000.00)
SHAWNEE MISSION, KANSAS
135th & MISSION ROAD 0.00 0.00 3,163,034.98 0.00 3,163,034.98
JOHNSON DR. & MONTICELLO RD. 0.00 0.00 293,265.19 0.00 293,265.19
(1) 135th -151st, METCALF TO NALL 0.00 0.00 13,637,758.24 0.00 13,637,758.24
RESIDENTIAL SUBDIVISIONS:
151st & NALL (S.W. CORNER) 0.00 0.00 1,903,486.11 0.00 1,903,486.11
13200 HOWE 0.00 0.00 22,574.75 0.00 22,574.75
148th & NALL 0.00 0.00 1,725,961.06 0.00 1,725,961.06
JOHNSON DR. & HWY. K-7 0.00 0.00 2,342,738.76 0.00 2,342,738.76
---------------------------------------------------------------------------------------
TOTAL LAND AND IMPROVEMENT
INVENTORIES 8,449,969.56 0.00 23,893,554.67 8,449,969.56 32,343,524.23
PROPERTY HELD FOR FUTURE DEVELOPMENT
VARIOUS LAND PARCELS KANSAS CITY,
MISSOURI; JOHNSON COUNTY,
KANSAS AND MIAMI COUNTY, KANSAS
HELD FOR FUTURE DEVELOPMENT
0.00 0.00 1,491,879.16 0.00 1,491,879.16
---------------------------------------------------------------------------------------
TOTAL PROPERTIES AND MORTGAGE
INDEBTEDNESS PER BALANCE SHEET 257,380,031.09 67,891,846.33 58,058,088.37 317,776,021.65 375,834,110.02
--------------------------------------------------------------------
--------------------------------------------------------------------
LESS ACCUMULATED DEPRECIATION 146,310,937.23
--------------
TOTAL PROPERTIES, NET OF
ACCUMULATED DEPRECIATION 229,523,172.79
--------------
--------------
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
LAND AND IMPROVEMENT INVENTORIES
KANSAS CITY, MISSOURI
400 WEST 49th TERR. 1988-1995 1962
STONE COUNTY, MISSOURI
TABLE ROCK LAKE (20 MILES 1986
WEST OF BRANSON, MO.)
SHAWNEE MISSION, KANSAS
135th & MISSION ROAD 1994
JOHNSON DR. & MONTICELLO RD. 1978
(1) 135th -151st, METCALF TO NALL 1989
RESIDENTIAL SUBDIVISIONS:
151st & NALL (S.W. CORNER) 1984
13200 HOWE 1983
148th & NALL 1983
JOHNSON DR. & HWY. K-7 1981
TOTAL LAND AND IMPROVEMENT
INVENTORIES
PROPERTY HELD FOR FUTURE DEVELOPMENT
VARIOUS LAND PARCELS KANSAS CITY,
MISSOURI, JOHNSON COUNTY,
KANSAS AND MIAMI COUNTY, KANSAS
HELD FOR FUTURE DEVELOPMENT -------------- 1978-1984
TOTAL PROPERTIES AND MORTGAGE
INDEBTEDNESS PER BALANCE SHEET 146,310,937.23
--------------
--------------
LESS ACCUMULATED DEPRECIATION
TOTAL PROPERTIES, NET OF
ACCUMULATED DEPRECIATION
</TABLE>
(1) All but 88 acres of this property is under contract for sale.
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION ROLLFORWARDS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Real Estate Assets Accumulated Depreciation
------------------------ ------------------------
<S> <C> <C>
Balance at beginning of year $381,182,000 $137,077,000
Additions during year:
Acquisitions 3,700,542 0
Construction and tenant improvements 7,449,127 0
Depreciation and amortization expense (3,324,818) 9,991,182
Deductions during year:
Cost of real estate sold (11,055,540) (757,245)
Valuation allowances and write-offs (2,117,201) 0
------------------------ ------------------------
Balance at end of year $375,834,110 $146,310,937
------------------------ ------------------------
------------------------ ------------------------
</TABLE>
F-8.2
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION ROLLFORWARDS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Real Estate Assets Accumulated Depreciation
------------------------ ------------------------
<S> <C> <C>
Balance at beginning of year $365,840,263 $126,832,000
Additions during year:
Acquisitions 45,210,536 626,000
Construction and tenant improvements 14,580,346 0
Depreciation and amortization expense (6,857,025) 10,644,975
Deductions during year:
Cost of real estate sold (12,925,339) (1,025,975)
Valuation allowances and write-offs (24,666,781) 0
------------------------ ------------------------
Balance at end of year $381,182,000 $137,077,000
------------------------ ------------------------
------------------------ ------------------------
</TABLE>
F-8.3
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
amount loans
subject to
delinquent
Interest Maturity Periodic Prior Face Amt Carrying Amt principal or
Description Rate Date Pymt. Term Liens of Mortgage of Mortgage interest
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Landing Ventures
Shopping Center
Kansas City, MO Prime adj. qtrly 8/15/98 Varying amounts 0 $3,255,000 $3,073,520 $0
over life to maturity
Westport Today Balloon at maturity
Residential Houses & of $2,861,723
3 office bldgs.
Kansas City, MO 8.5% 1/1/12 Level monthly 0 2,768,824 2,280,640 0
at $20,123
Lemons Descendents
Shopping Center
Kansas City, MO 11% 11/30/01 Level monthly 0 750,000 698,053 0
at $7,741
Balloon at maturity
Rayman, Steven M. of $564,556
Apartments
Merriam, KS 7% 12/1/02 Level monthly 0 11,750,000 11,102,003 0
at $87,000
Balloon at maturity
of $8,736,325
Construction loans
on single family
residences 10.50% 3/96 to 6/96 N/A N/A N/A 3,589,862 1,614,766
Other misc. mortgages 0% to 9.5% 1/96 to 4/96 N/A N/A N/A 592,922 299,000
-----------------------------------------
Totals $18,523,824 21,337,000 $1,913,766
------------- ------------
------------- ------------
Reserve for uncollectible accounts (1,468,000)
------------
$19,869,000
------------
------------
</TABLE>
F-9.1
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
ROLLFORWARD OF MORTGAGE LOANS ON REAL ESTATE
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Balance at beginning of year $ 24,332,000
Additions during year:
New mortgage loans 4,591,994
Deductions during year:
Collections of principal (5,065,040)
Settlement expense items (see financial statement note 16) (2,271,954)
Write-offs (250,000)
-------------
Balance at close of year $ 21,337,000
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1995
--------------------------
<S> <C> <C>
Gross Balance $ 24,332,000 $ 21,337,000
Reserve for uncollectible accounts (400,000) (1,468,000)
--------------------------
$ 23,932,000 $ 19,869,000
--------------------------
--------------------------
</TABLE>
F-9.2
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
ROLLFORWARD OF MORTGAGE LOANS ON REAL ESTATE
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Balance at beginning of year $ 28,590,283
Additions during year:
New mortgage loans 9,362,703
Deductions during year:
Collections of principal (13,620,986)
Write-offs -
------------
Balance at close of year $ 24,332,000
------------
------------
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1993 1994
--------------------------
<S> <C> <C>
Gross Balance $ 28,590,283 $ 24,332,000
Reserve for uncollectible accounts (192,283) (400,000)
--------------------------
$ 28,398,000 $ 23,932,000
--------------------------
--------------------------
</TABLE>
F-9.3
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Balance at Charged to
beginning of costs and Charged to Balance at end
Description year expenses other accounts Write -offs of year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Valuation Reserve - Revenue producing property $ 15,025,400 $ 1,830,000 $ 0 $ (139,925) $ 16,715,475
Valuation Reserve - Land and improvements inventory 4,696,242 287,201 0 0 4,983,443
Valuation Reserve - Property held for future development 1,327,450 0 (1,327,450) 0 0
Valuation Reserve - Marketable equity securities 0 85,000 0 0 85,000
Valuation Reserve - Notes and accounts receivable 4,259,930 1,900,750 0 (1,497,679) 4,663,001
Valuation Reserve - Prepaid expenses 1,208,631 0 (1,208,631) 0 0
Valuation Reserve - Investments in real estate
partnerships 1,360,239 0 (68,400) (75,000) 1,216,839
Valuation Reserve - Minority interest 952,474 0 (952,474) 0 0
------------ ------------ ------------ ------------ ------------
Totals $ 28,830,366 $ 4,102,951 $ (3,556,955) $ (1,712,604) $ 27,663,758
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
* These amounts were taken as credits to valuation allowance expense as the
Company was released from the assets and liabilities (net liability position)
of a consolidated affiliate during 1995.
F-10.1
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Balance at Charged to
beginning of costs and Charged to Balance at end
Description year expenses other accounts Write -offs of year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Valuation Reserve - Revenue producing property $ 443,512 $ 14,581,888 $ 0 $ 0 $ 15,025,400
Valuation Reserve - Land and improvements inventory 137,799 4,558,443 0 0 4,696,242
Valuation Reserve - Property held for future development 0 1,327,450 0 0 1,327,450
Valuation Reserve - Notes and accounts receivable 1,195,894 3,064,036 0 0 4,259,930
Valuation Reserve - Prepaid expenses 0 1,208,631 0 0 1,208,631
Valuation Reserve - Investments in real estate
partnerships 0 1,360,239 0 0 1,360,239
Valuation Reserve - Minority interest 0 952,474 0 0 952,474
------------ ------------ ------------ ------------ ------------
Totals $ 1,777,205 $ 27,053,161 $ 0 $ 0 $ 28,830,366
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
F-10.2
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
June 30, December 31,
Assets 1996 1995
------ ---- ----
(unaudited)
Revenue-producing properties $ 192,501,000 195,688,000
Land and improvement inventories 30,060,000 32,344,000
Property held for future development 1,492,000 1,492,000
------------ ------------
Total properties 224,053,000 229,524,000
Cash and cash equivalents 16,633,000 7,209,000
Temporary investments 31,867,000 4,606,000
Marketable equity securities available for sale - 38,114,000
Accounts receivable 1,806,000 4,205,000
Prepaid expenses 8,603,000 9,992,000
Income taxes receivable 4,142,000 4,192,000
Notes receivable 20,546,000 24,032,000
Investments in real estate partnerships 1,731,000 1,857,000
Minority interest in consolidated partnerships 4,383,000 4,284,000
Other assets, net 658,000 680,000
------------ ------------
$ 314,422,000 328,695,000
------------ ------------
------------ ------------
(Continued)
F-11
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30, December 31,
Liabilities and Stockholders' Equity (Deficit) 1996 1995
---------------------------------------------- ---- ----
(unaudited)
Mortgage indebtedness $ 310,817,000 326,349,000
Notes payable to banks and others 2,000,000 5,658,000
Accounts payable and tenants' deposits 5,641,000 6,266,000
Accrued expenses and other liabilities 11,338,000 9,597,000
Accrued contribution to Employee Stock Ownership
Trust 11,050,000 11,050,000
Deferred gains on the sale of property 549,000 552,000
Deferred income taxes 7,708,000 5,948,000
------------ ------------
349,103,000 365,420,000
------------ ------------
Stockholders' equity (deficit):
Common stock, par value $.01 per share;
10,000,000 shares authorized and 5,016,745
shares issued (note 2) 100,000 100,000
Additional paid-in capital (note 2) 8,009,000 7,079,000
Unrealized gain on marketable equity securities
available for sale, net of income taxes of
$0 and $11,466,000 - 21,023,000
Retained earnings 74,637,000 52,500,000
------------ ------------
82,746,000 80,702,000
Less:
Treasury stock, at cost (164,345 shares of
common stock) 117,427,000 117,427,000
------------ ------------
Total stockholders' equity (deficit) (34,681,000) (36,725,000)
Commitments and contingencies
------------ ------------
$ 314,422,000 328,695,000
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
Sales and revenues:
Rents $ 40,150,000 39,787,000
Property sales 4,289,000 3,352,000
Commissions and fees 557,000 631,000
Dividends and interest 2,050,000 1,879,000
Gains on sales of investments and other assets 33,072,000 2,827,000
Equity in earnings of unconsolidated affiliates 233,000 67,000
Other 474,000 337,000
------------- ----------
80,825,000 48,880,000
------------- ----------
Costs and expenses:
Selling, general and operating expenses 23,023,000 22,826,000
Cost of property sales 3,486,000 1,989,000
Interest 12,062,000 13,863,000
Depreciation and amortization 6,892,000 7,124,000
Employee Stock Ownership Trust contribution - 1,787,000
------------- ----------
45,463,000 47,589,000
------------- ----------
Income before income taxes 35,362,000 1,291,000
Income tax expense 13,225,000 500,000
------------- ----------
Net income $ 22,137,000 791,000
------------- ----------
------------- ----------
Net income per share (notes 2 and 4) $ 4.53 .05
------------- ----------
------------- ----------
Dividends $ - -
------------- ----------
------------- ----------
Average number of shares outstanding (note 2) 4,884,400 15,849,920
------------- ----------
------------- ----------
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
Common stock:
Balance at beginning and end of period (note 2) $ 100,000
-------------
Additional paid-in capital (note 2):
Balance at beginning of period 7,079,000
Earned stock compensation 930,000
-------------
Balance at end of period 8,009,000
-------------
Unrealized gain on marketable equity securities available
for sale, net of income taxes
Balance at beginning of period 21,023,000
Unrealized gain, net of income taxes of $183,000 320,000
Realized gain from sale of securities, net of income taxes
of $17,274,000 (21,343,000)
-------------
Balance at end of period -
-------------
Retained earnings:
Balance at beginning of period 52,500,000
Net income 22,137,000
-------------
Balance at end of period 74,637,000
-------------
Treasury stock:
Balance at beginning and end of period (117,427,000)
-------------
Total stockholders' deficit $ (34,681,000)
-------------
-------------
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
------ ------
Operating activities:
Net income $ 22,137,000 791,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of properties 6,375,000 6,610,000
Amortization of deferred costs 517,000 514,000
Deferred income taxes 13,225,000 500,000
Equity in earnings of unconsolidated affiliates (233,000) (67,000)
Employee Stock Ownership Trust contribution - 1,787,000
Earned stock compensation 930,000 -
Gains on sales of investments and other assets (92,000) (2,850,000)
(Gains) losses on sales of marketable equity
securities (32,980,000) 23,000
Changes in:
Land and improvement inventories 2,284,000 7,224,000
Accounts receivable 2,399,000 1,994,000
Minority interest in consolidated partnerships (99,000) 82,000
Accounts payable and tenants' deposits (625,000) 2,150,000
Accrued expenses and other liabilities 1,741,000 (621,000)
Deferred gains on the sale of property (3,000) 49,000
Other, net (431,000) (3,640,000)
------------ ----------
Net cash provided by operating activities 15,145,000 14,546,000
------------ ----------
Investing activities:
Net (increase) decrease in temporary investments (27,261,000) 2,699,000
Payments on notes receivable 5,432,000 2,225,000
Issuance of notes receivable (1,946,000) (2,240,000)
Additions to revenue-producing properties (1,821,000) (4,293,000)
Proceeds from sales of capital assets 101,000 2,547,000
Return of capital from unconsolidated affiliates 347,000 286,000
Proceeds from sales of marketable equity securities 38,617,000 258,000
------------ ----------
Net cash provided by investing activities $ 13,469,000 1,482,000
------------ ----------
(Continued)
F-14
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
1996 1995
---- ----
Financing activities:
Payments on mortgage indebtedness $ (19,757,000) (2,671,000)
Issuance of mortgage indebtedness 4,225,000 -
Issuance of notes to banks and others - 3,186,000
Payments on notes to banks and others (3,658,000) (4,026,000)
Dividends paid - (1,180,000)
Capital contributions from minority partners - 126,000
------------ -----------
Net cash used in financing activities (19,190,000) (4,565,000)
------------ -----------
Net increase in cash and cash equivalents 9,424,000 11,463,000
Cash and cash equivalents, beginning of period 7,209,000 14,186,000
------------ -----------
Cash and cash equivalents, end of period $ 16,633,000 25,649,000
------------ -----------
------------ -----------
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(1) INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of J.C. Nichols Company and
subsidiaries (the Company) have been prepared in accordance with the
instructions to interim financial statements. To the extent that
information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or
consistent with the audited consolidated financial statements, such
information and footnotes have not been duplicated herein. The
December 31, 1995 consolidated balance sheet has been derived from
the audited consolidated financial statements as of that date. In
the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation of
financial statements have been reflected herein. The results of the
interim period ended June 30, 1996 are not necessarily indicative of
the results expected for the year ended December 31, 1996.
(2) STOCK SPLIT
On May 29, 1996, the Company approved an increase from 225,000 to
10,000,000 in the number of shares of common stock authorized for
issuance by the Company and to decrease the par value per share of
common stock from $20.00 to $.01. Additionally, the Company approved
an 80-for-1 stock split of the Company's common stock for all issued
and outstanding shares not then held in the Company's treasury.
Accordingly, the common stock par value decreased from $4,500,000 to
$100,000 with an offsetting increase in additional paid-in capital
from $2,679,000 to $7,079,000. All periods presented have been
restated to reflect the effect of the Company's stock split.
(3) EARNED STOCK COMPENSATION
The Company has granted to an executive officer a stock option to purchase
64,000 shares at a price of $.0125 per share, which option vested 50%
on January 1, 1996 and the remaining 50% will vest on January 1,
1997. Another option has been granted to this executive officer to
purchase 160,000 shares of common stock of the Company at a price of
$19.375 per share, which option vests at a rate of 10% on December
31, 1996, 15% on December 31, 1997 and, 25% annually on December 31
for the years ended 1998, 1999 and 2000.
(4) NET INCOME PER SHARE
Net income per share has been computed based on the average number of
shares and common equivalent shares outstanding during the year. All
periods presented reflect retroactive adjustment for the stock split
approved by the Company on May 29, 1996 (note 2).
(5) MARKETABLE EQUITY SECURITIES
During the six months ended June 30, 1996, the Company liquidated its
investment in marketable equity securities for $38,617,000, realizing
a gain, net of taxes, of $21,343,000.
F-15
<PAGE>
EXHIBIT 3.1
EFFECTIVE 5/30/96
ARTICLES OF INCORPORATION
OF
J.C. NICHOLS COMPANY
--------------------
----------------
NOTE: THE FOLLOWING ARTICLES OF INCORPORATION ARE COMPILED FROM THE MOST RECENT
OFFICIAL RESTATEMENT OF THE ARTICLES AND SUBSEQUENT AMENDMENTS.
----------------
FIRST. The name of the corporation is:
J.C. NICHOLS COMPANY
SECOND. The address of its present registered office in the State of
Missouri is 2300 Main Street, Suite 1100, Kansas City, Missouri 64108, and the
name of its present registered agent at such address is BSMWL, Inc.
THIRD. The aggregate number of shares which the corporation shall have
authority to issue shall be Ten Million (10,000,000) shares of common stock,
each of the par value of one cent (.01) per share.
No holder of any shares of the corporation shall be entitled as such, as a
matter of right, to purchase or subscribe for any shares of stock of the
corporation of any class, whether now or hereafter authorized or whether issued
for cash, property or services or as a dividend or otherwise, or to purchase or
subscribe for any obligations, bonds, notes, debentures, other securities or
stock convertible into shares of stock of the corporation or carrying or
evidencing any right to purchase shares of stock of any class.
FOURTH. The Corporation was originally formed in 1944 as a result of the
consolidation of The J.C. Nichols Investment Company, J.C. Nichols
Development Company and J.C. Nichols Land Company. Pursuant to the terms and
conditions of the Articles of Consolidation and Reorganization, 15,000 shares
of the corporation's common stock of the par value of $100.00 per share were
issued. Without limiting the effect of such consolidation provided by law,
the corporation acquired, by reason of the consolidation, all of the physical
assets, real property, personal property, notes, stocks, bonds, mortgages,
deeds of trust, accounts receivable, rights, privileges, contracts, options,
easements, reservations and chooses in action, including also all rights
reserved prior to the consolidation by all or any of said companies to
enforce restrictions relating to the use of any land or the construction of
improvements thereon, including also all rights reserved prior to the
consolidation by all or any of said companies or granted to all or any of
said companies to modify or consent to the modification of any building
restrictions imposed prior to the consolidation upon any land by all or any
of said companies, and including all rights reserved prior to the
consolidation by all or any of said companies to approve plans of buildings
to be erected upon certain lots or tracts of land, with respect to which lots
or tracts of land all or any of said companies had reserved the right to
approve said plans before the construction of such buildings, and including
all rights reserved prior to the consolidation by all or any of said
companies to petition public authorities for the creation of sewer districts
or joint sewer districts and the construction of sewers therein, of each of
said companies.
<PAGE>
FIFTH. The number of directors to constitute the board of directors of
the corporation is nine. Directors need not be shareholders unless the
bylaws of the corporation require them to be shareholders.
SIXTH. The duration of the corporation is perpetual.
SEVENTH. This corporation is formed for the following purposes:
(a) To engage in the business of general real estate development; to
buy, lease, rent or otherwise acquire, own, hold, use, divide, partition,
plat, subdivide, develop, improve, operate, sell, lease, exchange, mortgage
or otherwise dispose of, deal in and turn to account, as principal, agent,
broker or otherwise, real estate, leaseholds and any and all interests or
estates therein or appertaining thereto; to build, develop, sell, lease,
manage, operate, maintain and otherwise deal in and with, as principal,
agent, broker or otherwise, shopping centers, industrial parks, office and
other commercial buildings, hotels, apartments, residential subdivisions
and any and all other income producing properties; to construct, develop,
lease, sell, manage, operate, alter, improve, maintain, repair and
otherwise deal in and with, as principal, agent, broker or otherwise,
buildings, structures and improvements situated or to be situated on any
real estate or leasehold; to solicit, negotiate, own, hold, buy and sell, as
principal, agent, broker or otherwise, mortgage or other loans; to
construct, maintain, own and operate water mains; to buy, own, grow and
sell trees, shrubbery, plants and other nursery stock; to act as trustee
for neighborhood associations; to build, construct, operate and maintain
streets, roads, sidewalks, curbs, gutters, parks, playgrounds, sewers,
sewage treatment and disposal plants and other improvements, both for
itself and for others; to solicit and sell insurance of any and all kinds
and to act as agent for insurance companies; and to do and perform any and
all other acts and things necessary or desirable in connection therewith or
incidental thereto.
(b) To buy, utilize, lease, rent, import, export, manufacture, produce,
design, prepare, assemble, fabricate, improve, develop, sell, lease,
mortgage, pledge, hypothecate, distribute and otherwise deal in at
wholesale, retail or otherwise, and as principal, agent or otherwise, all
commodities, goods, wares, merchandise, machinery, tools, devices,
apparatus, equipment and all other personal property, whether tangible or
intangible, of every kind without limitation as to description, location or
amount.
(c) To apply for, obtain, purchase, lease, take licenses in respect of
or otherwise acquire, and to hold, own, use, operate, enjoy, turn to
account, grant licenses in respect of, manufacture under, introduce, sell,
assign, mortgage, pledge or otherwise dispose of:
1. Any and all inventions, devices, processes and formulae and
any improvements and modifications thereof;
2. Any and all letters patent of the United States or of any
other country, state or locality, and all rights connected
therewith or appertaining thereto;
3. Any and all copyrights granted by the United States or any
other country, state or locality; and
2
<PAGE>
4. Any and all trademarks, trade names, trade symbols and other
indications of origin and ownership granted by or recognized
under the laws of the United States or of any other country,
state or locality; and to conduct and carry on its business
in any or all of its various branches under any trade name
or trade names.
(d) To enter into any lawful contract or contracts with persons,
firms, corporations, other entities, governments or any agencies or
subdivisions thereof, including guaranteeing the performance of any
contract or any obligation of any person, firm, corporation or other
entity.
(e) To purchase and acquire, as a going concern or otherwise, and to
carry on, maintain and operate all or any part of the property or business
of any corporation, firm, association, entity, syndicate or person
whatsoever, deemed to be of benefit to the corporation, or of use in any
manner in connection with any of its purposes; and to dispose thereof upon
such terms as may seem advisable to the corporation.
(f) To purchase or otherwise acquire, hold, sell, pledge, reissue,
transfer or otherwise deal in, shares of the corporation's own stock,
provided that it shall not use its funds or property for the purchase of
its own shares of stock when such use would be prohibited by law, by the
articles of incorporation or by the bylaws of the corporation; and,
provided further, that shares of its own stock belonging to it shall not be
voted upon directly or indirectly.
(g) To invest, lend and deal with moneys of the corporation in any
lawful manner, and to acquire by purchase, by the exchange of stock or
other securities of the corporation, by subscription or otherwise, and to
invest in, to hold for investment or for any other purpose, and to use,
sell, pledge or otherwise dispose of, and in general to deal in any
interest concerning or enter into any transaction with respect to
(including "long" and "short" sales of) any stocks, bonds, notes,
debentures, certificates, receipts and other securities and obligations of
any government, state, municipality, corporation, association or other
entity, including individuals and partnerships and, while owner thereof, to
exercise all of the rights, powers and privileges of ownership, including,
among other things, the right to vote thereon for any and all purposes and
to give contents with respect thereto.
(h) To borrower or raise money for any purpose of the corporation and
to secure any loan, indebtedness or obligation of the corporation and the
interest accruing thereon, and for that or any other purpose to mortgage,
pledge, hypothecate or charge all or any part of the present or hereafter
acquired property, rights and franchises of the corporation, real,
personal, mind or of any character whatever, subject only to limitations
specifically imposed by law.
(i) To do any or all of the things hereinabove enumerated alone for
its own account, or for the account of others, or as the agent for others,
or in association with others or by or through others, and to enter into
all lawful contracts and undertakings in respect thereof.
(j) To have one or more offices, to conduct its business, carry on its
operations and promote its objects within and without the State of
Missouri, in other states, the District
3
<PAGE>
of Columbia, the territories, colonies and dependencies of the United
States, in foreign countries and anywhere in the world, without restriction
as to place, manner or amount, but subject to the laws applicable thereto;
and to do any or all of the things herein set forth to the same extent as a
natural person might or could do and in any part of the world, either alone
or in company with others.
(k) In general, to carry on any other business in connection with each
and all of the foregoing or incidental thereto, and to carry on, transact
and engage in any and every lawful business or other lawful thing
calculated to be of gain, profit or benefit to the corporation as fully and
freely as a natural person might do, to the extent and in the manner, and
anywhere within and without the State of Missouri, as it may from time to
time determine; and to have and exercise each and all of the powers and
privileges, either direct or incidental, which are given and provided by or
are available under the laws of the State of Missouri in respect of general
and business corporations organized for profit thereunder; provided,
however, that the corporation shall not engage in any activity for which a
corporation may not be formed under the laws of the State of Missouri.
None of the purposes and powers specified in any of the paragraphs of this
Article SEVENTH shall be in any way limited or restricted by reference to or
inference from the terms of any other paragraph, and the purposes and powers
specified in each of the paragraphs of this Article SEVENTH shall be regarded as
independent purposes and powers. The enumeration of specific purposes and
powers in this Article SEVENTH shall not be construed to restrict in any manner
the general purposes and powers of this corporation, nor shall the expression of
one thing be deemed to exclude another, although it be of like nature. The
enumeration of purposes or powers herein shall not be deemed to exclude or in
any way limit by inference any purposes or powers which this Corporation has
power to exercise, whether expressly by the laws of the Sate of Missouri, now or
hereafter in effect, or impliedly by any reasonable construction of such laws.
EIGHTH.
(a) Except as may be otherwise specifically provided by statute, or
the articles of incorporation or the bylaws of the corporation, as from
time to time amended, all powers of management, direction and control of
the corporation shall be, and hereby are, vested in the board of directors.
(b) The bylaws of the corporation may from time to time be altered,
amended, suspended or repealed or new bylaws may be adopted, in any of the
following ways: (i) by the affirmative vote, at any annual or special
meeting of the shareholders, of the holders of a majority of the
outstanding shares of stock of the corporation entitled to vote; or (ii) by
resolution adopted by a majority of the full board of directors at a
meeting thereof, or (iii) by unanimous written consent of all the
shareholders or all the directors in lieu of a meeting; provided, however,
that the power of the directors to alter, amend, suspend or repeal the
bylaws or any portion thereof may be denied as to any bylaws or any portion
thereof enacted by the shareholders if at the time of such enactment the
shareholders shall so expressly provide.
(c) The corporation may agree to the terms and conditions upon which
any director or officer accepts his office or position and in its bylaws or
by contract may agree to indemnify and protect each and all of such persons
and any person who, at the request of the corpoation, served as a director
or officer of another corporation in which this
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corporation owned stock against all costs and expenses reasonably incurred
by any or all of them, and all liability imposed or threatened to be imposed
upon any or all of them, by reason of or arising out of their or any of
them being or having been a director or officer of this corporation or of
such other corporation; but any such bylaw or contractual provision shall
not be exclusive of any other right or rights of any such director or
officer to be indemnified and protected against such costs and liabilities
which he may otherwise possess.
NINTH. Except as may be otherwise provided by the bylaws of the
corporation, no contract or other transaction between this corpoation and any
other firm or corporation shall be affected or invalidated by reason of the fact
that any director or officer of this corporation is interested in, or is a
member, shareholder, director or officer of such other firm or corporation; and
any director or officer of this corporation, individually or jointly with one or
more other directors or officers of this corporation, may be a party to, or may
be interested in, any contract or transaction of this corporation or in which
this corporation is interested, and no such contract or transaction shall be
affected or invalidated thereby; and each and every person who may become a
director or officer of this corporation is hereby relieved from any liability
that might otherwise exist from his contracting with this corporation for the
beneift of himself or any person, firm, association or corporation in which he
may be in any way interested.
TENTH. The directors shall have power to hold their meetings and to keep
the books (except any books required to be kept in the State of Missouri,
pursuant to the laws thereof) at any place with or without the State of
Missouri.
ELEVENTH. The corporation reserves the right to alter, amend or repeal any
provision contained in its articles of incorporation in the manner now or
hereafter prescribed by the statutes of Missouri, and all rights and powers
conferred herein are granted subject to this reservation; and, in particular,
the corporation reserves the right and privilege to amend its articles of
incorporation from time to time so as to authorize other or additional classes
of shares (including preferential shares), to increase or decrease the number of
shares of any class now or hereafter authorized, to establish, limit or deny to
shareholders of any class the right to purchase or subscribe for any shares of
stock of the corporation of any class, whether now or hereafter authorized or
whether issued for cash, property or services or as a dividend or otherwise, or
to purchase or subscribe for any obligations, bonds, notes, debentures, or
securities or stock convertible into shares of stock of the corporation or
carrying or evidencing any right to purchase shares of stock of any class, and
to vary the preferences, priorities, special powers, qualifications,
limitations, restrictions and the special or relative rights or other
characteristics in respect of the shares of each class, and to accept and avail
itself of, or subject itself to, the provisions of any statutes of Missouri
hereafter enacted pertaining to general and business corporations, to exercise
all the rights, powers and privileges conferred upon corporations organized
thereunder or accepting the provisions thereof and to assume the obligations and
duties imposed therein, upon the affirmative vote of the holders of a majority
of the shares of stock entitled to vote thereon, or, in the event the laws of
Missouri require a separate vote by classes of shares, upon the affirmative vote
of the holders of a majority of the shares of each class whose separate vote is
required thereon.
TWELFTH. The terms, provisions and procedures of the Missouri Control
Share Acquisition Statute, Mo. Rev. Stat. Section 351.407, or any subsequent
amendments thereof, or substitutions therefor, or supplements thereto, shall not
apply to Control Share Acquistions of shares of stock of the corporation.
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BYLAWS
OF
J. C. NICHOLS COMPANY
OFFICES AND RECORDS
1. OFFICES AND REGISTERED AGENT.
(a) REGISTERED OFFICE AND REGISTERED AGENT. The location of the
registered office and the name of the registered agent of the corporation in the
State of Missouri shall be such as shall be determined from time to time by the
board of directors and on file in the appropriate office of the State of
Missouri pursuant to applicable provisions of law. Unless otherwise permitted
by law, the address of the registered office of the corporation and the address
of the business office of the registered agent shall be identical.
(b) CORPORATE OFFICES. The corporation may have such corporate
offices anywhere within or without the State of Missouri as the board of
directors from time to time may determine or the business of the corporation may
require. The "principal place of business" or "principal business" or
"executive" office or offices of the corporation may be fixed and so designated
from time to time by the board of directors, but the location or residence of
the corporation in Missouri shall be deemed for all purposes to be in the county
in which its registered office in Missouri is maintained.
2. RECORDS.
(a) MAINTENANCE. The corporation shall keep at its registered
office, or principal place of business, in Missouri, original or duplicate books
in which shall be recorded the number of its shares subscribed, the names of the
owners of its shares, the numbers owned of record by them respectively, the
amount of shares paid, and by whom, the transfer of said shares with the date of
transfer, the amount of its assets and liabilities, minutes of proceedings of
its shareholders and directors, and the names and places of residence of its
officers, and from time to time such other or additional records, statements,
lists, and information as may be required by law.
(b) INSPECTION OF RECORDS. A shareholder, if he be entitled and
demands to inspect the records of the corporation pursuant to any statutory or
other legal right, shall be privileged to inspect such records only during the
usual and customary hours of business and in such manner as will not unduly
interfere with the regular conduct of the business of the corporation. A
shareholder may delegate his right of inspection to an attorney or a certified
or public accountant. A shareholder must, as a condition precedent to any
inspection, agree that neither he nor his agent shall use, permit to be used or
acquiesce in the use by others of any information so obtained to the detriment
competitively of the corporation, nor shall he furnish or permit to be furnished
any information so obtained to any competitor or prospective competitor of the
corporation. The corporation as a condition precedent to any shareholder's
inspection of the records of the corporation may require the shareholder to
indemnify the corporation, in such manner and for such amount as may be
determined by the board of directors, against any loss or damage which may be
suffered by it arising out of or resulting from any unauthorized disclosure made
or permitted to be made by such shareholder of information obtained in the
course of such inspection.
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3. CORPORATE SEAL. The corporate seal shall have inscribed thereon the
name of the corporation and the words: Corporate Seal--Missouri. Said seal may
be used by causing it or a facsimile thereof to be impressed or affixed or in
any manner reproduced. If deemed advisable by the board of directors, a
duplicate seal or duplicate seals may be provided and kept for the necessary
purposes of the corporation.
SHAREHOLDERS' MEETINGS
4. PLACE OF MEETINGS. All meetings of the shareholders shall be held at
the principal business office of the corporation in Missouri, except such
meetings as the board of directors to the extent permissible by law expressly
determine may be held elsewhere, in which case such meetings may be held, upon
notice thereof as hereinafter provided, at such other place or places, within or
without the State of Missouri, as the board of directors determine, and as shall
be stated in such notice; and, unless specifically prohibited by law, any
meeting may be held at any place and time, and for any purpose, if consented to
in writing by all of the shareholders entitled to vote thereat.
5. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of shareholders shall be
held at 10:00 a.m., local time, on the fourth Monday in April of each year, or
on such other date or at such other time as the board of directors may determine
by resolution. The purpose of the annual meeting shall be to elect directors
and transact such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day.
(b) SPECIAL MEETINGS. Special meetings of the shareholders may be
held for any purpose or purposes and may be called by the chairman of the board,
by the president, by the secretary, by the board of directors, or by
shareholders upon the written request of the holders of not less than one-fifth
(1/5) of all outstanding shares entitled to vote at any such meeting, and shall
be called by any officer directed to do so by the board of directors.
The "call" and the "notice" of any such meeting shall be deemed to be
synonymous.
(c) CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. Any action required
to be taken or which may be taken at a meeting of the shareholders may be taken
without a meeting if consents in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
action so taken. Such consent shall have the same force and effect of a meeting
duly held and may be stated as such in any certificate or document filed under
the General and Business Corporation Law of Missouri. The secretary shall file
such consents with the minutes of the meetings of the shareholders.
6. PROCEDURAL MATTERS.
(a) NOTICE. Written or printed notice of each meeting of the
shareholders, whether annual or special, stating the place, day and hour of the
meeting, and, in case of a special meeting, the purpose or purposes thereof,
shall be delivered or given to each shareholder entitled to vote thereat, by or
at the direction of the chairman of the board, president, or secretary, either
personally or by mail, not less than ten (10) days or more than seventy (70)
days prior to the meeting, unless, as to a
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particular matter, other or further notice is required by law, in which case
such other or further notice shall be given. Any notice of a shareholders'
meeting sent by mail shall be deemed to be delivered when deposited in the
United States mail with postage thereon prepaid addressed to the shareholder at
his address as it appears on the records of the corporation.
(b) WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of these bylaws, or of the articles of incorporation or of
any law, a waiver thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
the equivalent to the giving of such notice. Attendance of a shareholder at any
meeting shall constitute a waiver of notice of such meeting except where a
shareholder attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
(c) CONDUCT OF MEETINGS. The Chairman of the Board, if any, or in
his absence the President, or in their absence any Vice President, shall call to
order meetings of shareholders and shall act as chairman of such meetings. The
board of directors, or, if the board fails to act, the shareholders, may appoint
any stockholder, director or officer of the corporation to act as chairman of
any meeting in the absence of the Chairman of the Board, the President and all
Vice Presidents. The Secretary of the corporation, or in his absence the
Assistant Secretary, shall act as Secretary of all meetings of shareholders,
but, in the absence of the Secretary and Assistant Secretary, the chairman of
the meeting may appoint any other person to act as secretary of the meeting.
The board of directors of the corporation may adopt by resolution such rules or
regulations for the conduct of meetings of shareholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the board of directors, the chairman of any meeting of
shareholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the board of directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (1) the establishment of an agenda or order of business for the
meeting; (2) rules and procedures for maintaining order at the meeting; (3)
limitation on attendance at or participation in the meeting to shareholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the chairman shall permit; (4) restrictions on entry to the
meeting after the time fixed for the commencement thereof; (5) whether the
election of directors shall be by written ballot; and (6) limitations on the
time allotted to questions or comments by participants. Unless and to the
extent determined by the board of directors or the chairman of the meeting,
meetings of shareholders shall not be required to be held in accordance with
rules of parliamentary procedure.
7. BUSINESS OF MEETINGS.
(a) BUSINESS WHICH MAY BE TRANSACTED AT ANNUAL MEETINGS. At each
annual meeting of the shareholders, the shareholders shall elect one-third of
the total number of the full board of directors. Such individuals shall hold
office for a three year term ending after the annual meeting held in the third
year after the year of election and after their successors shall have been
elected and qualified and shall elect to serve. In addition the shareholders
may transact such other business as may be desired, whether or not the same was
specified in the notice of the meeting, unless the consideration of such other
business without its having been specified in the notice of the meeting as one
of the purposes thereof is prohibited by law.
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(b) BUSINESS WHICH MAY BE TRANSACTED AT SPECIAL MEETINGS. Business
transacted at all special meetings shall be confined to the purposes stated in
the notice of such meeting, unless the transaction of other business is
consented to by the holders of all of the outstanding shares of stock of the
corporation entitled to vote thereat.
8. QUORUM. Except as otherwise may be provided by law or by the articles
of incorporation, the holders of a majority of the outstanding shares entitled
to vote thereat, present in person or by proxy, shall constitute a quorum for
the transaction of business at all meetings of the shareholders. Every decision
of a majority in amount of shares of such quorum shall be valid as a corporate
act, except in those specific instances in which a larger vote is required by
law or by the articles of incorporation. If, however, such quorum should not be
present at any meeting, the shareholders present and entitled to vote shall have
power successively to adjourn the meeting, without notice to any shareholder
other than announcement at the meeting, to a specified date not longer than 90
days after such adjournment. At any subsequent session of the meeting at which
a quorum is present in person or by proxy any business may be transacted which
could have been transacted at the initial session of the meeting if a quorum had
been present.
9. VOTING.
(a) PROXIES. At any meeting of the shareholders, every shareholder
entitled to vote at such meeting may vote either in person or by proxy executed
in writing by the shareholder or his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting. No proxy shall be valid after 11 months from the date of its
execution unless otherwise provided in the proxy. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only so long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A shareholder may revoke any proxy which is not irrevocable by attending
the meeting and voting in person or by filing a written revocation or another
duly executed proxy bearing a later date with the secretary of the corporation.
(b) VOTES PER SHARE. Each shareholder shall have one vote for each
share of stock entitled to vote under the provisions of the articles of
incorporation and which is registered in his name on the books of the
corporation; but in the election of directors, cumulative voting shall prevail.
Accordingly, each shareholder shall have the right to cast as many votes in the
aggregate as shall equal the number of voting shares so held by him, multiplied
by the number of directors to be elected at such election, and he may cast the
whole number of such votes for one candidate or distribute them among two or
more candidates. Directors shall not be elected in any other manner, unless
such cumulative voting be unanimously waived by all shareholders present.
No person shall be permitted to vote any shares belonging,
hypothecated or pledged to the corporation.
(c) REGISTERED SHAREHOLDERS--EXCEPTIONS--STOCK OWNERSHIP PRESUMED.
If the board of directors shall not have closed the transfer books of the
corporation and there shall be no date fixed by the board of directors or by
statute for the determination of its shareholders entitled to vote, no person
shall be admitted to vote directly or by proxy except those in whose names the
shares of the corporation shall stand on the transfer books at the time of the
meeting. The corporation shall be entitled to treat the holders of the shares
of stock of the corporation, as recorded on the stock record or transfer books
of the corporation, as the holders of record and as the holders and owners in
fact
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thereof and, accordingly, the corporation shall not be required to recognize any
equitable or other claim to or interest in any such shares on the part of any
other person, firm, partnership, corporation or association, whether or not the
corporation shall have express or other notice thereof, except as is otherwise
expressly required by law, and the term "shareholder" as used in these bylaws
means one who is a holder of record of shares of the corporation; provided,
however, that if permitted by law,
(i) shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such
corporation may determine;
(ii) shares standing in the name of a deceased person may be
voted by his administrator or executor, either in person or
by proxy; and shares standing in the name of a guardian,
curator or trustee may be voted by such fiduciary, either in
person or by proxy, but no guardian, curator or trustee
shall be entitled, as such fiduciary, to vote shares held by
him without a transfer of such shares into his name;
(iii) shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into his name if authority to do so be contained in
an appropriate order of the court by which such receiver was
appointed; or
(iv) except as limited by paragraph 9(b), a shareholder whose
shares are pledged shall be entitled to vote such shares
until the shares have been transferred of record into the
name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
10. SHAREHOLDERS' LISTS. A complete list of the shareholders entitled to
vote at each meeting of the shareholders, arranged in alphabetical order, with
the address of, and the number of voting shares held by each, shall be prepared
by the officer of the corporation having charge of the stock transfer books of
the corporation, and shall, for a period of ten (10) days prior to the meeting,
be kept on file at the registered office of the corporation in Missouri and
shall at any time during the usual hours for business be subject to inspection
by any shareholder. Such list or a duplicate thereof shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The
original share ledger or transfer book, or a duplicate thereof kept in the State
of Missouri, shall be prima facie evidence as to who are the shareholders
entitled to examine such list, share ledger or transfer book or to vote at any
meeting of shareholders.
Failure to comply with the foregoing shall not affect the validity of any
action taken at any such meeting.
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DIRECTORS
11. DIRECTORS--NUMBER. The number of directors to constitute the board of
directors shall be as is provided from time to time in the articles of
incorporation. Directors need not be shareholders unless the articles of
incorporation at any time so require.
Advisory directors may be appointed by the Chairman to serve for an
indefinite period of time at the discretion of the Chairman.
12. CLASS OF DIRECTORS. The board of directors shall be divided equally
into three classes, the directors in each class shall be elected for a three
year term, and only one class of directors shall be elected at each annual
meeting of the shareholders. At each annual meeting, directors to replace those
whose terms expire at such annual meeting shall be elected to hold office until
the third succeeding annual meeting. Each director shall hold office until such
director's successor shall have been elected and qualified. Directors need not
be residents of Missouri or shareholders of the corporation. Each director,
upon election, shall qualify by accepting the office of director and such
person's attendance at, or written approval of the minutes of, any meeting of
the board of directors held subsequent to election shall constitute acceptance.
13. POWERS OF THE BOARD. The property and business of the corporation
shall be controlled and managed by the directors, acting as a board. The board
shall have and is vested with all and unlimited powers and authorities, except
as may be expressly limited by law, the articles of incorporation or these
bylaws, to do or cause to be done any and all lawful things for and in behalf of
the corporation, to exercise or cause to be exercised any or all of its power,
privileges and franchises, and to seek the effectuation of its objects and
purposes.
14. MEETINGS OF THE NEWLY ELECTED BOARD--NOTICE. The newly elected
members of the board and those members of the board who continue in office shall
meet (i) at such time and place, either within or without the State of Missouri,
as shall be suggested or provided for by resolution of the shareholders at the
annual meeting and no notice of such meeting shall be necessary to such
directors in order legally to constitute the meeting, provided a quorum shall be
present, or (ii) if not so suggested or provided for by resolution of the
shareholders or if a quorum shall not be present, the members of such board may
meet at such time and place as shall be consented to in writing by a majority of
the directors, provided that written or printed notice of such meeting shall be
communicated to each of the other directors in the same manner as provided in
paragraph 16 of these bylaws with respect to the giving of notice for special
meetings of the board except that it shall not be necessary to state the purpose
of the meeting in such notice, or (iii) regardless of whether or not the time
and place of such meeting shall be suggested or provided for by resolution of
the shareholders at the annual meeting, the members of such board may meet at
such time and place as shall be consented to in writing by a majority of the
directors, which consent shall be deemed to exist for those directors attending
such meeting.
15. REGULAR MEETINGS--NOTICE. Regular meetings of the board or any
committee thereof may be held without notice at such times and places either
within or without the State of Missouri as shall from time to time be fixed by
resolution adopted by the full board of directors in the case of the board or,
in the case of a committee of the board, by resolution adopted by the respective
committee. Any business may be transacted at a regular meeting.
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16. SPECIAL MEETINGS--NOTICE. Special meetings of the board may be called
at any time by the chairman of the board, the president, any vice president or
the secretary, or by any one or more of the directors. Special meetings of any
committee of the board may be called at any time by the chairman of the
committee or by any one or more of the members of the committee. The place may
be within or without the State of Missouri as designated in the notice.
Written or printed notice of each special meeting of the board, stating the
place, day and hour of the meeting and the purpose or purposes thereof, shall be
mailed to each director at least five (5) days before the day on which the
meeting is to be held, or shall either be sent to him by electronic or facsimile
transmission or be hand delivered, in either case during regular and customary
business hours at least one full business day in advance of the meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail with postage thereon, addressed to the director at his residence or
usual place of business. If notice be given by delivery, such notice shall be
deemed to be delivered when the same is delivered by hand. If notice is given
by electronic or facsimile transmission, such notice shall be deemed to be
delivered when transmitted as set forth above to the director at his residence
or usual place of business.
Written or printed notice of each special meeting of a committee of the
board, stating the place, day and hour of the meeting and the purpose or
purposes thereof, shall be mailed to each member of the committee at least five
(5) days before the day on which the meeting is to be held, or shall either be
sent to him by electronic or facsimile transmission or be hand delivered, in
either case during regular and customary business hours at least one full
business day in advance of the meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail with postage thereon,
addressed to the member of the committee at his residence or usual place of
business. If notice be given by delivery, such notice shall be deemed to be
delivered when the same is delivered by hand. If notice is given by electronic
or facsimile transmission, such notice shall be deemed to be delivered when
transmitted as set forth above to the member of the committee at his residence
or usual place of business.
"Notice" and "call" with respect to such meetings shall be deemed to be
synonymous.
17. WAIVER OF NOTICE. Whenever any notice is required to be given to any
director under the provisions of these bylaws, or of the articles of
incorporation or of any law, a waiver thereof in writing signed by such
director, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
18 QUORUM. At all meetings of the board, a majority of the full board of
directors shall, unless a greater number as to any particular matter is required
by the articles of incorporation or these bylaws, constitute a quorum for the
transaction of business. The act of a majority of the directors present at any
meeting at which a quorum is present, except as may be otherwise specifically
provided by statute, the articles of incorporation, or these bylaws, shall be
the act of the board of directors.
19. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies on the board of
directors and newly created directorships resulting from any increase in the
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by the sole remaining director, until the next
election of directors by the shareholders of the corporation.
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20. TELEPHONE MEETING AND ATTENDANCE BY TELEPHONE. Members of Board of
directors or any committee of the board of directors may participate in any
meeting of the Board of directors or such committee by means of conference
telephone or similar communications equipment whereby all persons participating
in the meeting can hear each other, and participation in a meeting in this
manner shall constitute presence in person at the meeting.
21. ACTION WITHOUT A MEETING. Any action which is required to be or may
be taken at a meeting of the board of directors or any committee of the board of
directors may be taken without a meeting if consents in writing, setting forth
the action so taken, are signed by all of the directors or of the committee
members as the case may be. The consents shall have the same force and effect
as a unanimous vote at a meeting held, and may be stated as such in any
certificate or document filed under the General Business and Corporation Law of
Missouri. The secretary shall file the consents with the minutes of the
meetings of the board of directors or of the committee as the case may be.
22. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST LIABILITIES AND
EXPENSES IN ACTIONS. Subject to Section (b), the corporation shall indemnify
any person who is or was a director or officer of the corporation who is or was
a party, or is threatened to be made a party:
(i) to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative; or
(ii) to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its
favor,
by reason of the fact that such person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding. Notwithstanding, the corporation may in
its discretion, by action of its board of directors, grant indemnification to
employees and agents of the corporation to the extent provided for in this
bylaw.
(b) LIMITS OF INDEMNIFICATION: No indemnification shall be made to
any person from or on account of such person's conduct which was finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct. The corporation may in its discretion, by action of its board of
directors, deny to any person the indemnity provided in this bylaw in the event
that such person fails to notify the corporation within a reasonable period of
time of the commencement of any action, suit or proceeding or threat thereof, is
to be made against the corporation. The failure of such person to so notify the
corporation shall not relieve the corporation from any liability which it may
otherwise have under Mo. Rev. Stat. 351.355, or under any other bylaw, any
agreement or otherwise. The corporation shall be entitled to participate in any
such action, suit, or proceeding at its own expense and may employ its own
counsel.
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(c) ADVANCEMENT OF EXPENSES: Expenses incurred in defending a civil
or criminal action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the corporation as provided in this bylaw.
(d) NONEXCLUSIVE RIGHT: The indemnification and advancement of
expenses provided by this bylaw shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation or any other bylaw or any
agreement, vote of the shareholders or otherwise, both as to action in a
person's official capacity and as to action in another capacity while holding
the office of director or officer. The corporation is hereby expressly
authorized by the shareholders to enter into agreements with its present and
future directors and officers which provide further indemnification as granted
pursuant to this bylaw. Any such agreement providing for further indemnity
entered into pursuant to this bylaw after the date of approval of this bylaw by
the corporation's shareholders need not be further approved by the shareholders
of the corporation to be fully effective and enforceable. Such indemnification
(whether by agreement or otherwise) shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person.
(e) LIABILITY TO CORPORATION: No director or officer of the
corporation shall be liable to the corporation for any loss, damage, liability
or expense suffered by it on account of any action taken or omitted to be taken
by such person as a director or officer of the corporation, or of another
corporation, partnership, joint venture, trust or other enterprise (including
employee benefit plans) which such person serves as a director, officer,
employee or agent at the request of the corporation, if such person:
(i) exercised the same degree of care and skill as a prudent man
would have exercised under the circumstances in the conduct
of his own affairs, or
(ii) took or omitted to take such action in reliance upon advice
of counsel for the corporation, or for another corporation,
partnership, joint venture, trust or other enterprise or
upon statements made or information furnished by directors,
officers, employees or agents of the corporation, or of
another corporation, partnership, joint venture, trust or
other enterprise (including employee benefit plans) which
such person had no reasonable grounds to disbelieve.
23. REMOVAL OF DIRECTORS. Notwithstanding the foregoing, a director may
be removed by the affirmative vote of the holders of a majority of the shares
of the corporation, or such greater number of shares as may be required by law,
at an annual meeting or any special meeting called for that purpose. In
addition, a director may be removed by the affirmative vote of a majority of the
entire board of directors, if, in the opinion of the board based on its
knowledge at the time, such director has: (i) violated the fiduciary duties of
such director to the corporation and its shareholders, (ii) engaged in self-
dealing or other interested transactions without fully informing the board of
those transactions, or (iii) personally engaged in any conduct or transactions
involving corporate property that were not fully disclosed to the board and were
not fair to the corporation.
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24. BOARD COMMITTEES. The board of directors may, by resolution or
resolutions adopted by a majority of the whole board of directors, designate an
executive committee, such committee to consist of two or more directors of the
corporation, which committee, to the extent provided in said resolution or
resolutions, shall have and may exercise all of the authority of the board of
directors in the management of the corporation; provided, however, that the
designation of such committee and the delegation thereto of authority shall not
operate to relieve the board of directors, or any member thereof, of any
responsibility imposed upon it or him by law. The board of directors may, by
resolution or resolutions adopted by a majority of the whole board of directors,
designate a compensation committee and an audit committee, each such committee
to consist of two or more directors of the corporation. The audit committee
shall have responsibility for working with the accounting firm retained by the
corporation to review the annual financial statements of the corporation and
related management letter and for periodic review with the chief financial
officer of the corporation of the financial performance of the corporation. The
compensation committee shall be responsible for at least annual review of the
compensation for the chief executive officer, chief financial officer and any
senior vice president of the corporation.
Each committee shall keep regular minutes of its proceedings, which
minutes shall be recorded in the minute book of the corporation. The secretary
or an assistant secretary of the corporation may act as secretary for any
committee if the committee so requests.
In addition to the committees specifically provided for in these bylaws,
the board of directors, by resolution adopted a majority of the whole board of
directors, may designate and appoint two (2) or more directors to constitute any
other committee. Persons other than directors may be designated to serve in an
advisory capacity to any such committee. Each such committee, to the extent
provided in the resolution, shall have and may exercise all of the authority
provided in the resolutions designating and appointing any such committee, or
reasonably inferred therefrom, and the board of directors; provided, however,
that the designation of any such committee and the delegation thereto of
authority shall not operate to relieve the board of directors, or any members
thereof, of any responsibility imposed upon it or him by law. The board of
directors may also, by resolution adopted by a majority of the whole board of
directors, from time to time appoint special advisory committees, the member of
which may but need not be Directors and which shall serve at the pleasure of the
board of directors, which shall have such authority as may be conferred by the
board of directors and shall report and make recommendations to the board of
directors with respect to specified subjects.
25. COMPENSATION OF DIRECTORS AND COMMITTEE MEMBERS. Directors and
members of all committees of the board shall not receive any stated salary for
their services as such, but by resolution of the board, a fixed sum and expenses
of attendance, paid in cash, stock or other securities of the corporation or
such other consideration as the board may select, if any, may be allowed for
attendance at each regular or special meeting of the board or committee;
provided that nothing herein contained shall be construed to preclude any
director or committee member from serving the corporation in any other capacity
and receiving compensation therefor.
OFFICERS
26. (a) OFFICERS--WHO SHALL CONSTITUTE. The officers of the corporation
shall be a chairman of the board, a president, one or more vice presidents, a
secretary, a treasurer, one or more assistant secretaries, and one or more
assistant treasurers. The board shall elect or appoint a president and
secretary at its first meeting after each annual meeting of the shareholders.
The board then, or
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from time to time, may also elect or appoint one or more of the other prescribed
officers as it shall deem advisable, but need not elect or appoint any officers
other than a president and a secretary. The board may, if it desires, designate
any vice president as an executive or senior vice president and may further
identify or describe any one or more of such officers.
The officers of the corporation need not be members of the board of
directors. Any two or more offices may be held by the same person, except the
offices of president and secretary.
An officer shall be deemed qualified when he enters upon the duties of
the office to which he has been elected or appointed and furnishes any bond
required by the board; but the board may also require of such person his written
acceptance and promise to faithfully discharge the duties of such office.
(b) TERM OF OFFICE AND VACANCIES. Each officer of the corporation
shall hold his office at the pleasure of the board of directors or for such
other period as the board may specify at the time of his election or
appointment, or until his death, resignation or removal by the board, whichever
first occurs. In any event, the term of office of each officer of the
corporation holding his office at the pleasure of the board shall terminate at
the annual meeting of the board next succeeding his election or appointment and
at which any officer of the corporation is elected or appointed, unless the
board provides otherwise at the time of his election or appointment. Any
vacancy occurring in the office of president or secretary of the corporation by
death, resignation, removal or otherwise may be filled for the unexpired portion
of the term by the board of directors at any regular or special meeting and any
vacancy occurring in any other office may be filled for the unexpired portion of
the term by the president.
(c) OTHER AGENTS. The board from time to time may also appoint such
other agents for the corporation as it shall deem necessary or advisable, each
of whom shall serve at the pleasure of the board or for such period as the board
may specify, and shall exercise such powers, have such titles and perform such
duties as shall be determined from time to time by the board or by an officer
empowered by the board to make such determinations.
27. REMOVAL AND RESIGNATION. Any officer or agent elected or appointed by
the board of directors, and any employee, may be removed or discharged by the
board whenever in its judgment the best interests of the corporation would be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Any officer of the corporation may
resign at any time by giving written notice to the board of directors, the
president or the secretary of the corporation. Any such resignation shall take
effect at the time specified therein or, if the time is not specified therein,
then upon the receipt of the notice. The acceptance of such resignation shall
not be necessary to make it effective. Such resignation shall be without
prejudice to the contract rights, if any, of the corporation.
28. SALARIES AND COMPENSATION. Salaries and compensation of all elected
officers of the corporation shall be fixed, increased or decreased by the board
of directors, but this power, except as to the salary or compensation of the
chairman of the board and the president, may, unless prohibited by law, be
delegated by the board to the chairman of the board, the president, or a
committee. Salaries and compensation of all appointed officers and agents, and
of all employees of the corporation, may be fixed, increased or decreased by the
board of directors, but until action is taken with respect thereto
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by the board of directors, the same may be fixed, increased or decreased by the
president or by such other officer or officers as may be empowered by the board
of directors to do so.
29. DELEGATION OF AUTHORITY TO HIRE, DISCHARGE AND DESIGNATE DUTIES. The
board from time to time may delegate to the chairman of the board, the president
or other officer or executive employee of the corporation, authority to hire,
discharge and fix and modify the duties, salary or other compensation of
employees of the corporation under their jurisdiction, and the board may
delegate to such officer or executive employee similar authority with respect to
obtaining and retaining for the corporation the services of attorneys,
accountants and other experts.
30. THE CHAIRMAN OF THE BOARD. If a chairman of the board be elected or
appointed, he shall, preside at all meetings of the shareholders and directors
at which he may be present and shall have such other duties, powers and
authority as may be prescribed elsewhere in these bylaws. The board of
directors may delegate such other authority and assign such additional duties to
the chairman of the board, other than those conferred by law exclusively upon
the president, as it may from time to time determine.
31. THE PRESIDENT. Unless the board otherwise provides, the president
shall be the chief executive officer of the corporation with such general
executive powers and duties of supervision and management as are usually vested
in the office of the chief executive officer of a corporation, and he shall
carry into effect all directions and resolutions of the board. The president,
in the absence of the chairman of the board, or if there be no chairman of the
board, shall preside at all meetings of the shareholders and directors.
The president may execute all bonds, notes, debentures, mortgages and other
contracts requiring a seal, under the seal of the corporation and may cause the
seal to be affixed thereto, and all other instruments for and in the name of the
corporation.
Unless the board otherwise provides, the president, or any person
designated in writing by him, may (i) attend meetings of shareholders of other
corporations to represent this corporation thereat and to vote or take action
with respect to the shares of any such corporation owned by this corporation in
such manner as he or his designee may determine, and (ii) execute and deliver
waivers of notice and proxies for and in the name of the corporation with
respect to any such shares owned by this corporation.
He shall have such other or further duties and authority as may be
prescribed elsewhere in these bylaws or from time to time by the board of
directors.
If a chairman of the board be elected or appointed and designated as the
chief executive officer of the corporation, as provided in paragraph 29 of these
bylaws, the president shall perform such duties as may be specifically delegated
to him by the board of directors and as are conferred by law exclusively upon
him, and in the absence, disability or inability to act of the chairman of the
board, the president shall perform the duties and exercise the powers of the
chairman of the board.
32. VICE PRESIDENTS. The vice presidents, in the order of their
seniority, as determined by the board, shall, in the absence, disability or
inability to act of the president, perform the duties and exercise the powers of
the president, and shall perform such other duties as the board of directors
shall from time to time prescribe.
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33. THE SECRETARY AND ASSISTANT SECRETARIES. The secretary shall attend
all sessions of the board and, all meetings of the shareholders, and shall
record or cause to be recorded all votes taken and the minutes of all
proceedings in a minute book of the corporation to be kept for that purpose. He
shall perform like duties for the executive and other standing committees when
requested by the board or any such committee to do so.
He shall see that all books, records, lists and information, or duplicates,
required to be maintained at the registered or some office of the corporation in
Missouri, or elsewhere, are so maintained.
He shall keep in safe custody the seal of the corporation, and when duly
authorized to do so shall affix the same to any instrument requiring it, and
when so affixed, he shall attest the same by his signature.
He shall perform such other duties and have such other authority as may be
prescribed elsewhere in these bylaws or from time to time by the board of
directors or the chief executive officer of the corporation, under whose direct
supervision he shall be.
He shall have the general duties, powers and responsibilities of a
secretary of a corporation.
Any assistant secretary, in the absence, disability or inability to act of
the secretary, may perform the duties and exercise the powers of the secretary,
and shall perform such other duties and have such other authority as the board
of directors may from time to time prescribe.
34. THE TREASURER AND ASSISTANT TREASURERS. The treasurer shall have
responsibility for the safekeeping of the funds and securities of the
corporation, shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall keep,
or cause to be kept, all other books of account and accounting records of the
corporation. He shall deposit or cause to be deposited all moneys and other
valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors or by any officer of
the corporation to whom such authority has been granted by the board of
directors.
He shall disburse, or permit to be disbursed, the funds of the corporation
as may be ordered, or authorized generally, by the board, and shall render to
the chief executive officer of the corporation and the directors whenever they
may require it, an account of all his transactions as treasurer and of those
under his jurisdiction, and of the financial condition of the corporation.
He shall perform such other duties and shall have such other responsibility
and authority as may be prescribed elsewhere in these bylaws or from time to
time by the board of directors.
He shall have the general duties, powers and responsibility of a treasurer
of a corporation and shall, unless otherwise provided by the board, be the chief
financial and accounting officer of the corporation.
If required by the board, he shall give the corporation a bond in a sum and
with one or more sureties satisfactory to the board, for the faithful
performance of the duties of his office, and for the restoration to the
corporation, in the case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control which belong to the corporation.
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Any assistant treasurer, in the absence, disability or inability to act of
the treasurer, may perform the duties and exercise the powers of the treasurer,
and shall perform such other duties and have such other authority as the board
of directors may from time to time prescribe.
35. DUTIES OF OFFICERS MAY BE DELEGATED. If any officer of the
corporation be absent or unable to act, or for any other reason that the board
may deem sufficient, the board may delegate, for the time being, some or all of
the functions, duties, powers and responsibilities of any officer to any other
officer, or to any other agent or employee of the corporation or other
responsible person, provided a majority of the whole board of directors concurs
therein.
SHARES OF STOCK
36. PAYMENT FOR SHARES OF STOCK. The corporation shall not issue shares
of stock except for money paid, labor done or property actually received;
provided, however, that shares may be issued in consideration of valid bona fide
antecedent debts. No note or obligation given by any shareholder, whether
secured by deed of trust, mortgage or otherwise, shall be considered as payment
of any part of any share or shares.
37. CERTIFICATES FOR SHARES OF STOCK. The certificates for shares of
stock of the corporation shall be numbered, shall be in such form as may be
prescribed by the board of directors in conformity with law, and shall be
entered in the stock books of the corporation as they are issued. Such entries
shall show the name and address of the person, firm, partnership, corporation or
association to whom each certificate is issued. Each certificate shall have
printed, typed or written thereon the name of the person, firm, partnership,
corporation or association to whom it is issued and the number of shares
represented thereby. It shall be signed by the president or a vice president
and the secretary or an assistant secretary or the treasurer or an assistant
treasurer of the corporation, and sealed with the seal of the corporation, which
seal may be facsimile, engraved or printed. If the corporation has a transfer
agent or a transfer clerk who signs such certificates, the signatures of any of
the other officers above mentioned may be facsimiles, engraved or printed. In
case any such officer who has signed or whose facsimile signature has been
placed upon any such certificate shall have ceased to be such officer before
such certificate is issued, such certificate may nevertheless be issued by the
corporation with the same effect as if such officer were an officer at the date
of its issue.
38. TRANSFERS OF SHARES--TRANSFER AGENT--REGISTRAR. Transfers of shares
of stock shall be made on the stock record or transfer books of the corporation
only by the person named in the stock certificate, or by his attorney lawfully
constituted in writing, and upon surrender of the certificate therefor. The
stock record book and other transfer records shall be in the possession of the
secretary or of a transfer agent or transfer clerk for the corporation. The
corporation, by resolution of the board, may from time to time appoint a
transfer agent or transfer clerk, and, if desired, a registrar, under such
arrangements and upon such terms and conditions as the board deems advisable,
but until and unless the board appoints some other person, firm or corporation
as its transfer agent or transfer clerk (and upon the revocation of any such
appointment thereafter until a new appointment is similarly made), the secretary
of the corporation shall be the transfer agent or transfer clerk of the
corporation without the necessity of any formal action of the board, and the
secretary, or any person designated by him, shall perform all the duties
thereof.
39. CLOSING OF TRANSFER BOOKS. The board of directors shall have power to
close the stock transfer books of the corporation for a period not exceeding
seventy (70) days preceding the date of any
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meeting of the shareholders, or the date of payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of shares shall go into effect; provided, however, that in lieu of
closing the stock transfer books as aforesaid, the board of directors may fix in
advance a date not exceeding seventy (70) days preceding the date of any meeting
of shareholders, or the date for the payment of any dividend, or the date for
the allotment of rights, or the date when any change or conversion or exchange
of shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or
entitled to any such allotment of rights, or entitled to exercise the rights in
respect of any such change, conversion or exchange of shares. In such case such
shareholders and only such shareholders as shall be shareholders of record on
the date of closing of the transfer books or on the record date so fixed shall
be entitled to notice of, and to vote at, such meeting, and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after such date of
closing of the transfer books, or such record date fixed as aforesaid.
40. LOST OR DESTROYED CERTIFICATES. In case of the loss or destruction of
any certificate for shares of stock of the corporation, another may be issued in
its place upon proof of such loss or destruction and upon the giving of a
satisfactory bond of indemnity to the corporation and the transfer agent and the
registrar of such stock, if any, in such sum as the board of directors may
provide; provided, however, that a new certificate may be issued without
requiring a bond when in the judgment of the board it is proper so to do.
41. REGULATIONS. The board of directors shall have power and authority to
make all such rules and regulations as it may deem expedient concerning the
issue, transfer, conversion and registration of certificates for shares of stock
of the corporation, not inconsistent with the laws of Missouri, the articles of
incorporation or these bylaws.
GENERAL
42. FIXING OF CAPITAL--TRANSFERS OF SURPLUS. Except as may be
specifically otherwise provided in the articles of incorporation, the board of
directors is expressly empowered to exercise all authority conferred upon it or
the corporation by any law or statute, and in conformity therewith, relative to:
(i) the determination of what part of the consideration received
for shares of the corporation shall be stated capital,
(ii) increasing stated capital,
(iii) transferring surplus to stated capital,
(iv) the consideration to be received by the corporation for its
shares, and
(v) all similar or related matters;
provided that any concurrent action or consent by or of the corporation and its
shareholders required to be taken or given pursuant to law, shall be duly taken
or given in connection therewith.
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43. DIVIDENDS. Dividends upon the outstanding shares of the corporation,
subject to the provisions of the articles of incorporation and of any applicable
law, may be declared by the board of directors at any meeting. Dividends may be
paid in cash, in property, or in shares of the corporation's stock.
Liquidating dividends or dividends representing a distribution of paid-in
surplus or a return of capital shall be made only when and in the manner
permitted by law.
44. CREATION OF RESERVES. Before the payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the board of directors from time to time deems proper as a
reserve fund or funds to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for any other
purpose deemed by the board to be conducive to the interests of the corporation,
and the board may abolish any such reserve in the manner in which it was
created.
45. CHECKS. All checks and similar instruments for the payment of money
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate. If no such designation
is made, and unless and until the board otherwise provides, the president and
secretary or the president and treasurer, shall have power to sign all such
instruments for, in behalf and in the name of the corporation which are executed
or made in the ordinary course of the corporation's business.
46. FISCAL YEAR. The board of directors shall have power to fix and from
time to time change the fiscal year of the corporation. In the absence of
action by the board of directors, however, the fiscal year of the corporation
shall end each year on the date which the corporation treated as the close of
its first fiscal year, until such time, if any, as the fiscal year shall be
changed by the board of directors.
47. DIRECTORS' ANNUAL STATEMENT. The board of directors may present at
each annual meeting, and when called for by vote of the shareholders, shall
present to any annual or special meeting of the shareholders, a full and clear
statement of the business and condition of the corporation.
48. AMENDMENTS. The bylaws of the corporation may from time to time be
suspended, repealed, amended or altered, or new bylaws may be adopted, in the
manner provided in the articles of incorporation.
CERTIFICATE
I, the undersigned, hereby certify that the foregoing bylaws are the duly
authorized bylaws of the Corporation and hereby further certify that the
foregoing constitute the bylaws of said Corporation effective as of January 25,
1996.
---------------------------------------------
Secretary
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J. C. NICHOLS COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN
INDEX
- -----
PAGE
----
ARTICLE I NAME OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 ACCRUED BENEFITS . . . . . . . . . . . . . . . . . . . . . 2
2.2 ACTIVE PARTICIPANT . . . . . . . . . . . . . . . . . . . . 2
2.3 AFFILIATED EMPLOYER. . . . . . . . . . . . . . . . . . . . 2
2.4 BENEFICIARY. . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 COMPANY STOCK. . . . . . . . . . . . . . . . . . . . . . . 2
2.7 COMPANY STOCK ACCOUNT. . . . . . . . . . . . . . . . . . . 3
2.8 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 DIRECTED INVESTMENT ACCOUNT. . . . . . . . . . . . . . . . 3
2.10 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . 3
2.11 EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 EMPLOYEE ROLLOVER ACCOUNT. . . . . . . . . . . . . . . . . 4
2.13 EMPLOYER . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 EXEMPT LOAN. . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 FAMILY MEMBER. . . . . . . . . . . . . . . . . . . . . . . 4
2.17 FIDUCIARY. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 FIVE PERCENT OWNER . . . . . . . . . . . . . . . . . . . . 5
2.19 FORFEITURE . . . . . . . . . . . . . . . . . . . . . . . . 5
2.20 FORMER PARTICIPANT . . . . . . . . . . . . . . . . . . . . 6
2.21 415 COMPENSATION . . . . . . . . . . . . . . . . . . . . . 6
2.22 HIGHLY COMPENSATED EMPLOYEE. . . . . . . . . . . . . . . . 6
2.23 HOUR OF SERVICE. . . . . . . . . . . . . . . . . . . . . . 6
2.24 KEY EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 LIMITATION YEAR. . . . . . . . . . . . . . . . . . . . . . 8
2.26 NON-HIGHLY COMPENSATED EMPLOYEE. . . . . . . . . . . . . . 8
2.27 NON-KEY EMPLOYEE . . . . . . . . . . . . . . . . . . . . . 8
2.28 NORMAL RETIREMENT DATE . . . . . . . . . . . . . . . . . . 8
2.29 ONE YEAR BREAK-IN-SERVICE. . . . . . . . . . . . . . . . . 9
2.30 OTHER INVESTMENTS ACCOUNT. . . . . . . . . . . . . . . . . 9
2.31 PARTICIPANT. . . . . . . . . . . . . . . . . . . . . . . . 9
2.32 PARTICIPATION ACCOUNT. . . . . . . . . . . . . . . . . . .10
2.33 PERMANENT DISABILITY . . . . . . . . . . . . . . . . . . .10
2.34 PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.35 PLAN ADMINISTRATOR . . . . . . . . . . . . . . . . . . . .10
2.36 PLAN YEAR. . . . . . . . . . . . . . . . . . . . . . . . .10
2.37 REGULATION . . . . . . . . . . . . . . . . . . . . . . . .10
2.38 RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . .10
2.39 TERMINATION DATE . . . . . . . . . . . . . . . . . . . . .11
2.40 TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.41 TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . .11
2.42 TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
2.43 UNALLOCATED COMPANY STOCK SUSPENSE ACCOUNT . . . . . . . .11
2.44 VALUATION DATE . . . . . . . . . . . . . . . . . . . . . .11
2.45 VESTED . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.46 YEAR OF SERVICE. . . . . . . . . . . . . . . . . . . . . .12
ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . .12
3.1 CONDITIONS OF ELIGIBILITY. . . . . . . . . . . . . . . . .12
3.2 EFFECTIVE DATE OF PARTICIPATION. . . . . . . . . . . . . .12
3.3 PARTICIPANTS PRIOR TO AMENDMENT AND
RESTATEMENT. . . . . . . . . . . . . . . . . . . . . . . .13
3.4 DETERMINATION OF ELIGIBILITY . . . . . . . . . . . . . . .13
3.5 PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE IV CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . .13
4.1 AMOUNT OF CONTRIBUTIONS. . . . . . . . . . . . . . . . . .13
4.2 TIME OF PAYMENT OF CONTRIBUTIONS . . . . . . . . . . . . .14
4.3 EXCLUSIVE BENEFIT OF PARTICIPANTS. . . . . . . . . . . . .14
4.4 APPROVAL BY IRS. . . . . . . . . . . . . . . . . . . . . .14
4.5 EMPLOYER CONTRIBUTIONS ONLY. . . . . . . . . . . . . . . .14
ARTICLE V ROLLOVERS . . . . . . . . . . . . . . . . . . . . . . . . . . .15
5.1 TRANSFERS FROM OTHER PLANS . . . . . . . . . . . . . . . .15
5.2 SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . .15
5.3 WHEN PAYABLE . . . . . . . . . . . . . . . . . . . . . . .15
5.4 SELF-EMPLOYED RESTRICTIONS . . . . . . . . . . . . . . . .15
5.5 INVESTMENT OF ROLLOVER . . . . . . . . . . . . . . . . . .16
5.6 RESTRICTION ON TRANSFER. . . . . . . . . . . . . . . . . .16
ARTICLE VI PARTICIPATION ACCOUNTS, ALLOCATIONS AND
ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.1 SEPARATE ACCOUNTS. . . . . . . . . . . . . . . . . . . . .16
6.2 EMPLOYER CONTRIBUTIONS AND FORFEITURES . . . . . . . . . .17
6.3 ALLOCATIONS AND ADJUSTMENTS TO OTHER
INVESTMENT ACCOUNTS. . . . . . . . . . . . . . . . . . . .18
6.4 ALLOCATIONS AND ADJUSTMENTS TO COMPANY STOCK
ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . .19
6.5 DIVIDENDS ON COMPANY STOCK . . . . . . . . . . . . . . . .20
6.6 ALLOCATIONS OF SECTION 1042 STOCK. . . . . . . . . . . . .21
6.7 ACCOUNTING PROCEDURES. . . . . . . . . . . . . . . . . . .23
6.8 DETERMINATION OF ELIGIBILITY . . . . . . . . . . . . . . .23
6.9 SEGREGATED ACCOUNTS. . . . . . . . . . . . . . . . . . . .23
6.10 MAXIMUM ANNUAL ADDITIONS . . . . . . . . . . . . . . . . .24
6.11 STATEMENT OF PLAN INTEREST . . . . . . . . . . . . . . . .25
ARTICLE VII PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . .25
<PAGE>
7.1 WHEN BENEFITS BECOME DISTRIBUTABLE . . . . . . . . . . . .25
7.2 VESTED PORTION OF PARTICIPATION ACCOUNT. . . . . . . . . .26
7.3 TIME FOR DISTRIBUTION. . . . . . . . . . . . . . . . . . .27
7.4 ACCOUNTS OF TERMINATED PARTICIPANTS;
FORFEITURE ACCOUNTS; RESTORATIONS. . . . . . . . . . . . .30
7.5 MANNER AND METHOD OF DISTRIBUTION. . . . . . . . . . . . .31
7.6 DESIGNATION OF BENEFICIARY . . . . . . . . . . . . . . . .33
7.7 RIGHTS OF FIRST REFUSAL. . . . . . . . . . . . . . . . . .34
7.8 STOCK CERTIFICATE LEGEND . . . . . . . . . . . . . . . . .35
7.9 PUT OPTION . . . . . . . . . . . . . . . . . . . . . . . .35
7.10 NONTERMINABLE PROTECTIONS AND RIGHTS . . . . . . . . . . .36
7.11 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS. . . . . . . . .36
ARTICLE VIII NATURE OF PARTICIPANT'S INTEREST. . . . . . . . . . . . . . . .36
8.1 NO RIGHTS TO EMPLOYMENT. . . . . . . . . . . . . . . . . .36
8.2 NO PRESENT VALUE OR CONTROL OVER BENEFITS. . . . . . . . .37
8.3 ALIENATION . . . . . . . . . . . . . . . . . . . . . . . .37
ARTICLE IX PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . .38
9.1 PLAN ADMINISTRATOR . . . . . . . . . . . . . . . . . . . .38
9.2 AGENT FOR SERVICE OF PROCESS . . . . . . . . . . . . . . .38
9.3 REPORTS AND STATEMENTS . . . . . . . . . . . . . . . . . .38
9.4 DETERMINATION OF ACCRUED BENEFITS. . . . . . . . . . . . .38
9.5 CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . .38
9.6 APPEAL PROCEDURE . . . . . . . . . . . . . . . . . . . . .39
ARTICLE X BONDING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . .39
ARTICLE XI AMENDMENT, TERMINATION AND MERGER . . . . . . . . . . . . . . .40
11.1 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . .40
11.2 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . .40
11.3 MERGER OR CONSOLIDATION. . . . . . . . . . . . . . . . . .41
ARTICLE XII TRUST AGREEMENT AND INVESTMENT POLICY . . . . . . . . . . . . .41
12.1 TRUST AGREEMENT. . . . . . . . . . . . . . . . . . . . . .41
12.2 INVESTMENT POLICY. . . . . . . . . . . . . . . . . . . . .41
ARTICLE XIII GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
13.1 RECEIPT AND RELEASE. . . . . . . . . . . . . . . . . . . .42
13.2 SOURCE OF BENEFITS . . . . . . . . . . . . . . . . . . . .42
13.3 INFORMATION FROM PARTICIPANTS. . . . . . . . . . . . . . .42
13.4 INSPECTION OF PLAN DOCUMENTS . . . . . . . . . . . . . . .43
13.5 RESTRAINT ON DISCRETIONARY DECISIONS . . . . . . . . . . .43
<PAGE>
13.6 TITLES . . . . . . . . . . . . . . . . . . . . . . . . . .43
13.7 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . .43
13.8 STATE LAW GOVERNING PLAN . . . . . . . . . . . . . . . . .43
13.9 INTENTION TO COMPLY WITH CODE. . . . . . . . . . . . . . .43
13.10 ACTION BY THE EMPLOYER . . . . . . . . . . . . . . . . . .44
13.11 NAMED FIDUCIARIES AND ALLOCATION OF
RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . .44
13.12 LEGAL ACTION . . . . . . . . . . . . . . . . . . . . . . .44
13.13 SECURITIES AND EXCHANGE COMMISSION APPROVAL. . . . . . . .44
13.14 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . .45
ARTICLE XIV DIVERSIFICATION REQUIREMENT . . . . . . . . . . . . . . . . . .45
14.1 DIVERSIFICATION ELECTION . . . . . . . . . . . . . . . . .45
14.2 METHODS OF MEETING REQUIREMENTS. . . . . . . . . . . . . .45
ARTICLE XV TOP HEAVY PROVISIONS. . . . . . . . . . . . . . . . . . . . . .46
15.1 TOP HEAVY PLAN REQUIREMENTS. . . . . . . . . . . . . . . .46
15.2 DETERMINATION OF TOP HEAVY STATUS. . . . . . . . . . . . .46
15.3 SPECIAL MINIMUM ALLOCATIONS. . . . . . . . . . . . . . . .49
15.4 SPECIAL VESTING. . . . . . . . . . . . . . . . . . . . . .50
ARTICLE XVI PARTICIPATING EMPLOYERS . . . . . . . . . . . . . . . . . . . .51
16.1 ADOPTION BY OTHER EMPLOYERS. . . . . . . . . . . . . . . .51
16.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS. . . . . . . . . .51
16.3 DESIGNATION OF AGENT . . . . . . . . . . . . . . . . . . .52
16.4 EMPLOYEE TRANSFERS . . . . . . . . . . . . . . . . . . . .52
16.5 PARTICIPATING EMPLOYER'S CONTRIBUTION. . . . . . . . . . .53
16.6 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . .53
16.7 DISCONTINUANCE OF PARTICIPATION. . . . . . . . . . . . . .53
16.8 PLAN ADMINISTRATOR'S AUTHORITY . . . . . . . . . . . . . .53
<PAGE>
AMENDMENT TO AND RESTATEMENT OF
J. C. NICHOLS COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, on November 12, 1987, J. C. NICHOLS COMPANY, a Missouri
corporation ("Employer"), established a certain employee stock ownership plan
for the exclusive benefit of its employees, which plan, as amended by those
certain amendments dated July 21, 1988, August 11, 1988, September 8, 1989 and
April 26, 1993, respectively, is known as the J. C. NICHOLS COMPANY EMPLOYEE
STOCK OWNERSHIP PLAN ("Plan"); and
WHEREAS, the Employer now wishes to amend certain portions of the Plan
effective as of January 1, 1987, for the purposes of bringing said Plan into
conformity with the requirements of the Tax Reform Act of 1986, the Omnibus
Budget Reconciliation Act of 1986, the Omnibus Budget Reconciliation Act of
1987, the Technical and Miscellaneous Revenue Act of 1988, the Omnibus Budget
Reconciliation Act of 1989, the Revenue Reconciliation Act of 1990, the
Unemployment Compensation Amendments of 1992 and the Omnibus Budget
Reconciliation Act of 1993, and thereby continue its qualified and tax exempt
status as an employee stock ownership plan under Sections 401(a), 501(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended, and the Employee
Retirement Income Security Act of 1974, for the Plan Year beginning on the
effective date of this amendment and restatement and for all subsequent Plan
Years; and
WHEREAS, under the terms of the Plan, the Employer has the express
authority to amend the Plan, in whole or in part, at any time; and
WHEREAS, the Employer now wishes to amend and restate the Plan in its
entirety in the form that follows;
NOW, THEREFORE, in consideration of these premises and for the purposes
stated, the Employer adopts the following AMENDMENT TO AND RESTATEMENT OF J. C.
NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN to be effective for the Plan Year
beginning January 1, 1987:
ARTICLE I
NAME OF PLAN
This Plan shall be known as "J. C. NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP
PLAN" (hereinafter referred to as the "Plan").
<PAGE>
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following definitions shall apply:
2.1 ACCRUED BENEFITS
"Accrued Benefits" shall mean the Vested balance of the Participation
Account maintained for each Participant adjusted for withdrawals, income,
expenses, and realized and unrealized gains and losses attributable thereto.
2.2 ACTIVE PARTICIPANT
"Active Participant" shall mean a Participant who, in a given Plan Year,
meets the conditions of Section 6.2(a)(i) or (ii).
2.3 AFFILIATED EMPLOYER
"Affiliated Employer" shall mean the Employer and any corporation which is
a member of a controlled group of corporations (as defined in Code Section
414(b)) which includes such Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section 414(c))
with the Employer; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Employer, and any other entity required to be aggregated with the
Employer pursuant to Regulations under Code Section 414(o).
2.4 BENEFICIARY
"Beneficiary" shall mean a person to whom a deceased Participant's Accrued
Benefits are payable, determined in accordance with Section 7.6.
2.5 CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
2.6 COMPANY STOCK
"Company Stock" shall mean shares of capital stock issued by the Employer
(or by a corporation which is a member of the same controlled group), which
shares are voting common stock (or preferred stock convertible into voting
stock) and are "employer securities" under Code Section 409(l).
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<PAGE>
2.7 COMPANY STOCK ACCOUNT
"Company Stock Account" shall mean the account which reflects a
Participant's interest in Company Stock held under the ESOP.
2.8 COMPENSATION
"Compensation" shall mean a Participant's total salary and wages paid by
the Employer for a Plan Year. Amounts contributed by the Employer under this
Plan and any non-taxable fringe benefits shall not be considered as
Compensation.
Compensation shall be recognized only as of an Employee's effective date of
participation pursuant to Article III.
Compensation in excess of one hundred fifty thousand dollars ($150,000)
shall be disregarded. Such amount shall be adjusted for increases in the cost
of living in accordance with Code Section 401(a)(17)(B). In applying this
limitation, the family group of a Highly Compensated Employee who is subject to
the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a Five Percent Owner or one of the ten (10) Highly
Compensated Employees paid the greatest 415 Compensation during the year, shall
be treated as a single Participant, except that for this purpose Family Members
shall include only the affected Participant's spouse and any lineal descendants
who have not attained age nineteen (19) years before the close of the year. If,
as a result of the application of such rules the adjusted $150,000 limitation is
exceeded, then the limitation shall be prorated among the affected Family
Members in proportion to each such Family Member's Compensation prior to the
application of this limitation.
The amendments made by this Section 2.8 shall be effective January 1, 1994.
2.9 DIRECTED INVESTMENT ACCOUNT
"Directed Investment Account" shall mean the account which reflects a
Participant's interest in investments held pursuant to a diversification
election under Article XIV.
2.10 EFFECTIVE DATE
"Effective Date" of this Plan shall be January 1, 1987, the first day of
the Plan Year in which this Plan was initially established. The "Effective
Date" of this Plan amendment and restatement shall be January 1, 1987, the first
day of the Plan Year commencing after December 31, 1986.
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<PAGE>
2.11 EMPLOYEE
"Employee" shall mean any common-law employee of the Employer, but
excluding any person who is included in a unit of employees covered by a
collective bargaining agreement between employee representatives and the
Employer under which retirement benefits were the subject of good faith
bargaining between the parties, unless such agreement expressly provides for
such coverage in this Plan.
The term "Employee" shall also include any leased employees within the
meaning of Code Section 414(n)(2) unless such leased employees are covered by a
plan described in Code Section 414(n)(5) and such leased employees do not
constitute more than 20% of the recipient's non-highly compensated work force.
2.12 EMPLOYEE ROLLOVER ACCOUNT
"Employee Rollover Account" shall mean the account which reflects a
Participant's interest in qualified rollover contributions pursuant to Article
V.
2.13 EMPLOYER
"Employer" shall mean J. C. NICHOLS COMPANY and any successor thereto which
shall maintain this Plan. Unless the context of the Plan clearly indicates to
the contrary, "Employer" shall be deemed to include each Participating Employer
(as defined in Section 16.1) as related to its adoption of the Plan.
2.14 ESOP
"ESOP" shall mean the portion of this Plan which constitutes an employee
stock ownership plan under Code Section 4975(e)(7) and Regulation 54.4975-11.
2.15 EXEMPT LOAN
"Exempt Loan" shall mean a loan made to the Plan by a disqualified person
or any part of a loan to the Plan which is guaranteed by a disqualified person
and which satisfies the requirements of Section 2550.408b-3 of the Department of
Labor Regulations and Regulation 54.4975-7(b).
2.16 FAMILY MEMBER
"Family Member" shall mean, with respect to an affected Participant, an
individual described in Code Section 414(q)(6)(B).
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<PAGE>
2.17 FIDUCIARY
"Fiduciary" shall mean any person who:
(a) exercises any discretionary authority or discretionary
control respecting management of this Plan or exercises any authority
or control with respect to management or disposition of the Trust's
assets,
(b) renders investment advice for a fee or other compensation,
direct or indirect, with respect to any monies or other property of
the Trust or has any authority or responsibility to do so, or
(c) has any discretionary authority or discretionary
responsibility in the administration of the Plan, including, but not
limited to, the Trustees, the Employer and its representative body,
and the Plan Administrator.
2.18 FIVE PERCENT OWNER
"Five Percent Owner" of the Employer shall mean any person who owns (or is
considered as owning within the meaning of Code Section 318) more than five
percent (5%) of the outstanding stock of the Employer or stock possessing more
than five percent (5%) of the total combined voting power of all stock of the
Employer. In determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c) and (m), covering
members of a controlled group of corporations, partnerships, proprietorships,
etc., and members of an affiliated service group, respectively, shall be treated
as separate employers.
2.19 FORFEITURE
"Forfeiture" shall mean that portion of a Participant's Participation
Account that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Participant's Participation Account, or
(b) the last day of the Plan Year in which the Participant
incurs five (5) consecutive One Year Breaks-in-Service.
Effective January 1, 1992, for purposes of paragraph (a) above, in the case of a
terminated Participant with a Vested Participation Account of zero, such
terminated Participant shall be deemed to have received a distribution of the
entire Vested portion of such Participant's Participation Account. In
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<PAGE>
addition, the term "Forteiture" shall include any amount deemed to be forfeited
pursuant to any other provision of this Plan.
2.20 FORMER PARTICIPANT
"Former Participant" shall mean a person who has ceased to be a Participant
for any reason. For purposes of Section 2.22, a Former Participant shall be
treated as a Highly Compensated Employee if such Former Participant was a Highly
Compensated Employee at the time of separation from service with the Employer or
was a Highly Compensated Employee any time after attaining age 55.
2.21 415 COMPENSATION
"415 Compensation" shall mean compensation as defined in Section 6.10(e).
2.22 HIGHLY COMPENSATED EMPLOYEE
"Highly Compensated Employee" shall mean any Participant or Former
Participant who, during the relevant Plan Year or the next preceding Plan Year:
(a) was at any time a Five Percent Owner as defined in Section
2.18;
(b) received 415 Compensation from the Employer in excess of
seventy-five thousand dollars ($75,000);
(c) received 415 Compensation from the Employer in excess of
fifty thousand dollars ($50,000) and was in the top-paid group of
Employees (as defined in Code Section 414(q)); or
(d) was at any time an officer of the Employer and received 415
Compensation greater than fifty percent (50%) of the amount in effect
under Code Section 415(b)(1)(A) for such Plan Year.
The definition of "Highly Compensated Employee" shall be determined pursuant to
Code Section 414(q), any Regulations issued thereunder, and any cost of living
adjustments (as issued by the Secretary of the Treasury or delegate) applicable
to the dollar figures specified above. For purposes of this Section, the
determination of 415 Compensation shall be made in accordance with Code Section
414(q)(7).
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<PAGE>
2.23 HOUR OF SERVICE
"Hour of Service" means (1) each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer for the
performance of duties during the applicable computation period, (2) each hour
for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period, and (3) each hour
for which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages.
Notwithstanding the above, (i) no more than five hundred one (501) Hours of
Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of a
period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made by or due from
the Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year of
Service, a year of participation for purposes of Accrued Benefits, a One Year
Break-in-Service, and employment commencement date (or reemployment commencement
date). The provisions of Department of Labor Regulations Section 2530.200b-2(b)
and (c) are incorporated herein by reference.
2.24 KEY EMPLOYEE
"Key Employee" shall mean an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of such Employee's Beneficiaries) is considered a Key Employee if such
Employee, at
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<PAGE>
any time during the Plan Year or any of the preceding four (4) Plan Years, has
been included in one of the following categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual
415 Compensation greater than fifty percent (50%) of the dollar
limitation in effect under Code Section 415(b)(1)(A) for any such Plan
Year;
(b) one of the ten (10) employees having annual 415 Compensation
from the Employer for a Plan Year greater than the dollar limitation
in effect under Code Section 415(b)(1)(A) for the calendar year in
which such Plan Year ends and owning (or considered as owning within
the meaning of Code Section 318) the largest interests in the
Employer;
(c) a Five Percent Owner of the Employer as defined in Section
2.18; or
(d) a "One Percent Owner" of the Employer having annual 415
Compensation from the Employer of more than one hundred fifty thousand
dollars ($150,000). "One Percent Owner" shall mean any person who
owns (or is considered as owning within the meaning of Code Section
318) more than one percent (1%) of the outstanding stock of the
Employer or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Employer or, in the case of
an unincorporated business, any person who owns more than one percent
(1%) of the capital or profits interest in the Employer. In
determining percentage ownership hereunder, Employers that would
otherwise be aggregated under Code Sections 414(b), (c), and (m) shall
be treated as separate Employers. However, in determining whether an
individual has 415 Compensation or more than one hundred fifty
thousand dollars ($150,000), 415 Compensation from each Employer
required to be aggregated under Code Sections 415(b), (c), and (m)
shall be taken into account.
For purposes of this Section, the determination of 415 Compensation shall be
made in accordance with Code Section 414(q)(7).
2.25 LIMITATION YEAR
"Limitation Year" shall mean the twelve (12) consecutive month period
coinciding with the Plan Year hereinafter specified for purposes of applying the
limit on Annual Additions to a
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<PAGE>
Participant's Participation Account, as prescribed by Code Section 415(c).
2.26 NON-HIGHLY COMPENSATED EMPLOYEE
"Non-Highly Compensated Employee" shall mean any Participant who is neither
a Highly Compensated Employee nor a Family Member.
2.27 NON-KEY EMPLOYEE
"Non-Key Employee" shall mean any Employee or former Employee (and such
Employee's Beneficiaries) who is not a Key Employee.
2.28 NORMAL RETIREMENT DATE
"Normal Retirement Date" shall mean the date a Participant reaches the
Normal Retirement Age (the LATER OF (a) the date a Participant attains age
sixty-five (65) years, or (b) the date of the fifth (5th) anniversary of the
Participant's effective date of Plan participation). A Participant shall become
fully Vested in such Participant's Participation Account upon attaining the
Normal Retirement Age.
2.29 ONE YEAR BREAK-IN-SERVICE
"One Year Break-in-Service" shall mean any Plan Year in which an Employee
completes five hundred (500) or less Hours of Service with the Employer. For
the sole purpose of determining whether or not an Employee has incurred a One
Year Break-in-Service, Hours of Service shall be recognized for "authorized
leaves of absence" and "maternity and paternity leaves of absence." Years of
Service and One Year Breaks-in-Service shall be measured on the same computation
period.
"Authorized leave of absence" means an Employee's unpaid temporary absence
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason. A "maternity or paternity leave of absence" means an unpaid
temporary absence from employment with the Employer occasioned by the Employee's
pregnancy, birth of the Employee's child, placement of a child with the Employee
in connection with the adoption of such child, or any absence for the purpose of
caring for such child for a period immediately following such birth or
placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit thereof
is necessary to prevent the Employee from incurring a One Year Break-in-Service,
or, in any other case, in the immediately following computation period. The
Hours of Service credited for an "approved leave of absence" or a
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"maternity or paternity leave of absence" shall be those which would normally
have been credited but for such absence, or in any case in which the Plan
Administrator is unable to determine such hours normally credited, eight (8)
Hours of Service per day. The total Hours of Service required to be credited
for an "approved leave of absence" or a "maternity or paternity leave of
absence" shall not exceed five hundred one (501) hours.
2.30 OTHER INVESTMENTS ACCOUNT
"Other Investments Account" shall mean the account which reflects a
Participant's interest in certain assets of the Trust Fund other than Company
Stock.
2.31 PARTICIPANT
"Participant" shall mean any Employee who has met the eligibility and
participation requirements of Article III of the Plan, and has not for any
reason become ineligible to participate further in the Plan.
2.32 PARTICIPATION ACCOUNT
"Participation Account" shall mean the separate account maintained for each
Participant pursuant to Section 6.1 for the purpose of recording the
Participant's proportionate interest in the Trust Fund.
2.33 PERMANENT DISABILITY
"Permanent Disability" shall mean a physical or mental condition of a
Participant resulting from bodily injury, disease or mental disorder which
renders the Participant incapable of performing the Participant's usual or
customary employment duties and which can be expected to result in death or last
for a continuous period of twelve (12) months or more, as determined by a
qualified practicing physician (not in the employ of the Employer) approved for
such purpose by the Plan Administrator; except, that a Participant who is
eligible to receive Social Security disability benefits shall be deemed to be so
disabled without further proof.
2.34 PLAN
"Plan" shall mean the J. C. NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN,
as amended from time to time.
2.35 PLAN ADMINISTRATOR
"Plan Administrator" shall mean the J. C. NICHOLS COMPANY, or any other
person designated by the Employer to administer the Plan on behalf of the
Employer.
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2.36 PLAN YEAR
"Plan Year" shall mean the twelve (12) consecutive month fiscal period
beginning January 1st and ending the following December 31st.
2.37 REGULATION
"Regulation" shall mean the income tax regulations as promulgated by the
Secretary of the Treasury or delegate, and as amended from time to time.
2.38 RETIREMENT
"Retirement" shall mean the termination of a Participant's employment with
the Employer following the Normal Retirement Date as provided in Section 2.28.
2.39 TERMINATION DATE
"Termination Date" shall mean the date on which a Participant's employment
with the Employer is terminated because of the first to occur of the following
events:
(a) the Participant's death;
(b) the Participant's Permanent Disability;
(c) the Participant's Retirement; or
(d) the Participant's resignation or discharge prior to any one
of the foregoing events.
2.40 TRUST
"Trust" shall mean the J. C. NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP
TRUST, maintained pursuant to an amended and restated Trust Agreement entered
into by and between the Employer and the Trustees in conjunction with the
amendment and restatement of this Plan.
2.41 TRUSTEES
"Trustees" shall mean the person or persons designated under the Trust to
serve as fiduciaries thereunder.
2.42 TRUST FUND
"Trust Fund" shall mean and include all of the property received, held and
administered by the Trustees under the terms of the Trust.
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2.43 UNALLOCATED COMPANY STOCK SUSPENSE ACCOUNT
"Unallocated Company Stock Suspense Account" shall mean an account
containing Company Stock acquired with the proceeds of a loan and maintained
pursuant to Section 6.4(b).
2.44 VALUATION DATE
"Valuation Date" shall mean December 31st of each Plan Year.
2.45 VESTED
"Vested" shall mean that portion of a Participant's Participation Account
that is nonforfeitable.
2.46 YEAR OF SERVICE
"Year of Service" shall mean the computation period of twelve consecutive
months, herein set forth, during which an Employee has at least one thousand
(1,000) Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period shall shift to the Plan Year
which includes the anniversary of the date on which the Employee first performed
an Hour of Service.
For vesting purposes, the initial computation period shall begin with the
date on which an Employee first performs an Hour of Service. The vesting
computation period shall shift to the Plan Year which includes the anniversary
of the date on which the Employee first performed an Hour of Service, and the
vesting computation period shall remain the Plan Year for all purposes
thereafter.
For vesting purposes, Years of Service beginning prior to the Effective
Date of this Plan shall not be recognized.
Years of Service with any Affiliated Employer shall be recognized to the
extent otherwise allowed.
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ARTICLE III
PARTICIPATION
3.1 CONDITIONS OF ELIGIBILITY
Any Employee shall be eligible to participate in the Plan as of the date
such Employee has satisfied both of the following requirements: (1) completion
of one (1) Year of Service, and (2) attainment of age twenty-one (21) years.
3.2 EFFECTIVE DATE OF PARTICIPATION
(a) An Employee who has met the eligibility requirements of
Section 3.1 shall become a Participant effective as of the earlier of
the first day of the Plan Year or the first day of the seventh month
of such Plan Year coinciding with or next following the date such
Employee met such requirements, provided said Employee is still
employed as of such date (or if not employed on such date, as of the
date of rehire).
(b) If any Former Participant is reemployed by the Employer,
such Former Participant shall resume participation in the Plan
effective as of the date of rehire.
3.3 PARTICIPANTS PRIOR TO AMENDMENT AND RESTATEMENT
Any Employee who was a Participant in the Plan as of the date of execution
of this amendment and restatement shall continue to participate in the Plan.
3.4 DETERMINATION OF ELIGIBILITY
The records of the Employer with respect to dates and periods of
employment, Hours of Service, leaves of absence, age, and Compensation of the
respective Participants shall be binding and conclusive upon all persons. Any
question concerning eligibility for participation hereunder shall be decided by
the Plan Administrator, whose decision shall be binding and conclusive upon all
persons; provided that the criteria relating thereto shall be uniformly applied
to all Employees and Participants in like circumstances.
3.5 PARTICIPATION
Participation shall be entirely voluntary on the part of each Employee and
any Employee may decline to become a Participant by giving written notice of
such intention to the Plan Administrator.
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ARTICLE IV
CONTRIBUTIONS
4.1 AMOUNT OF CONTRIBUTIONS
(a) For each Plan Year, the Employer shall contribute to the
Plan such discretionary amount as shall be determined by its Board of
Directors. In no event shall the Employer be obligated to make a
contribution to the Plan.
(b) Notwithstanding the foregoing, the Employer's contribution
for any Plan Year shall not exceed the maximum amount allowable as a
deduction to the Employer under the provisions of Code Section 404.
All contributions by the Employer shall be made in cash or in such
property as is acceptable to the Trustees.
(c) The Employer's Board of Directors shall solely determine the
amount of any contribution to be made to the Plan. In determining
such contribution, the Board shall be entitled to rely upon an
estimate of the total Compensation for all Participants and of the
amounts contributable by it. The Board's determination of such
contribution shall be binding on all Participants, the Employer, and
the Trustees. Such determination shall be final and conclusive and
shall not be subject to change as a result of a subsequent audit by
the Internal Revenue Service or as a result of any subsequent
adjustment of the Employer's records. The Trustees shall have no
right or duty to inquire into the amount of the Employer's
contributions or the method used in determining the amount of the
Employer's contribution, but shall be accountable only for funds
actually received by the Trustees.
4.2 TIME OF PAYMENT OF CONTRIBUTIONS
The Employer shall pay to the Trustees any contributions to the Plan for
each fiscal year of the Employer within the time prescribed by law, including
extensions of time, for the filing of the Employer's federal income tax return
for the fiscal year.
4.3 EXCLUSIVE BENEFIT OF PARTICIPANTS
Except as provided in Section 4.4, all contributions shall be used for the
exclusive benefit of the Participants, or their Beneficiaries, as herein
provided, and no part thereof shall at any time revert to the Employer. Upon
transfer of contributions to the Trustees, all responsibility of the Employer
with respect thereto shall cease, and the Employer shall be in no way
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responsible for the acts of the Trustees or for the administration of the Trust.
4.4 APPROVAL BY IRS
In the event this Plan and Trust are not approved by the Internal Revenue
Service, the Employer reserves the right to reclaim all contributions made by it
prior to initial formal notification of such non-approval; provided, however,
such contributions are returned within one year after such determination, and
the application for determination is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan was adopted,
or such later date as the Secretary of the Treasury may prescribe. In addition,
the Employer reserves the right to reclaim within one (1) year of a disallowance
any contribution made by it which is subsequently determined to be
non-deductible, or reclaim any contribution which is made in error because of a
good faith mistake of fact.
4.5 EMPLOYER CONTRIBUTIONS ONLY
Except for contributions made pursuant to Article V hereof, only the
Employer will make contributions to the Trust and no Employee will be permitted
to make contributions thereto.
ARTICLE V
ROLLOVERS
5.1 TRANSFERS FROM OTHER PLANS
(a) With the consent of the Plan Administrator, amounts may be
transferred from other qualified plans, provided that in the opinion
of legal counsel for the Employer, the transfer will not jeopardize
the tax-exempt status of the Plan or Trust or create adverse tax
consequences for the Employer.
(b) Prior to accepting any transfers to which this Article
applies, the Plan Administrator may require a Participant to establish
that the amounts to be transferred to this Plan meet the requirements
of this Article and may also require a Participant to provide an
opinion of counsel satisfactory to the Employer that the amounts to
be transferred meet the requirements of this Article.
(c) For purposes of this Article, the term "qualified plan"
shall mean any tax qualified plan under Code Section 401(a).
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5.2 SEPARATE ACCOUNT
Any amounts transferred to this Plan pursuant to Section 5.1 shall be held
by the Trustees in a separate account herein referred to as an "Employee
Rollover Account." Such account shall be fully Vested at all times. Amounts in
such account may not be withdrawn by, or distributed to the Participant, in
whole or in part, except as provided in Article 5.3.
5.3 WHEN PAYABLE
At such date that the Participant receives a distribution of benefits under
this Plan, amounts credited to the Participant's Employee Rollover Account shall
be used to provide additional benefits to the Participant.
5.4 SELF-EMPLOYED RESTRICTIONS
Notwithstanding the foregoing, amounts transferred to this Plan as a
rollover contribution from a self-employed retirement plan shall be subject to
the following restrictions:
(a) No benefits other than those payable to a Participant upon
death or Permanent Disability may be payable from the Participant's
Employee Rollover Account prior to the Participant reaching age
fifty-nine and one-half (59 1/2) years. This limitation shall apply
even if the Participant's Employment with the Employer becomes
terminated by reasons of Retirement, voluntary resignation or
discharge prior to reaching such age.
(b) In any event, distribution of amounts credited to such
Participant's Employee Rollover Account from a self-employed plan,
together with earnings thereon, must begin no later than April 1 of
the calendar year following the calendar year in which the Participant
attains the age of seventy and one-half (70 1/2) years.
5.5 INVESTMENT OF ROLLOVER
(a) The Trustees may direct that employee transfers during a
Plan Year pursuant to this Article be segregated into a separate
account for each Participant in a federally insured savings account,
certificate of deposit in a bank or savings and loan association,
money market certificate, or other short term debt security acceptable
to the Trustees until the first day of the following Plan Year.
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(b) Unless the Trustees direct that employee transfers be
segregated into a separate account as specified in paragraph (a)
above, a Participant's Employee Rollover Account shall be invested as
part of the general Trust Fund in the same manner as all Participants'
Other Investments Accounts.
5.6 RESTRICTION ON TRANSFER
Notwithstanding anything herein to the contrary, this Plan shall not accept
any direct or indirect transfers from a defined benefit plan, money purchase
pension plan (including a target benefit plan), stock bonus or profit sharing
plan which would otherwise have provided for a life annuity form of payment to
the Participant.
ARTICLE VI
PARTICIPATION ACCOUNTS, ALLOCATIONS AND ADJUSTMENTS
6.1 SEPARATE ACCOUNTS
(a) The Trustees shall maintain a separate Participation Account
for each Participant for the purpose of recording the Participant's
proportionate interest in the Trust Fund. For accounting purposes,
and in order to identify the source of contributions giving rise to
such interest, each Participation Account shall be segregated into the
individual sub-accounts specified in (b) below. As of the Valuation
Date, the Trustees shall calculate the balance of each Participant's
Participation Account based on the allocations and adjustments
provided for in this Article VI.
(b) A Participant's Participation Account shall be subdivided
into the following separate sub-accounts:
(1) Company Stock Account;
(2) Other Investments Account;
(3) Directed Investment Account; and
(4) Employee Rollover Account.
(c) The allocations and adjustments to Participants'
Participation Accounts for each Plan Year shall be determined in
accordance with this Article VI.
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(d) If a Former Participant is reemployed after five (5)
consecutive One Year Breaks-in-Service, then separate Participation
Accounts shall be maintained for such Participant as follows:
(i) one account for nonforfeitable benefits
attributable to pre-break service, and
(ii) one account representing the Participant's status
in the Plan attributable to post-break service.
(e) Neither the allocation of contributions nor the
determination of the value of a Participation Account on any Valuation
Date shall vest in any Participant any right, title or interest in or
to, or require the segregation of, any of the assets of the Trust
Fund, or in any manner whatsoever enlarge the rights of Participants
hereunder, or have any effect whatsoever other than as expressly set
forth in this Plan.
6.2 EMPLOYER CONTRIBUTIONS AND FORFEITURES
(a) For each Plan Year, Employer contributions and Forfeitures
shall be allocated only among those Participants:
(i) who (A) completed one thousand (1,000) or more
Hours of Service to the Employer, and (B) are in the employ
of the Employer on the last day of such year; or
(ii) regardless of the number of Hours of Service
completed, whose Retirement, Permanent Disability or death
occurred during such year.
(b) The Trustees shall allocate Employer contributions to each
Active Participant in the same proportion that each such Active
Participant's Compensation for the Plan Year bears to the total
Compensation for all Active Participants in such year.
(c) As of the end of each Plan Year, any amounts which became
Forfeitures since the end of the prior Plan Year shall first be made
available to reinstate previously forfeited account balances of Former
Participants, if any. The remaining Forfeitures, if any, shall be
allocated to each Active Participant in the same proportion that each
such Active Participant's
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Compensation for the Plan Year bears to the total Compensation for all
Active Participants in such year.
6.3 ALLOCATIONS AND ADJUSTMENTS TO OTHER INVESTMENTS ACCOUNTS
(a) The Trustees shall annually credit the Other Investments
Account of each Participant as of the Valuation Date with such
Participant's allocable share of Employer contributions under the Plan
in cash, plus any cash dividends on Company Stock allocated to such
Participant's Company Stock Account and such Participant's allocable
share of any Forfeitures from Other Investments Accounts.
(b) The Other Investments Account of each Participant shall be
annually credited (or charged) as of the Valuation Date with the
Participant's allocable share of net income (or loss) of the Trust
Fund as determined under Section 6.3(d).
(c) The Other Investments Account of each Participant shall be
annually charged as of the Valuation Date for the Participant's share
of any cash payments made by the Trustees for the acquisition of
Company Stock or for the payment of any principal and/or interest on a
loan incurred for the acquisition of Company Stock, or for any
dividends currently distributed to Participants.
(d) The net income (or loss) of the Trust Fund for each Plan
Year will be determined as of the Valuation Date. Prior to the
allocations of Employer contributions and Forfeitures for the Plan
Year, net income (or loss) will be allocated among and credited to the
Other Investments Accounts of Participants, pro rata, according to the
balance of each Other Investments Account as of the immediately
preceding Valuation Date (as reduced by any distributions during the
Plan Year). The net income (or loss) of the Trust Fund includes the
increase (or decrease) in the fair market value of the Trust Fund
(other than Company Stock), interest income, dividends and other
income and gains (or losses) attributable to the Trust Fund (other
than dividends on Company Stock and gains or losses on Company Stock)
since the preceding Valuation Date, reduced by any expenses charged to
the Trust Fund for that Plan Year. The determination of net income
(or loss) of the Trust Fund for purposes of this paragraph shall not
take into account any dividends on Company Stock, which shall be
allocated or used in accordance with the provisions of Section 6.5.
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(e) Any gain or loss realized by the Trustees on the sale of
shares of Company Stock allocated to Participants' Company Stock
Accounts shall be allocated to the Other Investments Accounts of
Participants, pro rata, according to the balance of their Company
Stock Accounts immediately prior to such sale. Any net proceeds
realized by the Trustees on the sale of shares of Company Stock held
in the Unallocated Company Stock Suspense Account shall be allocated
to the Other Investments Accounts of each Active Participant for Plan
Year of sale in the same proportion that each such Active
Participant's Compensation for the Plan Year bears to the total
Compensation for all Active Participants in such year.
6.4 ALLOCATIONS AND ADJUSTMENTS TO COMPANY STOCK ACCOUNTS
(a) The Trustees shall annually credit the Company Stock Account
of each Participant as of the Valuation Date with such allocable share
of Company Stock (including fractional shares) purchased and paid for
by the Trustees (as determined under Section 6.4(c)) or contributed in
kind by the Employer, plus any stock dividends on Company Stock
allocated to such Participant's Company Stock Account and such
Participant's allocable share of any Forfeitures from Company Stock
Accounts.
(b) All Company Stock acquired by the Trustees with the proceeds
of a loan shall initially be credited to the Unallocated Company Stock
Suspense Account, and will be allocated to the Company Stock Accounts
of Participants pursuant to Section 6.4(a) only as payments on the
loan are made by the Trustees and such Company Stock is released from
the Unallocated Company Stock Suspense Account. For each Plan Year
during the duration of the loan, the number of shares of Company Stock
released from the Unallocated Company Stock Suspense Account for
allocation shall equal the number of encumbered shares held
immediately before release for the current Plan Year multiplied by a
fraction. The numerator of such fraction shall be the amount of
principal and interest paid on the loan for the Plan Year, and the
denominator of such fraction shall be the sum of the numerator plus
the principal and interest to be paid for all future Plan Years.
Notwithstanding the preceding sentence, if the loan is not an Exempt
Loan, or if the loan is an Exempt Loan that provides for annual
payments of principal and interest at a cumulative rate that is not
less rapid at any time than level annual payments of such amounts for
ten (10) years and otherwise meets the requirements of
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Regulation 54.4975-7(b)(8)(ii), the number of shares of Company Stock
released from the Unallocated Company Stock Suspense Account for allocation
for each Plan Year shall be determined solely with reference to principal
payments made during the Plan Year. Income earned with respect to Company
Stock in the Unallocated Company Stock Suspense Account shall be used, at
the discretion of the Trustees, to repay the loan used to purchase such
Company Stock.
(c) A Participant's allocable share of Company Stock (including
fractional shares) purchased and paid for by the Trustees shall be
determined for purposes of Section 6.4(a) as follows:
(i) First, if cash dividends on Company Stock
allocated to a Participant's Company Stock Account are used
during a Plan Year by the Trustees to make payments of any
principal and/or interest on a loan incurred for the
acquisition of Company Stock, then Company Stock with a fair
market value (determined at the Valuation Date for such Plan
Year) equal to the amount of such cash dividends shall be
allocated to such Participant's Company Stock Account.
(ii) Second, all remaining shares of Company Stock to
be allocated for the Plan Year (after subtracting the shares
allocated under (i) above) shall be allocated to each Active
Participant's Company Stock Account in the same proportion
that each such Active Participant's Compensation for the
Plan Year bears to the total Compensation for all Active
Participants in such year.
(d) The Trustees shall annually charge the Company Stock
Accounts of each Participant for their allocable shares of any Company
Stock sold during the Plan Year (consistent with Section 6.3(e)).
(e) Company Stock received by the Trust during a Plan Year with
respect to a contribution by the Employer for the preceding Plan Year
shall be allocated to the accounts of Participants as of the Valuation
Date at the end of such preceding Plan Year.
6.5 DIVIDENDS ON COMPANY STOCK
(a) The Trustees shall have the sole discretion to use any cash
dividends on Company Stock to pay
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principal and/or interest on any loan incurred for the acquisition of
Company Stock, retain such dividends for the benefit of Participants, or
distribute such dividends (to the extent on allocated Company Stock) to
Participants under Section 6.5(d).
(b) Any cash dividends received on shares of Company Stock
allocated to Participants' Company Stock Accounts shall be allocated
to the Other Investments Accounts of such Participants pursuant to
Section 6.3(a). Any stock dividends received on Company Stock
allocated to Participants' Company Stock Accounts shall be credited to
the Company Stock Accounts of such Participants pursuant to Section
6.4(a).
(c) Any cash dividends or stock dividends received on
unallocated shares of Company Stock (including all shares held in the
Unallocated Company Stock Suspense Account) shall be: (1) allocated
as income of the Plan by allocating such dividends to the Other
Investments Accounts or Company Stock Accounts, as the case may be, of
each Active Participant in the same proportion that each such Active
Participant's Compensation for the Plan Year bears to the total
Compensation for all Active Participants in such year, or (2) used by
the Trustees to repay a loan incurred for the acquisition of Company
Stock.
(d) Cash dividends on Company Stock allocated to Participants'
Company Stock Accounts may be paid to such Participants, as determined
in the sole discretion of the Trustees, within ninety (90) days after
the close of the Plan Year in which the dividend is paid. Any cash
dividends which are currently distributable to Participants under this
Section 6.5(d) shall be charged to their Other Investments Accounts.
6.6 ALLOCATIONS OF SECTION 1042 STOCK
(a) No portion of the Trust Fund attributable (or allocable in
lieu of) Company Stock acquired by the Trust in a sale to which Code
Section 1042 applies may accrue or be allocated directly or indirectly
under any tax-qualified plan maintained by the Employer:
(1) during the "nonallocation period" for the benefit
of:
(A) any taxpayer who makes an election under
Code Section 1042(a) with respect to Company Stock
(the "Section 1042 Seller");
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(B) any individual who is related to the
Section 1042 Seller (within the meaning of Code
Section 267(b)); or
(2) for the benefit of any other person who owns
(after application of Code Section 318(a)) more than
twenty-five percent (25%) of:
(A) any class of outstanding stock of the
Employer which issued such Company Stock; or
(B) the total value of any class of
outstanding stock of the Employer.
(b) Section 6.6(a)(1)(B) shall not apply to lineal descendants
of the Section 1042 Seller if the aggregate amount allocated to such
descendants during the nonallocation period does not exceed more than
five percent (5%) of the Company Stock (or amounts allocated in lieu
thereof) held by the Trust which is attributable to a sale to the
Trust by any person related to such descendants (within the meaning of
Code Section 267(c)(4)) in a transaction to which Code Section 1042
applied.
(c) A person shall be treated as failing to meet the stock
ownership limitation under Section 6.6(a)(2) if such person fails such
limitation:
(1) at any time during the one (1) year period ending
on the date of sale of Company Stock to the Trust; or
(2) on the date as of which Company Stock is allocated
to Participants in the Plan
(d) For purposes of this Section 6.6, "nonallocation period"
means the ten (10) year period beginning on the date of sale of the
Company Stock and ending on the later of:
(1) the date which is ten (10) years after the date of
sale; or
(2) the date of the Plan allocation attributable to
the final payment of
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acquisition indebtedness incurred in connection with such sale.
(e) For purposes of administering this Section 6.6, the
following rules shall apply:
(1) The Trustees shall first tentatively make all
allocations and adjustments to Participants' Participation
Accounts without regard to this Section 6.6; thereafter, any
prohibited allocations of Company Stock shall be reallocated
among the remaining Active Participants based on relative
Compensation.
(2) If the Trust acquires, pursuant to acquisition
indebtedness, shares of Company Stock some of which are
subject to a sale to which Code Section 1042 applied
("Section 1042 Stock") and some of which are not
("Non-Section 1042 Stock"), the first shares of Company
Stock allocated to Participants' Company Stock Accounts as
acquisition indebtedness is paid shall be treated as
allocations of Non-Section 1042 Stock, and thereafter the
remaining shares shall be treated as allocations of Section
1042 Stock.
(f) Any allocations under the Plan determined to be contrary to
Code Section 409(n) or this Section 6.6 may be reversed only at the
sole discretion of the Employer, and no Participant or Beneficiary
shall have a right to require such a reversal.
6.7 ACCOUNTING PROCEDURES
The Trustees shall establish accounting procedures for the purpose of
making the allocations, valuations and adjustments to Participation Accounts
provided for in this Article VI. If the Trustees determine that the strict
application of such accounting procedures will not result in an equitable and
nondiscriminatory allocation among the Participants' Participation Accounts, the
Trustees may modify such procedures for the purpose of achieving an equitable
and nondiscriminatory allocation in accordance with the general concepts of the
Plan and the provisions of this Article VI and the requirements of the Code and
ERISA; provided, however, that such adjustments to achieve equity shall not
reduce the Vested portion of a Participant's Participation Account. The
Trustees shall maintain adequate records of the aggregate cost basis of each
class of Company Stock allocated to the Participants' Participation Accounts.
The Trustees shall also keep separate records of shares of Company Stock
acquired with
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the proceeds of a loan and Employer contributions (and any earnings thereon)
made for the purpose of enabling the Trustees to repay such a loan.
6.8 DETERMINATION OF ELIGIBILITY
For each Plan Year (as required by the Trustees), the Employer shall
furnish a written statement to the Trustees setting forth the aggregate amount
of any contribution and the names, dates of employment and amounts of
Compensation paid to or accrued for the benefit of Active Participants.
Employer contributions and Forfeitures, if any, shall be allocated among the
Participation Accounts of all Active Participants as of the end of the Plan Year
in which made or accrued, even though a contribution may have been made in
various installments during the year or, if not yet made, the liability therefor
has been officially accrued as of the last day of such year and payment of same
to the Trust Fund is made on a subsequent date. The Trustees may rely in all
respects upon the information so stated by the Employer for purposes of
determining the allocations and adjustments under this Plan.
6.9 SEGREGATED ACCOUNTS
Any part of a Participant's Participation Account that is segregated from
the general assets of the Trust Fund such as an Employee Rollover Account or a
Directed Investment Account shall be disregarded for purposes of the allocations
and adjustments of this Article VI. Earnings and allocations on such segregated
amounts shall be determined and accomplished on a separate basis, with
appropriate charges for losses and expenses attributable to such amounts.
6.10 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding any other provisions of this Plan, the
maximum "Annual Additions" (as hereinafter defined) credited to a
Participant's Participation Account under this Plan and any accounts
under any "Related Defined Contribution Plan" (as hereinafter defined)
for any Limitation Year shall not exceed the lesser of:
(1) Thirty thousand dollars ($30,000) (or, if greater,
one-fourth of the dollar limitation in effect under Code
Section 415(b)(1)(A)), or
(2) Twenty-five percent (25%) of the Participant's 415
Compensation for such Limitation Year.
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In the event a Participant herein is also a participant at any time in
a Related Defined Contribution Plan, the sum of Annual Additions under
all such plans credited to a Participant's accounts in any Plan Year
shall not exceed the limitations described in (a) or (b) above, but
such limitations shall first be applied to reduce the Annual Additions
under the Related Defined Contribution Plan before being applied to
reduce the Annual Additions under this Plan.
(b) The term "Annual Additions" means the total amount of
Employer contributions, Employee contributions and Forfeitures
allocated to a Participant's Participation Account under this Plan and
to a Participant's accounts under a Related Defined Contribution Plan
for a Limitation Year. If no more than one-third (1/3) of the
Employer contributions for a Limitation Year are allocated to Highly
Compensated Employees, the term "Annual Additions" shall not include
Forfeitures of Company Stock purchased with the proceeds of a loan or
Employer contributions which are applied by the Trustees to pay
interest on a loan incurred to purchase Company Stock.
(c) The term "Related Defined Contribution Plan" means any
defined contribution plan (as defined in Code Section 414(i)) which is
maintained by the Employer or any Affiliated Employer.
(d) For purposes of applying the limitations of Code Section
415, Company Stock allocated to Participants' Participation Accounts
(except for allocations resulting from Forfeitures) and the transfer
of funds from one qualified plan to another are not Annual Additions.
(e) The term "415 Compensation" for any Limitation Year shall
include all amounts received or accrued as compensation for personal
services rendered to an Employer or Affiliated Employer as an
employee, including, but not limited to, wages, salaries, bonuses,
commissions and fees, but excluding amounts contributed by an Employer
or Affiliated Employer to a deferred compensation plan, amounts
realized from the exercise of non-qualified stock options or lapse of
restrictions on restricted property, or amounts realized from the
sale, exchange or other disposition of stock acquired under a
qualified stock option. For the purpose of this Section, the
determination of 415 Compensation shall be made by not including
amounts that would otherwise be excluded from a Participant's gross
income by reason of the application of Code
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Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer
contributions made pursuant to a salary reduction agreement, Code Section
403(b).
(f) The dollar limitation under Code Section 415(b)(1)(A) stated
in paragraph (a)(1) above shall be adjusted annually as provided in
Code Section 415(d) pursuant to the Regulations. The adjusted
limitation is effective as of January 1st of each calendar year and is
applicable to Limitation Years ending with or within that calendar
year.
(g) If, after making reallocations under this Plan necessary to
satisfy the requirements of Code Section 415 and the Regulations
thereunder, there is any amount remaining which cannot be reallocated
to any Active Participant as a result of the limitations contained
herein, such amount shall be maintained in a separate suspense account
under the Trust to be allocated among Active Participants in the next
succeeding Limitation Year, as if such amount were part of a
Forfeiture for such next succeeding Limitation Year.
6.11 STATEMENT OF PLAN INTEREST
After each Plan Year, the Plan Administrator shall provide each Participant
with a statement of the Participant's interest under the Plan as of the
Valuation Date for such Plan Year. In addition, the Plan Administrator shall
furnish each Participant a summary of the Trustees' annual report to the
Employer for such Plan Year.
ARTICLE VII
PAYMENT OF BENEFITS
7.1 WHEN BENEFITS BECOME DISTRIBUTABLE
Accrued Benefits for a Participant shall become distributable to such
Participant (or for such Participant's benefit) following such Participant's
Termination Date.
In addition, Accrued Benefits for a Participant shall become distributable
to such Participant (in an amount necessary to satisfy the minimum distribution
requirements of Code Section 401(a)(9)) following the Participant's attainment
of age seventy and one-half (70 1/2) years, even though such Participant
continues in the employ of the Employer.
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The time, method and manner of any distribution under this Plan shall be
determined in accordance with the provisions of Sections 7.3 and 7.5.
7.2 VESTED PORTION OF PARTICIPATION ACCOUNT
(a) If a Participant's employment with the Employer terminates
by reason of the Participant's death, Permanent Disability or
Retirement, the Vested portion of such Participant's Participation
Account shall be one hundred percent (100%) of such account.
(b) If a Participant's employment with the Employer terminates
by reason of the Participant's resignation or discharge, the Vested
portion of such Participant's Participation Account shall be
contingent upon the number of Years of Service to the Employer
completed by the Participant and determined in accordance with the
following schedule:
Years of Service Percentage (%)
Completed of Account Vested
---------------- -----------------
(1) Before Three (3) Years of Service 0%
(2) After Three (3) Years of Service,
but prior to Four (4) Years of Service 20%
(3) After Four (4) Years of Service,
but prior to Five (5) Years of Service 40%
(4) After Five (5) Years of Service,
but prior to Six (6) Years of Service 60%
(5) After Six (6) Years of Service,
but prior to Seven (7) Years of Service 80%
(6) After Seven (7) Years of Service 100%
(c) If a Former Participant is reemployed by the Employer (and
resumes Plan Participation as of the date of rehire in accordance with
Section 3.2(b)), then for purposes of the preceding vesting schedule,
the following rules shall apply:
(1) If reemployed prior to a One Year
Break-in-Service, a Participant shall continue to
participate in the Plan in the same manner as if such
termination had not occurred.
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(2) If reemployed after a One Year Break-in-Service, a
Participant shall be credited for vesting purposes with
Years of Service for both pre-break and post-break service,
subject to the following rules:
(A) Pre-break and post-break service shall
be used for computing Years of Service for vesting
purposes only after a Participant has been
employed for one (1) Year of Service following the
date of reemployment by the Employer.
(B) Each non-Vested Former Participant shall
lose credits otherwise allowable under (A) above
if such Former Participant's consecutive One Year
Breaks-in-Service equal or exceed the greater of
(i) five (5), or (ii) the aggregate number of
pre-break Years of Service.
(C) After five (5) consecutive One Year
Breaks-in-Service, a Former Participant's Vested
Participation Account balance attributable to
pre-break service shall not be increased as a
result of post-break service.
(d) If Accrued Benefits are distributable to a Participant by
reason of the Participant's attainment of age seventy and one-half (70
1/2) years, the amount distributed shall not exceed the Vested portion
of such Participant's Participation Account, computed in the same
manner as in (b) above.
7.3 TIME FOR DISTRIBUTION
(a) The Trustees shall begin to distribute Accrued Benefits to a
Participant (or for such Participant's benefit) not later than sixty
(60) days following the close of the Plan Year in which the latest of
the following events shall occur:
(1) the date on which the Participant attains age
sixty-five (65) years;
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(2) the date of the tenth (10th) anniversary of the
year in which the Participant commenced participation in the
Plan; or
(3) the Participant's Termination Date.
(b) If the distribution of a Participant's Accrued Benefits
would be accelerated ahead of the time periods specified in paragraph
(a) above by applying the time periods specified in this paragraph
(b), the Trustees shall begin to distribute such Accrued Benefits to
the Participant not later than one (1) year following the close of the
Plan Year -
(1) in which the Participant terminates employment
with the Employer by reason of Retirement, Permanent
Disability or death, or
(2) which is the fifth (5th) Plan Year following the
Plan Year in which the Participant terminates employment
with the Employer for any other reason (except that this
subparagraph shall not apply if the Participant is
reemployed by the Employer before the end of such fifth
(5th) Plan Year).
For purposes of this paragraph (b), the Accrued Benefits of a
Participant shall not include any Company Stock acquired by a loan
until the close of the Plan Year in which such loan is repaid in full.
(c) Unless an earlier date is required under paragraphs (a) or
(b), or unless the Participant has not consented to receipt of a
distribution as required under Section 7.3(g), if a Participant's
employment with the Employer terminates by reason of the Participant's
death, Permanent Disability or Retirement or such termination occurs
after the Participant reaches age sixty-five (65) years of age, the
Trustees shall begin to distribute a Participant's Accrued Benefits
within one (1) year following the close of the Plan Year during which
such termination takes place.
(d) If a Participant dies or suffers a Permanent Disability
following the Participant's Termination Date but before a distribution
has commenced, the Trustees shall begin to distribute the
Participant's Accrued Benefits not later than one (1) year following
the close of the Plan Year in which the Participant died or became
disabled.
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(e) Notwithstanding any provision in this Section 7.3 to the
contrary, the distribution of Accrued Benefits shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder (including
Regulation 1.401(a)(9)-2), the provisions of which are incorporated
herein by reference:
(1) Distribution of a Participant's Accrued Benefits
shall be made: (A) not later than the "required beginning
date," or (B) beginning not later than the "required
beginning date," in accordance with Regulations, over the
life of such Participant or over the lives of such
Participant and a designated beneficiary (or over a period
not extending beyond the life expectancy of such Participant
or the life expectancy of such Participant and a designated
beneficiary).
(2) For purposes of this paragraph (e), "required
beginning date" means April 1 of the calendar year following
the calendar year in which the Participant attains age
seventy and one-half (70 1/2) years.
(3) If a distribution has begun in accordance with
Section 7.3(e)(1)(B) and the Participant dies before such
Participant's entire interest has been distributed, the
remaining portion of such interest will be distributed at
least as rapidly as under the method of distribution being
used under Section 7.3(e)(1)(B) as of the date of such
Participant's death. If a Participant dies before the
distribution has begun in accordance with Section
7.3(e)(1)(B), the entire interest of the Participant will be
distributed within five (5) years after the death of such
Participant (subject, however, to the provisions of Code
Sections 401(a)(9)(B)(iii) and 401(a)(9)(B)(iv)).
(4) For purposes of this paragraph (e), the life
expectancy of the Participant and the Participant's spouse
may be redetermined annually in accordance with such rules
as may be prescribed by Regulations. Furthermore, life
expectancy and joint and last survivor expectancy shall be
computed using the return multiples of Regulation 1.72-9.
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(f) Notwithstanding anything herein to the contrary, cash
dividends payable to Participants pursuant to Section 6.5(d) may be
distributed within ninety (90) days after the close of the Plan Year
in which such dividends are paid.
(g) Any distribution to a Participant prior to the Participant's
Normal Retirement Date shall require the written consent of the
Participant. Failure to consent shall be deemed to be an election to
defer the distribution of Accrued Benefits until sixty (60) days
following the close of the Plan Year in which the later of the
following events shall occur: (1) the date on which the Participant
reaches the Normal Retirement Date, or (2) the date of the tenth
(10th) anniversary of the year in which the Participant commenced
participation in the Plan. However, a distribution to a Participant
may be made without consent if the value of the Participant's Accrued
Benefits does not exceed three thousand five hundred dollars
($3,500.00). The consent requirement of this paragraph shall not
apply with respect to distributions which are required by reason of a
Participant's attainment of age seventy and one-half (70 1/2) years.
The consent requirement of this paragraph shall also not apply to any
distribution of dividends to which Code Section 404(k) applies.
(h) If a distribution is one to which Sections 401(a)(11) and
417 of the Internal Revenue Code do not apply, such distribution may
commence less than 30 days after the notice required under Regulation
1.411(a)-11(c) is given, provided that: (a) the Plan Administrator
clearly informs the Participant that the Participant has a right to a
period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and (b) the
Participant, after receiving the notice, affirmatively elects a
distribution.
7.4 ACCOUNTS OF TERMINATED PARTICIPANTS; FORFEITURE ACCOUNTS; RESTORATIONS
(a) Except as herein provided, following a Participant's
Termination Date, such Participant's Participation Account shall
remain part of the general assets of the Trust Fund and continue to
share in the allocations and adjustments provided for in Article VI up
to (and including) the Valuation Date immediately preceding the date a
final distribution of Accrued Benefits is made. For any distribution
of Accrued Benefits, the value of a Participant's Participation
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Account shall be determined as of the Valuation Date immediately preceding
the date such distribution is made.
(b) Following a Participant's Termination Date, the portion of a
Participant's Other Investments Account and Company Stock Account that
is not Vested shall be credited, respectively, to an Other Investments
Forfeiture Account and Company Stock Forfeiture Account established
and maintained in such Participant's name as of the Valuation Date
coincident with or next following such Participant's Termination Date.
Such non-Vested amounts shall remain credited to the Other Investments
Forfeiture Account and Company Stock Forfeiture Account until the
earlier of: (1) such time as the amounts become a Forfeiture (in
which case said amounts shall be allocated in accordance with the
provisions of Article VI), or (2) such time as the Participant returns
to the employ of the Employer and resumes participation in the Plan
(in which case said amounts shall be credited to such Participant's
Participation Account).
(c) If reemployed prior to five (5) consecutive One Year
Breaks-in-Service, and such Former Participant received (or was deemed
to have received) a distribution of the entire Vested Participation
Account balance prior to reemployment, a Former Participant's
forfeited account balance shall be reinstated if such Former
Participant repays the full distributed amount before the earlier of
five (5) years after the first date on which the Former Participant is
subsequently reemployed by the Employer or the close of the first
period of five (5) consecutive One Year Breaks-in-Service commencing
after the distribution, or in the event of a deemed distribution, upon
the reemployment of such Former Participant. If a distribution occurs
for any reason other than a separation from service, the time for
repayment may not end earlier than five (5) years after the date of
distribution. In the event the Former Participant does repay the full
distributed amount, or in the event of a deemed distribution, the
undistributed portion of such Former Participant's Participation
Account must be restored in full, unadjusted by any gains or losses
occurring subsequent to the Valuation Date coinciding with or
preceding the date of the distribution. The source for such
reinstatement shall first be any Forfeitures occurring during the
year. If such source is insufficient, then the Employer shall
contribute an amount which is sufficient to restore any such forfeited
amounts; provided, however, that such a
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contribution shall be specially allocated to such Former Participant for
purposes of restoring the forfeited account balance.
(d) For any installment form of distribution for plan benefits,
the Trustees must first segregate a Participant's Other Investments
Account into a separate account segregated from the general assets of
the Trust Fund.
7.5 MANNER AND METHOD OF DISTRIBUTION
(a) When Accrued Benefits are to be distributed, the Trustees
shall distribute such benefits to the Participant, or in the case of
the Participant's death, to the Participant's Beneficiary.
(b) Distribution of a Participant's Accrued Benefits shall be
made in one of the following methods:
(1) by payment in a single sum; or
(2) by payment in a series of substantially equal
installments over a period not to exceed five (5) years,
provided the maximum period over which the distribution of a
Participant's Company Stock Account may be made shall be
extended by one (1) year, up to five (5) additional years,
for each $100,000 (or fraction thereof) by which such
Participant's Company Stock Account balance exceeds $500,000
(with the aforementioned figures subject to cost-of-living
adjustments prescribed by the Secretary of the Treasury).
A Participant shall select the method in which such Participant's
Accrued Benefits shall be distributed. If a Participant so desires,
such Participant may direct how such Participant's Accrued Benefits
are to be paid to such Participant's Beneficiary. Notwithstanding any
provision to the contrary, if the value of a Participant's Accrued
Benefits at the time of any distribution does not equal or exceed
$3,500, then such Participant's Accrued Benefits shall be distributed
in a single sum.
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(c) Distributions of a Participant's Vested Company Stock
Account shall be made entirely in whole shares of Company Stock, cash,
or a combination of both, as determined by the Trustees; provided,
however, that the Trustees shall notify the Participant of the
Participant's right to demand distribution of such Participant's
Vested Company Stock Account balance entirely in whole shares of
Company Stock (with the value of any fractional share paid in cash).
However, if the charter or by-laws of the Employer restrict ownership
of substantially all of the outstanding Company Stock to employees and
the Trust, then the distribution of a Participant's Vested Company
Stock Account shall be made entirely in the form of cash or other
property, and the Participant is not entitled to a distribution in the
form of Company Stock. Distribution of the Vested balance of a
Participant's Other Investments Account, Directed Investment Account
and Employee Rollover Account will be made in cash.
(d) The Trustees will make a distribution from the Trust only on
instructions from the Plan Administrator.
(e) Except as otherwise provided herein, Company Stock
distributed by the Trustees may be restricted as to sale or transfer
by the by-laws or articles of incorporation of the Employer, provided
such restrictions are applicable to all Company Stock of the same
class. If a Participant is required to offer the sale of Company
Stock to the Employer before offering to sell Company Stock to a third
party, in no event may the Employer pay a price less than that offered
to the distributee by another potential buyer making a bona fide offer
and in no event shall the Trustees pay a price less than the fair market
value of the Company Stock.
(f) If Company Stock acquired with the proceeds of a loan is
available for distribution and such stock consists of more than one
class, a distributee must receive substantially the same proportion of
each such class.
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(g) Notwithstanding the provisions of paragraph (a), if, in the
opinion of the Plan Administrator a Participant or other person
entitled to benefits under the Plan is under a legal disability or is
in any way incapacitated so as to be unable to manage his or her
financial affairs, the Plan Administrator may, until a claim is made
by a conservator or other person legally charged with the care of such
person or of such person's estate, direct the Trustees to make payment
to a relative or friend of such person for such person's benefit.
Thereafter, any benefits under the Plan to which such Participant or
other person is entitled shall be paid to such conservator or other
person legally charged with the care of such person or such person's
estate, which shall then fully discharge the obligation of the
Trustees to pay benefits under the Plan with respect to such
Participant.
(h) Notwithstanding the provisions of this Section 7.5 (and
effective January 1, 1993), if the distributee of any "eligible
rollover distribution" (1) elects to have such distribution paid
directly to an "eligible retirement plan" and (2) specifies the
"eligible retirement plan" to which such distribution is to be paid
(in such form and such time as the Plan Administrator may prescribe),
and to the extent required by the Code and Regulations, such
distribution shall be made in the form of a direct trustee-to-trustee
transfer to the "eligible retirement plan" so specified; provided,
however, that such "eligible rollover distribution" would have been
includible in the distributee's gross income if not so transferred
(determined without regard to Code Sections 402(c) and 403(a)(4)).
"Eligible rollover distribution" and "eligible retirement plan" shall
have the meanings as contained in Code Section 401(a)(31).
7.6 DESIGNATION OF BENEFICIARY
(a) Each Participant from time to time, by signing a form
furnished by the Plan Administrator, may designate any legal or
natural person or persons (who may be designated contingently or
successively) to whom distribution of the Participant's Accrued
Benefits shall be made if such Participant dies before such
Participant receives all of such benefits; provided, however, if a
married Participant designates a Beneficiary other than such
Participant's spouse, the designation will be invalid unless such
Participant's spouse consents in writing to such designation and
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acknowledges in writing the effect of such designation, with such consent
and acknowledgement witnessed by a Plan representative or a notary public.
However, the spouse's consent shall not be required if it is established to
the satisfaction of the Plan Administrator that the required consent cannot
be obtained because there is no spouse, the spouse cannot be located, or
because of such other circumstances as the Secretary of the Treasury may by
Regulation prescribe. Any designation by an unmarried Participant shall be
rendered ineffective by any subsequent marriage and any consent of a spouse
shall be effective only as to that spouse. A Beneficiary designation form
will be effective only when the signed form is filed with the Plan
Administrator while the Participant is alive and will cancel all
Beneficiary designation forms signed earlier.
(b) If a deceased Participant failed to properly designate a
Beneficiary as provided above, or if the Designated Beneficiary of a
deceased Participant dies before such Participant's death or dies
before complete payment of the Participant's benefits, the Trustees
shall pay the Participant's benefits as follows:
(1) to the surviving spouse of the Participant, if
any;
(2) if the Participant leaves no surviving spouse, to
the Participant's surviving descendants, PER STIRPES; or
(3) if the Participant has no surviving spouse or
descendants, to the Participant's estate.
The term "Designated Beneficiary" as used in this Plan means the
person or persons designated by a Participant as the Participant's
Designated Beneficiary in the last effective Beneficiary designation
form filed with the Plan Administrator and to whom a deceased
Participant's benefits are payable under the Plan.
(c) Each Participant and each Designated Beneficiary must file
with the Plan Administrator from time to time in writing such person's
post office address and each change of post office address. Any
communication, statement or notice addressed to a Participant or
Designated Beneficiary at the person's last post office address filed
with the Plan Administrator, or if no address is filed with the Plan
Administrator then, in the case of a Participant, at the Participant's
last post office address as shown on the Employer's records, will be
binding on the Participant and Designated Beneficiary for all purposes
of the Plan. The Employer, the Plan Administrator and the Trustees
are not required to search for or locate a Participant or Designated
Beneficiary. If a Participant or Designated Beneficiary are not
located within a reasonable time after the Accrued Benefits become
payable, the Trustees may treat the amount as a Forfeiture (to be
restored if such Participant or Designated Beneficiary are
subsequently located).
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7.7 RIGHTS OF FIRST REFUSAL
(a) Any shares of Company Stock distributed by the Trust shall
be subject to a "right of first refusal." The right of first refusal
shall provide that, prior to any subsequent transfer, the shares must
first be offered for purchase in writing to the Employer, and then to
the Trust, at the then fair market value. A bona fide written offer
from an independent prospective buyer shall be deemed to be the fair
market value of such Company Stock for this purpose. The Employer and
the Trustees shall have a total of fourteen (14) days after written
notice to exercise the right of first refusal on the same terms
offered by a prospective buyer. If the right of first refusal is not
exercised, such Company Stock may be sold according to the terms of
the written offer, or otherwise such Company Stock shall remain
subject to a right of first refusal.
(b) Any shares of Company Stock when held by the Trust may, but
need not, be subject to a right of first refusal. The right of first
refusal must be in favor of the Employer, the Trust, or both, in any
order of priority, at the then fair market value. A bona fide written
offer from an independent prospective buyer shall be deemed to be the
fair market value of such Company Stock for this purpose. The
Employer and the Trustees shall have a total of fourteen (14) days
after written notice to exercise the right of first refusal on the
same terms offered by a prospective buyer. If the right of first
refusal is not exercised, such Company Stock may be sold according to
the terms of the written offer, or otherwise such Company Stock shall
remain subject to a right of first refusal.
(c) Company Stock acquired with the proceeds of an Exempt Loan
shall not be subject to the rights of refusal under this Section 7.7
if such shares are publicly traded at the time that such rights may be
exercised.
7.8 STOCK CERTIFICATE LEGEND
All certificates for shares distributed pursuant to this Plan shall contain
the following legend:
"The shares represented by this certificate are transferable only
upon compliance with the terms of the J. C. NICHOLS COMPANY EMPLOYEE
STOCK OWNERSHIP PLAN, effective as of January 1, 1987, which grants to
J. C. Nichols Company and the Trustees of the J. C. NICHOLS
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COMPANY EMPLOYEE STOCK OWNERSHIP TRUST a right of first refusal, a copy of
said Plan being on file in the office of the Company."
7.9 PUT OPTION
(a) The Employer shall issue a "put option" to any Participant
who receives a distribution of Company Stock. The put option shall
permit the Participant to sell such Company Stock to the Company at
any time during two option periods, at the fair market value of such
shares. The first put option period shall be for at least sixty (60)
days beginning on the date of distribution. The second put option
period shall be for at least sixty (60) days beginning after the new
determination of the fair market value of Company Stock by the
Trustees (and notice to the Participant) in the following Plan Year.
The Employer may allow the Trustees to purchase shares of Company
Stock tendered to the Company under a put option. The payment for any
Company Stock sold under a put option shall begin not later than
thirty (30) days after the exercise of the put option, and shall be
made in a lump sum or in substantially equal annual installments over
a period not exceeding five (5) years, with adequate security and
interest payable at a reasonable rate on any unpaid balance (as
determined by the Employer).
(b) Company Stock shall not be subject to the put option under
this Section 7.9 if such shares are publicly traded at the time that
such put option may be exercised.
7.10 NONTERMINABLE PROTECTIONS AND RIGHTS
Except as otherwise specifically provided in Sections 7.7 and 7.9 herein,
no Company Stock acquired with the proceeds of an Exempt Loan may be subject to
a put, call, or other option, or buy-sell or similar arrangement when held by
and when distributed from the Trust Fund, whether or not the Plan is then an
ESOP. The protections and rights granted in this Section and in Sections 7.7
and 7.9 are nonterminable, and such protections and rights shall continue to
exist under the terms of this Plan so long as any Company Stock acquired with
the proceeds of an Exempt Loan is held by the Trust Fund or by any Participant
or other person for whose benefit such protections and rights have been created,
and neither the repayment of such loan nor the failure of the Plan to be an
ESOP, nor an amendment of the Plan shall cause a termination of said protections
and rights.
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7.11 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order" as those terms are defined in Code
Section 414(p).
ARTICLE VIII
NATURE OF PARTICIPANT'S INTEREST
8.1 NO RIGHTS TO EMPLOYMENT
Neither the establishment, maintenance or modification of this Plan and its
companion Trust Agreement, nor the creation of any account or segregated fund
for the purpose of recording a Participant's proportionate interest in Employer
contributions to the Trust Fund under such Trust Agreement, nor the payment of
any Accrued Benefits to a Participant or Beneficiary shall be construed as
giving a Participant or Beneficiary any legal or equitable rights against the
Employer or interests in the Trust Fund other than those expressly provided for
in this Plan; in addition, no such facts and/or events shall be deemed to
constitute a contract between the Employer and any Participant or Beneficiary
or, consideration, inducement or condition of employment of any such
Participant, and nothing contained in this Plan shall be construed as conferring
upon any Participant the right to be retained in the employ of the Employer or
interfere with the Employer's right to terminate employment of such Participant
at any time with or without cause.
8.2 NO PRESENT VALUE OR CONTROL OVER BENEFITS
No Participant or Beneficiary shall receive anything of present
exchangeable value from the Trust Fund or from the Employer in anticipation of
or prior to the actual distribution of such Participant's Vested interest
therein made pursuant to the terms and conditions of this Plan. In addition, no
Participant or Beneficiary shall exercise any control over the investment of the
Trust Fund (except for the control permitted by Directed Investment Accounts) or
the use or disposition of the Trust Fund by the Trustees.
8.3 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable under this Plan to any person (including a
Participant or a Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
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transfer, assign, pledge, encumber, or charge to the same shall be void;
and no such benefit shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements, or torts of any such person,
nor shall it be subject to attachment or legal process for or against such
person, and the same shall not be recognized by the Trustees, except to
such extent as may be required by law.
(b) This provision shall not apply to the extent a Participant
or Beneficiary is indebted to the Plan, for any reason, under any
provision of the Plan. At the time a distribution is to be made to or
for a Participant's or Beneficiary's benefit, such proportion of the
amount distributed as shall equal such indebtedness shall be paid by
the Trustees to the Trustees or the Plan Administrator, at the
direction of the Plan Administrator, to apply against or discharge
such indebtedness. Prior to making a payment, however, the
Participant or Beneficiary must be given written notice by the Plan
Administrator that such indebtedness is to be so paid in whole or part
from the Participant's Participation Account. If the Participant or
Beneficiary does not agree that the indebtedness is a valid claim
against such Participant's Vested Participation Account, such
Participant shall be entitled to a review of the validity of the claim
in accordance with procedures provided in the Plan.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the Plan
Administrator under the provisions of the Retirement Equity Act of
1984. The Plan Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order," a former
spouse of a Participant shall be treated as the spouse or surviving
spouse for all purposes under the Plan.
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ARTICLE IX
PLAN ADMINISTRATION
9.1 PLAN ADMINISTRATOR
Administration of this Plan and responsibility for its interpretation and
implementation shall be entrusted to the Plan Administrator.
9.2 AGENT FOR SERVICE OF PROCESS
The Plan Administrator, together with any other person designated by the
Employer, shall be the designated agents for service of legal process upon the
Plan or Trust.
9.3 REPORTS AND STATEMENTS
The Plan Administrator shall be responsible for the preparation,
publication, distribution and filing of all annual reports, Participation
Account statements, registration statements, and plan descriptions, required to
be given to the Employer, Participants, Beneficiaries or any federal agency by
the laws and regulations promulgated thereunder governing this Plan. The Plan
Administrator shall be entitled to rely upon all tables, valuations,
certificates, reports, notices, opinions, and other information furnished by the
Employer, Trustees, any Participant or Beneficiary, or any duly appointed
actuary, accountant or legal counsel, for purposes of preparing such reports,
statements and descriptions.
9.4 DETERMINATION OF ACCRUED BENEFITS
The Plan Administrator shall determine the amount of Accrued Benefits which
are payable under this Plan, the party or parties entitled to receive
distribution of same and shall have the sole and exclusive right to establish
such rules and procedures as may reasonably be necessary for the proper and
efficient administration of this Plan.
9.5 CLAIMS PROCEDURE
The Plan Administrator may require any Participant or Beneficiary claiming
a right to receive benefits under this Plan to apply for such benefits in
writing and to provide satisfactory information to prove the basis of such claim
including, but not limited to, date of birth, marital status, social security
number, address, or relationship to the Plan or Plan Participant.
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9.6 APPEAL PROCEDURE
Whenever a claim for benefits by any Participant or Beneficiary is to be
denied, the Plan Administrator shall notify the claimant in writing of such
denial and set forth, in a manner calculated to be understood by the claimant,
the reasons and relevant Plan provisions upon which the denial is based. The
Plan Administrator shall advise the claimant what, if any, additional material
or information is necessary to complete the claim.
In addition, the Plan Administrator's notice must advise the claimant that,
upon his or her written request delivered to the Plan Administrator within sixty
(60) days following the date of such notice, the claimant will be given an
opportunity to furnish additional material or information relating to any
matters in controversy and to request an informal hearing before the Plan
Administrator for the purpose of making a complete and impartial review of such
issues. If the claimant's request for a hearing is submitted within the time
allotted, the Plan Administrator shall set a time and date for conducting the
informal hearing at the Plan Administrator's office and the claimant shall be so
notified in writing. The date of any such hearing shall be no later than sixty
(60) days following the Plan Administrator's receipt of the claimant's request.
The Plan Administrator shall fairly and deliberately consider all material
and information presented by the Participant or Beneficiary in support of the
claim for benefits, but the Plan Administrator shall be guided solely by the
provisions of this Plan and the laws governing its operation. The Plan
Administrator shall make a final decision with respect to the matters presented
at the hearing no later than sixty (60) days following the date of such hearing
and provide the Participant or Beneficiary written notice of the decision and
the reasons upon which such decision is based.
ARTICLE X
BONDING REQUIREMENTS
Unless otherwise exempted by law, each Fiduciary shall be bonded in an
amount not less than ten percent (10%) of the amount of funds such Fiduciary
handles; provided, however, that the minimum bond shall be one thousand dollars
($1,000.00) and the maximum bond shall be five hundred thousand dollars
($500,000.00). The amount of funds handled shall be determined at the beginning
of each Plan Year by the amount of funds handled by such person, group or class
to be covered and their predecessors, if any, during the preceding Plan Year, or
if there is no preceding Plan Year, then by the amount of the funds to be
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handled during the current Plan Year. The bond shall protect the Plan and Trust
Fund against any loss by reason of acts of fraud or dishonesty by the Fiduciary
alone, or in connivance with others. The surety issuing such bond shall be a
corporate surety company which is an acceptable surety on Federal bonds under
authority granted by the Secretary of the Treasury, and the bond shall be in a
form approved by the Secretary of Labor. The cost of such bond shall be an
expense of administering this Plan and the Trust Fund and may, at the election
of the Plan Administrator, be paid from the Trust Fund or by the Employer.
ARTICLE XI
AMENDMENT, TERMINATION AND MERGER
11.1 AMENDMENT
The Employer shall have the right at any time to amend the Plan. However,
no such amendment shall authorize or permit any part of the Trust Fund (other
than such part as is required to pay taxes and administration expenses) to be
used for or diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; no such amendment shall cause
any reduction in the amount credited to the account of any Participant or cause
or permit any portion of the Trust Fund to revert to or become the property of
the Employer; and no such amendment which affects the right, duties or
responsibilities of the Trustees and Plan Administrator, respectively, may be
made without the written consent of the Trustees or Plan Administrator, as the
case may be.
For purposes of this Section, a Plan amendment which has the effect of (1)
eliminating or reducing an early retirement benefit or a retirement-type
subsidy, (2) eliminating an optional form of benefit (as provided in
Regulations) or (3) restricting, directly or indirectly, the benefit provided to
any Participant prior to the amendment shall be treated as reducing the amount
credited to the account of a Participant except that an amendment described in
clause (2) (other than an amendment having an effect described in clause (1))
shall not be treated as reducing the amount credited to the account of a
Participant to the extent so provided in Regulations.
11.2 TERMINATION
The Employer presently intends to maintain the Plan and Trust throughout
its existence. However, the Employer shall have the right at any time to
terminate the Plan by delivering to the Trustees and Plan Administrator written
notice of such termination. A complete discontinuance of the Employer's
contributions to the Plan shall be deemed to constitute a
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termination. Upon any termination (full or partial) or complete discontinuance
of contributions, all amounts credited to the affected Participants'
Participation Accounts (then standing to the credit of such Participants on the
books of the Trustees, as determined in the manner prescribed in Article VI)
shall become 100% Vested and shall not thereafter be subject to forfeiture and
all unallocated amounts shall be allocated to the accounts of all Participants
in accordance with the provisions of Article VI. Upon such termination of the
Plan, the Employer, by written notice to the Trustees and Plan Administrator,
may direct either:
(a) complete distribution of the assets of the Trust Fund to the
Participants in a manner consistent with the requirements of Article
VII; or
(b) continuation of the Trust created by this agreement and the
distribution of benefits at such time and in such manner as though the
Plan had not been terminated.
11.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other Plan and Trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the Plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation.
ARTICLE XII
TRUST AGREEMENT AND INVESTMENT POLICY
12.1 TRUST AGREEMENT
Concurrently with the establishment of this Plan, the Employer has entered
into a Trust Agreement for the purpose of creating a trust to which Employer
contributions shall be made in furtherance of this Plan. The Trust Agreement
will incorporate this Plan by reference, together with all amendments made from
time to time, and the rights of all persons under this Plan shall be subject to
the terms of this Plan and such Trust Agreement.
12.2 INVESTMENT POLICY
(a) The Trust is designed and intended to invest primarily in
Company Stock.
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(b) With due regard to Section 12.2(a), the Trustees may also
invest funds in other property as described in the Trust Agreement or
may hold such funds in cash or cash equivalents.
(c) The Trust may not obligate itself to use the proceeds of an
Exempt Loan to acquire Company Stock from a particular holder thereof
at an indefinite time determined upon the happening of an event such
as the death of the holder.
(d) The Trust may not obligate itself to acquire Company Stock
acquired with the proceeds of an Exempt Loan under a put option
binding upon the Plan except as otherwise explicitly permitted by the
Plan.
(e) All purchases of Company Stock shall be made at a price
which, in the judgment of the Trustees, does not exceed the fair
market value thereof. All sales of Company Stock shall be made at a
price which, in the judgment of the Trustees, is not less than the
fair market value thereof.
ARTICLE XIII
GENERAL
13.1 RECEIPT AND RELEASE
Full payment of Accrued Benefits in accordance with the terms of this Plan
to any Participant, such Participant's legal representative or Beneficiary, or
to any guardian or other person appointed for such Participant or Beneficiary,
shall be in full satisfaction of all claims hereunder against the Employer, the
Plan Administrator and Trustees. As a condition precedent to such payment, the
Plan Administrator may, at its discretion, require such Participant or
Beneficiary to execute a receipt for the benefits paid and a release of the
Employer, the Plan Administrator and the Trustees from any and all claims,
demands, rights, and causes of action, known or unknown, which such Participant
or Beneficiary then has or may thereafter acquire against them arising out of,
existing under or related to establishment, maintenance, operation and/or
termination of this Plan and its companion Trust, in such form as the Plan
Administrator shall require.
13.2 SOURCE OF BENEFITS
The Trust Fund shall be the sole source of all benefits provided for in
this Plan, and the liability of the Trustees to make any payment hereunder shall
be limited to the available
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assets of the Trust Fund. The Employer does not guarantee any payment of
benefits hereunder to any person, and in no event shall the Employer be liable
or responsible for the payment of any such benefits. Neither the Trustees, the
Plan Administrator nor the Employer in any way guarantee the Trust Fund from
loss or depreciation.
13.3 INFORMATION FROM PARTICIPANTS
Participants, Former Participants, Beneficiaries thereof and anyone
claiming hereunder shall supply the Employer and/or the Plan Administrator with
such information as may from time to time be requested of them; including, by
way of illustration but not of limitation, proof of age, marital status and
heirship. The Employer, Plan Administrator and Trustees shall be entitled to
rely upon such information for purposes of discharging their respective
responsibilities under this Plan and the Trust Agreement, and shall be fully
protected against any liability arising from any action taken by them in good
faith and reliance upon any such information.
13.4 INSPECTION OF PLAN DOCUMENTS
The Plan and Trust Agreement, modifications thereof and supplements
thereto, may be inspected at the principal office of the Employer during regular
business hours, by any Participant, Former Participant or Beneficiary.
13.5 RESTRAINT ON DISCRETIONARY DECISIONS
All provisions of this Plan charging the Employer, Plan Administrator and
Trustees to make decisions of a discretionary nature with respect to any matter
including, but not limited to, determining the eligibility of Participants, the
amount, time or manner of the payment of benefits, and the forfeitability of
benefits shall be uniformly and consistently applied to all Employees and
Participants in like circumstances, without discrimination.
13.6 TITLES
The titles of Articles and grouping of provisions in this Plan have been
inserted and arranged for convenience or reference only and are to be ignored in
any construction of the provisions hereof.
13.7 RULES OF CONSTRUCTION
Whenever appropriate, words used in the singular shall include the plural
and words used in the masculine shall include the feminine, and vice versa.
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13.8 STATE LAW GOVERNING PLAN
This Plan shall be construed, regulated, enforced and administered in
accordance with the laws of the State of Missouri.
13.9 INTENTION TO COMPLY WITH CODE
This Plan and its companion Trust are intended to comply with Code Sections
401(a), 501(a) and 4975(e)(7), respectively, and the Employee Retirement Income
Security Act of 1974 (ERISA), so as to qualify as an employee stock ownership
plan and to qualify for the tax exempt status accorded certain employee benefit
plans and trusts under such Code Sections, and any other Section or Sections of
the Code relative thereto, and to qualify the Employer's contributions to the
Trust Fund established hereunder as tax deductible under Code Section 404. If
any provision of this Plan and its companion Trust Agreement is subject to more
than one interpretation or any term used therein is subject to more than one
construction, such ambiguity shall be resolved in favor of the interpretation or
construction which is consistent with this Plan's intention of being so
qualified.
13.10 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
13.11 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the Plan
Administrator and (3) the Trustees. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustees and the Plan
Administrator; to formulate the Plan's funding policy and method; and to amend
or terminate, in whole or in part, the Plan. The Plan Administrator shall have
the sole responsibility for the administration of the Plan, which responsibility
is specifically described in the Plan. The Trustees shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an investment manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
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direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended
under the Plan that each named Fiduciary shall be responsible for the proper
exercise of its own powers, duties, responsibilities and obligations under the
Plan. No named Fiduciary shall guarantee the Trust Fund in any manner against
investment loss or depreciation in asset value. Any person or group may serve
in more than one Fiduciary capacity.
13.12 LEGAL ACTION
In the event any claim, suit or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustees or the Plan
Administrator may be a party, and such claim, suit or proceeding is resolved in
favor of the Trustees or Plan Administrator, they shall be entitled to be
reimbursed from the Trust Fund for any and all costs, attorneys' fees, and other
expenses pertaining thereto incurred by them for which they shall have become
liable.
13.13 SECURITIES AND EXCHANGE COMMISSION APPROVAL
The Employer may request an interpretative letter from the Securities
Exchange Commission stating that the transfers of Company Stock contemplated
hereunder do not involve transactions requiring a registration of such Company
Stock under the Securities Act of 1933. In the event that a favorable
interpretative letter is not obtained, the Employer reserves the right to amend
the Plan and Trust retroactively to their Effective Dates in order to obtain a
favorable interpretative letter or to terminate the Plan.
13.14 INDEMNIFICATION
Neither the Employer, any of its officers or directors, nor the Plan
Administrator shall be personally liable for any action or inaction with respect
to any duty or responsibility imposed upon such person by the terms of the Plan,
unless such action or inaction is judicially determined to be a breach of that
person's fiduciary responsibility with respect to the Plan under any applicable
law. The Employer may indemnify or purchase insurance to underwrite indemnity
for the Plan Administrator and/or the Employer's Board of Directors against any
personal liability or expense except for their own gross negligence.
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ARTICLE XIV
DIVERSIFICATION REQUIREMENT
14.1 DIVERSIFICATION ELECTION
(a) Each "qualified Participant" may make a diversification
election within ninety (90) days after the close of each Plan Year in
the "qualified election period" with respect to at least twenty-five
percent (25%) of the Participant's Company Stock Account (to the
extent such portion exceeds the amount to which a prior election under
this Section 14.1 applies). In the case of the election year in which
the Participant can make such Participant's last election, the
preceding sentence shall be applied by substituting "fifty percent
(50%)" for "twenty-five percent (25%)." A diversification election
does not have to be offered if the value of a Participant's Company
Stock Account is $500 or less as of the Valuation Date immediately
preceding the first day of any qualified election period (or at or
below some other higher level established by Regulations or other
Treasury rules).
(b) The term "qualified Participant" means any Participant who
has completed at least ten (10) years of participation under the Plan
and has attained age fifty-five (55). The term "qualified election
period" means the six (6) Plan Year period beginning with the first
Plan Year in which the Participant first becomes a qualified
Participant.
14.2 METHODS OF MEETING REQUIREMENTS
If a qualified Participant makes a diversification election in accordance
with Section 14.1, the Trustees shall:
(a) offer the Participant a distribution of the value
(determined as of the last preceding Valuation Date) of the portion of
such Participant's Participation Account covered by the election in
the form of cash to be made within ninety (90) days after the period
during which the election may be made; or
(b) establish a Directed Investment Account with the portion of
such Participant's Participation Account covered by the election, and
offer such Participant at least three (3) investment options (not
inconsistent with Regulations), and invest such account accordingly
within ninety (90) days after the period during which the election may
be made.
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ARTICLE XV
TOP HEAVY PROVISIONS
15.1 TOP HEAVY PLAN REQUIREMENTS
For any Plan Year in which the Plan is Top Heavy, the Plan shall provide
the special minimum allocations and special vesting required by Code Section
416(c).
15.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, the Top-Heavy Ratio exceeds sixty
percent (60%).
(b) Top-Heavy Ratio: The Top-Heavy Ratio is (1) the Present
Value of Accrued Benefits of Key Employees and the sum of the
Aggregate Accounts of Key Employees under this Plan and all plans of
an Aggregation Group, to (2) the Present Value of Accrued Benefits and
the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but
such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate
Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy Group). In
addition, if a Participant or Former Participant has not performed any
services for any Employer maintaining the Plan at any time during the
five-year period ending on the Determination Date, any accrued benefit
for such Participant or Former Participant shall not be taken into
account for purposes of determining whether this Plan is a Top Heavy
Plan.
(c) Aggregate Account: A Participant's Aggregate Account as of
the Determination Date is the sum of:
(1) the Participant's Participation Account balance as
of the most recent valuation occurring within a twelve (12)
month period ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of
any
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contributions actually made after the valuation date but on or before
the Determination Date, except for the first Plan Year when such
adjustment shall also reflect the amount of any contributions made
after the Determination Date that are allocated as of a date in that
first Plan Year;
(3) any Plan distributions made within the Plan Year
that includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the valuation date and prior to the Determination
Date, such distributions are not included as distributions
for top heavy purposes to the extent that such distributions
are already included in the Participant's Participation
Account balance as of the valuation date. Distributions
from the Plan (including the cash value of life insurance
policies) of a Participant's Participation Account balance
because of death shall be treated as a distribution for the
purposes of this paragraph.
(4) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both initiated by the
Employee and made from a plan maintained by one employer to
a plan maintained by another employer), if this Plan
provides the rollovers or plan-to-plan transfers, it shall
always consider such rollovers or plan-to-plan transfers as
a distribution for purposes of this Section. If this Plan
is the plan accepting such rollovers or plan-to-plan
transfers, it shall not consider such rollovers or
plan-to-plan transfers as a part of the Participant's
Participation Account balance.
(5) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made
to a plan maintained by the same employer), if this Plan
provides the rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this Section.
If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or
plan-to-plan transfer as part of the Participant's
Participation Account balance.
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(6) For purposes of determining whether two employers
are to be treated as the same employer in (4) and (5) above,
all employers aggregated under Code Section 414(b), (c) or
(m) are treated as the same employer.
(d) Aggregation Group: Aggregation Group means either a
Required Aggregation Group or a Permissive Aggregation Group as
hereinafter determined.
(1) Required Aggregation Group: In determining a
Required Aggregation Group hereunder, each plan of the
Employer in which a Key Employee is a participant in the
Plan Year containing the Determination Date or any of the
four (4) preceding Plan Years, and each other plan of the
Employer which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections
401(a)(4) or 410, will be required to be aggregated. Such
group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan
in the group will be considered a Top Heavy Plan if the
Required Aggregation Group is a Top Heavy Group. No plan in
the Required Aggregation Group will be considered a Top
Heavy Plan if the Required Aggregation Group is not a Top
Heavy Group.
(2) Permissive Aggregation Group: The Employer may
also include any other plan not required to be included in
the Required Aggregation Group, provided the resulting
group, taken as a whole, would continue to satisfy the
provisions of Code Sections 401(a)(4) and 410. Such group
shall be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a
plan that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
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(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar year shall
be aggregated in order to determine whether such plans are
Top Heavy Plans.
(4) An Aggregation Group shall include any terminated
plan of the Employer if it was maintained within the last
five (5) years ending on the Determination Date.
(e) Determination Date: Determination Date means (a) the last
day of the preceding Plan Year, or (b) in the case of the first Plan
Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefits: In the case of a defined
benefit plan, the Present Value of Accrued Benefits for a Participant
other than a Key Employee shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C).
(g) Top Heavy Group: Top Heavy Group means an Aggregation Group
in which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans included in the
group, and
(2) the Aggregate Accounts of Key Employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all
Participants.
(h) Notwithstanding the above, all top heavy determinations made
under this Section shall be consistent with Code Section 416 and the
Regulations and rulings thereunder.
15.3 SPECIAL MINIMUM ALLOCATIONS
(a) Notwithstanding any other provision of this Plan, for any
Plan Year in which the Plan is Top Heavy, the sum of the Employer
Contributions and Forfeitures allocated to each Non-Key Employee's
Participation
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Account shall be equal to at least three percent (3%) of such Non-Key
Employee's 415 Compensation. However, if (1) such allocation is less than
three percent (3%), and (2) this Plan is not required to be included in an
Aggregation Group to enable a defined benefit plan to meet the requirements
of Code Sections 401(a)(4) or 410, such allocation must only be equal to
the largest percentage allocated to any Key Employee's Participation
Account.
(b) If the Employer is required to make an additional
contribution to satisfy (a) above, such additional amount shall be
treated in all respects as an Employer contribution under Section 4.1.
(c) No minimum allocation under (a) above shall be required in
this Plan for any Non-Key Employee who participates in another defined
contribution plan subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation Group.
(d) For purposes of the minimum allocation under (a) above, the
percentage allocated to a Key Employee's Participation Account shall
be equal to the ratio of the sum of the Employer contributions and
Forfeitures allocated on behalf of such Key Employee divided by the
415 Compensation for such Key Employee.
(e) For any Plan Year in which the Plan is Top Heavy, the
minimum allocations under (a) above shall be allocated to all
Participation Accounts for those Non-Key Employees who are
Participants and who are employed by the Employer on the last day of
the Plan Year, including Non-Key Employees who have failed to complete
a Year of Service.
(f) Notwithstanding the above, the minimum allocations under (a)
shall be made only to the Employees required to receive such
allocations by Code Section 416 and the Regulations thereunder.
15.4 SPECIAL VESTING
(a) Notwithstanding any other provision of this Plan, for any
Plan Year in which the Plan is Top Heavy, the Vested portion of the
Participation Account for a Participant who has an Hour of Service
after the Plan becomes Top Heavy shall be contingent upon the number
of Years of Service to the Employer completed by the Participant, and
determined in accordance with the following schedule:
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Years of Service Percentage (%)
Completed of Account Vested
---------------- -----------------
(1) Before Two (3) Years of Service 0%
(2) After Two (2) Years of Service,
but prior to Three (3) Years of Service 20%
(3) After Three (3) Years of Service,
but prior to Four (4) Years of Service 40%
(4) After Four (4) Years of Service,
but prior to Five (5) Years of Service 60%
(5) After Five (5) Years of Service,
but prior to Six (6) Years of Service 80%
(6) After Six (6) Years of Service 100%
(b) If in any subsequent Plan Year the Plan ceases to be Top
Heavy, the Plan Administrator shall revert to the vesting schedule in
effect before the Plan became Top Heavy. Any such reversion shall be
treated as a Plan amendment pursuant to the terms of the Plan;
provided, however, that the vesting schedule described in paragraph
(a) above may not be made less favorable for any Participant who has
completed three (3) or more Years of Service, and no amendment may
cause any previously Vested portion of a Participation Account to
become forfeitable.
ARTICLE XVI
PARTICIPATING EMPLOYERS
16.1 ADOPTION BY OTHER EMPLOYERS
With the consent of J. C. Nichols Company, any other corporation or entity,
whether an affiliate or subsidiary or not, may adopt this Plan and all of the
provisions hereof, and participate herein and be known as a Participating
Employer, by a properly executed document evidencing said intent and will of
such Participating Employer.
16.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use
the same Trust Agreement as provided in this Plan, and shall be bound
thereby and be bound by any subsequent amendments thereto.
-56-
<PAGE>
(b) The Trustees may, but shall not be required to, commingle,
hold and invest as one Trust Fund all contributions made by
Participating Employers, as well as all increments thereof.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether such Participant be an Employee of
the Employer or a Participating Employer, shall not affect such
Participant's rights under the Plan, and all amounts credited to such
Participant's Participation Account as well as accumulated service
time with the transferor or predecessor, and length of participation
in the Plan, shall continue to such Participant's credit.
(d) All rights and values forfeited by termination of employment
shall inure only to the benefit of the Employee-Participants of the
particular Employer by which the forfeiting Participant was employed,
except if the Forfeiture is for an Employee whose Employer is a member
of an affiliated or controlled group, then said Forfeiture shall inure
to the benefit of the Employee-Participants of the entire affiliated
or controlled group. Should an Employee of one ("First") Employer be
transferred to an associated ("Second") Employer (the Employer, an
affiliate or subsidiary), such transfer shall not cause any portion of
such person's Participation Account (generated while an Employee of
"First" Employer) in any manner, or by any amount to be forfeited.
Such Employee's Participation Account for all purposes of the Plan,
including length of service, shall be considered as though such person
had always been employed by the "Second" Employer and as such had
received contributions, forfeitures, earnings or losses, and
appreciation or depreciation in value of assets totaling the amount so
transferred.
(e) Any expenses of the Trust which are to be paid by the
Employer or borne by the Trust Fund shall be paid by each
Participating Employer in the same proportion that the total amount
standing to the credit of all Participants employed by such
Participating Employer bears to the total standing to the credit of
all Participants.
16.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a part of this Plan;
provided, however, that with respect to all of its relations with the Trustees
and Plan Administrator for the purpose of this Plan, each Participating Employer
shall be deemed
-57-
<PAGE>
to have designated irrevocably J. C. Nichols Company as its agent.
16.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Employers,
and in the event of any such transfer, the Employee involved shall continue to
all accumulated service and eligibility. No such transfer shall effect a
termination of employment hereunder, and the Employer to which the Employee is
transferred shall thereupon become obligated hereunder with respect to such
Employee in the same manner as was the Employer from whom the Employee was
transferred.
16.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution or Forfeiture subject to allocation during each Plan Year
shall be allocated among all Participants of all Employers in accordance with
the provisions of this Plan. On the basis of the information furnished by the
Plan Administrator, the Trustees shall keep separate books and records
concerning the affairs of each Employer hereunder and as to the accounts and
credits of the Employees of each Participating Employer.
16.6 AMENDMENT
Amendment of this Plan shall only be by the written adoption of such
amendment by J. C. Nichols Company. Each Participating Employer shall be
deemed to consent to any such amendment.
16.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustees. The Trustees shall thereafter
transfer, deliver and assign Trust Fund assets allocable to the Participants of
such Participating Employer to such new Trustee as shall have been designated by
such Participating Employer, in the event that it has established a separate
pension plan for its Employees. If no successor is designated, the Trustees
shall retain such assets for the Employees of said Participating Employer
pursuant to the provisions of Article VII hereof. In no such event shall any
part of the corpus or income of the Trust as it relates to such Participating
Employer be used for or diverted for purposes other than for the exclusive
benefit of the Employees of such Participating Employer.
16.8 PLAN ADMINISTRATOR'S AUTHORITY
The Plan Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all
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<PAGE>
Participating Employers and all Participants, to effectuate the purpose of this
Article.
IN WITNESS WHEREOF, and to record the formal adoption of this Plan, the
Employer has caused the same to be executed in several counterparts, each of
which shall be deemed a duplicate original, by its duly authorized officers and
its corporate seal to be affixed hereto this 14th day of December, 1994.
J. C. NICHOLS COMPANY,
a Missouri corporation
(Corporate Seal)
By:
Its:
ATTEST:
Secretary/Assistant Secretary
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<PAGE>
FIRST AMENDMENT
TO THE AMENDED AND RESTATED
J. C. NICHOLS COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
THIS FIRST AMENDMENT is made this 14th day of November, 1995, by J. C.
Nichols Company, a Missouri corporation (the "Employer");
WHEREAS, on November 12, 1987, the Employer established an employee stock
ownership plan for the exclusive benefit of its employees, which plan is known
as the J. C. Nichols Company Employee Stock Ownership Plan (the "Plan"); and
WHEREAS, pursuant to the establishment of said Plan, the Employer entered
into a trust agreement for the purpose of establishing a trust to receive
Employer contributions and to pay benefits under the terms of the Plan ("Trust
Agreement"); and
WHEREAS, pursuant to the terms of the Plan, the Employer reserved the right
to amend the Plan from time to time in its discretion; and
WHEREAS, on December 14, 1994, the Employer amended and restated the Plan
in its entirety effective as of January 1, 1987, for the purpose of bringing
said Plan into compliance with the requirements of Sections 401(a), 501(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended, and the Employee
Retirement Income Security Act of 1974, as amended ("Restatement"); and
WHEREAS, pursuant to said amendment and restatement, the Employer reserved
the right to amend the Plan pursuant to Article XI thereof; and
WHEREAS, the Employer now desires to amend the Plan, and to make certain
other clarifying changes, as set forth below:
NOW, THEREFORE, in consideration of these premises, the Plan is amended and
clarified as follows:
1. Paragraph (b) of Section 7.3 is amended to read in it entirety as
follows:
(b) If the distribution of a Participant's Accrued Benefits
would be accelerated ahead of the time periods specified in paragraph
(a) above by applying the time periods specified in this paragraph
(b), the Participant may elect to receive distribution of such Accrued
Benefits during the following periods -
(1) no later than one (1) year following the close of
the Plan Year in which the Participant terminates employment
with the Employer by reason of Retirement, Permanent
Disability or death, or
(2) during the first or second year following the
close of the Plan Year which is the fifth (5th) Plan Year
following the
<PAGE>
Plan Year in which the Participant terminates employment with the
Employer for any reason other than Retirement, Permanent Disability,
or death (except that this subparagraph shall not apply if the
Participant is reemployed by the Employer before the end of such fifth
(5th) Plan Year.
For purposes of paragraph (b), the Accrued Benefits of a Participant
shall not include any Company Stock acquired by an exempt loan until
the close of the Plan Year in which such loan repaid in full.
2. Paragraph (a) of Section 7.9 is clarified to read in its entirety as
follows:
(a) The Employer shall issue a "put option" to any Participant
who receives a distribution of Company Stock. The put option shall
permit the Participant to sell such Company Stock to the Company at
any time during two option periods, at the fair market value of such
shares determined as of the Valuation Date immediately preceding the
date on which the put option is exercised. Notwithstanding the
preceding sentence, if the Participant is a "disqualified person"
within the meaning of Code Section 4975(e)(2), the price at which the
put option may be exercised shall be the fair market value of such
shares determined as of the date the put option is exercised. The
first put option period shall be at least sixty (60) days beginning on
the date of distribution. The second put option period shall be for
at least sixty (60) days beginning after the new determination of the
fair market value of Company Stock has been made, and notice has been
given to the Participant, in the following Plan Year. The payment for
any Company Stock sold under a put option shall begin not later than
thirty (30) days after the exercise of the put option, and shall be
made in a lump sum or in substantially equal annual installments over
a period not exceeding five (5) years, with adequate security and
interest payable at a reasonable rate on any unpaid balance (as
determined by the Employer).
3. Section 12.1 of the Plan is amended in its entirety to read as
follows, effective as of the day and year first above appearing:
12.1 TRUST AGREEMENT
Concurrently with the establishment of this Plan, the Employer
has entered into a Trust Agreement for the purpose of creating a trust
to which Employer contributions shall be made in furtherance of this
Plan. The Trust Agreement is hereby incorporated by reference,
together with all amendments made to said Trust Agreement from time to
time, and the rights of all persons under this Plan shall be subject
to the terms of this Plan and such Trust Agreement.
IN WITNESS WHEREOF, and to record the formal adoption of this First
Amendment, the Employer has caused the same to be executed as of the day and
year first above appearing.
<PAGE>
J.C. NICHOLS COMPANY
"EMPLOYER"
BY:
-------------------------------------
Title:
----------------------------------
<PAGE>
THIRD AMENDMENT
TO THE AMENDED AND RESTATED
J. C. NICHOLS COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
THIS THIRD AMENDMENT is made as of the 13th day of December, 1995, by J. C.
Nichols Company, a Missouri corporation (the "Employer");
WHEREAS, on November 12, 1987, the Employer established an employee stock
ownership plan for the exclusive benefit of its eligible employees, which plan
is known as the J. C. Nichols Company Employee Stock Ownership Plan (the
"Plan"); and
WHEREAS, pursuant to the terms of the Plan, the Employer reserved the right
to amend the Plan from time to time in its discretion; and
WHEREAS, on December 14, 1994, the Employer amended and restated the Plan
in its entirety effective as of January 1, 1987, for the purpose of bringing
said Plan into compliance with the requirements of Sections 401(a), 501(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended, and the Employee
Retirement Income Security Act of 1974, as amended; and
WHEREAS, pursuant to said amendment and restatement, the Employer reserved
the right to amend the Plan pursuant to Article XI thereof; and
WHEREAS, the Plan was subsequently amended by the First Amendment thereto;
and
WHEREAS, a Second Amendment to the Plan has been proposed, but not
finalized, to implement the terms of that certain Settlement Agreement and
Mutual Releases dated as of June 30, 1995; and
WHEREAS, the Employer now desires to further amend the Plan as set forth
below;
NOW, THEREFORE, in consideration of these premises, the Plan is amended as
follows, effective as November 14, 1995:
1. The reference to "Trustees" in the first sentence of Section 5.2 is
amended to instead refer to "Plan Administrator."
<PAGE>
2. Section 5.5 is amended to read in its entirety as follows:
5.5 INVESTMENT OF ROLLOVER
(a) The Plan Administrator may direct that Employee transfers
during a Plan Year pursuant to this Article be segregated into a
separate account for each Participant in a federally insured savings
account, certificate of deposit in a bank or savings and loan
association, money market certificate, or other short term debt
security acceptable to the Trustee until the first day of the
following Plan Year.
(b) Unless the Plan Administrator directs that employee
transfers be segregated into a separate account as specified in
paragraph (a) above, a Participant's Employee Rollover Account shall
be invested as part of the general Trust Fund in the same manner as
all Participants' Other Investment Accounts.
3. The references to "Trustees" in paragraph (a) of Section 6.1 are
amended to instead refer to "Plan Administrator."
4. The reference to "Trustees" in paragraph (b) of Section 6.2 is amended
to instead refer to "Plan Administrator."
5. The reference to "Trustees" in paragraph (a) of Section 6.3 is amended
to instead refer to "Plan Administrator."
6. Paragraph (a) of Section 6.4 is amended to read in its entirety as
follows:
The Plan Administrator shall annually credit the Company Stock Account
of each Participant as of the Valuation Date with such allocable share
of Company Stock (including fractional shares) purchased and paid for
by the Trustees (as determined under Section 6.4(c)) or contributed in
kind by the Employer, plus any stock dividends on Company Stock
allocated to such Participant's Company Stock Account and such
Participant's allocable share of any Forfeitures from Company Stock
Accounts.
7. The reference to "Trustees" in paragraph (d) of Section 6.4 is amended
to instead refer to "Plan Administrator."
8. Paragraph (a) of Section 6.5 is amended to read in its entirety as
follows:
(a) The Plan Administrator shall have the sole discretion to direct
the Trustee to use any cash dividends on Company Stock to pay principal
and/or interest on any loan incurred for the acquisition of Company Stock,
retain such dividends for the benefit of Participants, or distribute
dividends (to the extent attributable to allocated Company Stock) to
Participants under Section 6.5(d).
<PAGE>
9. The reference to "Trustees" in the first sentence of paragraph (d) of
Section 6.5 is amended to instead refer to "Plan Administrator."
10. The reference to "Trustees" in paragraph (e)(1) of Section 6.6 is
amended to instead refer to "Plan Administrator."
11. The references to "Trustees" in Section 6.7 are amended to instead
refer to "Plan Administrator."
12. The references to "Trustees" in Section 6.8 are amended to instead
refer to "Plan Administrator."
13. Section 6.11 is amended to read in its entirety as follows:
6.11 STATEMENT OF PLAN INTEREST
After each Plan Year, the Plan Administrator shall provide each
Participant with a statement of the Participant's interest under the
Plan as of the Valuation Date for such Plan Year.
14. Paragraph (a) of Section 7.3 is amended to read in its entirety as
follows:
(a) The Plan Administrator shall direct the Trustee to begin to
distribute Accrued Benefits to a Participant (or for such
Participant's benefit), not later than sixty (60) days following the
close of the Plan Year in which the latest of the following events
shall occur:
(1) Date on which the Participant attains age sixty-
five (65);
(2) The date of the tenth (10th) anniversary of the
year in which the Participant commenced participation in the
Plan; or
(3) The Participant's Termination Date.
15. Paragraph (c) of Section 7.3 is amended to read in its entirety as
follows:
(c) Unless an earlier date is required under paragraph (a) or
(b), or unless the Participant has not consented to a receipt of a
distribution as required under Section 7.3(g), if a Participant's
employment with the Employer terminates by reason of the Participant's
death, Permanent Disability or Retirement or such termination occurs
after the Participant reaches age sixty-five (65) years of age, the
Plan Administrator shall direct the Trustee to begin to distribute the
<PAGE>
Participant's Accrued Benefits within one (1) year following the close of
the Plan Year during which such termination takes place.
16. Paragraph (d) of Section 7.4 is amended to read in its entirety as
follows:
(d) For any installment form of distribution for Plan benefits,
the Plan Administrator may direct the Trustee to first segregate a
Participant's Other Investment Account into a separate account
segregated from the general assets of the Trust Fund.
17. Paragraph (a) of Section 7.5 is amended to read in its entirety as
follows:
(a) When Accrued Benefits are to be distributed, the Plan
Administrator shall direct the Trustee to distribute such benefits to
the Participant, or in the case of the Participant's death, to the
Participant's Beneficiary.
18. The references to "Trustees" in the first sentence of paragraph (c) of
Section 7.5 are amended to instead refer to "Plan Administrator."
19. Paragraph (c) of Section 7.5 is amended by the addition of the
following:
Cash distributions with respect to a Participant's Vested Company Stock
Account shall be based upon the fair market value of the shares credited to
such Account as of the Valuation Date immediately preceding the date of
distribution. Such cash distributions from the Trust may reduce the
interest of other Participants in Trust assets other than Company Stock and
increase such Participants' interest in Company Stock held in the Trust.
20. The reference to "Trustees" in the last sentence of paragraph (c) of
Section 7.6 is amended to instead refer to "Plan Administrator."
21. Section 16.1 is amended to read in its entirety as follows:
16.1 ADOPTION BY OTHER EMPLOYERS
With the consent of J. C. Nichols Company, any Affiliated
Employer may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a
properly executed document, evidencing said intent and will of such
Participating Employer.
<PAGE>
IN WITNESS WHEREOF, and to record the formal adoption of this Third
Amendment, the Employer has caused the same to be executed as of the day and
year first above appearing.
J. C. NICHOLS COMPANY
"EMPLOYER"
BY:
-------------------------------------
TITLE:
----------------------------------
<PAGE>
J. C. NICHOLS COMPANY
EMPLOYEE STOCK OWNERSHIP TRUST
<PAGE>
EMPLOYEE STOCK OWNERSHIP TRUST
INDEX
- -----
PAGE
----
ARTICLE I NAME OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III TRUST FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE IV BENEFICIARIES OF THE TRUST. . . . . . . . . . . . . . . . . . . 2
ARTICLE V TRUST FUND ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . 2
5.1 SEPARATE ACCOUNTS. . . . . . . . . . . . . . . . . . . . . 2
5.2 RECORDS AND STATEMENTS . . . . . . . . . . . . . . . . . . 3
ARTICLE VI POWERS OF TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . 3
6.1 RECEIVE AND MANAGE ASSETS. . . . . . . . . . . . . . . . . 3
6.2 INVEST IN COMPANY STOCK OR OTHER PROPERTY. . . . . . . . . 3
6.3 INVEST IN COMMON TRUST FUNDS . . . . . . . . . . . . . . . 4
6.4 VOTING COMPANY STOCK . . . . . . . . . . . . . . . . . . . 4
6.5 TAKE TITLE TO TRUST ASSETS . . . . . . . . . . . . . . . . 4
6.6 COMMINGLE TRUST ASSETS . . . . . . . . . . . . . . . . . . 5
6.7 ASSURE LIQUIDITY . . . . . . . . . . . . . . . . . . . . . 5
6.8 EXERCISE STOCK PRIVILEGES. . . . . . . . . . . . . . . . . 5
6.9 RETAIN DISPUTED ASSETS . . . . . . . . . . . . . . . . . . 5
6.10 BORROW FUNDS . . . . . . . . . . . . . . . . . . . . . . . 5
6.11 PURCHASE INSURANCE CONTRACTS . . . . . . . . . . . . . . . 7
6.12 SELL TRUST ASSETS. . . . . . . . . . . . . . . . . . . . . 7
6.13 DISTRIBUTE TRUST ASSETS. . . . . . . . . . . . . . . . . .11
6.14 ENFORCE OBLIGATIONS. . . . . . . . . . . . . . . . . . . 12
6.15 EMPLOY ADVISORS. . . . . . . . . . . . . . . . . . . . . .12
6.16 EXECUTE DOCUMENTS. . . . . . . . . . . . . . . . . . . . .12
6.17 EMPLOYER SECURITIES AND REAL PROPERTY. . . . . . . . . . .12
6.18 COMMERCIAL BANKING DEPOSITS. . . . . . . . . . . . . . . .12
6.19 DIVERSIFICATION ELECTION . . . . . . . . . . . . . . . . .13
6.20 GENERALLY. . . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE VII DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . .13
<PAGE>
ARTICLE VIII RESPONSIBILITIES OF TRUSTEES. . . . . . . . . . . . . . . . . .13
8.1 BASIC RESPONSIBILITIES . . . . . . . . . . . . . . . . . .13
8.2 LIABILITY FOR LOSS . . . . . . . . . . . . . . . . . . . .14
8.3 NO OBLIGATION TO RECORD TRUST AGREEMENT. . . . . . . . . .14
8.4 INVESTIGATE INSURERS . . . . . . . . . . . . . . . . . . .14
8.5 ADEQUACY OF TRUST. . . . . . . . . . . . . . . . . . . . .14
8.6 LIMITED BY TRUST AGREEMENT . . . . . . . . . . . . . . . .14
8.7 INFORMATION FROM OTHERS. . . . . . . . . . . . . . . . . .14
8.8 RELY UPON LEGAL COUNSEL. . . . . . . . . . . . . . . . . .15
8.9 SUE ONLY WHEN INDEMNIFIED. . . . . . . . . . . . . . . . .15
8.10 DISTRIBUTE BENEFITS TO PARTICIPANTS. . . . . . . . . . . .15
8.11 AGENT FOR EMPLOYER OR PLAN ADMINISTRATOR . . . . . . . . .15
ARTICLE IX ACCOUNTING. . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.1 ANNUAL ACCOUNTS. . . . . . . . . . . . . . . . . . . . . .16
9.2 INDEPENDENT AUDIT OF ACCOUNTS. . . . . . . . . . . . . . .16
9.3 JUDICIAL REVIEW OF ACCOUNTS. . . . . . . . . . . . . . . .17
ARTICLE X ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . .18
10.1 LEGAL TITLE TO ASSETS. . . . . . . . . . . . . . . . . . .18
10.2 SUMS AND PROPERTY RECEIVED . . . . . . . . . . . . . . . .18
10.3 DECISIONS BY MAJORITY. . . . . . . . . . . . . . . . . . .18
10.4 CUSTODIAN OF ASSETS. . . . . . . . . . . . . . . . . . . .18
ARTICLE XI FEES, TAXES AND EXPENSES. . . . . . . . . . . . . . . . . . . .18
11.1 TRUSTEES' FEES . . . . . . . . . . . . . . . . . . . . . .18
11.2 TRUST EXPENSES . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE XII TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
12.1 NUMBER OF TRUSTEES . . . . . . . . . . . . . . . . . . . .19
12.2 RESIGNATION AND DISCHARGE. . . . . . . . . . . . . . . . .19
12.3 APPOINTMENT OF SUCCESSOR TRUSTEES. . . . . . . . . . . . .20
ARTICLE XIII TERM OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE XIV AMENDMENT OF TRUST AGREEMENT. . . . . . . . . . . . . . . . . .21
ARTICLE XV TERMINATION OF TRUST. . . . . . . . . . . . . . . . . . . . . .21
15.1 FINAL DISTRIBUTION OF ASSETS . . . . . . . . . . . . . . .21
15.2 RESERVE TO DISCHARGE OBLIGATIONS . . . . . . . . . . . . .21
<PAGE>
ARTICLE XVI GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
16.1 TRUSTEES REPRESENT CLAIMANTS . . . . . . . . . . . . . . .22
16.2 PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . .22
16.3 TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . .22
16.4 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . .22
16.5 TITLES . . . . . . . . . . . . . . . . . . . . . . . . . .23
16.6 STATE LAW GOVERNING TRUST. . . . . . . . . . . . . . . . .23
16.7 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .23
16.8 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
AMENDMENT TO AND RESTATEMENT OF
J. C. NICHOLS COMPANY
EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT
THIS AGREEMENT, made and entered into this 14th day of December, 1994, by
and between J. C. NICHOLS COMPANY, a Missouri corporation ("Employer"), and
WALTER C. JANES, ANTHONY J. SWEENEY and DAVID L. CODY ("Trustees");
W I T N E S S E T H :
WHEREAS, Employer has established an employee stock ownership plan for the
exclusive benefit of its employees, which plan is known as the J. C. NICHOLS
COMPANY EMPLOYEE STOCK OWNERSHIP PLAN ("Plan"); and
WHEREAS, Employer has amended and restated the Plan in its entirety and now
desires to establish a restated trust to receive contributions and pay benefits
under the terms of the Plan; and
WHEREAS, the Trustees are now in possession of all assets now subject to
the terms of the Plan;
NOW, THEREFORE, in consideration of these premises, Employer and the
Trustees hereby adopt the following AMENDMENT TO AND RESTATEMENT OF J. C.
NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT to restate and replace
all prior trust agreements and amendments, and the Trustees acknowledge receipt
of the above assets, and covenant and agree that they will hold the same,
together with any and all additional contributions which the Employer may from
time to time deliver to them as Trustees, IN TRUST, for the uses and purposes
and upon the terms and conditions hereinafter stated.
ARTICLE I
NAME OF TRUST
This Trust shall be known as the "J. C. NICHOLS COMPANY EMPLOYEE STOCK
OWNERSHIP TRUST" ("Trust").
ARTICLE II
PURPOSE
This Trust is established for the purpose of receiving contributions made
to fund the J. C. NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN, and as a means
by which said contributions may be held, managed, invested and subsequently
distributed to
<PAGE>
Participants in such Plan, all in accordance with the terms and conditions of
the Plan and this Trust.
ARTICLE III
TRUST FUND
The Trust Fund shall consist of all of the property received, held and
administered by the Trustees under the terms of the Plan and this Trust
including, but not limited to, Employer contributions, income, profits and
increments thereon.
ARTICLE IV
BENEFICIARIES OF THE TRUST
This Trust is established for the exclusive benefit of all Employees of the
Employer who qualify as Participants under the terms and provisions of the Plan.
ARTICLE V
TRUST FUND ACCOUNTS
5.1 SEPARATE ACCOUNTS
(a) The Trustees shall maintain a separate Participation Account
for each Participant for the purpose of recording the Participant's
proportionate interest in the Trust Fund. For accounting purposes,
and in order to identify the source of contributions giving rise to
such interest, each Participation Account shall be segregated into the
individual sub-accounts specified in (b) below.
(b) A Participant's Participation Account shall be subdivided
into the following separate sub-accounts:
(1) Company Stock Account;
(2) Other Investments Account;
(3) Directed Investment Account; and
(4) Employee Rollover Account.
<PAGE>
5.2 RECORDS AND STATEMENTS
The Trustees shall be entitled to rely upon the written records and
statements of the Employer and the Plan Administrator as a conclusive
determination as to all matters within their respective control or discretion
under the terms of the Plan including, but not limited to, the following
specific determinations:
(a) The dates on which each eligible Employee's participation in
the Plan begins and ends;
(b) The aggregate amount of the contribution to be made to the
Trust by the Employer for a given Plan Year;
(c) The names, dates of employment and amounts of Compensation
paid to or accrued for the benefit of Employees eligible to
participate in an allocation of the Employer's contribution for a
given Plan Year; and
(d) The amount of each Participant's allocable share in a
contribution made by the Employer to the Trust for a given Plan Year.
ARTICLE VI
POWERS OF TRUSTEES
The Trustees shall have and enjoy all the investment powers and rights
necessary or desirable to assure their proper administration of this Trust,
subject to the limitations expressed in the Plan and this Trust. In accordance
with the foregoing, the Trustees shall have the following general powers and
authority, subject to the limitations expressed:
6.1 RECEIVE AND MANAGE ASSETS
Receive, hold, manage and control all assets of the Trust Fund, whether the
same be derived from Employer contributions, Forfeitures, principal, income,
recoveries or other sources.
6.2 INVEST IN COMPANY STOCK OR OTHER PROPERTY
Invest and reinvest the Trust Fund primarily in Company Stock (in
accordance with the funding policy and method of investment set forth in Article
XII of the Plan); and also invest and reinvest the Trust Fund, without
distinction between principal and income, in bank accounts, certificates of
deposit, common stocks, preferred stocks, open-end or closed-end mutual funds,
put and call options, bonds, corporate bonds, notes,
<PAGE>
mortgages, debentures, convertible debentures, commercial paper, U.S. Treasury
bills, U.S. Treasury notes and other direct or indirect obligations of the
United States Government or its agencies, and in such other property, real or
personal, so long as the incidents of ownership of such property are within the
jurisdiction of the United States, and so long as such investments do not
violate applicable law.
6.3 INVEST IN COMMON TRUST FUNDS
Invest and reinvest the Trust Fund, or any part thereof, in a common or
collective trust fund or pooled investment fund maintained by a bank or trust
company or a pooled investment fund of an insurance company qualified to do
business within the State of Missouri.
6.4 VOTING COMPANY STOCK
Vote all Company Stock held as part of the Trust fund, whether allocated or
unallocated, but only in accordance with the following requirements:
(a) If the Employer has a registration-type class of securities,
each Participant (or such Participant's Beneficiary) shall be entitled
to vote all Company Stock allocated to such Participant's Company
Stock Account.
(b) If the Employer does not have a registration-type class of
securities, each Participant (or such Participant's Beneficiary) shall
be entitled to vote all Company Stock allocated to such Participant's
Company Stock Account but only with respect to the following issues:
approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business, or such similar
transaction as may be prescribed in Regulations.
(c) If a Participant or Beneficiary fails or refuses to give the
Trustees timely instructions as to how to vote any Company Stock as to
which such Participant or Beneficiary is entitled to vote, the
Trustees may then vote such Company Stock.
For purposes of this Section 6.4, "registration-type" class of securities" shall
have the same meaning as the definition contained in Code Section 409(e)(4).
<PAGE>
6.5 TAKE TITLE TO TRUST ASSETS
(a) Cause title to assets of the Trust Fund to be registered in
the name of the Trustees or in the name of a nominee, in bearer form
so that title will pass by delivery, or in any other manner authorized
by the law, provided the records of the Trustees shall reflect the
true ownership of such assets; and
(b) Organize and incorporate (or participate in the organization
or incorporation of) under the laws of any state, a corporation for
the purpose of acquiring and holding title to any property which the
Trustees are authorized to acquire for the Trust Fund, and to exercise
with respect thereto any of the powers, rights and duties it has with
respect to other assets of the Trust Fund.
6.6 COMMINGLE TRUST ASSETS
Commingle the Trust Fund with the funds of any other qualified
participating trust established exclusively for the benefit of the Employees of
the Employer.
6.7 ASSURE LIQUIDITY
Maintain any part of the Trust Fund in cash and unproductive of income as
they may deem advisable or expedient to meet cash requirements of the Trust,
including, but not necessarily limited to, payments to Participants or
Beneficiaries under the terms of the Plan, without being required to pay
interest on such cash balances or on cash in their hands pending investment.
6.8 EXERCISE STOCK PRIVILEGES
(a) Convert any stocks, bonds or other securities, give general
or special proxies or powers of attorney with or without power of
substitution, and exercise any warrants, conversion privileges,
subscription rights or other options and make any payments incidental
thereto; and
(b) Consent to or otherwise participate in corporate
reorganizations, recapitalizations, consolidations, mergers and
similar transactions with respect to Company Stock or other securities
and pay any assessments or charges in connection therewith, and
generally to exercise any of the powers of an owner with respect to
stocks, bonds, securities or other properties held in the Trust Fund;
subject, however, to the requirements of Section 6.4 and Section 6.12
regarding Company Stock.
<PAGE>
6.9 RETAIN DISPUTED ASSETS
Retain, without liability for the payment of interest, assets of the Trust
Fund which are subject to any dispute and decline to make payment or delivery of
such assets until final adjudication is made by a court of competent
jurisdiction.
6.10 BORROW FUNDS
Borrow or raise money for the purposes of the Plan in such amount, and upon
such terms and conditions, as the Trustees shall deem advisable, and for any sum
so borrowed, to issue a promissory note as Trustees, and to secure the repayment
thereof (if required) by pledging all, or any part, of the Trust Fund. No
person lending money to the Trustees shall be bound to see to the application of
the money lent or to inquire into the validity, expediency, or propriety of any
borrowing.
Notwithstanding the preceding, any portion of a loan to the Trust which is
made or guaranteed by a disqualified person must satisfy all requirements of an
Exempt Loan, including, but not limited to, the following:
(a) the loan must be at a reasonable rate of interest;
(b) any collateral pledged to the creditor by the Trust shall
consist only of the Company Stock purchased with the borrowed funds;
(c) under the terms of the loan, any pledge of Company Stock
shall provide for the release of shares so pledged on a pro rata basis
pursuant to Section 6.4(b) of the Plan;
(d) under the terms of the loan, the creditor shall have no
recourse against the Trust except with respect to such collateral,
earnings attributable to such collateral, employer contributions
(other than contributions of Company Stock) and earnings attributable
to such contributions;
(e) the loan must be for a specific term and may not be payable
at the demand of any person, except in the case of default;
(f) in the event of default upon an Exempt Loan, the value of
Trust Fund assets transferred in satisfaction of the Exempt Loan shall
not exceed the amount of default (and if the lender is a disqualified
person, an Exempt Loan shall provide for a transfer of Trust Fund
assets upon default only upon and to the
<PAGE>
extent of the failure of the Trust to meet the payment schedule of the
Exempt Loan);
(g) Exempt Loan payments during a Plan Year must not exceed an
amount equal to:
(1) the sum, over all Plan Years, of all contributions
made by the Employer to the Trust with respect to such
Exempt Loan and earnings on such Employer contributions,
less
(2) the sum of the Exempt Loan payments in all
preceding Plan Years; and
(h) a separate accounting shall be maintained for such Employer
contributions and earnings until the Exempt Loan is repaid.
For purposes of this Section 6.10, "disqualified person" shall have the same
meaning as the definition contained in Code Section 4975(e)(2).
6.11 PURCHASE INSURANCE CONTRACTS
Purchase life insurance, in any form, on the lives of key employees of the
Employer which insurance shall be payable to the Trust Fund as beneficiary
thereof; and, exercise any and all rights, privileges and options with respect
to any life insurance policies purchased by the Trustees as may be granted under
the terms and provisions of the Plan and such contracts. No insurance company
issuing any policy of insurance to the Trustees pursuant to the Plan shall be
deemed to be a party to this Trust Agreement for any purpose nor be deemed to
have responsibility for its validity. Likewise, such insurers shall have no
responsibility for any action taken or not taken by the Trustees as sole owner
of such policies, for determining the propriety of accepting premium payments,
for making payments in accordance with the directions of the Trustee, or for
application of such payments. Such insurers shall be fully protected in
assuming that the Trustees are as shown on the latest written notification
received by it at its home office.
6.12 SELL TRUST ASSETS
Sell, convey, transfer, exchange, mortgage, pledge or otherwise deal with
or dispose of any asset of the Trust Fund in such manner for such consideration
and upon such terms and conditions as the Trustees, in their sole discretion,
shall determine; subject, however, to the requirements of Section 6.12 regarding
an unsolicited offer.
<PAGE>
Upon receipt by the Trustees of any unsolicited offer from someone other
than the Employer to purchase, exchange or otherwise acquire Company Stock, the
Trustees may sell Company Stock pursuant to the terms of such offer only if the
requirements of subsection (a) are satisfied.
(a)(1) Upon receipt by the Trustees of any unsolicited
offer described above, the Trustees must request an advisory
opinion from the Board of Directors of the J. C. Nichols
Company as to whether or not sale of Company Stock pursuant
to such offer would be in the best interests of the
Participants and Beneficiaries. Such request shall be made
in writing and submitted to the Board of Directors on or
before the date of the next regularly scheduled Board
meeting; however, to the extent that the Trustees in their
sole discretion deem it necessary or desirable, the Trustees
may first require the offeror to submit to the Trustees an
"Acquisition Statement" before any request is made to the
Board of Directors for an advisory opinion. Any such
"Acquisition Statement" required to be submitted to the
Trustees must set forth all information currently required
to be included in a registration statement pursuant to
Missouri Revised Statute Section 409.516, of the Missouri
Takeover Bid Disclosure Act, as the same may be amended from
time to time, and any additional information that the
Trustees in their sole discretion may deem necessary or
desirable. The Trustees may require any and all information
to be verified and acknowledged before a notary public or
otherwise made subject to prosecution for perjury. The
offeror shall have a continuing obligation to update such
information by disclosing any changes. If at any point in
time the Trustees discover an error, misstatement or
misrepresentation in such "Acquisition Statement," or a
failure on the part of the offeror to provide an update of
information, the Trustees shall require the offeror to
prepare an amended "Acquisition Statement," and after
receipt of such amended "Acquisition Statement" the Trustees
shall request a new advisory opinion from the Board of
Directors and then again begin the procedure under this
subsection (a) for consideration of approval of the offer.
Upon receipt from the Trustees of a request
<PAGE>
for an advisory opinion, the Board of Directors shall have ninety
(90) days following the date of its next regularly scheduled
Board meeting to submit such advisory opinion in writing to the
Trustees. After the earlier of: (i) the expiration of the
ninety (90) day period, or (ii) the receipt of the Board's
advisory opinion, the Trustees shall proceed in consideration of
the offer as follows:
(A) In the event that the Board of Directors
recommends against acceptance of the offer, or
fails to make any recommendation at all, or in the
event that the Trustees in their sole discretion
deem it otherwise desirable to obtain the advice
of an advisory committee, the Trustees may
effectuate the formation of an advisory committee
comprised of the same number of members as the
number of Trustees then serving under this Trust
Agreement. Such advisory committee shall be
formed for the sole purpose of advising the
Trustees whether or not sale of Company Stock
pursuant to such offer would be in the best
interests of the Participants and Beneficiaries.
If the Trustees decide to effectuate the formation
of an advisory committee, the Trustees shall call
a meeting (or meetings) of the Participants for
purposes of nominating members to serve as members
of the advisory committee. Written notice of such
meeting shall be provided by the Trustees to all
Participants no later than sixty (60) days
following receipt by the Trustees of the Board's
advisory opinion or the expiration of the period
for the Board's submittal of an advisory opinion,
and such meeting shall then be held no sooner than
thirty (30) days, and no later than ninety (90)
days, following the sending of such written
notice. The preceding time limitations may
<PAGE>
be extended by the Trustees to the extent necessary to
provide separate meetings for Participants of all
Participating Employers under the Plan. At the initial
meeting (or meetings) for the Participants, nominations
shall be received for members to serve on the advisory
committee: the Trustees may nominate no more than four (4)
candidates; the Board of Directors of the J. C. Nichols
Company may nominate no more than four (4) candidates; and
the Participants are free to nominate as many candidates as
they so choose. After the end of such meeting (or
meetings), the Trustees shall provide written notice within
thirty (30) days to the Participants of all eligible
candidates, and a second meeting (or meetings) of the
Participants shall be held within sixty (60) days of such
notice, or at a time extended by the Trustees if deemed
necessary to provide separate meetings for Participants of
all Participating Employers under the Plan, for purposes of
electing members of the advisory committee. At such meeting
(or meetings), all Participants shall be entitled to cast
one vote for each one thousand dollars ($1,000.00) of
Compensation under the terms of the Plan received in the
preceding twelve calendar months. Those candidates up to
the maximum number of Trustees then serving under this Trust
Agreement receiving the most votes shall then become members
of the advisory committee. However, if less than fifty
percent (50%) of the number of all Participants entitled to
vote do not do so at such meeting (or meetings), the
Trustees shall disregard the election results, and shall
conduct a mail election by sending within thirty (30) days
to all Participants written ballots to be
<PAGE>
returned within sixty (60) days of the sending of such
notice. Those candidates up to the maximum number of
Trustees then serving under this Trust Agreement receiving
the most votes by written ballot shall then become members
of the advisory committee, regardless of the percentage of
Participants so voting. Upon its election, the advisory
committee shall have complete discretion in evaluating the
terms and conditions of the offer, and in submitting its
recommendations and conclusions to the Trustees. The
advisory committee shall have full power to require
statements, hearings, or other items pursuant to other
investigatory techniques in evaluating the terms and
conditions of the offer.
(B) Upon the Trustees proceeding with the
consideration of an unsolicited offer, with or
without seeking the advice of an advisory
committee, the Trustees shall independently
consider all relevant factors in determining
whether or not the sale, exchange or disposition
of Company Stock pursuant to such offer is in the
best interests of the Participants and
Beneficiaries. If the Trustees then conclude that
the sale, exchange or disposition of Company Stock
pursuant to such offer is in the best interests of
the Participants and Beneficiaries, the Trustees
shall have full power and authority to sell,
exchange or dispose of such Company Stock; or, if
the Trustees then conclude that the sale, exchange
or disposition of Company Stock pursuant to such
offer is not in the best interests of the
Participants and Beneficiaries, the Trustees shall
have full power and authority to reject the offer,
or initiate any counteroffer that the Trustees
deem
<PAGE>
in the best interests of the Participants and Beneficiaries.
(2) The Trustees may at any time after the receipt of
an unsolicited offer described above require the offeror to
post a cash bond that the Trustees deem necessary and proper
to cover all expenses to be incurred by the Trust in
satisfying the requirements of this subsection (a). From
such cash bond, the Trustees may deduct any and all expenses
incurred by the Trust in satisfying the requirements of this
subsection (a), including expenses such as appraisal fees
and attorneys' fees. Any deduction from the cash bond shall
not be returned to the offeror regardless of the acceptance
or rejection of the offer, or the termination of procedures
begun in accordance with this subsection (a). The Trustees
shall have the discretion to increase the amount of cash
bond at any time from time to time. The Trustees shall also
have the discretion to delay the completion of any procedure
or requirement under this subsection (a), pending the
initial posting of any required cash bond or pending any
increase thereto.
(3) Under this subsection (a), the Trustees are
required to separately follow the required procedures with
respect to each respective unsolicited offer to purchase
Company Stock. The Trustees are free to accept any
unsolicited offer, regardless of the order in which any such
offer is received. The receipt of any unsolicited offer by
the Trustees, and the implementation of, or the pending
nature of, the procedures under this subsection (a), shall
in no way affect or limit the Trustees rights to solicit
bids to sell or otherwise dispose of Company Stock and
complete such sale or disposition at any time, as long as
the Trustees determine that such sale or disposition is in
the best interests of the Participants and Beneficiaries.
The Trustees are specifically authorized and empowered to
solicit bids to sell Company Stock in response to any
unsolicited offer received, and to complete a sale or
disposition of all or any part of the Company Stock which is
the subject of the unsolicited offer, at any
<PAGE>
time, even if the procedures in evaluating the unsolicited offer
under this subsection (a) are still pending.
(b) Notwithstanding any provision to the contrary, if the
Trustees conclude that the sale, exchange or disposition of Company
Stock pursuant to an unsolicited offer is in the best interests of the
Participants and Beneficiaries, the Trustees then have the complete
discretion to grant a right of first refusal to the Employer to
purchase such stock upon the same terms and conditions, but only if
such grant is permitted by Treasury Regulations and Labor Regulations
and if the Trustees determine that such grant is in the best interests
of the Participants and Beneficiaries.
6.13 DISTRIBUTE TRUST ASSETS
Make distributions of Accured Benefits to Participants or Beneficiaries as
the Plan Administrator shall direct pursuant to the terms of the Plan.
6.14 ENFORCE OBLIGATIONS
(a) Collect and receive any and all money, securities and other
property of whatsoever kind or nature due or owing or belonging to the
Trust Fund and to give full discharge and acquittance therefor, and to
extend the time of payment of any obligation at any time owing to the
Trust Fund; and
(b) Settle, compromise, submit to arbitration or abandon any
claim, debts or damages due or owing to or from the Trust; commence or
defend suits or legal proceedings whenever, in their judgment, any
interest of the Trust requires it, and to represent the Trust in all
suits or legal proceedings in any court of law or equity or before any
other body or tribunal.
6.15 EMPLOY ADVISORS
Employ the services of an investment manager or managers (within the
meaning of Section 3(38) of ERISA) each of whom shall have full authority to
manage, acquire or dispose of any Trust Fund asset entrusted to such person;
employ attorneys, accountants, investment counselors and other advisors for
purposes of assisting the Trustees in collecting, investing, managing,
protecting, administering and distributing assets of the Trust; and, in this
connection, to delegate various administrative duties and responsibilities to
any such attorneys, accountants, investment counselors and advisors so employed,
and, to pay their reasonable expenses and compensation out of the
<PAGE>
income and principal of the Trust Fund, if the same are not paid directly by the
Employer as provided in Article XI hereof.
6.16 EXECUTE DOCUMENTS
Make, execute, acknowledge and deliver any and all documents of transfer
and conveyance and any other instruments that may be necessary or appropriate to
carry out the powers herein granted.
6.17 EMPLOYER SECURITIES AND REAL PROPERTY
Acquire and hold "qualifying employer securities" and "qualifying employer
real property" as those terms are defined by the Employee Retirement Income
Security Act of 1974.
6.18 COMMERCIAL BANKING DEPOSITS
Invest and reinvest all or any part of the assets of the Trust Fund in the
commercial banking department of a Trustee (or any affiliate) that is a bank or
similar financial institution and supervised by the United States or a state,
provided only that such deposits bear a reasonable rate of interest.
6.19 DIVERSIFICATION ELECTION
Comply with a Participant's diversification election under the Plan without
questioning such election. The Trustees shall not be responsible or liable for
any loss or expense which may arise from or result from compliance with a
diversification election. To the extent of assets covered by a diversification
election, the Trustees are relieved of their fiduciary responsibilities as
provided in Section 404 of ERISA.
6.20 GENERALLY
Exercise all of the powers and rights of an individual owner with respect
to any of the assets of the Trust Fund and perform all acts, execute all
instruments and engage in all proceedings which the Trustees, in their sole
judgment and discretion, deem to be necessary or desirable for the proper and
advantageous investment, management, administration and distribution of the
Trust Fund.
ARTICLE VII
DISTRIBUTIONS
All distributions of Accured Benefits under the Plan shall be made by the
Trustees from the assets of the Trust Fund only in accordance with directions
from the Plan Administrator and the terms of the Plan.
<PAGE>
ARTICLE VIII
RESPONSIBILITIES OF TRUSTEES
8.1 BASIC RESPONSIBILITIES
The basic responsibilities of the Trustees shall be:
(a) to receive, hold, manage and control all assets of the Trust
Fund;
(b) to pay Accrued Benefits to Plan Participants and their
Beneficiaries as required by the terms of the Plan; and
(c) to maintain records of receipts and disbursements and
furnish to the Employer and Plan Administrator for each Plan Year a
written annual report.
8.2 LIABILITY FOR LOSS
The Trustees shall not be liable for any loss to or diminution of the Trust
property except such loss or diminution that arises from their own gross
negligence or willful misconduct.
8.3 NO OBLIGATION TO RECORD TRUST AGREEMENT
The Trustees shall be under no obligation to record this Trust or to give
any notice of the execution or delivery of this Trust Agreement.
8.4 INVESTIGATE INSURERS
The Trustees shall have no duty to investigate the financial condition of
any life insurance company licensed to do business in the State of Missouri
before purchasing any life insurance policy from any such company, and shall not
be liable for any loss resulting from any such investment.
8.5 ADEQUACY OF TRUST
In no event shall the Trustees be responsible for the inadequacy of the
Trust Fund to meet and discharge any and all payments, or distribution of
benefits, under the Plan.
8.6 LIMITED BY TRUST AGREEMENT
The duties and obligations of the Trustees shall be determined solely by
the express provisions of this Trust Agreement, and the Trustees shall not be
liable except for the performance of such duties and obligations as are
specifically set forth herein, and no implied covenants or obligations shall be
incorporated or read into this Trust Agreement against the Trustees.
8.7 INFORMATION FROM OTHERS
The Trustees shall be entitled to rely upon information, directions and
professional opinions expressed in any written instrument delivered to them by
the Employer, Plan Administrator, any Participant or Beneficiary thereof, or any
duly appointed actuary, accountant, investment counselor and legal counsel, or
any other person, for purposes of discharging its fiduciary duties in the
administration of the Trust, and it shall be fully protected against any
liability arising from any action taken in good faith and reliance upon any such
instrument. The Employer will indemnify and hold harmless the Trustees of and
from any liability, loss, cost or expense arising from or in any way connected
with their relying upon any information, directions, or professional opinions
expressed in a written instrument delivered to it by any of the aforenamed
persons, or their failure to act because of the lack of information, directions,
or professional opinions from any of such persons, or because of any breach of
trust by a Co-Trustee, if any.
<PAGE>
8.8 RELY UPON LEGAL COUNSEL
The Trustees may consult with legal counsel, who may be counsel for the
Employer, with respect to the meaning or construction of any provisions
contained in this Trust Agreement or their obligations or duties hereunder, or
with respect to any action or proceeding or any question of law, and the
Trustees shall be fully protected against any liability arising from any action
taken or omitted by them in good faith pursuant to advice of such counsel.
8.9 SUE ONLY WHEN INDEMNIFIED
The Trustees may institute, maintain, or defend any litigation necessary in
connection with the administration of the Trust; provided, however, that the
Trustees shall be under no duty or obligation to do so unless they shall have
been indemnified to their satisfaction against all expenses which they may
sustain or reasonably anticipate by reason thereof, and if the result of such
suit is adverse to such Participant or Beneficiary, any cost or expense incurred
by the Trustees in defending such suit shall be charged against the separate
interest or fund of such Participant or such Beneficiary.
8.10 DISTRIBUTE BENEFITS TO PARTICIPANTS
The Trustees shall from time to time make distributions from the Trust Fund
to such Plan Participants, or their Beneficiaries, in such amounts, and for such
purposes as may be specified by the Plan Administrator in writing pursuant to
carrying out the terms of the Plan. No distribution shall be made from the
Trust Fund either during the existence or upon the termination of the Plan,
which would cause any part of the Trust Fund to be used for or diverted to
purposes other than for the exclusive benefit of Participants and Former
Participants or their Beneficiaries pursuant to the provisions of the Plan.
8.11 AGENT FOR EMPLOYER OR PLAN ADMINISTRATOR
The Trustees shall not be responsible for or liable to perform any act,
keep any records or accounts, or make any computations which are required of the
Employer and Plan Administrator by this Trust Agreement or the Plan. The
Employer and Plan Administrator may, however, employ the Trustees as their agent
for any such purpose and may compensate said Trustees therefor, and such
employment shall not be deemed to be contrary to or inconsistent with the
provisions of this Trust. Nothing undertaken or completed by the Trustees as
agent of the Employer and Plan Administrator shall change or increase in any
manner their responsibility or liability as Trustees hereunder.
ARTICLE IX
ACCOUNTING
9.1 ANNUAL ACCOUNTS
(a) Within ninety (90) days after the close of each Plan Year,
the Trustees shall deliver to the Employer and Plan Administrator a
written accounting of the Trust Fund and transactions in the
administration thereof for such year. Such accounting shall include
the valuation of the Trust assets, a statement of liabilities to which
the assets of said Fund are subject, a statement of receipts and
disbursements by or on behalf of said Fund and the balance of each
Participant's Participation Account as of the end of such year, all as
more fully described in the Plan.
(b) The Employer and Plan Administrator shall have thirty (30)
days after receipt of the aforesaid written accounting within which to
approve such accounting in writing or to object thereto. Upon receipt
of such written approval, or the expiration of thirty (30) days
without receipt of written objections, the Employer and Plan
<PAGE>
Administrator shall be deemed to have approved such accounting and the
Trustees shall be released, relieved and discharged with respect to all
matters and things set forth in such accounting as if such accounting had
been settled and approved by a decree of a court of competent jurisdiction;
and, such shall be binding upon the Employer and Plan Administrator and
every Participant, Beneficiary and personal representative having any
interest in the Trust.
9.2 INDEPENDENT AUDIT OF ACCOUNTS
(a) If an audit of the Plan's records shall be required by ERISA
and the regulations thereunder for any Plan Year, the Plan
Administrator shall direct the Trustees to engage on behalf of all
Participants an independent qualified public accountant for that
purpose. Such accountant shall, after an audit of the books and
records of the Plan in accordance with generally accepted auditing
standards, within a reasonable period after the close of the Plan
Year, furnish to the Plan Administrator and the Trustees a report of
its audit setting forth his opinion as to whether each of the
following statements, schedules or lists, or any others that are
required by Section 103 of ERISA or the Secretary of Labor to be filed
with Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently:
(1) statement of the assets and liabilities of the
Plan;
(2) statement of changes in net assets available to
the Plan;
(3) statement of receipts and disbursements, a
schedule of all assets held for investment purposes, a
schedule of all loans or fixed income obligations in default
at the close of the Plan Year;
(4) a list of all leases in default or uncollectible
during the Plan Year;
(5) the most recent annual statement of assets and
liabilities of any bank common or collective trust fund in
which Plan assets are invested or such information regarding
separate accounts or trusts with a bank or insurance company
as the Trustees and Plan Administrator deem necessary; and
(6) a schedule of each transaction or series of
transactions involving an amount in excess of five percent
(5%) of Plan assets.
All auditing and accounting fees shall be an expense of and may, at
the election of the Plan Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Plan Administrator to comply with Section 103 of ERISA is maintained
by a bank, insurance company, or similar institution, regulated and
supervised and subject to periodic examination by a state or federal
agency, it shall transmit and certify the accuracy of that information
to the Plan Administrator as provided in Section 103(b) of ERISA
within ninety (90) days after the end of the Plan Year or by such
other date as may be prescribed under regulations of the Secretary of
Labor.
<PAGE>
9.3 JUDICIAL REVIEW OF ACCOUNTS
The Trustees, Employer or Plan Administrator shall have the right to seek a
settlement and approval of the Trustees' accounting by judicial proceedings, if
they so elect. In any such proceeding only the Trustees, Employer and Plan
Administrator shall be necessary parties entitled to notice or process in
connection therewith.
ARTICLE X
ADMINISTRATION
10.1 LEGAL TITLE TO ASSETS
The Trustees shall have legal title to all of the assets of the Trust Fund.
10.2 SUMS AND PROPERTY RECEIVED
The Trustees shall be responsible only for the sums and property actually
received by it hereunder, and it shall not be a duty of the Trustees to compute
any amount to be paid by it pursuant to the Plan or to collect any sum or
property from the Employer.
10.3 DECISIONS BY MAJORITY
The decision of the majority of the Trustees from time to time acting
hereunder shall control in all matters. It shall not be necessary for the
Trustees to hold formal meetings, but any action of the Trustees reduced to
writing and signed by a majority of the Trustees shall be as effective as if
such action had been adopted at a formal meeting of the Trustees, provided that
all the Trustees then acting shall have had notice of such action.
10.4 CUSTODIAN OF ASSETS
Upon the written direction of the Employer, the Trustees may at any time
turn over the assets of the Trust Fund to any bank, trust company, mutual fund,
brokerage firm to be registered in street name, or insurance company which the
Employer, in its sole discretion, may select. Such bank, trust company, mutual
fund, brokerage firm or insurance company shall then act as custodial and
administrative agent of the Trustees, and as such shall maintain all clerical,
bookkeeping and accounting work in connection with the management and
administration of the Trust Fund, and shall carry out such other duties in
regard to the Trust Fund as the Trustees may from time to time in writing assign
to it.
ARTICLE XI
FEES, TAXES AND EXPENSES
11.1 TRUSTEES' FEES
The Trustees shall be paid for their services such reasonable compensation
as shall from time to time be agreed upon by the Employer and the Trustees;
provided, however, that the Trustees are not then receiving full-time pay from
the Employer. In any case, the Trustees shall be reimbursed for such reasonable
and necessary expenses as they shall incur in the administration of this Trust.
Compensation for services of any Trustee hereunder, whether corporate or
individual, shall be deemed reasonable if paid in amounts consistent with any
published fee schedule, as the same may be in existence from time to time.
<PAGE>
11.2 TRUST EXPENSES
Unless paid by the Employer, the Trustees shall charge against and pay from
the Trust Fund:
(a) all taxes that may be assessed upon the assets or income of
the Trust.
(b) all expenses incurred by the Trustees in the performance of
their duties hereunder including, but not limited to, the fees of
attorneys, accountants, investment managers or counselors, and such
other persons for services rendered in connection with this Trust; and
(c) the fees and other compensation of the Trustees for their
services hereunder.
ARTICLE XII
TRUSTEES
12.1 NUMBER OF TRUSTEES
During the existence of this Trust, the number of Trustees acting hereunder
shall be determined from time to time by the Board of Directors or the Executive
Committee of the Board of Directors of J. C. NICHOLS COMPANY.
12.2 RESIGNATION AND DISCHARGE
Any Trustee acting at any time hereunder may resign by delivering written
notice to the other Trustee(s) then serving hereunder, or if none, to the Board
of Directors or the Executive Committee of the Board of Directors of J. C.
NICHOLS COMPANY. Any Trustee at any time acting hereunder may be removed by
instrument in writing authorized by the Board of Directors or the Executive
Committee of the Board of Directors of J. C. NICHOLS COMPANY and hand delivered
or mailed to such Trustee. Any such removal shall be effective upon the earlier
of: (a) delivery of such instrument to the Trustee, or (b) sending of such
instrument by registered or certified mail, addressed to the Trustee at the
Trustee's last known address.
12.3 APPOINTMENT OF SUCCESSOR TRUSTEES
(a) In the event of the resignation, removal, death, inability or
failure to act, or to continue to act, of any Trustee acting
hereunder, a successor or successors to such Trustee may be appointed
by the Board of Directors or the Executive Committee of the Board of
Directors of J. C. NICHOLS COMPANY. Until a successor is appointed
(if any), the remaining Trustee or Trustees shall have all powers of
the Trustees, discretionary or otherwise.
(b) Any successor Trustee, upon executing a written acceptance of
appointment, shall become vested with all rights, powers, trusts,
duties and obligations of the Trustee's predecessor in the Trust
hereunder with like effect as if originally named as a Trustee herein,
and such successor Trustee shall be entitled to the immediate delivery
by the predecessor Trustee of any money or property which may then be
in the possession of such Trustee under the provisions of this Trust
Agreement, and all the estate, right, title and interest of such
predecessor Trustee in such money or property shall wholly cease and
completely terminate. A successor Trustee shall also be entitled to
the immediate delivery by the predecessor Trustee of all books,
records, documents or information then in the possession or under the
control of the said predecessor Trustee. In every case of resignation
by a Trustee or of discharge of a Trustee, the Trustee so resigning or
discharged shall, at the request of the successor Trustee, make and
<PAGE>
execute such transfers or assurances to its successor as shall be requisite
to vest such successor Trustee with the powers and authority as Trustee
hereunder.
(c) No successor Trustee shall be liable or responsible for any
losses or expenses resulting from or occasioned by anything done or
neglected to be done in the administration of this Trust prior to
becoming a Trustee hereunder, nor shall any such successor Trustee be
required to inquire into or take any notice of the prior
administration of this Trust or of any prior accounting hereunder.
(d) In the event that Employer and the Participating Employer(s)
all cease to exist, the existence of this Trust shall continue until
fully liquidated according to the provisions of the Plan and this
Trust Agreement.
ARTICLE XIII
TERM OF TRUST
The Trust herein created shall continue so long as the Plan shall remain in
effect and so long thereafter as may be necessary to make final distribution of
the Trust Fund in accordance with the provisions of said Plan.
ARTICLE XIV
AMENDMENT OF TRUST AGREEMENT
The Employer hereby reserves unto itself the right to amend or modify this
Trust Agreement, provided that any such modification or amendment shall be in
writing and no such amendment may be adopted, the effect of which would be:
(a) to vest or revest in the Employer, directly or indirectly,
any interest in or ownership or control of the assets of the Trust, or
any part thereof;
(b) to divest any Participants or Beneficiaries of the Trust of
their Vested interest in the Trust Fund;
(c) to give any Participants or Beneficiaries any assignable or
exchangeable interest in the Trust Fund in advance of the distribution
now or hereafter provided for under the Plan; or
(d) to change the powers, duties or obligations of the Trustees
without their consent.
ARTICLE XV
TERMINATION OF TRUST
15.1 FINAL DISTRIBUTION OF ASSETS
If and when the Employer shall terminate the Plan, the Trustees shall
complete the affairs of the Trust and make final and complete distribution of
the Trust Fund in accordance with the provisions of said Plan. In no event
shall any amount be payable out of the Trust Fund to or for the use of the
Employer.
15.2 RESERVE TO DISCHARGE OBLIGATIONS
At the time of making such final distribution of the Trust Fund, the
Trustees shall first reserve from the Trust Fund such amount or amounts as they
may deem necessary to discharge liabilities of the Trust and to pay the expenses
<PAGE>
and compensation then due or thereafter to become payable to them, after which
the Trustees shall distribute the balance of the Trust Fund to the Plan
Participants, or their Beneficiaries, in the manner and proportions designated
by the Employer or Plan Administrator in accordance with the Plan.
ARTICLE XVI
GENERAL
16.1 TRUSTEES REPRESENT CLAIMANTS
In all actions, suits or proceedings of law or in equity in any way
affecting or relating to the Trust property, or any part thereof, or the title
thereto, the Trustees shall be deemed the representative of the Participants
under the Plan, Former Participants or Beneficiaries thereof, and anyone
claiming thereunder, and in no case shall it be necessary to notify anyone
thereof or make any one of such persons a party to any such action, suit or
proceedings, and the results thereof shall be final and binding on all
Participants, Former Participants, Beneficiaries thereof and anyone claiming
thereunder.
16.2 PLAN
The Term "Plan," as used in this Trust Agreement, shall mean the J. C.
NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN, adopted November 12, 1987, as
amended and restated by that certain AMENDMENT TO AND RESTATEMENT OF J. C.
NICHOLS COMPANY EMPLOYEE STOCK OWNERSHIP PLAN, dated December 14, 1994, and
together with any and all written amendments thereto which may from time to time
be adopted by the Employer.
16.3 TRUSTEES
Except where the context otherwise clearly indicates, the term "Trustees"
as used in this Trust Agreement shall be held and construed to mean the Trustees
then acting hereunder, whether original or successor.
16.4 RULES OF CONSTRUCTION
(a) Whenever the context requires, words used in the singular
shall include the plural, and words used in the masculine shall
include the feminine, and vice versa.
(b) Whenever any action is required to be taken, or may be
taken, under this Trust Agreement by the Trustees on a specific date
and that date falls on a Saturday, Sunday or holiday, then such action
need not be taken until the first full business day thereafter.
16.5 TITLES
The titles of Articles and grouping of provisions in this Trust Agreement
have been inserted and arranged for convenience or reference only and are to be
ignored in any construction of the provisions hereof.
16.6 STATE LAW GOVERNING TRUST
This Trust Agreement shall be construed, regulated, enforced, and
administered in accordance with the laws of the State of Missouri.
16.7 DEFINITIONS
The definitions of certain terms in the Plan shall apply to this Trust
Agreement wherever applicable.
<PAGE>
16.8 SEVERABILITY
In the event that any provision of this Trust Agreement shall be held
illegal or invalid for any reason, the illegality or invalidity thereof shall
not affect the remaining provisions of this Trust Agreement, but shall be fully
severable, and the Trust Agreement shall be construed and enforced as if the
illegal or invalid provision had never been inserted herein.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
in several counterparts, each of which shall be deemed a duplicate original.
J. C. NICHOLS COMPANY,
a Missouri corporation
(Corporate Seal)
By:
--------------------------------
Its:
-------------------------------
ATTEST:
Secretary/Assistant Secretary
"EMPLOYER"
Walter C. Janes
Anthony J. Sweeney
David L. Cody
"TRUSTEES"
<PAGE>
STATE OF )
) ss:
COUNTY OF )
On this day of , 19 , before me appeared
_____________________ to me personally known, who being by me duly sworn, did
say that he is the _______________ of J. C. NICHOLS COMPANY, a corporation, and
that the seal affixed to the foregoing instrument is the corporate seal of said
corporation and that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors, and said
____________________ acknowledged said instrument to be the free act and deed of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal at my office in , , the day and
year last above written.
Notary Public
My commission expires:
<PAGE>
STATE OF )
) ss:
COUNTY OF )
On this day of , 19 , before me appeared WALTER C.
JANES, ANTHONY J. SWEENEY and DAVID L. CODY to me known to be the persons
described in and who executed the foregoing instrument, and acknowledged that
they executed the same as their free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal at my office in , , the day and
year last above written.
Notary Public
My commission expires:
<PAGE>
FIRST AMENDMENT
TO THE AMENDED AND RESTATED
J. C. NICHOLS COMPANY
EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT
THIS AMENDMENT to the J. C. Nichols Company Employee Stock Ownership Trust
Agreement ("Trust Agreement") is made and entered into this ____ day of
_________________________, 1995, by and between J. C. Nichols Company, a
Missouri corporation (the "Employer"), and Bank IV, N.A. (the "Trustee");
WHEREAS, on November 14, 1987, the Employer established an employee stock
ownership plan and trust for the exclusive benefit of its eligible employees,
which plan is known as the J. C. Nichols Company Employee Stock Ownership Plan
(the "Plan"); and
WHEREAS, pursuant to the establishment of said Plan, the Employer entered
into the Trust Agreement for the purpose of establishing a trust to receive
Employer contributions and to pay benefits under the terms of the Plan; and
WHEREAS, on December 14, 1994, the Plan and Trust Agreement were amended
and restated in their entirety for the purpose of complying with the
requirements of Sections 401(a), 501(a) and 4975(e)(7) of the Internal Revenue
Code of 1986, as amended, and the Employee Retirement Income Security Act of
1974, as amended; and
WHEREAS, pursuant to said amendment and restatement, the Employer reserved
the right unto itself to amend the Trust Agreement from time to time pursuant to
Article XIV thereof, provided that the any such amendment changing the powers,
duties and obligations of any Trustee under the Trust Agreement must be
consented to by such Trustee; and
WHEREAS, Bank IV, N.A. was appointed successor trustee under the Trust
Agreement, effective November 14, 1995; and
WHEREAS, the Employer and Bank IV, N.A. desire to amend the Trust Agreement
in connection with the appointment of Bank IV, N.A. as Trustee and in the manner
set forth below;
NOW, THEREFORE, in consideration of these premises, the Trust Agreement is
amended as set forth below, effective as of the day and year first above
appearing.
1. Section 5.1 is amended to read in its entirety as follows:
5.1 SEPARATE ACCOUNTS
The Plan Administrator shall maintain a separate Participation
Account for each Participant for the purpose of recording the
Participant's proportionate interest in the Trust Fund. Each such
Participation Account shall be segregated into the following
individual sub-accounts for the purpose of identifying the
1
<PAGE>
source of contributions giving rise to such Participant's interest in the
Trust Fund:
(1) Company Stock Account;
(2) Other Investments Account;
(3) Directed Investment Account; and
(4) Employee Rollover Account.
The Trustee shall have no obligation to verify the accuracy of the amounts
credited to a Participant's Participation Account or sub-accounts.
2. Section 6.2 is amended by adding the following paragraphs to the end
thereof:
The authority of the Trustee to invest in any open-end or closed-
end mutual funds under this Section expressly includes the shares of
FUNDS IV Trust and any other open-end or closed-end investment
management trust or company registered under the Investment Company
Act of 1940, as amended, for which the Trustee or any of its
subsidiaries or affiliate companies serves as an investment advisor,
sponsor, distributor, custodian, transfer agent, administrator,
registrar, or otherwise.
For the purposes of satisfying the requirements of Department of
Labor Prohibited Transaction Class Exemption 77-4 in connection with
the purchase or sale of shares of the FUNDS IV Trust by the Trustee,
the Employer acknowledges that it has received the prospectus for the
FUNDS IV Trust together with the other information required by such
exemption, and approves the purchase and sale of shares of FUNDS IV
Trust. If the rate of investment advisory fees or other fees charged
by FUNDS IV Trust and paid by the Plan are increased after the
execution of this Amendment, the Employer shall be notified of any
such change in writing and must provide written approval to the
Trustee of the continuation of purchases and sales of shares of FUNDS
IV Trust and of the continued holding of any shares of FUNDS IV Trust
acquired by the Plan prior to such change (and still held by the
Plan).
3. Section 6.4 is amended by adding the following paragraph to the end
thereof:
The Employer shall provide each Participant with appropriate
information in connection with any matter with respect to which
Participants are entitled to vote pursuant to this Section 6.4.
However, the Trustee shall receive and tabulate voting instructions
transmitted from Participants and Beneficiaries, and the Trustee shall
establish procedures to ensure that any instructions received are held
in confidence and are not divulged, released or otherwise utilized in
a manner that, in the Trustee's reasonable judgment, might influence
the Participants' free exercise of the rights set forth in this
Section 6.4.
4. Section 6.15 is amended to read in its entirety as follows:
Employ attorneys, accountants, and others, as it may deem
advisable for the best interest of the Trust.
5. Section 8.2 is amended to read in its entirety as follows:
Section 8.2 [RESERVED]
2
<PAGE>
6. Section 8.7 is amended to read in its entirety as follows:
The Trustees shall be entitled to rely upon information,
directions and professional opinions expressed in any written
instrument delivered to them by the Employer, Plan Administrator, any
Participant or Beneficiary (with respect to such matters as are
relevant only to such Participant or Beneficiary), or any other person
engaged by the Employer, Plan Administrator, Participant or
Beneficiary for such purpose (including, but not limited to, an
actuary, accountant, recordkeeper, appraiser, investment counselor or
legal counsel), for purposes of discharging its fiduciary duties in
the administration of the Trust, and it shall be fully protected
against any liability arising from any action taken in good faith in
reliance upon any such instrument.
7. Section 8.8 is amended to read in its entirety as follows:
The Trustees may consult with legal counsel, who may be counsel
for the Employer, with respect to the meaning or construction of any
provisions contained in this Trust Agreement or their obligations or
duties hereunder, or with respect to any action or proceeding or any
question of law.
8. Section 8.10 is amended by adding the following to the end thereof:
The Trustee shall prepare and timely file all required governmental
reports (including, but not limited to, IRS Forms 1099-R) in
connection with distributions from the Plan and shall provide copies
thereof to any and all persons required to receive such copies.
9. Paragraph (a) of Section 9.1 is amended to read in its entirety as
follows:
(a) Within ninety (90) days after the close of each Plan Year,
the Trustee shall deliver to the Employer and Plan Administrator a
written accounting of the Trust Fund and transactions in the
administration thereof for such year. Such accounting shall include
the valuation of the Trust assets, a statement of liabilities to which
the assets of the Trust Fund are subject, and a statement of receipts
and disbursements by or on behalf of the Trust Fund.
10. The first sentence of paragraph (a) of Section 9.2 is amended to read
in its entirety as follows:
The Plan Administrator shall engage an independent public
accountant for the purpose of performing any audit of the Plan's
records.
11. Section 9.2 is amended by the addition of the following new paragraph
(c):
(c) The Plan Administrator shall, with the advice and consent of
the Trustees, engage an independent appraiser for the purpose of
valuing the Company Stock held by the Plan. Within a reasonable
period of time following the performance of such appraisal, the
appraiser shall furnish to the Plan Administrator and the Trustee a
written report setting forth the appraiser's opinion with respect to
the Company stock's value and the methods, techniques, and analyses
taken into account in rendering its opinion.
All appraisal fees shall be an expense of and may, at the
election of the Plan Administrator, be paid from the Trust Fund.
3
<PAGE>
12. Paragraph (a) of Section 12.3 is amended to read in its entirety as
follows:
(a) Upon the removal or resignation of the Trustee, the Board of
Directors or the Executive Committee of the Board of Directors of J.
C. Nichols Company shall appoint and designate a new Trustee with the
same powers and duties as those conferred upon the Trustee hereunder.
13. A new Section 12.4 is added to Article XII to read in its entirety as
follows:
12.4 INDEMNIFICATION
The Employer shall indemnify and hold harmless the Trustee and its
respective officers, directors, employees and agents from and against any
and all damages (including without limitation amounts paid in settlement),
fines, losses, costs, liabilities, interest and reasonable attorneys' fees
that result from or relate to any Claims (as defined below) that relate to
or arise out of Trustee's being or having been Trustee of the Plan
(hereinafter collectively referred to as the "Trustee Liabilities")
(whether or not it is Trustee at the time any such Trustee Liabilities are
asserted or incurred); provided, however, that the foregoing
indemnification shall not apply to matters as to which Trustee violated any
applicable law or regulation (which law or regulation is not preempted by
ERISA) or breached any of its duties (which are not preempted by ERISA)
specifically undertaken by Trustee under the provisions of the Trust
Agreement (including, but not limited to, its fiduciary duties under
ERISA), unless such violation or breach either: (i) was performed (or not
performed) in accordance with the direction or written reports of the
Employer, the Plan Administrator, or any person engaged by the Employer or
Plan Administrator for such purpose (including, but not limited to,
directions or written reports from the Plan recordkeeper or the appraisal
firm for Company Stock); or (ii) was caused by the Employer's or the Plan
Administrator's violation of applicable law, regulation or their respective
duties specifically undertaken under the Plan and Trust (including, but not
limited to, their fiduciary duties under ERISA). For purposes of this
Section, "Claims" shall mean any actions, causes of action, claims,
demands, suits, proceedings, disputes, citations, summons, subpoenas,
inquiries or investigations of any nature whatsoever, whether or not in
law, in equity or in any civil, criminal or regulatory proceeding.
IN WITNESS WHEREOF, and to record the formal adoption of this First
Amendment, the Employer and Trustee have caused the same to be executed as of
the day and year first above appearing.
J.C. NICHOLS COMPANY
"EMPLOYER"
BY:
-------------------------------------
Title:
----------------------------------
BANK IV, N.A.
"TRUSTEE"
BY:
-------------------------------------
Title:
----------------------------------
4
<PAGE>
REAL ESTATE CONTRACT OF SALE
THIS CONTRACT is made and entered into as of the execution date hereof by
and between J.C. NICHOLS COMPANY, a Missouri corporation ("Seller") and SYNERGY
DEVELOPMENT ALLIANCE, L.C., a Kansas limited liability company, or assigns
("Buyer").
WITNESSETH:
WHEREAS, Seller is the owner of that certain parcel of land consisting of
approximately 800 acres located in Overland Park, Johnson County, Kansas; and
Seller desires to sell to Buyer and Buyer desires to purchase from Seller the
said Land on the terms and conditions hereinafter more fully set out. NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:
ARTICLE I
THE PROPERTY
1.1 Subject to the terms and provisions of this Contract, Seller agrees to
sell to Buyer, and Buyer agrees to purchase from Seller, all of the following
described property (sometimes referred to herein in the aggregate as the
"Property"):
(a) The land described on EXHIBIT "A" (the "Land") consisting of
approximately 800 acres, the exact legal description of which shall be
determined pursuant to the Survey (as defined in Section 3.2 hereof).
(b) all site plans, surveys, soil and substrata studies,
architectural renderings, plans and specifications, engineering plans and
studies, floor plans, landscape plans and other plans, diagrams or studies
of any kind, if any, in Seller's possession which relate to the Land.
(c) all other rights, privileges and appurtenances owned by Seller
and in any way related to the properties described above in this Article I.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price (the "Purchase Price")
for the Property shall be an amount equal to $25,000 per acre (net of any right-
of-way acreage previously dedicated to the City of Overland Park or Johnson
County) as determined by the Survey, to be paid in the following manner:
<PAGE>
(a) Upon execution hereof, Buyer shall deposit its Irrevocable Letter
of Credit in the amount of $500,000, in the form of EXHIBIT "B" attached
hereto (the "Letter of Credit") with the title company as earnest money
(the "Earnest Money Deposit") to be held for delivery to Seller five (5)
days after Buyer's and Title Company's receipt of written notice from
Seller to Title Company and Buyer of Buyer's default as provided in
paragraph 9.3 or if Buyer terminates this Contract pursuant to a provision
of this Contract beyond forty-five (45) days after the date of this
Contract; provided, however, that if (i) Buyer has terminated this Contract
by notice to Seller within five (5) days after the expiration of the cure
period referenced in paragraph 3.3, (ii) Buyer notifies Seller of its
disapproval as set forth in Section 6.1(a) hereof, (iii) Buyer requests
Seller's approval of a Transfer (as hereinafter defined) as more
specifically set forth in Section 5.4(k) (ii) hereof, but fails to obtain
such approval of Seller in writing within forty-five (45) days after the
date of this Contract, or (iv) Buyer has terminated this Contract due to
Seller's default as provided in paragraph 9.2, then the Letter of Credit
shall be instead delivered to Buyer. Notwithstanding anything contained
herein to the contrary, in no event shall the Letter of Credit be delivered
to Seller unless Buyer has received Seller's written approval of the Master
Plan and the Preliminary Plat of the Residential Area as set forth in
Section 5.4 (e) and (f) . Upon closing of the transaction, or if Buyer
shall not receive Seller's written approval of the Master Plan and the
Preliminary Plat of the Residential Area as set forth above, the Letter of
Credit shall be returned to Buyer.
(b) At Phase I Closing, Buyer shall pay to Seller a sum equal to the
Cash Payment (as defined herein) less the Earnest Money Deposit, if any,
collected by Seller, subject to prorations and other credits provided for
in this Contract. The Cash Payment shall be defined as the amount equal to
$25,000 multiplied by the number of acres constituting the Phase I Land.
The Phase I Land shall be defined (subject to a revised Preliminary Plat
agreed to by Buyer and Seller) as that portion of the Land which is
contiguous residential real property currently with access to public
gravity fed sewers, which is situated south of 143rd Street and east to the
parcels zoned RP-3 and RP-4, which shall consist of at least 265 acres but
which in no event shall exceed 320 acres, all as shall be agreed to by
Buyer and Seller as a condition to Closing. The Phase I Land shall include
areas covered by lakes and easements. Notwithstanding anything contained
herein to the contrary, Buyer may postpone paying cash at Closing on up to
55 acres of the Phase I Land that is not currently serviced by public
gravity fed sewers and such property shall remain in Seller's name (the
"Phase II Land"). Any Phase II Land not purchased for cash at Phase I
Closing (hereinafter defined) shall be acquired by Buyer for cash within 30
days after receipt of notice from Johnson County Wastewater that the
sanitary sewer service for such real property is installed and approved;
provided, however, in no event shall the purchase of the Phase II Land
occur later than 60 months after the Phase I Closing Date, regardless of
whether such sanitary sewer service has been made available. In addition
to the Phase II Land, Buyer agrees to purchase from Seller that portion of
the Property located within the 143rd Street Right-of -Way (the "1143rd
Street Right-of-Way Land") at the Phase II Closing at a price equal to the
lesser of (i) $25, 000 per acre, or (ii)
2
<PAGE>
$50,000 in the aggregate. At the Phase I Closing a Special Warranty Deed
conveying the Phase II Land to Buyer shall be executed by Seller and
delivered into escrow with the Title Company pursuant to the Escrow
Agreement attached hereto as EXHIBIT "C" (the "Escrow Agreement"). Buyer
and each of its members shall guarantee the purchase of the Phase II Land
and the 143rd Street Right of Way Land (at a cost not to exceed $50,000)
only by a Guaranty Agreement in the form attached hereto AS EXHIBIT "D"
(the "Guaranty").
(c) As used herein, the "Phase III Land" shall be defined as the
Land, less the Phase I Land and Phase II Land. Closing with respect to the
Phase III Land shall occur within twenty-four (24) months after the Phase I
Closing (the "Phase III Closing Date"). At the Closing of the Phase III
Land, Buyer shall deliver to Seller a nonrecourse Promissory Note (the
"Note") executed by Buyer and payable to the order of Seller in an amount
equal to the Purchase Price reduced by the Cash Payment and any sums paid
by Buyer to Seller with respect to the Phase II Closing. Commencing on the
Phase III Closing Date, interest under the Note shall accrue at seven
percent (7%) per annum, with accrued interest payable semi-annually, with
the first payment due 30 months after the Phase I Closing Date or six (6)
months after the Phase III Closing Date, whichever is first to occur, and
the entire principal balance and accrued interest payable 60 months after
the Phase I Closing Date. The Note shall be in the form attached hereto as
EXHIBIT "E". The Note shall be secured by a Mortgage in the form attached
hereto as EXHIBIT "F" (the "Mortgage") executed by Buyer in favor of Seller
encumbering the Phase III Land.
(d) The initial expiration of the Letter of Credit shall occur not
earlier than one hundred twenty (120) days after the date of execution of
this Contract, and, unless this Contract is terminated pursuant to Section
2.1(a) hereof, evidence of renewal or replacement of the Letter of Credit
shall be delivered to Seller and Title Company not later than ten (10)
business days prior to the expiration of such Letter of Credit or
replacement letter of credit, and such extension or renewal shall be
accomplished through and including the Phase I Closing hereunder. If
Seller shall not have received acceptable evidence of such renewal or
extension by ten (10) business days prior to the expiration of the Letter
of Credit or any renewal or replacement thereof, then it may direct as set
forth in attached EXHIBIT "L", Title Company forthwith to deliver the
Letter of Credit to Seller, and Seller shall be entitled to draw
immediately the full amount thereof for use as the Earnest Money Deposit
hereunder. Notwithstanding anything contained herein to the contrary, the
Title Company shall be required to provide Buyer with written notice as set
forth in EXHIBIT "M" of its receipt of any notice of default by Seller not
less than three (3) business days prior to the delivery of the Letter of
Credit to Seller. In the event of a dispute between Buyer and Seller
concerning the delivery of the Letter of Credit to Seller, which dispute
remains unresolved three (3) business days prior to the expiration of the
Letter of Credit or any renewal or replacement thereof, Escrow Agent is
instructed to present the Letter of Credit and draw down all funds
evidenced thereby and hold such funds in escrow pursuant to the terms
hereof. Buyer and Seller indemnify Escrow Agent and hold it harmless from
any and all claims, liability, losses, actions, suits or proceedings at law
or
3
<PAGE>
in equity, or any other expenses, fees or charges of any character or
nature, which it may incur by reason of its acting pursuant to the terms
hereof, unless the same arises out of Escrow Agent's breach of the terms
provided herein or its gross negligence or willful misconduct in performing
its obligations hereunder.
ARTICLE III
TITLE AND SURVEY
3.1 TITLE BINDER. Seller shall, as soon as possible, and not later than
twenty (20) days from the date hereof, cause to be furnished to Buyer, a current
ALTA 1992 Form B commitment for an Extended Coverage Owner's Policy of Title
Insurance ("Title Binder") issued through a title company acceptable to Buyer
(Title Company"), together with copies of all documents identified on the Title
Binder as exceptions to the title. The Title Binder shall describe the Land
identically with the survey, name Buyer as the party to be insured thereunder
and commit to insure the Buyer with indefeasible, good and marketable title in
the full amount of the Purchase Price. The Title Binder shall list and identify
by reference to volume and page, where recorded, all easements, rights-of-way
and other instruments or matters affecting title to the Property. Additional
endorsements (which may take the form of affirmative insurance covering, for
example, restrictive covenants, encroachments, etc.) may be required, depending
upon the status of title as shown in the Title Binder. A 3.0 zoning endorsement
may be obtained, at Buyer's expense, insuring that Buyer's intended use of the
Property will be permitted by all applicable zoning laws and regulations. With
regard to the standard printed exceptions and other common exceptions generally
included in Title Binders, (a) there shall be no exception for "any lien, or
right to a lien, for services, or material heretofore or hereafter furnished,
imposed by law and not shown by the public records," (b) the exception for ad
valorem taxes or special assessments shall reflect only taxes and special
assessments for the current year and shall be annotated "Not yet due and
payable," (c) the exception for survey or "encroachments, overlaps, boundary
line disputes, and other matters which would be disclosed by an accurate survey
and inspection of the premises" shall be deleted, (d) there shall be no
exception for "easements or claims of easements not shown by the public records"
or the like, (e) there shall be no exception for "rights of parties in
possession not shown by the public records" and (f) any restrictive covenants
shown on the Title Binder shall provide affirmative insurance that "there are no
current violations of any covenants and/or restrictions and any future violation
shall not result in a forfeiture of Buyer's title."
3.2 SURVEY. Seller shall as soon as possible and not later than twenty
(20) days from the date hereof, cause to be prepared and furnished to Buyer and
the Title Company a current ALTA boundary survey ("Survey") of the Land,
prepared by a Registered Public Surveyor in all respects acceptable to Buyer and
to the Title Company. The Survey at a minimum shall meet the standards and
requirements set forth on EXHIBIT "G" attached hereto, except that no fences,
improvements or other features on the Land are required to be located, except
for utility easements and except as shall otherwise be at or near the perimeter
of the Land.
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3.3 REVIEW OF TITLE AND SURVEY. Buyer shall have until ten (10) days
after receipt of both the Title Binder and Survey ("Review Period"), in which to
notify Seller of any objections Buyer has to any matters shown or referred to in
the Title Binder or the Survey. Any title encumbrances or exceptions which are
set forth in the Title Binder or the Survey and to which Buyer does not object
within the Review Period (as to the Title Binder and the Survey), or, if waived
by Buyer as provided below, shall be deemed to be permitted exceptions to the
status of Seller' s title ("Permitted Exceptions") . None of the exceptions
prohibited in Section 3.1 hereof shall be Permitted Exceptions. With regard to
items to which Buyer does object within the Review Period, Seller shall have a
period of ten (10) days from the date of Buyer's notice, in which to cure
objections. If Seller is unable or unwilling to cure such objections within
such ten (10) day period, Buyer may at Buyer's option waive the objections not
cured or terminate this Contract by notice to Seller within five (5) days after
the expiration of said cure period.
ARTICLE IV
ENVIRONMENTAL AUDIT
4.1 ENVIRONMENTAL Audit. Buyer may commence at its cost an environmental
audit ("Environmental Audit") of the Property by an independent environmental
consultant chosen by Buyer to identify Adverse Environmental Conditions, if any,
affecting the soil, air, surface waters and ground water in, on or around the
Property, the work required to remedy any such Adverse Environmental Conditions
and an estimate of the cost of the Remedial Work. The scope and form of the
Environmental Audit shall be in all respects satisfactory to Buyer, in its sole
and absolute discretion.
4.2 RIGHT TO TERMINATE CONTRACT DUE TO ADVERSE ENVIRONMENTAL CONDITIONS.
Buyer shall have forty-five (45) days after the date hereof to give notice to
Seller of whether there are any Adverse Environmental Conditions on, above,
below or about the Property to which Buyer objects, and in such event Buyer may
elect to terminate this Contract by notice to Seller. Buyer's notice shall be
accompanied by a copy of such Environmental Audit and a full explanation of
Buyer's reason for objection.
4.3 DEFINITIONS. As used herein:
(a) The term "Hazardous Materials" shall mean and include the
existence in any form of (i) polychlorinated biphenyls; (ii) asbestos or
asbestos containing materials; (iii) urea formaldehyde foam insulation;
(iv) oil, gasoline or other petroleum products (other than in vehicles
operated in the ordinary course of business); (v) pesticides and
herbicides; and (vi) any other chemical, material or substance to which
exposure is prohib ited, limited or regulated by any Environmental Laws and
any federal, state, county, regional or local authority or which, even if
not so regulated, is known to pose or suspected of posing a threat to the
health or safety of those coming into contact with such materials or
substances.
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(b) The term "Environmental Laws" shall mean any federal, state or
local laws, statutes, ordinances, regulations or policies relating to the
environment, health and safety, any hazardous materials (including without
limitation, the use, handling, transportation, production, disposal,
discharge or storage thereof) or to industrial hygiene or the environmental
conditions applicable to the Property, including, without limitation, soil,
subsurface and ground water conditions.
(c) The term "Adverse Environmental Conditions" shall mean conditions
existing or which existed in the past on or in the vicinity of the Property
owned or operated by the Seller with respect to the air, soil, surface
waters, ground waters or stream sediments, which conditions may pose a
threat to human health or the environment, may require remedial action
and/or may result in non-parties to this Contract, including without
limitation, governmental entities, becoming an interested party with
respect to the condition that exists.
ARTICLE V
INFORMATION, REPRESENTATIONS AND WARRANTIES
5.1 INFORMATION. Seller shall, as soon as possible and not later than
twenty (20) days from the date hereof, deliver to Buyer legible, accurate and
complete copies of the following (the "Delivery Items"):
(a) the most recent ad valorem tax statements from all taxing
authorities having jurisdiction over the Property; and
(b) any site plans, surveys, soil and substrata studies, or plans and
studies of any kind related to the Property.
5.2 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants as of the date hereof and as of the Closing Date that except for
the items specifically disclosed on EXHIBIT "H" (the "Seller's Disclosure
Schedule") that:
(a) there is no pending condemnation or similar proceeding affecting
the Land or any portion thereof, and Seller has not received any written
notice and has no knowledge that any such proceeding is contemplated;
(b) there are no contracts of employment, management, maintenance,
service, supply or rental outstanding which affect any portion of the
Property;
(c) Seller has no knowledge that the continued ownership, operation,
use and occupancy of the Land violate any zoning, building, health, flood
control, fire or other law, ordinance, order or regulation or any
restrictive covenant. To Seller's knowledge, there are no violations of
any federal, state, county or municipal law, ordinance, order,
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regulation or requirement, affecting any portion of the Land and no written
notice of any such violation has been issued by any governmental authority;
(d) no work has been performed or is in progress by Seller at and no
materials have been furnished to the Land or any portion thereof, which
might give rise to me chanic's, materialman' s or other liens against the
Land or any portion thereof;
(e) Seller is not prohibited from consummating the transactions
contemplated in this Contract, by any law, regulation, agreement,
instrument, restriction, order or judgment;
(f) there are no adverse parties in possession of the Property or of
any part thereof and no parties in possession thereof except Seller and no
party has been granted any license, lease, or other right relating to the
use or possession of the Property;
(g) there are no attachments, executions, assignments for the
benefit of creditors, receiverships, conservatorships or voluntary or
involuntary proceedings in bankruptcy or pursuant to any other debtor
relief laws contemplated or filed by Seller or pending against Seller or
the Property;
(h) there are no contracts or other obligations outstanding for the
sale, exchange or transfer of the Property or any portion thereof;
(i) Seller is duly organized, validly existing and in good standing
under the laws of the state of its origin. Seller has full right, title,
authority and capacity to execute and perform this Contract and to
consummate all of the transactions contemplated herein, and the individual
of the Seller who executes and delivers this Contract and all documents to
be delivered to Buyer hereunder is and shall be duly authorized to do so;
(j) Seller is not a foreign person selling property as described in
the Foreign Investment in Real Property Tax Act ("FIRPTA") and agrees to
deliver an affidavit at Closing reflecting that Seller is not such a
foreign person and provide Seller's tax identification number ("Tax
Affidavit") ;
(k) To Seller's knowledge, and except as may be disclosed in the
Environmental Audit obtained by Buyer hereunder, the Property has never
been the site of any activity which would violate any past or present law
or regulation of any federal, state or local governmental body or agency,
including all Environmental Laws. No part of the Property presently, or at
any time in the past has been used as a dump or other waste disposal site;
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(l) To Seller's knowledge, and except as may be disclosed in the
Environmental Audit, Hazardous Materials are not present in any form in, on
or about the Property; and
(m) All information given to Buyer by or on behalf of Seller and
pertaining to the Property or the operations thereon is true and correct in
all material respects, and fully and accurately depicts the matters set
forth therein; further, neither Seller, nor any of their respective
directors, officers or employees knows of any facts, conditions or other
information which have not been disclosed fully to Buyer and which could
reasonably be expected to have a material bearing or effect upon Buyer's
decision to enter into the Contract and Buyer's decision to consummate the
transactions contemplated hereby.
5.3 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants as of the date hereof and as of the Closing Date that except for the
items specifically disclosed on EXHIBIT "I" (the "Buyer's Disclosure Schedule")
that:
(a) Buyer is a duly organized and validly existing Kansas limited
liability company in good standing under the laws of the State of Kansas.
Buyer has full right, title, authority and capacity to execute and perform
this Contract and to consummate all of the transactions contemplated
herein, including execution, delivery and performance of the Note, Mortgage
and other loan documents, and the individual of the Buyer who executes and
delivers this Contract and all such other documents to be delivered to
Seller hereunder is and shall be duly authorized to do so;
(b) Buyer is not prohibited from consummating the transactions
contemplated in this Contract, by any law, regulation, agreement,
instrument, restriction, order or judgment;
(c) There are no attachments, executions, assignments for the benefit
of creditors, receiverships, conservatorships, voluntary or involuntary
proceedings in bankruptcy or pursuant to any other debtor relief laws
contemplated or filed by Buyer or pending against Buyer;
(d) There are no actions, suits, proceedings or investigations
pending or, to the actual knowledge of Buyer, threatened against Buyer or
Buyer's members or managers, in any court or before any federal, state,
municipal or other governmental agency which could in any manner materially
affect Buyer's ability to perform its obligations hereunder, and Buyer is
not in default with respect to any order of any court or governmental
agency;
(e) The financial statements of Buyer and each of Buyer's members
delivered to Seller prior to closing are true and correct in all material
respects in accordance with generally accepted accounting principles and
there are no known or expected
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contingencies, conditions or state of facts not disclosed therein which
would materially alter the financial positions reflected thereby;
(f) All information given to Seller on behalf of Buyer is materially
true and correct, and fully and accurately depicts the matters set forth
therein; further, neither Buyer, nor any member or manager of Buyer nor any
of their respective directors, officers or employees knows of any facts,
conditions or other information which have not been disclosed fully to
Seller and which could reasonably be expected to have a material bearing or
effect upon Seller's decision to enter into the Contract and Seller's
decision to consummate the transactions contemplated hereby.
5.4 COVENANTS OF BUYER AND SELLER. Buyer and Seller agree and
covenant as follows:
(a) (I) After the Phase I Closing but prior to the Phase III Closing,
Phase III Land may be purchased by Buyer upon the payment by Buyer to
Seller of $26,250 per acre acquired and so long as the property to be
purchased meets the requirements set forth in (II) below for a release of
property from the Mortgage. To the extent of any such early purchase of
Phase III Land, the Note amount shall be reduced by the aggregate purchase
price thereof at $26,250 per acre.
(II) Buyer shall be obligated to pay to Seller a sum sufficient
for the release of a minimum of 150 acres, together with accrued interest
on such principal amount, within 36 months from the Phase I Closing Date.
For purposes of such 150 acre requirement, any Phase III Land purchased
prior to the Phase III closing under (I) above shall be counted. Any
portion of such property released, which is encumbered by the Mortgage
(subsequent to the Phase III Closing) shall also include payment of accrued
interest on the principal amount by which the Note is reduced by such
release. All terms and conditions governing a release from the Mortgage
shall be as more particularly set forth in the Mortgage. In the event of a
conflict with the provisions of this Section 5.4, the Mortgage shall
control. The balance of the Note, plus accrued interest, shall be paid in
full within 60 months from the Closing Date. Buyer shall provide to Seller
within ten (10) business days prior written notice of its intent to pay for
additional land and provide Seller with a legal description of such
property that shall be released from the Mortgage. Upon the receipt of such
payments, and meeting the requirements of the Mortgage for a release,
Seller shall execute and deliver to Buyer a release of that acreage of the
Land which corresponds with the payment made. The parties agree that Buyer
shall have the right to prepay the Note in whole or in part at any time
without penalty or premium, and such payments shall be credited to the
minimum required principal payments set forth in the Note established at 36
and 60 months after the Phase I Closing Date. All partial releases shall
be contiguous to Land not subject to the Mortgage, unless such partial
release affects real property not zoned R-1, in which case noncontiguous
partial releases shall be granted. In the event Buyer shall not have
acquired a minimum of 150 acres (for
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$3,937,500) within 36 months from the Phase I Closing Date (including Phase
III Land purchased under (I) above), Seller shall extend the payment date
of the Note up to 12 months provided Buyer pays to Seller all accrued
interest due and owing through 36 months after the Phase I Closing Date.
(b) Buyer agrees to cooperate with Seller to execute reasonably
necessary documents to enable Seller to pledge or assign this Contract
and/or the Note and Mortgage, at Mortgagor's sole discretion, to obtain a
loan (limited as provided herein) from a third party lender.
(c) Buyer agrees to acquire one-half of the right-of-way for 137th
Street and contribute the said right-of-way to Seller or Seller's designee
when Seller determines, in its sole discretion, that 137th Street is to be
constructed. The construction of 137th Street shall be at Seller's sole
cost and expense.
(d) Seller agrees to construct to the then existing City standard,
Lamar Avenue from K-150 through the property zoned CP-0 retained by Seller,
at such time as Buyer makes final payment on the Mortgage for the
residential acreage contiguous to the south.
(e) Buyer, shall, at Buyer's sole cost and expense, promptly after
execution of this Contract prepare or have prepared a detailed, written,
comprehensive development plan for the Land, or an amendment to the
existing master plan (hereinafter referred to as the "Master Plan"), and
shall submit the same to Seller for its review and comment within thirty
(30) days after the date hereof. The Master Plan must be completed,
submitted to Seller, revised (but only if reasonably required by Seller as
set forth herein), approved by Seller, in the exercise of its reasonable
judgment, which approval shall not be un reasonably withheld, delayed or
conditioned, and preliminarily approved by the City of Overland Park,
Kansas prior to the Phase I Closing. Notwithstanding anything contained
herein to the contrary, the Letter of Credit shall not be delivered by the
Title Company to Seller as set forth in Section 2.1(a) hereof unless and
until Seller has given written unconditional approval of the Master Plan
submitted by Buyer. For the purposes hereof, Seller's reasonable approval
of the Master Plan may be based upon such matters as appropriate street
access to the Phase III Land and to the commercially zoned property being
retained by Seller (the "Commercial Property,,); availability of utilities
through and across dedicated right-of-ways or appropriately dedicated
easements to the Phase III Land and Commercial Property; no additional
commercially zoned property shall be proposed or applied for; reasonable
general considerations necessary for development and ownership of the
Commercial Property and/or the Phase III Land, which might be necessary or
desirable for separate ownership and development of the Phase III Land in
the event of a default or other failure of Buyer to obtain a release of all
of the Phase III Land. Buyer and Seller agree to deal in good faith and
use best efforts to obtain a mutually acceptable Master Plan. The Phase I
Land shall be contiguous and regular, rather than convoluted in shape, and
shall be located in such manner as to permit rapid initial development of
the
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single family component of the project. Any revision to the Master Plan
shall be submitted to Seller for review and comment if such revision
requires Planning Commission approval from the City of Overland Park or if
such revision could reasonably be expected to materially effect the
Commercial Property or the Phase III Land. Seller's approval shall be
based on the factors set forth hereinabove, and shall not be unreasonably
withheld, delayed or conditioned.
(f) Buyer shall have the right to propose a revision to the
Preliminary Plat of the Residential Area which must be in conformance with
the Master Plan approved by Seller. Any such revision shall first be
submitted to Seller for its review and approval within thirty (30) days
after the date hereof, which approval shall not be, based upon the same
standards as set forth in (e) above, unreasonably withheld, delayed or
conditioned, prior to the final submission of Buyer's revised Preliminary
Plat to the City. Notwithstanding anything contained herein to the
contrary, the Letter of Credit shall not be delivered from the Company to
the Seller as set forth in Section 2.1(a) hereof unless and until Seller
has given written unconditional approval of any revised Preliminary Plat of
the Residential Area subdivided by Buyer. Upon approving the revised
Preliminary Plat, Seller shall cooperate in rezoning, replatting, sewer
petitions and other matters necessary to implement the revised Preliminary
Plat and provide Buyer with copies of any land plans, engineering,
environmental or market studies in Seller's possession. Any City approval
or change in the Preliminary Plat relative to the Residential Area shall
only become effective after the Phase I Closing is completed; and Seller
may delay any action which, in its reasonable judgment could reasonably be
expected to affect existing zoning or constitute any other final action,
until the Phase I Closing. Notwithstanding anything contained herein to
the contrary, should Buyer make any subsequent requests that Seller review
and approve revisions proposed by Buyer to the Master Plan or the
Preliminary Plat of the Residential Area, Buyer shall reimburse Seller for
Seller' s reasonable out -of -pocket expenses related to such review and
approval, including without limitation reason able attorneys fees and the
reasonable fees of any unaffiliated and reasonably necessary consultant or
professional.
(g) In the event any Phase III Land within the Residential Area faces
a proposed street which contains commercial acreage retained by Seller on
the other side, Buyer shall acquire the Residential Area to the middle of
such street (except right-of-ways as set forth in Subsection (c) above),
and the cost for improvement for such street shall be borne equally between
Seller and Buyer as to that part of the street adjoining such commercial
acreage, except for 143rd Street which shall be at Buyer's sole cost, if,
and only if, Buyer requires the development of 143rd Street West to Metcalf
prior to Seller's need for the development of 143rd Street West to Metcalf;
provided, however, if Seller shall require the development of 143rd Street
West to Metcalf prior to Buyer's need for development of 143rd Street West
to Metcalf, the cost of improvements for such Street as it adjoins property
owned by Seller shall be at Seller's sole cost and expense. Both Seller
and Buyer shall permit the other party performing such improvements such
access as is reasonably
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necessary to complete such improvements. Buyer may, at Buyer's option,
construct 143rd Street across Seller's retained land to Metcalf Avenue, and
in such event Seller shall grant to Buyer access and rights-of-way to
accomplish such construction. Any such improvements shall be accomplished
by Buyer subject to reasonable approval of the City of Overland Park as to
design, standard and cost. All other costs associated with development of
the Residential Area, including without limitation all relocation of
existing utility lines, hook-ups, roadways, sewers, easements, etc. will be
sole expense of Buyer.
(h) Relocation of the Arco pipeline shall be completed by Buyer, at
Buyer's expense in accordance with the July 6, 1994 agreement with Williams
Pipeline Company, a copy of which is attached hereto as Exhibit "J", and
made a part hereof as if fully set forth herein. Buyer hereby assumes the
obligations of Seller thereunder, except as set forth below. The cost of
such relocation in excess of $225, 000 that is not paid by Arco/Williams
shall be paid by Seller, provided, however, Seller's contribution shall not
exceed $25,000.
(i) Buyer agrees to assume the obligations of Seller under those two
certain Exchange Agreements attached hereto as EXHIBIT "K".
(j) Prior to the Phase II Closing, Buyer shall have the right to
enter upon the Phase II Land to install berm, fencing and landscaping (the
"Improvements") upon such Phase II Land which fronts Nall Avenue; provided
however, Buyer shall first satisfy each of the following conditions: (i)
such improvements shall be made only on such Phase II Land which lies
within 50 feet of the right-of-way, (ii) Buyer shall provide Seller, in
advance, lien waivers from all persons or entities providing labor or
materials with respect to such Improvements, (iii) Buyer shall indemnify,
defend, and hold Seller harmless from and against any and all claims,
costs, lawsuits, damages, or expenses in connection with such Improvements,
(iv) Buyer shall obtain the written consent of any tenant which leases land
upon which such Improvements would be made and (v) such Improvements shall
be approved by Seller, which approval shall not be unreasonably withheld,
delayed or conditioned.
(k) Buyer covenants and agrees with Seller that any change in the
beneficial ownership of Buyer, without the prior written consent of Seller,
shall be prohibited. Notwithstanding the foregoing, the following sales,
assignments, transfers, pledges, encumbrances or other dispositions (each,
a "Transfer") by Buyer or any member, manager or owner of any equity
interest in Buyer shall be permitted without Seller's consent:
(i) the following Transfers by any member of Buyer or any owner
of an equity interest in a member of Buyer (each, a "Designated
Member',):
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(x) a testamentary disposition of all or any part of such
Designated Member's interest in Buyer or any member of Buyer, to
any "Member of His Family" (as hereinafter defined) , or to a
trust if (BUT ONLY IF) such trust is primarily for the benefit of
any person or persons, a non-testamentary Transfer to whom would
be permitted under this Section 5.4(k); or
(y) a non-testamentary Transfer of such Designated Member's
interest in Buyer or any member of Buyer or any part thereof if
such assignment or transfer is made:
(A) to any Member of His Family or, in the case of a
revocable inter VIVOS trust which is a Designated Member, to
the grantor and/or to any Member of His Family with respect
to the grantor;
(B) to a trust if (BUT ONLY IF) such trust is primarily for
such transferor's benefit and/or the benefit of any Member of His
Family and/or one or more other persons each of whom was a
Designated Member as of the date hereof or is a Member of His
Family with respect to a person who was Designated Member as of
the date hereof;
(C) if such Designated Member is currently a trust, a
Transfer to the beneficiaries of such trust by operation of its
governing instrument;
(D) if such Designated Member is a corporation or
partnership, to effect the distribution of its interest in Buyer
or any member of Buyer to one or more persons each of who was a
Designated member as of the date hereof or is a Member of His
Family with respect to a person who was a Designated Member as of
the date hereof;
(E) to any partnership, limited liability company or
corporation, at least 51% of the beneficial ownership of which is
owned directly by such Designated Member and/or any of the
persons described in (A) or (B) above; and
(ii) provided, however, within forty-five (45) days after the
execution of this Contract, Buyer may add a member which may own up to
a 25% interest in Buyer, which new member shall require the prior
approval of Seller, which approval shall not be unreasonably withheld,
delayed or conditioned.
For purposes of this Section 5.4(k), the term "Member of His Family"
shall mean a spouse, child, spouse of a child, grandchild, sister, brother
or parent (each, a "Close
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Relative,) of the person in question or a lineal descendant of any such
Close Relative. Notwithstanding anything to the contrary in this Section
5.4(k), in no event shall the provisions of this Section 5.4(k) be
construed to permit, without Seller's consent, indirect Transfers to
persons who would not otherwise be permitted transferrees of equity
interest in question hereunder without Seller's consent by means of the
admission of such persons into any partnership, corporation or other
entity. Nothing in this Section 5.4(k) shall be construed to permit or
allow any transfer or change of ownership or control as between the various
members of Buyer, one to another.
All of Buyer's and Seller's warranties and representations shall not merge with
delivery of the Warranty Deed specified in Section 7.2(a) but shall survive
delivery of said deed.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 BUYER'S CONDITIONS PRECEDENT. Buyer's obligation to consummate the
transactions contemplated hereunder is conditioned upon satisfaction of each of
the following conditions at or prior to the Phase I Closing (or such earlier
date as IS specified with respect to a particular condition):
(a) The condition of the Property shall meet the approval of Buyer,
in Buyer's sole and absolute discretion, upon on-site inspections of the
Property to be made by Buyer or Buyer's representatives within forty-five
(45) days from the date hereof. If Buyer fails to notify Seller of Buyer's
disapproval within forty-five (45) days from the date hereof, this
condition shall be deemed satisfied.
(b) None of the representations and warranties of Seller set forth in
Article V hereof shall be untrue or inaccurate in any material respect.
(c) Seller shall not have failed to perform or comply with any of its
agreements or obligations in a material manner and within the periods
provided herein.
(d) Buyer shall have received a written agreement (in form and
substance reasonably acceptable to Buyer and Buyer's counsel) from any
lender of Seller holding or committing to hold an instrument encumbering
the Phase III Land stating that in no event shall the Phase III Land be at
anytime encumbered by an amount in excess of seventy percent (70%) of the
amount of the Note plus accrued interest.
(e) If Buyer requests the approval of a Transfer from Seller as
provided in Section 5.4(k) (ii) hereof, Buyer shall have received written
approval within fortyfive (45) days from the date of this Contract.
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If Buyer seeks to terminate this Contract by reason that the above conditions
have not been satisfied or that there is a defect in title, Seller shall have
fifteen (15) days from the date of Buyer's written objection to the above
conditions or to the Title Commitment to cure such defects or to commence in a
manner satisfactory to the Buyer a cure of such conditions (except with respect
to the conditions set forth in Section 6.1(a) and 6.1(e) hereof, in which case
no cure by Seller is permitted). In the event that all of the above conditions
are not satisfied or cured as set forth herein at or prior to the Phase I
Closing (or such earlier date as is specified with respect to a particular
condition), Buyer may terminate this Contract by notice to Seller.
6.2 SELLER'S CONDITIONS PRECEDENT. Seller's obligation to consummate the
transactions contemplated hereunder is conditioned upon satisfaction of each of
the following conditions at or prior to the Phase I Closing (or such earlier
date as is specified with respect to a particular condition):
(a) The revised Master Plan and Preliminary Plat of Buyer for the
Land shall be acceptable to Seller based upon the requirements of this
Contract, and the size and configuration of the Master Plan and the Phase I
Land, Phase II Land, and Phase III Land shall be acceptable to Seller.
(b) Seller shall have approved the financial statements of Buyer and
each of Buyer's members for purposes of establishing the creditworthiness
of Buyer to accept the Guaranty and to service the Note and Mortgage herein
required, which approval shall not be unreasonably withheld. Seller shall
receive the financial statements on or before the date hereof. If Seller
fails to notify Buyer in writing of Seller's disapproval within thirty (30)
days from the date hereof, this condition shall be deemed satisfied.
(c) None of the representations and warranties of Buyer set forth in
Article V hereof shall be untrue or inaccurate in any material respect;
(d) Buyer shall not have failed to perform or comply with any of its
agreements or obligations in a material manner and within the periods
provided herein.
(e) Seller shall have received a commitment to obtain a loan in an
amount not to exceed seventy percent (70%) of the Note amount plus interest
thereon, secured by the Phase III Land or an assignment of Seller's rights
hereunder and under the Note and Mortgage, at Seller's sole discretion,
which loan shall be upon terms acceptable to Seller. If Seller fails to
notify Buyer in writing of Seller's failure to obtain such a loan within
forty-five (45) days from the date hereof, this condition shall be deemed
satisfied. Seller agrees that in no event shall The Phase III Land be at
any time encumbered by an amount in excess of seventy percent (70%) of the
Note amount, plus interest thereon.
If Seller seeks to terminate this Contract by reason that the above
conditions have not been satisfied, Buyer shall have fifteen (15) days from the
date of Seller's written objection to the above
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condition to cure such defects or to commence in a manner satisfactory to the
Seller a cure of such conditions. In the event that all of the above conditions
are not satisfied or cured as set forth herein at or prior to the Phase I
Closing, Seller may terminate this Contract by notice to Buyer. In the event
Seller terminates this Contract by reason of Section 6.2 (a), (b) or (e) above,
the Letter of Credit shall be delivered to Buyer.
ARTICLE VII
CLOSING
7.1 TIME AND PLACE OF CLOSING. Provided that all of the conditions of
this Contract shall have been satisfied prior to or on the Phase I Closing Date
(herein so called), the Phase I Closing (herein so called) of this transaction
with respect to the Phase I Land shall take place at the Title Company ninety
(90) days from the date of this Contract, or such earlier date as may be
specified by the Buyer by not less than five business (5) days advance notice to
the Seller. The Closing of the transaction with respect to the Phase II Land
and the Phase III Land shall take place at the Title Company within the time
frames set forth in this Contract. Time is of the essence.
7.2 Events OF CLOSING. At the Phase I Closing:
(a) Seller shall deliver to Buyer the following:
(1) a Special Warranty Deed (in form and substance reasonably
acceptable to Buyer and Buyer's counsel) duly executed and
acknowledged by Seller, conveying to Buyer the Phase I Land in
indefeasible fee simple title free and clear of any lien, encumbrance
or exception other than the Permitted Excep tions.
(2) an extended coverage ALTA Policy of Title Insurance issued
by the Title Company conforming to the requirements of Article III
above insuring Buyer's title to the Phase I Land in indefeasible fee
simple title in the amount of the Purchase Price (of the Phase I Land)
and containing no exceptions other than the Permitted Exceptions.
(3) a Special Warranty Deed (in form and substance reasonably
acceptable to Buyer and Buyer's counsel) duly executed and
acknowledged by Seller, conveying to Buyer the Phase II Land in
indefeasible fee simple free and clean of any lien, encumbrance or
other exception other than the Permitted Excep tions, which shall be
delivered into escrow with Title Company and held pursuant to the
terms hereof.
(4) Notice of Contract to Convey Land and Obligations Running
with Land (the "Notice") (in form and substance reasonably acceptable
to Buyer and Buyer's counsel) in recordable form duly executed and
acknowledged by Seller,
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wherein it is acknowledged and agreed that Seller has contracted to
convey to Buyer the Phase II Land and the Phase III Land in
indefeasible free simple title free and clear of any lien, encumbrance
or exception other than the Permitted Exceptions. The parties agree
that this Contract shall not be recorded. The Notice shall, in
addition, state that the Seller has agreed not to further encumber the
Phase II Land and the Phase III Land except as specifically permitted
herein.
(5) the written agreement from any lender of Seller as set forth
in Section 6.1(d) hereof.
(6) such evidence of the authority and capacity of Seller and
its representatives as Buyer or the Title Company may reasonably
require.
(7) mechanic lien affidavits of Seller.
(8) the Tax Affidavit.
(9) the Escrow Agreement duly executed and acknowledged by
Seller.
(b) Buyer shall deliver to Seller the following:
(1) the consideration required pursuant to Article II above, by
Buyer's certified wire transfer in U.S. funds available immediately to
Seller.
(2) such evidence of the authority and capacity of Buyer and its
representatives as Seller or the Title Company may reasonably require.
(3) The Note and Mortgage set out in paragraph 2.1(c).
(4) The Guaranty duly executed and acknowledged by Buyer and
each member of Buyer.
(5) A Notice Release, as defined in the Escrow Agreement,
executed by Buyer, which shall be filed upon Buyer's failure to
complete the Phase II Clos ing or the Phase III Closing, or to make
final payment of the Note at maturity.
(6) (with respect to the Phase III Closing only) An extended
coverage ALTA loan policy of title insurance issued by the Title
Company insuring Seller's interest in the Mortgage in the amount of
the Note and containing no exceptions other than Permitted Exceptions.
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(7) (With respect to the Phase III Closing only) Required
insurance policies or certificates with clauses and endorsements as
required by the Mortgage;
(8) (With respect to the Phase III Closing only) Opinion letter
of Buyer's counsel concerning due formation, authority and capacity of
Buyer and its representatives to enter into and enforceability of the
Note, Mortgage and related security documents.
(9) The Escrow Agreement duly executed and acknowledged by Buyer.
7.3 EXPENSES. At the Phase I Closing, the Phase II Closing and the Phase
III Closing, as applicable (subject to Section 7.6 hereof), Seller shall pay the
survey expense, one-half of the escrow fee charged by the Title Company, its
share of the prorations as set forth in Section 7.4 hereof, the premium for the
Owner's Policy of Title Insurance, and its own attorneys' fees. Buyer shall pay
its proportionate share of the prorations as set forth in Section 7.4 hereof,
one- half of the escrow fee charged by the Title Company, the recording fees for
its Special Warranty Deed and the Mortgage, applicable mortgage registration
tax, and its own attorneys' fees. Except as otherwise provided in this Section,
all other expenses hereunder shall be paid by the party incurring such expenses.
7.4 PRORATIONS. Real property ad valorem taxes, installments of current
year special assessments, and any operating income or other expenses of the
Phase I Land, the Phase II Land, or the Phase III Land, as applicable, shall be
prorated to the Phase I Closing, the Phase II Closing, or the Phase III Closing,
as applicable, based upon actual days involved. Seller shall be responsible for
all ad valorem taxes or installments of special assessments for any period prior
to each respective Closing. To the extent that the amounts of such charges,
expenses, and income referred to in this Section are unavailable at the
respective Closing Date or in the event of prorations made on the basis of
erroneous information or clerical errors, a readjustment of these items shall be
made within thirty (30) days after the Closing or as soon as practical after
discovery of any erroneous information or clerical error. Both expense items
and income items shall be prorated as of the Closing Date, with Buyer receiving
all income for the Closing Date and bearing all expenses for the Closing Date.
In connection with the proration of both real and personal property ad valorem
taxes, if actual tax figures for the year of Closing are not available at the
Closing Date, an estimated, tentative proration of taxes shall be made using tax
figures from the preceding year; however, when actual taxes for the year of
Closing are available, a corrected proration of taxes shall be made. If such
taxes for the year of Closing increase over those for the preceding year Seller
shall pay to Buyer a pro rata portion of such increase, computed to the Closing
Date, and conversely, if such taxes for the year of Closing decrease from those
of the preceding year Buyer shall pay to Seller a pro rata portion of such
decrease, computed to the Closing Date, any such payment to be made within ten
(10) days after notification by either party that such adjustment is necessary.
Seller shall, on or before the Closing Date, furnish to Buyer and the Title
Company all information necessary to compute the prorations provided for in this
Section.
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7.5 REIMBURSEMENT OF EXPENSES. On the sixth, twelfth, eighteenth and
twenty-fourth month anniversary of the Phase I Closing Date, Buyer agrees to
reimburse Seller for one-half of its estimated annual reasonable and actual out-
of-pocket Net Expenses (hereinafter defined) for general and special real estate
ad valorem taxes and general liability insurance premiums attributable to such
six month increment of the 24 month period commencing immediately after the
Phase I Closing and pertaining only to the Phase II Land and the Phase III Land,
which monies shall be held by Seller until the same shall fall due. Seller
shall deliver to Buyer a certified statement showing in detail the real estate
ad valorem taxes and general liability insurance premiums (based on a general
liability insurance policy with single limit coverage of $2, 000, 000) together
with the cost of maintenance and managing, incurred and actually paid by Seller
attributable to such six month increment of the 24 month period immediately
after Closing and pertaining only to the Phase II Land and the Phase III Land
(the "Operating Expenses") together with evidence of Seller's payment thereof,
and all gross income, royalties and rental received by Seller attributable to
such six month increment of the 24 month period immediately after Phase I
Closing and pertaining only to the Phase II Land and the Phase III Land (the
"Income") . "Net Expenses" shall be defined as the sum, if any, in which
Operating Expenses paid by Seller during such six month period exceed Income
received by Seller during the same six month period. Seller agrees to keep
books and records showing Operating Expenses and Income in accordance with a
system of accounts and accounting practices consistently maintained on a year-
to-year basis, and to keep said books and records available to Buyer for
inspection and review at reasonable hours and upon reasonable advance notice.
If Buyer wishes to dispute the determination of Operating Expenses or Income or
the calculation of any amount payable hereunder, Buyer shall give Seller written
notice of such dispute within 30 days of the receipt of notice from Seller of
the matter giving rise to the dispute. If Buyer does not give Seller such
notice within such time, Buyer shall have waived its right to dispute such
determination or calculation (absent clerical error or fraud). Promptly after
the giving of such written notice by Buyer to Seller, Seller shall meet with
Buyer and attempt to reconcile any outstanding disputes. If such efforts do not
succeed, Seller shall provide to Buyer copies of all accounting records,
invoices and other documents evidencing the operating Expenses and the Income
and Buyer shall have the right to have made a complete audit of Seller's records
relating to the matter in dispute by a nationally recognized firm of independent
certified accountants selected by Buyer. The cost of such audit shall be born
by Buyer unless such audit discloses error of five percent (5%) or greater, in
which event Seller shall bear the cost of such audit. If such audit reveals an
error of five percent (5%) or greater, a correction shall be made and Seller
shall promptly return to Buyer any overpayment and Buyer shall pay any
additional amount due as appropriate. Notwithstanding anything contained herein
to the contrary, in no event shall Buyer's obligation to reimburse Seller for
Net Expenses exceed $100,000 in the aggregate during the 24 month period
immediately after Closing.
7.6 CLOSING OF PHASE II LAND AND PHASE III LAND. At the closing of the
Phase II Land and Phase III Land as provided herein, Seller shall delivery to
Buyer an extended coverage ALTA Policy of Title Insurance issued by the Title
Company conforming to the requirements of Article III above insuring Buyer's
title to the Phase II Land and Phase III Land, respectively, in indefeasible fee
simple title in the amount of the purchase price of the Phase II Land and the
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Phase III Land, respectively, and containing no exceptions other than the
Permitted Exceptions. There shall be no other conditions to Buyer's obligations
to perform the Phase II or Phase III Closing. With respect to the closing of
the Phase III Land only, Buyer shall pay the cost of the aforesaid policy of
title insurance and shall receive a credit against the purchase price of the
Phase III Land which shall be reflected as a credit which will be applicable
together with and as a part of the first payment on the Note.
7.7 POSSESSION. Notwithstanding anything in this Contract to the
contrary, Buyer acknowledges and agrees that, except for such access as is
necessary to conduct Buyer's due diligence hereunder, Buyer shall not have
possession, control or access to the Phase II Land or the Phase III Land until
such time as the Phase II Closing and Phase III Closing, as applicable, shall
occur. No storage of equipment or materials, construction staging or other
activity, control or possession shall be exercised by Buyer prior to ownership
thereof in fee.
ARTICLE VIII
DAMAGE TO PROPERTY AND CONDEMNATION
8.1 Seller agrees to give Buyer prompt notice of any casualty affecting
the Land between the date hereof and the Closing Date or of any actual or
threatened taking or condemna tion of all or any portion of the Land. If prior
to the Closing there shall occur a condemnation taking of so much of the Land
that the remainder of the site is rendered as undevelopable, then in such event
Seller may, at its option, terminate this Contract by notice to Buyer within
twenty (20) days after Buyer has received the notice referred to above or at the
Closing, whichever is earlier. If Buyer does not so elect to terminate this
Contract, then the Closing shall take place as provided herein without abatement
of the purchase price, and there shall be assigned to Buyer at the Closing all
of Seller's interest in and to all insurance proceeds or condemnation award.
ARTICLE IX
TERMINATION, DEFAULT AND REMEDIES
9.1 PERMITTED TERMINATION. If this Contract is terminated by Buyer as
permitted pursuant to section 2.1(a) hereof (herein referred to as a "Permitted
Termination"), the Earnest Money deposit shall immediately be returned to Buyer
and neither party shall have any further rights or obligations hereunder.
9.2 DEFAULT BY SELLER. Seller shall be in default hereunder upon the
occurrence of any one or more of the following events:
(a) Any of Seller's warranties or representations set forth herein
are untrue or inaccurate in any material respect.
(b) Seller shall fail to meet, comply with or perform any material
covenant, agreement, or obligation on its part required, within the time
limits and in the manner
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required in this Contract, for any reason other than a Permitted
Termination, or a default by Buyer hereunder.
In the event of a default by Seller hereunder, Buyer shall provide Seller with
written notice specifying such default and Seller shall be granted five (5) days
after receipt of such notice to cure such default, and if Seller fails to cure
such default, Buyer may, at Buyers option, do any of the following:
(1) terminate this Contract by written notice delivered to
Seller at or prior to the Closing whereupon, the Buyer's Earnest Money
deposit shall immediately be returned to Buyer;
(2) enforce specific performance of this Contract against
Seller; or
(3) in addition to and not to the exclusion of the remedy in
subparagraph (1) immediately above, bring an action against Seller for
damages; provided, however, such damages shall be limited to $500,000;
further provided, however, any action for damages by Buyer against
Seller with respect to or in any fashion related to the Phase III
Closing and Seller's obligations or undertakings from and after such
Phase III Closing shall be limited to all costs of such action and
collection thereof, including reasonable attorney fees and expenses in
connection therewith not to exceed $10, 000 in the aggregate
9.3 DEFAULT BY BUYER. Buyer shall be in default hereunder upon the
occurrence of any one or more of the following events:
(a) Any of Buyer's warranties or representations set forth herein are
untrue or inaccurate in any material respect.
(b) Buyer shall fail to meet, comply with or perform any material
covenant, agreement, or obligation on its part required, within the time
limits and in the manner required in this Contract, for any reason other
than a Permitted Termination or a default by Seller hereunder.
In the event of a default by Buyer hereunder, Seller shall provide Buyer with
written notice specifying such default and Buyer shall be granted five (5) days
after receipt of such notice to cure such default, and if Buyer fails to cure
such default, Seller, as Seller's sole and exclusive remedy for such default,
shall be entitled to terminate this Contract by notice to Buyer and retain the
Earnest Money Deposit, it being agreed between Buyer and Seller that the Earnest
Money shall be liquidated damages for a default of Buyer hereunder because of
the difficulty, inconvenience, and the uncertainty of ascertaining actual
damages for such default. Buyer shall have no right to cure any default by
Buyer which first exists more than 45 days after the date of this Contract. The
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foregoing shall not limit Seller's remedies at law for Buyer's default for the
Phase II Closing, or its rights under the Guaranty or Seller's remedies at law
for Buyer's default for the Phase III Closing (if, but only if the Phase III
Closing occurs), or its rights under the Note, Mortgage or other loan documents
(the Seller recognizing, however, that the Note and Mortgage are nonrecourse
instruments, except as otherwise set forth herein).
9.4 ATTORNEY'S FEES. If it shall be necessary for either Buyer or Seller
to employ an attorney to enforce its rights pursuant to this Contract because of
the default of the other party, the prevailing party shall be reimbursed by the
other party for its reasonable attorney's fees.
ARTICLE X
BROKERAGE COMMISSION
10.1 Each party agrees that there is no real estate commission owing to
any real estate company or broker as a result of this transaction, except a fee
or commission to Mark R. Simpson or an entity affiliated with Mark R. Simpson,
which fee or commission shall be paid solely by Buyer. Each party agrees to
indemnify the other and hold the other harmless from any loss, liability,
damage, cost or expense (including, without limitation, reasonable attorney's
fees) paid or incurred by the party by reason of any claim to any broker's,
finder's or other fee in connection with this transaction by any party claiming
by, through or under such party.
ARTICLE XI
MISCELLANEOUS
11.1 No ASSUMPTION OF SELLER'S LIABILITIES. Buyer is acquiring only the
Property from Seller and is not the successor of Seller. Buyer does not assume
or agree to pay, or indemnify Seller or any other person or entity against, any
liability, obligation or expense of Seller or relating to the Property in any
way except only to the extent, if any, herein expressly and specifically
provided.
11.2 NOTICES. All notices, demands, requests and other
communications required or permitted hereunder shall be in writing, and shall be
deemed delivered on the earlier of (i) posting of registered or certified mail,
addressed to the addressee at its address set forth below or at such other
address as such party may have specified theretofore by notice delivered in
accordance with this Section or (ii) actual receipt by the addressee:
If to Seller:
J.C. Nichols Company
310 Ward Parkway
Kansas City, MO 64112
Attn: Lynn McCarthy
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With a copy to:
Randal J. Leimer
Rose, Brouilette &
Shapiro, P.C.
4900 Main St., llth FL
Kansas City, MO 64112
If to Buyer:
Synergy Development Alliance, L.C.
c/o Mark R. Simpson
9401 Nall, Suite 210
Prairie Village, KS 66207
with a copy to:
Polsinelli, White, Vardeman & Shalton
Lighton Plaza III
7500 College Blvd., Suite 750
Overland Park, KS 66210
Attn: Larry Winn III
11.3 SURVIVAL. All warranties, representations and agreements contained
herein or arising out of the sale of the Property by Seller to Buyer shall
survive the delivery of Seller's warranty deed and Closing hereof.
11.4 GOVERNING LAW; VENUE. The laws of the State of Kansas shall govern
the validity, enforcement, and interpretation of this Contract. Any dispute or
cause of action under this Contract shall be resolved in a court of competent
subject matter jurisdiction in Johnson County, Kansas.
11.5 INTEGRATION; MODIFICATION; WAIVER. (a) This Contract constitutes the
complete and final expression of the agreement of the parties relating to the
Property, and supersedes all previous contracts, agreements, and understandings
of the parties, either oral or written, relating to the Property. This Contract
cannot be modified, or any of the terms hereof waived, except by an instrument
in writing (referring specifically to this Contract) executed by the party
against whom enforcement of the modification or waiver is sought; (b) THE
PARTIES AGREE THAT THIS ENTIRE AGREEMENT IS NONSTANDARD AND CONTAINS SUFFICIENT
SPACE FOR THE PLACEMENT OF NONSTANDARD TERMS. THIS AGREEMENT, TOGETHER WITH THE
AGREEMENTS REFERRED HEREIN, CONTAIN ALL OF THE AGREEMENTS
23
<PAGE>
AND ARE INTENDED TO BE THE FINAL EXPRESSION OF THE AGREEMENT OF BUYER AND
SELLER, AND SUPERSEDE ANY AND ALL PRIOR DISCUSSION AND/OR AGREEMENTS RELATIVE
THERETO. THIS AGREEMENT AND THE AGREEMENTS REFERRED HEREIN MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL CREDIT AGREEMENT OR OF A
CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BUYER AND SELLER. BUYER AND
SELLER HEREBY INITIAL THIS PROVISION AS AN AFFIRMATION THAT NO UNWRITTEN ORAL
CREDIT AGREEMENTS BETWEEN THE PARTIES EXIST:
BUYER:
---------------------------------
SELLER:
---------------------------------
11.6 HEADINGS; CONSTRUCTION. The headings which have been used throughout
this Contract have been inserted for convenience of reference only and do not
constitute matter to be construed in interpreting this Contract. Words of any
gender used in this Contract shall be held and construed to include any other
gender and words in the singular number shall be held to include the plural, and
vice versa, unless the context requires otherwise. The words "herein, "hereof,
"hereunder" and other similar compounds of the word "here" when used in this
Contract shall refer to the entire Contract and not to any particular provision
or section. If the last day of any time period stated herein shall fall on a
Saturday, Sunday or legal holiday, then the duration of such time period shall
be extended so that it shall end on the next succeeding day which is not a
Saturday, Sunday or legal holiday.
11.7 INVALID PROVISIONS. If any one or more of the provisions of this
Contract, or the applicability of any such provision to a specific situation,
shall be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Contract and
all other applications of any such provision shall not be affected thereby.
11.8 BINDING EFFECT. This Contract shall be binding upon and inure to the
benefit of Seller and Buyer, and their respective heirs, personal
representatives, successors and assigns. Buyer shall not assign all or any of
Buyer's rights hereunder or allow any direct or indirect transfer of an interest
in Buyer, except for a permitted "Transfer" as defined in Section 5.4(k) hereof,
without the consent of the Seller. Except as expressly provided herein, nothing
in this Contract is intended to confer on any person, other than the parties
hereto and their respective heirs, personal representatives, successors and
assigns, any rights or remedies under or by reason of this Contract.
11.9 FURTHER ACTS. In addition to the acts recited in this Contract to be
performed by Seller and Buyer, Seller and Buyer agree to perform or cause to be
performed at the Closing or after the Closing any and all such further acts as
may be reasonably necessary to consummate the transactions contemplated hereby.
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11.10 DATE OF CONTRACT. The date of this Contract shall for all
purposes be the date of the signature of the last party to sign this Contract.
IN WITNESS WHEREOF, the undersigned have caused this Contract to be
executed and delivered as of the date(s) set forth below.
Seller
J. C. NICHOLS COMPANY,
a Missouri corporation
By:
----------------------------------------
Lynn L. McCarthy
Chairman and President
Executed by Seller on
January 24, 1995
Buyer:
SYNERGY DEVELOPMENT ALLIANCE, L.C., a Kansas
limited liability company
By:
----------------------------------------
Mark R. Simpson
Administrator
Executed by Buyer on
January 24, 1995.
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By: SAUL ELLIS AND COMPANY, INC.,
Member
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By: ASHNER DEVELOPMENT CO., INC.,
Member
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By: GREAT PLAINS DEVELOPMENT CO.,
Member
By:
-----------------------------------
Bobby F. Sailors, Venturer
26
<PAGE>
AMENDMENT TO REAL ESTATE CONTRACT OF SALE
THIS AMENDMENT TO REAL ESTATE CONTRACT OF SALE (the "Amendment") is made
and entered into as of the execution date hereof by and between J.C. NICHOLS
COMPANY, a Missouri corporation ("Seller") and SYNERGY DEVELOPMENT ALLIANCE,
L.C., a Kansas limited liability company, or assigns ("Buyer").
WITNESSETH:
WHEREAS, Buyer and Seller entered into that certain Real Estate Contract of
Sale dated January 24, 1995 (the "Contract") wherein Buyer contracted to
purchase from Seller approximately 800 acres of land located in Overland Park,
Johnson County, Kansas;
WHEREAS, Buyer and Seller wish to extend the period of performance of
certain conditions and obligations set forth in the Contract as hereinafter set
forth.
NOW, THEREFORE, in consideration of the agreements herein contained and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer hereby amend the Contract as follows:
1. The last two sentences of Section 3.3 of the Contract shall be deleted
in their entirety and the following shall be added in their place and stead:
"With regard to items to which Buyer does object on or
before March 8, 1995, Seller shall have a period until March
10, 1995 in which to cure such objections. If Seller is
unable or unwilling to cure such objections before March 10,
1995, Buyer may at Buyer's option waive the objections not
cured or terminate this Contract by notice to Seller within
four (4) days after the expiration of said cure period."
2. All capitalized terms of this Amendment shall have the meaning given
to them in the Contract, unless defined herein. Except as specifically amended
hereby, the contract remains in full force and effect and the terms thereof are
ratified and affirmed.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Contract to be
executed and delivered an of the date(s) set forth below.
Seller
J. C. NICHOLS COMPANY,
a Missouri corporation
By:
------------------------------------------
Walter C. Janes
Vice President and Treasurer
Executed by Seller on
March ____, 1995.
Buyer
SYNERGY DEVELOPMENT ALLIANCE, L.C., a Kansas
limited liability company
By:
------------------------------------------
Mark R. Simpson
Administrator
Executed by Buyer on
March ___, 1995.
2
<PAGE>
SECOND AMENDMENT TO REAL ESTATE CONTRACT OF SALE
THIS SECOND AMENDMENT TO REAL ESTATE CONTRACT OF SALE (the "Amendment") is
made and entered into as of the execution date hereof by and between J.C.
NICHOLS COMPANY, a Missouri corporation ("Seller") and SYNERGY DEVELOPMENT
ALLIANCE, L.C., a Kansas limited liability company, or assigns ("Buyer").
WITNESSETH:
WHEREAS, Buyer and Seller entered into that certain Real Estate Contract of
Sale dated January 24, 1995, amended March 7, 1995 (the "Contract") wherein
Buyer contracted to purchase from Seller approximately 800 acres of land located
in Overland Park, Johnson County, Kansas (the "Property");
WHEREAS, Buyer and Seller wish to extend the period of performance of
certain conditions and obligations set forth in the Contract as hereinafter set
forth.
NOW, THEREFORE, in consideration of the agreements herein contained and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer hereby amend the Contract as follows:
1. Notwithstanding anything contained in the Contract to the contrary,
Seller shall have until April 20, 1995 in which to obtain from all appropriate
parties and file of record one or more spillway easements, in form and substance
acceptable to the Kansas State Board of Agriculture Water Rights Section and to
Buyer, in Buyer's sole and absolute discretion, with respect to the
approximately 16 acre lake located upon the Property. If Seller is unable or
unwilling to obtain and file of record such spillway easements on or before
April 20, 1995, Buyer may, at Buyer's's option, waive such requirement or
terminate the Contract by notice to Seller on or before April 25, 1995.
2. Buyer and Seller acknowledge that Old Republic Title Company of Kansas
City, Inc. ("Old Republic") has issued Title Commitment No. 95020049-5 Third
Amended Commitment (the "Commitment") in conjunction with the sale of the
Property to Buyer. If at any time the Commitment shall include an exception in
Schedule B relating to the authority of the Board of Directors of Seller to
authorize and consummate this transaction or any similar exception (the
"Exception") and by the later to occur of April 25, 1995 or ten (10) days after
such Exception is raised in writing to Seller: (i) the same is not eliminated by
Old Republic; or (ii) Seller does not obtain a title commitment from such other
title company and underwriter acceptable to Buyer, insuring Buyer against any
issue relating to the Exception, in form and substance acceptable to Buyer, in
Buyer's sole and absolute discretion, then Buyer may, at Buyer's option, accept
such Exception or terminate the Contract by notice to Seller.
<PAGE>
3. Seller hereby confirms its approval of the Master Plan dated
February 19, 1995 entitled Community Concept Plan prepared by David Jensen &
Associates submitted by Buyer to Seller in accordance with Section 5.4(e) of the
Contract. Buyer shall have the right to propose a revision to the Preliminary
Plat of the Residential Area on or before April 15, 1995, which revision must be
in conformance with the Master Plan approved by Seller. Seller shall, within
ten (10) days after the delivery of the revised Preliminary Plat, advise Buyer
in writing whether the revision to the Preliminary Plat is acceptable, and if
not, specify in writing and in detail Seller's objections thereto. If Seller is
unable or unwilling to approve the revised Preliminary Plat of the Residential
Area in the time frame set forth above, Buyer may, at Buyer's option, waive such
requirement or terminate the Contract by notice to Seller on or before April 25,
1995. If Buyer fails to deliver a revised Preliminary Plat by April 15, 1995
which substantially conforms with the Master Plan, then the conditions of this
Section are deemed to be waived.
4. Section 5.4(k) (ii) of the Contract shall be deleted in its entirety
and the following shall be added in its place and stead:
"(ii) provided, however, on or before April 25,
1995, Buyer may add a member which may own up to a
25% interest in Buyer, which new member shall
require the prior approval of Seller, which
approval shall not be unreasonably withheld,
delayed or conditioned."
5. The first sentence of Section 7.1 of the Contract shall be deleted in
its entirety and the following shall be added in its place and stead:
"Provided that all of the conditions of this
Contract shall have been satisfied prior to or on
the Phase I Closing Date (herein so called), the
Phase I Closing (herein so called) of this
transaction with respect to the Phase I Land shall
take place at the Title Company on May 25, 1995,
or such earlier date as may be mutually agreed by
Buyer and Seller."
6. Notwithstanding anything contained herein or in the Contract to the
contrary, the Letter of Credit shall remain in escrow with the Title Company in
accordance with the terms of the Contract to be delivered to Seller either (i)
upon Buyer's failure to consummate this transaction on or after April 26, 1995
pursuant to Section 5 above (provided Buyer has not previously terminated the
Contract as provided in Section 1, 2 or 3 above or as set forth in this Section
6 below, and further provided such failure to close on or after April 26, 1995
is not due to Seller's default) or (ii) on the Phase I Closing Date contingent
upon and provided: (a) Seller has given its written unconditional approval of
the revisions to the Preliminary Plat on or before April 25, 1995; (b) Seller
has satisfied or Buyer has waived the conditions set forth in Sections 1 and 2;
and (c)
2
<PAGE>
Buyer has not terminated the Contract by notice to Seller on or before April 25,
1995. In the event Buyer terminates the Contract by notice to Seller on or
before April 25, 1995, due to the failure of Seller to satisfy the terms, or
approve the matters, set forth in Sections 1, 2 :and 3 hereof, the Letter of
Credit shall be immediately delivered to Buyer and the Contract shall become
null and void and of no further effect and Buyer and Seller shall have no cause
of action against each other under the Contract, at law or in equity. Buyer
shall also be entitled to terminate the Contract by notice to Seller on or
before April 25, 1995, for any reason whatsoever, or for no reason at all. In
the event Buyer exercises its right to terminate the Contract pursuant to the
preceding sentence, Buyer shall pay to Seller the sum of $1,000 and the Letter
of Credit shall be immediately delivered to Buyer and the Contract shall become
null and void and of no further effect and Buyer and Seller shall have no cause
of action against each other under the Contract, at law or in equity.
7. If Seller is unable or unwilling to consummate this transaction on the
Closing Date due to Seller's default under the Contract, including but not
limited to Seller's inability to provide Buyer with an Owner's Policy of Title
Insurance which does not make exception with respect to Seller' s authority to
consummate this transaction and/or whether Seller' s Board of Directors has been
properly constituted or any matter related thereto, then the Letter of Credit
shall be immediately delivered to Buyer.
8. All capitalized terms of this Amendment shall have the meaning given
to them in the Contract, unless otherwise defined herein. The parties hereto
agree to amend the Escrow Agreement and the Letter of credit by not later than
April 5, 1995 so that the same are consistent with the terms hereof. In the
event of any conflict between the terms of this Amendment and any other document
executed by Buyer and Seller, the terms of this Amendment shall control.
Except as specifically amended hereby, the Contract remains in full force and
effect and the terms thereof are ratified and affirmed.
IN WITNESS WHEREOF, the undersigned have caused this Contract to be
executed and delivered as of the date(s) set forth below.
Seller
J. C. NICHOLS COMPANY,
a Missouri corporation
By:
------------------------------------
Lynn L. McCarthy
Chairman and President
Executed by Seller on
March ____, 1995.
3
<PAGE>
Buyer:
SYNERGY DEVELOPMENT ALLIANCE, L. C.,
a Kansas limited liability company
By:
-------------------------------------
Mark R. Simpson
Administrator
By: ASHNER DEVELOPMENT CO., INC.,
Member
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Executed by Buyer on
March ___, 1995.
4
<PAGE>
April 25, 1995
Synergy Development Alliance, L.C.
c/o Mark R. Simpson
9401 Nall, Suite 210
Prairie Village, Kansas 66207
Re: Real Estate Contract of Sale dated January 24, 1995, Amended March 7,
1995 and March 10, 1995 (the "Contract") between J.C. Nichols Company
("Seller") and Synergy Development Alliance, L.C. ("Buyer")
Gentlemen:
This letter shall serve as the agreement of Buyer and Seller relative to
the referenced Contract and the timing of the performance of certain obligations
thereunder. Capitalized terms not defined in this letter have the meaning set
forth in the Contract.
As you know, Buyer is currently obligated to deliver its Preliminary Plat
of the Residential Area on or before April 15, 1995. That delivery date is
hereby extended to May 12, 1995. Seller shall, on the earlier of ten (10) days
after receipt thereof or the Closing Date of May 25, 1995, advise Buyer in
writing whether the revision to the Preliminary Plat is acceptable, and if not,
specify in writing, any objections thereto. If Seller is unable or unwilling to
approve such revisions in the time frame set forth above, Buyer may, at Buyer's
option, waive such requirement or terminate the Contract by notice to Seller on
or before Closing.
If Buyer fails to deliver a revised Preliminary Plat on or before May 12,
1995, then the condition under the Contract requiring approval thereof shall be
deemed waived by Buyer.
As a material inducement to Seller agreeing to the foregoing extension,
Buyer hereby agrees that all other conditions and requirements shall be and
hereby are waived and the Letter of Credit may only be refunded hereafter under
one or more of the following conditions:
(i) Seller shall fail to approve the Preliminary Plat of Buyer within the
time period provided;
(ii) Seller shall be in material default under the Contract; or
<PAGE>
(iii) Seller's inability to provide Buyer with an owner's policy of title
insurance which does not make exception with respect to Seller's
authority to consummate the contemplated transaction and/or whether
Seller's Board of Directors has been properly constituted.
and except for such occurrences, upon Buyer's failure to timely consummate this
transaction on or before May 25, 1995 the Letter of Credit shall be forfeited to
Seller. In the event of the occurrence of the events described in items (i),
(ii) or (iii) above, the Letter of Credit shall be immediately delivered to
Buyer.
In addition the parties hereby agree that they have discussed and have
reached agreement pertaining to extension of sanitary sewers northerly to the
shopping center tract, and from 135th Street southerly to the residential area
south of the office site. Buyer and Seller each hereby covenant and agree that
at such time as either party shall desire either such sewer extension to be
constructed, then the party desiring such extension shall be responsible for the
full cost and expense of building such sewers, with necessary easements as may
be reasonably determined by the granting party to be provided to the other
party. Both parties agree to cooperate and coordinate in all respects thereto,
including the alignment and site grades for such installations.
If you are in agreement with the foregoing, please sign the extra copy of
this letter where indicated below and return to the undersigned on or before the
close of business Tuesday, April 25, 1995.
Sincerely,
J.C. NICHOLS COMPANY
By:
-------------------------------------
Its:
-------------------------------
<PAGE>
Agreed and accepted this ____ day of April, 1995
SYNERGY ALLIANCE, L.C.,
a Kansas limited liability company
By:
-------------------------------------
MARK R. SIMPSON, Administrator
By: SAUL ELLIS AND COMPANY, INC.
By:
-------------------------------------
Name:
------------------------------
Its:
-------------------------------
MEMBER
<PAGE>
May 11, 1995
J. C. Nichols Company
310 ward Parkway
Kansas City, Missouri 64112
Attn: Mr. Lynn McCarthy
RE: Real Estate Contract of Sale dated January 24, 1995, amended March 7,
1995, March 10, 1995 and April 25, 1995 (the "Contract") between J. C.
Nichols Company ("Seller") and Synergy Development Alliance, L.C.
("Buyer").
Gentlemen:
This letter shall serve as an agreement of Buyer and Seller relative to the
above- referenced Contract. Capitalized terms not defined in this letter shall
have the meaning set forth in the Contract.
This letter shall confirm that the Phase I Closing shall take place at the
Plaza offices of Polsinelli, White, Vardeman & Shalton on Thursday, May 11, 1995
at 10:00 a.m., or such other date on or before May 25, 1995 as shall be mutually
agreed by Buyer and Seller. Buyer shall receive a credit against the Purchase
Price for the Phase I Land in the amount of $2,000 for each day prior to May 25,
1995 that the Phase I Closing shall occur (E.G. if the Phase I Closing occurs on
May 11, 1995, Buyer shall receive a $28, 000 credit against the Purchase Price
for the Phase I Land).
Buyer and Seller agree that, notwithstanding anything in the Contract to
the contrary, Buyer shall not be obligated to obtain Seller's approval of any
revisions to the Preliminary Plat prior to or after closing. Buyer agrees,
however, that any revision to the Preliminary Plat shall result in a Preliminary
Plat in substantial conformance with the previously approved Master Plan
attached hereto as EXHIBIT "A". Buyer further agrees that any revisions to the
Preliminary Plat shall also: allow street access to the Phase III Land and to
the commercially zoned property being retained by Seller (the "Commercial
Property"); allow for availability of utilities through and across dedicated
right-of -ways or dedicated easements to the Phase III Land and the Commercial
Property; not include or propose additional commercially zoned property; allow
for separate development and ownership of the Commercial Property and/or the
Phase III Land in the event of a default or other failure of Buyer to obtain a
release of all the Phase III Land. The Buyer agrees to deliver to Seller
revisions to the Preliminary Plat, which shall conform to the standards set
forth above, but Seller agrees that Seller's consent to such revisions shall not
be required.
<PAGE>
J.C. Nichols Company
May 11, 1995
Page 2
Seller hereby sells and assigns to Buyer all of Seller's rights, title and
interest in and to the name "Lionsgate" and the goodwill associated therewith.
If you are in agreement with the forgoing, please sign the enclosed
duplicate copy of this letter where indicated below and return it to the
undersigned.
Sincerely,
SYNERGY DEVELOPMENT ALLIANCE, L.C.,
a Kansas limited liability company
BY:
-------------------------------------
Mark R. Simpson, Administrator
By: SAUL ELLIS & COMPANY, INC.,
Member
By:
--------------------------------
Saul Ellis
President
Agreed and accepted this ____ day of May, 1995.
J. C. NICHOLS COMPANY
By:
-------------------------------------
Lynn McCarthy
Chairman and President
<PAGE>
SECURED PROMISSORY NOTE
[NOTE A]
$40,000,000.00 DECEMBER 27, 1993
KANSAS CITY, MISSOURI
FOR VALUE RECEIVED, the undersigned, J.C. NICHOLS COMPANY, a Missouri
corporation, hereby promises to pay to the order of PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY, an Iowa corporation, at the Home Office of Principal Mutual
Life Insurance Company at 711 High Street, Des Moines, Iowa 50392, or at such
other place as the Holder of this Note may designate, the principal sum of Forty
Million and 00/100 Dollars ($40,000,000.00), together with interest on the
unpaid balance of said sum as herein set forth. It is agreed as follows:
1. DEFINITIONS. The following terms shall be defined as follows:
"Applicable Rate Index Period Date" shall, at any point in time, be the
next to occur of (i) the date on which the 120th payment is due; (ii) the date
on which the 180th payment is due if the Five Year Adjusted Rate is in effect;
(iii) the Maturity Date if the Ten Year Adjusted Rate is in effect; or (iv) the
Maturity Date if the Second Five Year Adjusted Rate is in effect.
"Basic Amortization Schedule" shall mean that amount of 240 equal monthly
payments of principal and interest necessary so as to result in full
amortization.
"Deed of Trust" shall mean the Deed of Trust herein described.
"Effective Date" shall be the date set forth above.
"Holder" shall be the Original Holder and such party or parties as shall,
from time to time, own this Note or any part or interest herein.
"Initial Interest Rate" shall be eight percent (8%) per annum.
"Loan" shall mean the indebtedness evidenced by this Note and the Other
Note.
"Loan Documents" shall mean this Note, the Other Note, the Deed of Trust
and any and all other documents or instruments that evidence, secure or
otherwise relate to the Loan.
"Maker" shall be J.C. Nichols Company, a Missouri corporation.
"Maturity Date" shall mean December 15, 2013.
<PAGE>
"Obligor" shall mean the Maker and any other party or parties who are, from
time to time, the owner or owners of the Premises.
"Original Holder" shall be Principal Mutual Life Insurance Company, an Iowa
corporation.
"Other Note" shall be that Secured Promissory Note [Note B] dated this date
from Maker to Original holder in the amount of $30,000,000.00 and also secured
by the Deed of Trust.
2. INTEREST AND PAYMENTS.
A. Commencing with the fifteenth (15th) day of January, 1994 and on
the fifteenth (15th) day of each of the next one hundred nineteen
(119) months thereafter there shall be monthly payments of
principal and interest at the Initial Interest Rate in the amount
of Three Hundred Thirty Four Thousand Five Hundred Seventy Six
and 03/100 Dollars ($334,576.03).
B. The rate of interest payable hereunder and under the Other Note
shall be adjusted effective as of the date the one hundred
twentieth (120th) payment is due to an interest rate established
by the Holder for either a five-year period or a ten-year period
(depending on which such period Obligor elects hereunder), based
on Holder's evaluation of the then current financial performance
and projected risk of the security for this Note and the Other
Note, the then current financial status of the Obligor, and the
term and amount of the indebtedness secured by the Deed of Trust.
Review of the financial performance and projected risk of the
security shall encompass various factors, including but not
limited to, contract debt service coverage, loan-to-value ratio,
economic debt service coverage, tenant occupancy, frequency of
tenant rollover, financial strength and stability of tenants.
Review of the then current financial status of the Obligor shall
include but not be limited to creditworthiness, financial
strength, percentage of liabilities to liquid assets, and annual
net income. The Holder shall, on or before the date on which the
one hundred eighteenth (118th) payment is due hereunder
[10/15/2003], notify the Obligor in writing of the proposed
adjusted interest rate for a five-year period ("Five Year
Adjusted Rate") and the proposed adjusted interest rate for a
ten-year period ("Ten Year Adjusted Rate"), one of which is to
begin on the date the one hundred twentieth (120th) payment is
due. The Obligor shall notify Holder in writing of the Obligor's
acceptance of either the Five Year Adjusted Rate or the Ten Year
Adjusted Rate no later than the fifteenth (15th) day
2
<PAGE>
after the due date of the one hundred eighteenth (118th) payment
[10/30/2003], and shall at the same time notify the holder of the
Other Note of its acceptance of the adjusted interest rate
thereunder which must be for a similar period, and if Holder has
not received the Obligor's written acceptance on or before said
date, or if the Holder of the Other Note has not received a
similar acceptance pursuant to the terms of the Other Note, then
all principal and interest and other sums due hereunder shall
become due and payable in full without premium on the date the
one hundred twenty first (121st) payment is due [1/15/2004],
subject to any extension of such date as provided in Section 3.B
hereof; provided, however, that the Five Year Adjusted Rate and
the Ten Year Adjusted Rate established by the Holder hereunder
shall be the same rates, respectively, as the Five Year Adjusted
Rate and the Ten Year Adjusted Rate established by the holder of
the Other Note thereunder pursuant to Section 2.B. thereof, and
Obligor shall accept the same adjusted interest rate (either the
Five Year Adjusted Rate or the Ten Year Adjusted Rate) under the
Other Note as the Obligor accepts hereunder.
C. In the event the Holder has received the Obligor's written
acceptance of the Five Year Adjusted Rate as specified herein,
the Five Year Adjusted Rate shall become the effective rate of
interest hereunder as of the date the one hundred twentieth
(120th) payment is due, and the monthly payments of principal and
interest due hereunder on the 15th day of January, 2004 (the one
hundred twenty first (121st) payment) and on the 15th day of each
of the next fifty nine (59) months thereafter, shall be
determined using the Five Year Adjusted Rate, the outstanding
principal balance, and the Basic Amortization Schedule reduced by
the number of payments previously made.
D. In the event the Holder has received the Obligor's written
acceptance of the Ten Year Adjusted Rate as specified herein, the
Ten Year Adjusted Rate shall become the effective rate of
interest hereunder as of the date the one hundred twentieth
(120th) payment is due, and the monthly payments of principal and
interest due hereunder on the 15th day of January, 2004 (the one
hundred twenty first (121st) payment) and on the 15th day of the
next one hundred nineteen (119) months thereafter, shall be
determined using the Ten Year Adjusted Rate, the outstanding
principal balance, and the Basic Amortization Schedule reduced by
the number of payments previously made.
E. In the event the holder has received the Obligor's written
acceptance of the Five Year Adjusted Rate as provided in
section 2.C. above, the rate
3
<PAGE>
of interest payable hereunder and under the Other Note shall be
adjusted effective as of the date that the one hundred eightieth
(180th) payment is due, to an interest rate established by
Holder, in accordance with the criteria for the establishment of
the prior interest rate adjustment. Holder shall notify the
Obligor in writing of the adjusted interest rate to begin
effective as of the date that the one hundred eightieth (180th)
payment is due, no later than the date on which the 178th payment
is due [10/15/2008]. The Obligor shall notify the Holder in
writing of the Obligor's acceptance of the Second Five Year
Adjusted Rate no later than the fifteenth (15th) day after the
date that the one hundred seventy eighth (178th) payment is due
[10/30/2008], and shall at the same time notify the holder of the
Other Note of its acceptance of the adjusted interest rate
thereunder, and if the Holder has not received the Obligor's
written acceptance on or before said date, or if the Holder of
the Other Note has not received a similar acceptance pursuant to
the terms of the Other Note, then all principal and interest and
other sums due hereunder shall become due and payable in full
without premium on the date the one hundred eighty first (181st)
payment is due, subject to any extension of such date as provided
in Section 3.B. hereof. In the event the Holder has received the
Obligor's written acceptance as specified herein, the Second Five
Year Adjusted Rate shall become the effective rate of interest
hereunder as of the date the one hundred eightieth (180th)
payment is due, and the monthly payments of principal and
interest due hereunder on the 15th day of January, 2009 (the one
hundred eighty first (181st) payment), and on the 15th day of the
next fifty nine (59) months, shall be determined using the Second
Five year Adjusted Rate, the outstanding principal balance, and
the Basic Amortization Schedule reduced by the number of payments
previously made; provided, however, that the Second Five Year
Adjusted Rate established by the Holder hereunder shall be the
same rate as the Second Five Year Adjusted Rate established by
the holder of the Other Note thereunder pursuant to Section 2.E.
thereof, and if Obligor accepts the Second Five Year Adjusted
Rate or does not accept the Second Five Year Adjusted Rate,
Obligor shall do so under both his Note and the Other Note.
F. Except as specified herein, all unpaid principal and interest and
other sums due hereunder or under any of the Loan Documents shall
be fully due and payable on the Maturity Date. Monthly payments
shall be made in immediately available funds by bank wire
transfer to the registered owner hereof at Norwest Bank of Iowa,
N.A., Seventh and Walnut Streets, Des Moines, Iowa 50304, for
credit to Principal Mutual Life Insurance Company, General
Account Number 014752, Re: D-750038, with reference to the
Obligor, or at such other place as Holder shall
4
<PAGE>
from time to time specify. Each installment shall be credited
first upon interest then accrued and unpaid and the remainder
upon principal, and interest shall cease to accrue upon principal
so credited. All principal and interest shall be paid in lawful
money of the United States of America. If on the date of the
first installment, interest is accrued for more or less than one
installment period, the amount of said installment shall be
increased or decreased by the amount that the interest accrued
exceeds or is less than the interest for one installment period
based on the actual number of days elapsed to the date of said
installment. In any given month, the monthly payment hereunder
and the monthly payment under the Other Note may be made by a
single wire transfer.
G. In connection with any interest rate adjustment pursuant to this
Section 2, Obligor shall comply with the provisions of Section 43
of the Deed of Trust.
3. PREPAYMENT.
A. No privilege is reserved by the Obligor to prepay any principal
of this Note prior to the Maturity Date, except as herein set
forth.
(i) At the time that the Holder notifies the Obligor of the Five
Year Adjusted Rate and the Ten Year Adjusted Rate, and if
the Holder has not received the Obligor's written acceptance
of one of the aforementioned adjusted interest rates, as
provided in Section 2.B. above, all principal and interest
and other sums due hereunder or under any of the Loan
Documents shall become due and payable in full, without
premium, including accrued and unpaid interest to the date
of prepayment, on the due date of the one hundred twenty
first (121st) payment.
(ii) At the time (if necessary) that the Holder notifies the
Obligor of the Second Five Year Adjusted Rate, and if the
Holder has not received the Obligor's written acceptance of
the adjusted interest rate, as provided in Section 2.E.
above, all principal and interest and other sums due
hereunder or under any of the Loan Documents shall become
due and payable in full, without premium, including accrued
and unpaid interest to the date of prepayment on the due
date of the one hundred eighty first (181st) payment.
(iii) The Obligor shall have the right, at its option, exercisable
by thirty (30) days prior written notice given to Holder at
any time
5
<PAGE>
from and after the Effective Date, to prepay in full all
principal and interest and other sums due hereunder or under
any of the Loan Documents, including accrued and unpaid
interest to the date of prepayment, with a Make Whole
Premium determined in accordance with Section 3.D. below, it
being provided that as a condition to this right to prepay
(a) no default or Event of Default exists under this Note,
the Other Note or any of the Loan Documents, and (b) there
is a simultaneous exercise of the right to prepay under
Section 3.A (iii) of the Other Note.
B. Notwithstanding the above, in the event that this Note becomes
due and payable in accordance with Sections 3.A(i) or (ii) above,
and provided the Obligor is not in default under any of the Loan
Documents (and no event or circumstance exists which with notice
and the expiration of any cure period could constitute such a
default) and is making good faith and diligent efforts to obtain
and consummate refinancing of the Loan with another financial
institution, the Holder agrees to grant the Obligor up to three
(3) separate additional six (6) month periods from the date this
Note becomes due and payable in accordance with Sections 3.A(i)
or (ii) above, as the case may be, to allow the Obligor
additional time to consummate the refinancing of the Loan;
provided, however, that Obligor shall be required to continue to
make monthly payments of principal and interest at an interest
rate to be established by the Holder at the time each additional
period is granted, in accordance with the criteria set forth in
Section 2.B above for establishing an adjusted interest rate, and
further provided that if Obligor does not agree to any such
interest rates, then all principal and interest and other sums
due hereunder or under any of the Loan Documents shall become due
and payable in full without premium, including accrued and unpaid
interest to the date of payment on demand.
C. The Obligor agrees that if the Holder of this Note accelerates
the principal sum evidenced hereby, or applies any proceeds as if
such application has been made as a result of such acceleration,
pursuant to the provisions hereof, of the Deed of Trust, Security
Agreement and Assignment of Rents ("Deed of Trust") of even date
herewith between the Obligor as Trustor, Michael G. O'Flaherty as
Trustee and Principal Mutual Life Insurance Company as
Beneficiary, or under any of the other Loan Documents, the
Obligor waives any right to prepay said principal sum in whole or
in part without premium and agrees to pay, as liquidated damages
and not as a penalty, a "Make Whole Premium"; provided, however
that the Make Whole Premium shall not be payable if the Holder
(i) accelerates the Note upon Holder's failure to receive
6
<PAGE>
Obligor's acceptance under Section 2.B. or Section 2.E. hereof,
(ii) applies any insurance proceeds to reduce the indebtedness
hereunder pursuant to Section 5 of the Deed of Trust, or (iii)
applies any proceeds of a condemnation award to reduce the
indebtedness hereunder pursuant to Section 6 of the Deed of
Trust.
D. The Make Whole Premium shall be the greater of (i) one percent
(1%) of the principal amount to be prepaid or (ii) a premium
calculated as follows:
(a) Determine the "Reinvestment Yield." The Reinvestment Yield
will be equal to the yield on the respective U.S. Treasury
Issue, Bond, Note or Bill for the appropriate period as
indicated in the "Prepayment Period Table" at the end of
this Section 3 published two weeks prior to the date of
prepayment and converted to an equivalent monthly compounded
nominal yield. Holder will, at any time that a calculation
is necessary, choose that U.S. Treasury Issue, Bond, Note or
Bill which the Holder reasonably deems to be similar to the
characteristics of the indebtedness being paid (i.e., rate,
maturity, remaining time to maturity, yield).
(b) Calculate the "Present Value of the Mortgage." The Present
Value of the Mortgage is the present value of the payments
to be made in accordance with this Note (all installment
payments and any remaining payment due up to and including
the Applicable Rate Index Period Date) discounted at the
Reinvestment Yield for the number of months remaining from
the date of prepayment to the Applicable Rate Index Period
Date.
(c) Subtract the principal amount of this Note so prepaid from
the Present Value of the Mortgage as of the date of
prepayment. Any resulting positive differential shall be the
premium.
7
<PAGE>
PREPAYMENT PERIOD TABLE
- --------------------------------------------------------------------------------
U.S. TREASURY ISSUE PREPAYMENT PERIOD
- --------------------------------------------------------------------------------
* Commencing on the date of Continuing to the date on
funding which the 120th payment
is due
- --------------------------------------------------------------------------------
* Commencing on the date Continuing through the
the 120th payment is due date on which the 180th
payment is due if the
Five Year Adjusted Rate
is in effect
- --------------------------------------------------------------------------------
* Commencing on the date Continuing through
the 120th payment is due maturity if the Ten Year
Adjusted Rate is in
effect
- --------------------------------------------------------------------------------
* Commencing on the date Continuing through
the 180th payment is due maturity if the Second
Five Year Adjusted Rate
is in effect
- --------------------------------------------------------------------------------
* This will be determined pursuant to the last sentence of Section
3.D.(a) hereof.
4. LATE CHARGE.
If any payment of principal, interest or premium is not made when due,
damages will be incurred by the Holder of this Note, including additional
expense in handling overdue payments, the amount of which is difficult and
impractical to ascertain. The Obligor therefore agrees to pay, upon demand, the
sum of 2 cents ($.02) for each one dollar ($1.00) of each said payment which
becomes overdue as a reasonable estimate of the amount of said damages.
5. ACCELERATION-DEFAULT INTEREST.
If any payment of principal, interest or premium is not made when due
(sometimes referred to as an "Event of Default" hereunder) or if any Event of
Default has occurred or is continuing under the Other Note, the Deed of Trust or
any of the Loan Documents, the entire principal balance, interest then accrued,
and premium, whether or not otherwise then due, shall at the option of the
Holder of this Note, become immediately due and payable without demand or
notice, and whether or not the Holder of this Note has exercised said option,
interest shall accrue on the entire principal balance, interest then accrued,
and any premium then due, at the rate of two percent (2%) per annum above the
then applicable rate of interest payable under this Note until fully paid or if
the Holder of this Note has not exercised said option, for the duration of such
Event of Default hereunder.
8
<PAGE>
6. MISCELLANEOUS PROVISIONS.
A. Notwithstanding anything herein or in any instrument by which
this Note may be secured to the contrary, no provision contained
herein or therein which purports to obligate the Obligor to pay
any amount of interest or any fees, costs or expenses which are
in excess of the maximum permitted by applicable law, shall be
effective to the extent it calls for the payment of any interest
or other amount in excess of such maximum. Any such excess shall,
at the option of the Holder of this Note, either be paid to the
Obligor or be credited to principal without premiums.
B. The Obligor and any endorsers or guarantors waive presentment,
protest and demand, notice of protest, demand and dishonor and
nonpayment and agree the due date of this Note or any installment
may be extended without affecting any liability hereunder, and
further promise to pay all reasonable costs and expenses,
including attorney's fees, incurred by the Holder hereof in
connection with any default or in any proceeding to interpret
and/or enforce any provision of this Note or any instrument by
which it is secured.
C. This Note is secured by the Deed of Trust and other instruments
and agreements of even date herewith executed and delivered by
the Obligor to Principal Mutual Life Insurance Company creating
among other things legal and valid encumbrances on and an
assignment of all of the Obligor's interest in any leases of
certain Premises located in the County of Jackson, State of
Missouri. Terms used herein which are defined in such
instruments or agreements and not otherwise defined herein have
the same definition as in such instruments and agreements. This
Note shall be governed by and construed in accordance with the
laws of the State where the Premises is located.
7. NON-RECOURSE
A. Subject to the exceptions and qualifications hereinafter
described, Obligor shall have no personal liability for the
payment of any principal, interest or premium due under this Note
or the Other Note, and Holder shall not seek any deficiency
judgment against Obligor or make any resort therefor to any
property of Obligor other than the Premises and the rents,
issues, proceeds and profits thereof.
B. The foregoing limitation of personal liability shall be subject
to the following exceptions and qualifications:
9
<PAGE>
(i) The provisions of subsection A. of this Section 7 shall not
(a) limit Obligor's personal liability for its obligations
under the Deed of Trust or that Assignment of Leases and
Rents from Obligor to Holder of even date herewith (the
"Lease Assignment") for operation or maintenance of the
Premises, or payment of taxes, assessments, utility charges
and insurance or for its obligation to indemnify and hold
Holder harmless from any loss or damage from any Hazardous
Material that exists on or is discharged from the Premises;
(b) limit or impair the lien or enforcement of the Deed of
Trust or any other instrument or agreement by which this
Note and the Other Note are secured or the right of Holder
to collect all sums due under this Note and the Other Note
or the Deed of Trust other than as expressly limited in this
Section 7; (c) cause the failure of Obligor to make all
payments of principal, interest and premium or to perform
any obligation within the time periods provided herein from
being an Event of Default hereunder, under the Deed of Trust
or under any of the Loan Documents; (d) be construed as
limiting the obligations of Obligor under any lease of the
Premises; or (e) limit the obligations of any indemnitor or
guarantor, if any, of Obligor's obligations under the Deed
of Trust, this Note and the Other Note or any other
instrument or agreement by which it is secured; and
(ii) Obligor shall be fully and personally liable for the
following: (a) any rents or other income from the Premises
received by Obligor after default hereunder or under any
other document by which this Note and the Other Note is
secured which are not applied to the fixed and operating
expenses of the Premises; (b) any sums expended by Holder in
fulfilling the obligations of Obligor as lessor under any
lease of the Premises or for any security deposits of
tenants not turned over to the Holder upon foreclosure or
sale pursuant to power of sale or for any misapplication of
security deposits, prepaid rents or other similar sums paid
to or held by Obligor, its agents, employees, property
managers or subsidiaries in connection with the operation of
the Premises; (c) any waste committed by Obligor with
respect to the Premises; (d) any insurance or condemnation
proceeds or other similar funds or payments applied by
Obligor in a manner other than as expressly provided in the
Deed of Trust and any other instruments or agreements by
which this Note and the Other Note is secured; and (e) the
indebtedness secured by the Deed of Trust, or any deficiency
which may result from any foreclosure
10
<PAGE>
sale, to the extent of the Maximum Amount (as hereinafter
defined).
C. As used herein, the term "Maximum Amount" shall be deemed to mean
an aggregate maximum total amount under the Loan Documents of
$17,500,000.00 as the same may be reduced as hereinafter set
forth: Commencing on the first anniversary of the Effective Date
and on each anniversary of the Effective Date thereafter (the
"Reduction Date"), upon request of Obligor, the Maximum Amount
shall be reduced by $1,750,000.00 (the "Annual Reduction Amount")
provided that the following conditions are met:
(i) There is no default under any of the Loan Documents which
has not been cured within any expressly applicable cure
period;
(ii) The "Annual Net Operating Income" from "Approved Leases" for
the "Comparison Period" is at least 130 percent of "Annual
Debt Service Payments"it being agreed that for these
purposes (a) "Annual Net Operating Income" shall be as
determined pursuant to generally accepted accounting
principles, and shall be determined from such reports and
audits as are provided to Holder pursuant to the Deed of
Trust; (b) "Approved Leases" shall be those leases in effect
at the time the Deed of Trust is recorded and such other
leases as are, from time to time, approved by Holder, or
deemed approved under the Loan Documents; provided, however,
that a lease shall not be an Approved Lease unless and until
the tenant is in possession and paying rent; (c) the
"Comparison Period" shall be the 24-month period preceding
each Reduction Date, it being recognized that the first
Comparison Period will include the 12-month period prior to
the recording of the Deed of Trust; and (d) Annual Debt
Service Payments" shall be the total principal and interest
payable under the Note and the Other Note for the 12-month
period preceding the Reduction Date;
(iii) The Maximum Amount shall never be reduced to an amount less
than $10,000,000.00 during the period ending 12/27/2003, and
even if such amount would, prior to 12/27/2003, be reduced
below $10,000,000.00 pursuant to the terms hereof, such
Maximum Amount shall remain at $10,000,000.00 until
12/27/2003, at which time reduction of the Maximum Amount
shall resume subject and pursuant to the terms hereof.
11
<PAGE>
It is further provided that although provisions similar to this
Section 7.C may appear in the Other Note, the Deed of Trust and
other of the Loan Documents, there will only be one reduction on
a Reduction Date and that shall be equal to the Annual Reduction
Amount. Further, and notwithstanding anything to the contrary in
any of the Loan Documents, the maximum aggregate amount of
personal liability under each and all of the Loan Documents shall
be the aforesaid Maximum Amount.
D. Nothing herein shall be deemed to be a waiver of any right which
Holder may have under the United States Bankruptcy Code to file a
claim for the full amount of the debt owed to Holder by Obligor
or to require that all the Premises shall continue to secure all
of the indebtedness owing to Holder in accordance with the Loan
Documents. Nothing herein stated shall impair the right of Holder
to accelerate (or to avail itself of any of its other rights and
remedies) upon the occurrence of default hereunder or an Event of
Default under the Deed of Trust or under any other instrument
securing or evidencing the indebtedness secured by the Deed of
Trust, nor shall anything herein stated impair or be construed to
impair the right of Holder to seek personal judgments and all
rights and remedies to enforce same allowed by law, jointly and
severally, with respect to the personal liability of Obligor as
described in subsection B and subsection C of this Section 7.
The provisions set forth in this Section 7 are not intended as
any release or discharge of the indebtedness secured hereby or
any monies due under this Note, the Other Note or under any of
the other Loan Documents, but are intended as a limitation on
Holder's right to sue for deficiency or personal judgment except
as provided in this Section 7. Anything in the Deed of Trust,
this Note and the Other Note or any other instrument or agreement
by which this Note and the Other Note be secured to the contrary
notwithstanding, this limited agreement not to pursue recourse
liability SHALL BECOME NULL AND VOID and shall be of no further
force and effect in the event: (x) that there shall be any
breach or violation of Obligor's agreement not to, directly or
indirectly, due to assignment of beneficial interest under a
trust, partnership interest in a partnership, or otherwise, cause
or permit any sale, transfer or conveyance of the Premises
(provided however, the transfer of stock in J.C. Nichols Company
shall not be deemed a violation of this provision), or create,
suffer or permit any encumbrance or lien on the Premises other
than the lien of the Deed of Trust and any other instrument or
agreement by which this Note and the Other Note is secured, the
leases of the Premises assigned to Holder and such other
transfers, liens or encumbrances, if any, as expressly permitted
under the Deed of Trust or any other instrument or agreement by
which this Note and the Other
12
<PAGE>
Note is secured (and other than a non-material breach or
violation of such sections such as the filing of a non-material
mechanic's lien affecting the Premises, the granting of any
utility or other easement or servitude burdening the Premises, or
any other transfer or encumbrance not in the nature of transfer,
reduction or impairment of any material economic interest in the
Premises); (y) Obligor should file, or there should be filed
against Obligor (and the same is not dismissed within ninety (90)
days), a petition in bankruptcy or insolvency or a petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
the bankruptcy laws of the United States or under any other
applicable federal, state or other statute or law, or bankruptcy
related receiver, trustee or liquidator should be appointed with
the respect to Obligor for the Premises as defined in the Deed of
Trust, or any material part thereof; or (z) of any fraud or
willful misrepresentation by Obligor regarding the Premises, the
making or delivery of this Note and the Other Note or any other
instrument or agreement by which this Note and the Other Note be
secured or in any materials or information provided by Obligor in
connection with the Loan evidenced thereby.
8. SERVICER
Notwithstanding anything to the contrary set forth in this Note, and
provided that there be in existence no Event of Default hereunder or any Event
of Default under any of the Loan Documents (beyond any applicable notice and
cure period), Obligor shall not be required to deal with more than one Servicer
(as hereafter defined) at any time with respect to the administration of its
rights, duties and obligations under the Deed of Trust, this Note, the Other
Note, the Assignment of Leases and Rents and any other documents evidencing or
securing the Notes. Accordingly, whether or not this Note and the Other Note
continue to be held by the original holders thereof, Obligor shall not be
required to deliver notices or requests to, or otherwise deal with, any person
or entity other than Servicer, or any New Servicer (as hereafter defined)
respecting the foregoing documents and the loan evidenced thereby, except upon
the existence and continuance of an Event of Default hereunder or an Event of
Default under any of the Loan Documents (and expiration of applicable notice and
cure periods, if any).
Holder agrees that it shall designate a servicer for the Loan evidenced by
this Note and the Other Note and secured by the Deed of Trust (the "Servicer")
which shall be authorized to act on behalf of the Holder (whether one or more)
in accordance with the terms of any agreement between the Holder and the
Servicer, with respect to the Loan. The Holder hereby designates Principal
Mutual Life Insurance Company as Servicer. Any notices, requests, approvals,
consents, deliveries, or other forms communication from Obligor to Servicer
(including but not limited to any notices under Section 2.B. or 2.E. hereof)
shall be deemed
13
<PAGE>
adequate and sufficient as if given to Holder if given in writing and service is
made by registered or certified mail or overnight air courier, or by facsimile
communication, addressed to Principal Mutual Life Insurance Company at 711 High
Street, Des Moines, Iowa 50392- 1450, Attn: Commercial Real Estate Loan
Administration, Loan Nos. 750037 and 750038, or to such other place as the
Servicer may, by notice given in writing to Obligor, designate as a place for
service of notice. Further, prior to an Event of Default hereunder or under any
of the Loan Documents, any notice, election or other communication to Obligor
hereunder shall be effective only if given by the Servicer as duly appointed
hereunder. It is agreed that should the Servicer cease to service this Loan,
that the Holder shall, by written notice given to Obligor, substitute and
appoint any other party (who may or may not be the holder of one of the Notes
evidencing this Loan) as servicer (the "New Servicer") and upon such
appointment, the New Servicer shall receive all notices, requests, approvals,
consents, deliveries and other forms of communication from Obligor to New
Servicer at the address specified in the written notice from the Servicer as set
forth above. Holder has and reserves the right to revoke the designation of
Servicer upon the occurrence of an Event of Default hereunder or an Event of
Default under any of the Loan Documents (and expiration of any applicable notice
and cure period).
If more than one, all obligations and agreements of the Obligor are joint
and several.
J.C. NICHOLS COMPANY, a Missouri corporation
[SEAL]
By:
ATTEST: ---------------------------------------
Walter C. Janes
Vice President and Treasurer
By:
------------------------------
Robert L. Jackson, Jr.
Assistant Secretary and Vice President
14
<PAGE>
SECURED PROMISSORY NOTE
[NOTE B]
$30,000,000.00 DECEMBER 27, 1993
KANSAS CITY, MISSOURI
FOR VALUE RECEIVED, the undersigned, J.C. NICHOLS COMPANY, a Missouri
corporation, hereby promises to pay to the order of PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY, an Iowa corporation, at the Home Office of Principal Mutual
Life Insurance Company at 711 High Street, Des Moines, Iowa 50392, or at such
other place as the Holder of this Note may designate, the principal sum of
Thirty Million and 00/100 Dollars ($30,000,000.00), together with interest on
the unpaid balance of said sum as herein set forth. It is agreed as follows:
1. DEFINITIONS. The following terms shall be defined as follows:
"Applicable Rate Index Period Date" shall, at any point in time, be the
next to occur of (i) the date on which the 120th payment is due; (ii) the date
on which the 180th payment is due if the Five Year Adjusted Rate is in effect;
(iii) the Maturity Date if the Ten Year Adjusted Rate is in effect; or (iv) the
Maturity Date if the Second Five Year Adjusted Rate is in effect.
"Basic Amortization Schedule" shall mean that amount of 240 equal monthly
payments of principal and interest necessary so as to result in full
amortization.
"Deed of Trust" shall mean the Deed of Trust herein described.
"Effective Date" shall be the date set forth above.
"Holder" shall be the Original Holder and such party or parties as shall,
from time to time, own this Note or any part or interest herein.
"Initial Interest Rate" shall be eight percent (8%) per annum.
"Loan" shall mean the indebtedness evidenced by this Note and the Other
Note.
"Loan Documents" shall mean this Note, the Other Note, the Deed of Trust
and any and all other documents or instruments that evidence, secure or
otherwise relate to the Loan.
"Maker" shall be J.C. Nichols Company, a Missouri corporation.
"Maturity Date" shall mean December 15, 2013.
<PAGE>
"Obligor" shall mean the Maker and any other party or parties who are, from
time to time, the owner or owners of the Premises.
"Original Holder" shall be Principal Mutual Life Insurance Company, an Iowa
corporation.
"Other Note" shall be that Secured Promissory Note [Note A] dated this date
from Maker to Original holder in the amount of $40,000,000.00 and also secured
by the Deed of Trust.
2. INTEREST AND PAYMENTS.
A. Commencing with the fifteenth (15th) day of January, 1994 and on
the fifteenth (15th) day of each of the next one hundred nineteen
(119) months thereafter there shall be monthly payments of
principal and interest at the Initial Interest Rate in the amount
of Two Hundred Fifty Thousand Nine Hundred Thirty Two and 02/100
Dollars ($250,932.02).
B. The rate of interest payable hereunder and under the Other Note
shall be adjusted effective as of the date the one hundred
twentieth (120th) payment is due to an interest rate established
by the Holder for either a five-year period or a ten-year period
(depending on which such period Obligor elects hereunder), based
on Holder's evaluation of the then current financial performance
and projected risk of the security for this Note and the Other
Note, the then current financial status of the Obligor, and the
term and amount of the indebtedness secured by the Deed of Trust.
Review of the financial performance and projected risk of the
security shall encompass various factors, including but not
limited to, contract debt service coverage, loan-to-value ratio,
economic debt service coverage, tenant occupancy, frequency of
tenant rollover, financial strength and stability of tenants.
Review of the then current financial status of the Obligor shall
include but not be limited to creditworthiness, financial
strength, percentage of liabilities to liquid assets, and annual
net income. The Holder shall, on or before the date on which the
one hundred eighteenth (118th) payment is due hereunder
[10/15/2003], notify the Obligor in writing of the proposed
adjusted interest rate for a five-year period ("Five Year
Adjusted Rate") and the proposed adjusted interest rate for a
ten-year period ("Ten Year Adjusted Rate"), one of which is to
begin on the date the one hundred twentieth (120th) payment is
due. The Obligor shall notify Holder in writing of the Obligor's
acceptance of either the Five Year Adjusted Rate or the Ten Year
Adjusted Rate no later than the fifteenth (15th) day after the
due date of the one hundred eighteenth (118th) payment
2
<PAGE>
[10/30/2003], and shall at the same time notify the holder of the
Other Note of its acceptance of the adjusted interest rate
thereunder which must be for a similar period, and if Holder has
not received the Obligor's written acceptance on or before said
date, or if the Holder of the Other Note has not received a
similar acceptance pursuant to the terms of the Other Note, then
all principal and interest and other sums due hereunder shall
become due and payable in full without premium on the date the
one hundred twenty first (121st) payment is due [1/15/2004],
subject to any extension of such date as provided in Section 3.B
hereof; provided, however, that the Five Year Adjusted Rate and
the Ten Year Adjusted Rate established by the Holder hereunder
shall be the same rates, respectively, as the Five Year Adjusted
Rate and the Ten Year Adjusted Rate established by the holder of
the Other Note thereunder pursuant to Section 2.B. thereof, and
Obligor shall accept the same adjusted interest rate (either the
Five Year Adjusted Rate or the Ten Year Adjusted Rate) under the
Other Note as the Obligor accepts hereunder.
C. In the event the Holder has received the Obligor's written
acceptance of the Five Year Adjusted Rate as specified herein,
the Five Year Adjusted Rate shall become the effective rate of
interest hereunder as of the date the one hundred twentieth
(120th) payment is due, and the monthly payments of principal and
interest due hereunder on the 15th day of January, 2004 (the one
hundred twenty first (121st) payment) and on the 15th day of each
of the next fifty nine (59) months thereafter, shall be
determined using the Five Year Adjusted Rate, the outstanding
principal balance, and the Basic Amortization Schedule reduced by
the number of payments previously made.
D. In the event the Holder has received the Obligor's written
acceptance of the Ten Year Adjusted Rate as specified herein, the
Ten Year Adjusted Rate shall become the effective rate of
interest hereunder as of the date the one hundred twentieth
(120th) payment is due, and the monthly payments of principal and
interest due hereunder on the 15th day of January, 2004 (the one
hundred twenty first (121st) payment) and on the 15th day of the
next one hundred nineteen (119) months thereafter, shall be
determined using the Ten Year Adjusted Rate, the outstanding
principal balance, and the Basic Amortization Schedule reduced by
the number of payments previously made.
E. In the event the Holder has received the Obligor's written
acceptance of the Five Year Adjusted Rate as provided in section
2.C. above, the rate of interest payable hereunder and under the
Other Note shall be adjusted
3
<PAGE>
effective as of the date that the one hundred eightieth (180th)
payment is due, to an interest rate established by Holder, in
accordance with the criteria for the establishment of the prior
interest rate adjustment. Holder shall notify the Obligor in
writing of the adjusted interest rate to begin effective as of
the date that the one hundred eightieth (180th) payment is due,
no later than the date on which the 178th payment is due
[10/15/2008]. The Obligor shall notify the Holder in writing of
the Obligor's acceptance of the Second Five Year Adjusted Rate no
later than the fifteenth (15th) day after the date that the one
hundred seventy eighth (178th) payment is due [10/30/2008], and
shall at the same time notify the holder of the Other Note of its
acceptance of the adjusted interest rate thereunder, and if the
Holder has not received the Obligor's written acceptance on or
before said date, or if the Holder of the Other Note has not
received a similar acceptance pursuant to the terms of the Other
Note, then all principal and interest and other sums due
hereunder shall become due and payable in full without premium on
the date the one hundred eighty first (181st) payment is due,
subject to any extension of such date as provided in Section 3.B.
hereof. In the event the Holder has received the Obligor's
written acceptance as specified herein, the Second Five Year
Adjusted Rate shall become the effective rate of interest
hereunder as of the date the one hundred eightieth (180th)
payment is due, and the monthly payments of principal and
interest due hereunder on the 15th day of January, 2009 (the one
hundred eighty first (181st) payment), and on the 15th day of the
next fifty nine (59) months, shall be determined using the Second
Five Year Adjusted Rate, the outstanding principal balance, and
the Basic Amortization Schedule reduced by the number of payments
previously made; provided, however, that the Second Five Year
Adjusted Rate established by the Holder hereunder shall be the
same rate as the second Five Year Adjusted Rate established by
the holder of the Other Note thereunder pursuant to Section 2.E.
thereof, and if Obligor accepts the Second Five Year Adjusted
Rate or does not accept the Second Five Year Adjusted Rate,
Obligor shall do so under both this Note and the Other Note.
F. Except as specified herein, all unpaid principal and interest and
other sums due hereunder or under any of the Loan Documents shall
be fully due and payable on the Maturity Date. Monthly payments
shall be made in immediately available funds by bank wire
transfer to the registered owner hereof at Norwest Bank of Iowa,
N.A., Seventh and Walnut Streets, Des Moines, Iowa 50304, for
credit to Principal Mutual Life Insurance Company, General
Account Number 014752, Re: D-750037, with reference to the
Obligor, or at such other place as Holder shall from time to time
specify. Each installment shall be credited first upon
4
<PAGE>
interest then accrued and unpaid and the remainder upon
principal, and interest shall cease to accrue upon principal so
credited. All principal and interest shall be paid in lawful
money of the United States of America. If on the date of the
first installment, interest is accrued for more or less than one
installment period, the amount of said installment shall be
increased or decreased by the amount that the interest accrued
exceeds or is less than the interest for one installment period
based on the actual number of days elapsed to the date of said
installment. In any given month, the monthly payment hereunder
and the monthly payment under the Other Note may be made by a
single wire transfer.
G. In connection with any interest rate adjustment pursuant to this
Section 2, Obligor shall comply with the provisions of Section 43
of the Deed of Trust.
3. PREPAYMENT.
A. No privilege is reserved by the Obligor to prepay any principal
of this Note prior to the Maturity Date, except as herein set
forth.
(i) At the time that the Holder notifies the Obligor of the Five
Year Adjusted Rate and the Ten Year Adjusted Rate, and if
the Holder has not received the Obligor's written acceptance
of one of the aforementioned adjusted interest rates, as
provided in Section 2.B. above, all principal and interest
and other sums due hereunder or under any of the Loan
Documents shall become due and payable in full, without
premium, including accrued and unpaid interest in the date
of prepayment, on the due date of the one hundred twenty
first (121st) payment.
(ii) At the time (if necessary) that the Holder notifies the
Obligor of the Second Five Year Adjusted Rate, and if the
Holder has not received the Obligor's written acceptance of
the adjusted interest rate, as provided in Section 2.E.
above, all principal and interest and other sums due
hereunder or under any of the Loan Documents shall become
due and payable in full, without premium, including accrued
and unpaid interest to the date of prepayment on the due
date of the one hundred eighty first (181st) payment.
(iii) The Obligor shall have the right, at its option,
exercisable by thirty (30) days prior written notice given
to Holder at any time from and after the Effective Date,
to prepay in full all principal
5
<PAGE>
and interest and other sums due hereunder or under any of
the Loan Documents, including accrued and unpaid interest to
the date of prepayment, with a Make Whole Premium determined
in accordance with Section 3.D. below, it being provided
that as a condition to this right to prepay (a) no default
or Event of Default exists under this Note, the Other Note
or any of the Loan Documents, and (b) there is a
simultaneous exercise of the right to prepay under Section
3.A (iii) of the Other Note.
B. Notwithstanding the above, in the event that this Note becomes
due and payable in accordance with Sections 3.A(i) or (ii) above,
and provided the Obligor is not in default under any of the Loan
Documents (and no event or circumstance exists which with notice
and the expiration of any cure period could constitute such a
default) and is making good faith and diligent efforts to obtain
and consummate refinancing of the Loan with another financial
institution, the Holder agrees to grant the Obligor up to three
(3) separate additional six (6) month periods from the date this
Note becomes due and payable in accordance with Sections 3.A(i)
or (ii) above, as the case may be, to allow the Obligor
additional time to consummate the refinancing of the Loan;
provided, however, that Obligor shall be required to continue to
make monthly payments of principal and interest at an interest
rate to be established by the Holder at the time each additional
period is granted, in accordance with the criteria set forth in
Section 2.B above for establishing an adjusted interest rate, and
further provided that if Obligor does not agree to any such
interest rates, then all principal and interest and other sums
due hereunder or under any of the Loan Documents shall become due
and payable in full without premium, including accrued and unpaid
interest to the date of payment on demand.
C. The Obligor agrees that if the Holder of this Note accelerates
the principal sum evidenced hereby, or applies any proceeds as if
such application has been made as a result of such acceleration,
pursuant to the provisions hereof, of the Deed of Trust, Security
Agreement and Assignment of Rents ("Deed of Trust") of even date
herewith between the Obligor as Trustor, Michael G. O'Flaherty as
Trustee and Principal Mutual Life Insurance Company as
Beneficiary, or under any of the other Loan Documents, the
Obligor waives any right to prepay said principal sum in whole or
in part without premium and agrees to pay, as liquidated damages
and not as a penalty, a "Make Whole Premium"; provided, however
that the Make Whole Premium shall not be payable if the Holder
(i) accelerates the Note upon Holder's failure to receive
Obligor's acceptance under Section 2.B. or Section 2.E. hereof,
(ii)
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<PAGE>
applies any insurance proceeds to reduce the indebtedness
hereunder pursuant to Section 5 of the Deed of Trust, or (iii)
applies any proceeds of a condemnation award to reduce the
indebtedness hereunder pursuant to Section 6 of the Deed of
Trust.
D. The Make Whole Premium shall be the greater of (i) one percent
(1%) of the principal amount to be prepaid or (ii) a premium
calculated as follows:
(a) Determine the "Reinvestment Yield." The Reinvestment Yield
will be equal to the yield on the respective U.S. Treasury
Issue, Bond, Note or Bill for the appropriate period as
indicated in the "Prepayment Period Table" at the end of
this Section 3 published two weeks prior to the date of
prepayment and converted to an equivalent monthly compounded
nominal yield. Holder will, at any time that a calculation
is necessary, choose that U.S. Treasury Issue, Bond, Note or
Bill which the Holder reasonably deems to be similar to the
characteristics of the indebtedness being paid (i.e., rate,
maturity, remaining time to maturity, yield).
(b) Calculate the "Present Value of the Mortgage." The Present
Value of the Mortgage is the present value of the payments
to be made in accordance with this Note (all installment
payments and any remaining payment due up to and including
the Applicable Rate Index Period Date) discounted at the
Reinvestment Yield for the number of months remaining from
the date of prepayment to the Applicable Rate Index Period
Date.
(c) Subtract the principal amount of this Note so prepaid from
the Present Value of the Mortgage as of the date of
prepayment. Any resulting positive differential shall be the
premium.
7
<PAGE>
- --------------------------------------------------------------------------------
PREPAYMENT PERIOD TABLE
- --------------------------------------------------------------------------------
U.S. TREASURY ISSUE PREPAYMENT PERIOD
- --------------------------------------------------------------------------------
* Commencing on the date of Continuing to the date on
funding which the 120th payment
is due
- --------------------------------------------------------------------------------
* Commencing on the date Continuing through the
the 120th payment is due date on which the 180th
payment is due if the
Five Year Adjusted Rate
is in effect
- --------------------------------------------------------------------------------
* Commencing on the date Continuing through
the 120th payment is due maturity if the Ten Year
Adjusted Rate is in
effect
- --------------------------------------------------------------------------------
* Commencing on the date Continuing through
the 180th payment is due maturity if the Second
Five Year Adjusted Rate
is in effect
- --------------------------------------------------------------------------------
* This will be determined pursuant to the last sentence of Section
3.D.(a) hereof.
4. LATE CHARGE.
If any payment of principal, interest or premium is not made when due,
damages will be incurred by the Holder of this Note, including additional
expense in handling overdue payments, the amount of which is difficult and
impractical to ascertain. The Obligor therefore agrees to pay, upon demand, the
sum of 2 cents ($.02) for each one dollar ($1.00) of each said payment which
becomes overdue as a reasonable estimate of the amount of said damages.
5. ACCELERATION-DEFAULT INTEREST.
If any payment of principal, interest or premium is not made when due
(sometimes referred to as an "Event of Default" hereunder) or if any Event of
Default has occurred or is continuing under the Other Note, the Deed of Trust or
any of the Loan Documents, the entire principal balance, interest then accrued,
and premium, whether or not otherwise then due, shall at the option of the
Holder of this Note, become immediately due and payable without demand or
notice, and whether or not the Holder of this Note has exercised said option,
interest shall accrue on the entire principal balance, interest then accrued,
and any premium then due, at the rate of two percent (2%) per annum above the
then applicable rate of interest payable under this Note until fully paid or if
the Holder of this Note has not exercised said option, for the duration of such
Event of Default hereunder.
8
<PAGE>
6. MISCELLANEOUS PROVISIONS.
A. Notwithstanding anything herein or in any instrument by which
this Note may be secured to the contrary, no provision contained
herein or therein which purports to obligate the Obligor to pay
any amount of interest or any fees, costs or expenses which are
in excess of the maximum permitted by applicable law, shall be
effective to the extent it calls for the payment of any interest
or other amount in excess of such maximum. Any such excess shall,
at the option of the Holder of this Note, either be paid to the
Obligor or be credited to principal without premiums.
B. The Obligor and any endorsers or guarantors waive presentment,
protest and demand, notice of protest, demand and dishonor and
nonpayment and agree the due date of this Note or any installment
may be extended without affecting any liability hereunder, and
further promise to pay all reasonable costs and expenses,
including attorney's fees, incurred by the Holder hereof in
connection with any default or in any proceeding to interpret
and/or enforce any provision of this Note or any instrument by
which it is secured.
C. This Note is secured by the Deed of Trust and other instruments
and agreements of even date herewith executed and delivered by
the Obligor to Principal Mutual Life Insurance Company creating
among other things legal and valid encumbrances on and an
assignment of all of the Obligor's interest in any leases of
certain Premises located in the County of Jackson, State of
Missouri. Terms used herein which are defined in such
instruments or agreements and not otherwise defined herein have
the same definition as in such instruments and agreements. This
Note shall be governed by and construed in accordance with the
laws of the State where the Premises is located.
7. NON-RECOURSE
A. Subject to the exceptions and qualifications hereinafter
described, Obligor shall have no personal liability for the
payment of any principal, interest or premium due under this Note
or the Other Note, and Holder shall not seek any deficiency
judgment against Obligor or make any resort therefor to any
property of Obligor other than the Premises and the rents,
issues, proceeds and profits thereof.
B. The foregoing limitations of personal liability shall be subject
to the following exceptions and qualifications:
9
<PAGE>
(i) The provisions of subsection A. of this Section 7 shall not
(a) limit Obligor's personal liability for its obligations
under the Deed of Trust or that Assignment of Leases and
Rents from Obligor to Holder of even date herewith (the
"Lease Assignment") for operation or maintenance of the
Premises, or payment of taxes, assessments, utility charges
and insurance or for its obligation to indemnify and hold
Holder harmless from any loss or damage from any Hazardous
Material that exists on or is discharged from the Premises;
(b) limit or impair the lien or enforcement of the Deed of
Trust or any other instrument or agreement by which this
Note and the Other Note are secured or the right of Holder
to collect all sums due under this Note and the Other Note
or the Deed of Trust other than as expressly limited in this
Section 7; (c) cause the failure of Obligor to make all
payments of principal, interest and premium or to perform
any obligation within the time periods provided herein from
being an Event of Default hereunder, under the Deed of Trust
or under any of the Loan Documents; (d) be construed as
limiting the obligations of Obligor under any lease of the
Premises; or (e) limit the obligations of any indemnitor or
guarantor, if any, of Obligor's obligations under the Deed
of Trust, this Note and the Other Note or any other
instrument or agreement by which it is secured; and
(ii) Obligor shall be fully and personally liable for the
following: (a) any rents or other income from the Premises
received by Obligor after default hereunder or under any
other document by which this Note and the Other Note is
secured which are not applied to the fixed and operating
expenses of the Premises; (b) any sums expended by Holder in
fulfilling the obligations of Obligor as lessor under any
lease of the Premises or for any security deposits of
tenants not turned over to the Holder upon foreclosure or
sale pursuant to power of sale or for any misapplication of
security deposits, prepaid rents or other similar sums paid
to or held by Obligor, its agents, employees, property
managers or subsidiaries in connection with the operation of
the Premises; (c) any waste committed by Obligor with
respect to the Premises; (d) any insurance or condemnation
proceeds or other similar funds or payments applied by
Obligor in a manner other than as expressly provided in the
Deed of Trust and any other instruments or agreements by
which this Note and the Other Note is secured; and (e) the
indebtedness secured by the Deed of Trust, or any deficiency
which may result from any foreclosure
10
<PAGE>
sale, to the extent of the Maximum Amount (as hereinafter
defined).
C. As used herein, the term "Maximum Amount" shall be deemed to mean
an aggregate maximum total amount under the Loan Documents of
$17,500,000.00 as the same may be reduced as hereinafter set
forth: Commencing on the first anniversary of the Effective Date
and on each anniversary of the Effective Date thereafter (the
"Reduction Date"), upon request of Obligor, the Maximum Amount
shall be reduced by $1,750,000.00 (the "Annual Reduction Amount")
provided that the following conditions are met:
(i) There is no default under any of the Loan Documents which
has not been cured within any expressly applicable cure
period;
(ii) The "Annual Net Operating Income" from "Approved Leases" for
the "Comparison Period" is at least 130 percent of "Annual
Debt Service Payments"it being agreed that for these
purposes (a) "Annual Net Operating Income" shall be as
determined pursuant to generally accepted accounting
principles, and shall be determined from such reports and
audits as are provided to Holder pursuant to the Deed of
Trust; (b) "Approved Leases" shall be those leases in effect
at the time the Deed of Trust is recorded and such other
leases as are, from time to time, approved by Holder, or
deemed approved under the Loan Documents; provided, however,
that a lease shall not be an Approved Lease unless and until
the tenant is in possession and paying rent; (c) the
"Comparison Period" shall be the 24-month period preceding
each Reduction Date, it being recognized that the first
Comparison Period will include the 12-month period prior to
the recording of the Deed of Trust; and (d) "Annual Debt
Service Payments" shall be the total principal and interest
payable under the Note and the Other Note for the 12-month
period preceding the Reduction Date;
(iii) The Maximum Amount shall never be reduced to an amount less
than $10,000,000.00 during the period ending 12/27/2003, and
even if such amount would, prior to 12/27/2003, be reduced
below $10,000,000.00 pursuant to the terms hereof, such
Maximum Amount shall remain at $10,000,000.00 until
12/27/2003, at which time reduction of the Maximum Amount
shall resume subject and pursuant to the terms hereof.
11
<PAGE>
It is further provided that although provisions similar to
this Section 7.C may appear in the Other Note, the Deed of
Trust and other of the Loan Documents, there will only be one
reduction on a Reduction Date and that shall be equal to the
Annual Reduction Amount. Further, and notwithstanding
anything to the contrary in any of the Loan Documents, the
maximum aggregate amount of personal liability under each and
all of the Loan Documents shall be the aforesaid Maximum
Amount.
D. Nothing herein shall be deemed to be a waiver of any right which
Holder may have under the United States Bankruptcy Code to file a
claim for the full amount of the debt owed to Holder by Obligor
or to require that all the Premises shall continue to secure all
of the indebtedness owing to Holder in accordance with the Loan
Documents. Nothing herein stated shall impair the right of Holder
to accelerate (or to avail itself of any of its other rights and
remedies) upon the occurrence of default hereunder or an Event of
Default under the Deed of Trust or under any other instruments
securing or evidencing the indebtedness secured by the Deed of
Trust, nor shall anything herein stated impair or be construed to
impair the right of Holder to seek personal judgments and all
rights and remedies to enforce same allowed by law, jointly and
severally, with respect to the personal liability of Obligor as
described in subsection B and subsection C of this Section 7.
The provisions set forth in this Section 7 are not intended as
any release or discharge of the indebtedness secured hereby or
any monies due under this Note, the Other Note or under any of
the other Loan Documents, but are intended as a limitation on
Holder's right to sue for deficiency or personal judgment except
as provided in this Section 7. Anything in the Deed of Trust,
this Note and the Other Note or any other instrument or agreement
by which this Note and the Other Note be secured to the contrary
notwithstanding, this limited agreement not to pursue recourse
liability SHALL BECOME NULL AND VOID and shall be of no further
force and effect in the event: (x) that there shall be any
breach or violation of Obligor's agreement not to, directly or
indirectly, due to assignment of beneficial interest under a
trust, partnership interest in a partnership, or otherwise, cause
or permit any sale, transfer or conveyance of the Premises
(provided, however, the transfer of stock in J.C. Nichols Company
shall not be deemed a violation of this provision), or create,
suffer or permit any encumbrance or lien on the Premises other
than the lien of the Deed of Trust and any other instrument or
agreement by which this Note and the Other Note is secured, the
leases of the Premises assigned to Holder and such other
transfers, liens or encumbrances, if any, as expressly permitted
under the Deed of Trust or any other instrument or agreement by
which this Note and the Other
12
<PAGE>
Note is secured (and other than a non-material breach or
violation of such sections such as the filing of a non-material
mechanic's lien affecting the Premises, the granting of any
utility or other easement or servitude burdening the Premises, or
any other transfer or encumbrance not in the nature of transfer,
reduction or impairment of any material economic interest in the
Premises); (y) Obligor should file, or there should be filed
against Obligor (and the same is not dismissed within ninety (90)
days), a petition in bankruptcy or insolvency or a petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
the bankruptcy laws of the United States or under any other
applicable federal, state or other statute or law, or bankruptcy
related receiver, trustee or liquidator should be appointed with
the respect to Obligor for the Premises as defined in the Deed of
Trust, or any material part thereof; or (z) of any fraud or
willful misrepresentation by Obligor regarding the Premises, the
making or delivery of this Note and the Other Note or any other
instrument or agreement by which this Note and the Other Note be
secured or in any materials or information provided by Obligor in
connection with the Loan evidenced thereby.
8. SERVICER
Notwithstanding anything to the contrary set forth in this Note, and
provided that there be in existence no Event of Default hereunder or any Event
of Default under any of the Loan Documents (beyond any applicable notice and
cure period), Obligor shall not be required to deal with more than one Servicer
(as hereafter defined) at any time with respect to the administration of its
rights, duties and obligations under the Deed of Trust, this Note, the Other
Note, the Assignment of Leases and Rents and any other documents evidencing or
securing the Notes. Accordingly, whether or not this Note and the Other Note
continue to be held by the original holders thereof, Obligor shall not be
required to deliver notices or requests to, or otherwise deal with, any person
or entity other than Servicer, or any New Servicer (as hereafter defined)
respecting the foregoing documents and the loan evidenced thereby, except upon
the existence and continuance of an Event of Default hereunder or an Event of
Default under any of the Loan Documents (and expiration of applicable notice and
cure periods, if any).
Holder agrees that it shall designate a servicer for the Loan evidenced by
this Note and the Other Note and secured by the Deed of Trust (the "Servicer")
which shall be authorized to act on behalf of the Holder (whether one or more)
in accordance with the terms of any agreement between the Holder and the
Servicer, with respect to the Loan. The Holder hereby designates Principal
Mutual Life Insurance Company as Servicer. Any notices, requests, approvals,
consents, deliveries, or other forms of communication from Obligor to Servicer
(including but not limited to any notices under Section 2.B. or 2.E. hereof)
shall be deemed
13
<PAGE>
adequate and sufficient as if given to Holder if given in writing and service is
made by registered or certified mail or overnight air courier, or by facsimile
communication, addressed to Principal Mutual Life Insurance Company at 711 High
Street, Des Moines, Iowa 50392- 1450, Attn: Commercial Real Estate Loan
Administration, Loan Nos. 750037 and 750038, or to such other place as the
Servicer may, by notice given in writing to Obligor, designate as a place for
service of notice. Further, prior to an Event of Default hereunder or under any
of the Loan Documents, any notice, election or other communication to Obligor
hereunder shall be effective only if given by the Servicer as duly appointed
hereunder. It is agreed that should the Servicer cease to service this Loan,
that the Holder shall, by written notice given to Obligor, substitute and
appoint any other party (who may or may not be the holder of one of the Notes
evidencing this Loan) as servicer (the "New Servicer") and upon such
appointment, the New Servicer shall receive all notices, requests, approvals,
consents, deliveries and other forms of communication from Obligor to New
Servicer at the address specified in the written notice from the Servicer as set
forth above. Holder has and reserves the right to revoke the designation of
Servicer upon the occurrence of an Event of Default hereunder or an Event of
Default under any of the Loan Documents (and expiration of any applicable notice
and cure period).
If more than one, all obligations and agreements of the Obligor are joint
and several.
J.C. NICHOLS COMPANY, a Missouri corporation
[SEAL]
By:
ATTEST: ----------------------------------
Walter C. Janes
Vice President and Treasurer
By:
--------------------------------
Robert L. Jackson, Jr.
Assistant Secretary and Vice President
14
<PAGE>
DEED OF TRUST, SECURITY AGREEMENT
AND ASSIGNMENT OF RENTS
THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS IS
ALSO TO BE EFFECTIVE AS A FINANCING STATEMENT
FILED AS A FIXTURE FILING.
(THIS DEED OF TRUST SECURES, AMONG OTHER THINGS, FUTURE ADVANCES AND FUTURE
OBLIGATIONS AND IS TO BE GOVERNED BY THE PROVISIONS OF Section 443.005 OF
MISSOURI REVISED STATUTES. THE TOTAL PRINCIPAL AMOUNT OF FUTURE ADVANCES AND
FUTURE OBLIGATIONS THAT MAY BE SECURED HEREBY IS $96,400,000.00.)
THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS (the "Deed
of Trust"), made as of December 27, 1993, between J.C. NICHOLS COMPANY, a
Missouri corporation, having a post office address at 310 Ward Parkway, Kansas
City, Missouri 64112, as Trustor, MICHAEL G. O'FLAHERTY having a post office
address of 1201 Walnut Street, Kansas City, Missouri 64141-6251, as Trustee, and
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation, having its
principal place of business and post office address at 711 High Street, Des
Moines, Iowa 50392, as Beneficiary.
WITNESSETH:
THAT Trustor is justly indebted to Beneficiary for money borrowed in the
aggregate principal sum of SEVENTY MILLION AND 00/100 Dollars
($70,000,000,000.00), evidenced by the following two promissory notes of
Trustor:
A. Secured Promissory Note in the original principal amount of FORTY
MILLION and 00/100 Dollars ($40,000,000,000.00) ("Note A") of even
date herewith, made payable and delivered to Beneficiary, in which
said Note A Trustor promises to pay to Beneficiary the said principal
sum [or so much thereof as may be advanced from time to time by
Beneficiary,] together with interest at the rate, at the times, and in
installments as in the Note provided, until the entire principal and
accrued interest have been paid, but in any event, the principal
balance (if any) remaining due on Note A shall be due and payable on
December 15, 2013 ("Maturity Date"); and
B. Secured Promissory Note in the original principal amount of THIRTY
MILLION and 00/100 Dollars ($30,000,000.00) ("Note B") of even date
herewith, made payable and delivered to Beneficiary, in which said
Note B Trustor promises to pay to Beneficiary the said principal sum
[or so much thereof as may be advanced from
<PAGE>
time to time by Beneficiary,] together with interest at the rate, at
the times, and in installments as in Note B provided, until the entire
principal and accrued interest have been paid, but in any event, the
principal balance (if any) remaining due on Note B shall be due and
payable on December 15, 2013 ("Maturity Date"). Note A and Note B
shall sometimes be referred to herein collectively as the "Note."
This Deed of Trust secures all future advances and future obligations
constituting the indebtedness and obligations herein described. The total
amount of obligations and advances secured hereby may decrease or increase from
time to time, but as no time shall the total principal amount of obligations and
advances secured hereby, not including sums expended or incurred for the
reasonable protection of the lien and security interest hereby created in the
Premises (as hereinafter defined) or for other purposes specified in Section
443.005 of the Missouri Revised Statutes, exceed the sum of $96,400,000.00.
NOW, THEREFORE, to secure the payment of the said indebtedness in
accordance with the terms and conditions hereof and of the Note and the
performance of the covenants and agreements contained herein, and also to secure
the payment of any and all other indebtedness, direct or contingent, that may
now or hereafter become owing from Trustor to Beneficiary as otherwise more
fully provided for herein, and in consideration of Ten Dollars in hand paid,
receipt of which is hereby acknowledged, Trustor does by these presents GRANT,
BARGAIN and SELL, CONVEY AND CONFIRM unto Trustee, his successors and assigns
forever, that certain real estate and all of Trustor's estate, right, title and
interest therein, located in the County of Jackson, State of Missouri, more
particularly described in Exhibit A attached hereto and made a part hereof,
which real estate, together with the following described property, rights and
interests, is collectively referred to herein as the "Premises."
Together with Trustor's interest as lessor in and to all leases of the said
Premises, or any part thereof, heretofore or hereafter made and entered into by
Trustor during the life of this Deed of Trust or any extension or renewal
thereof and all rents, issues, proceeds and profits accruing or to accrue from
the Premises (which are pledged primarily and on a parity with the real estate
and not secondarily).
Together with all and singular the tenements, hereditaments, easements,
appurtenances, passages, waters, water courses, riparian rights, other rights,
liberties and privileges thereof or in any way now or hereafter appertaining to
the Premises, including homestead and any other claim at law or in equity as
well as any after-acquired title, franchise or license and the reversion and
reversions and remainder and remainders thereof.
Together with all right, title and interest of Trustor in any and all
buildings and improvements of every kind and description now or hereafter
erected or placed on the said real estate and all materials intended for
construction, reconstruction, alteration and repairs of such buildings and
improvements now or hereafter erected thereon, all of which materials shall be
deemed to be included within the Premises immediately upon the delivery thereof
to the Premises,
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<PAGE>
and all fixtures now or hereafter owned by Trustor and attached to or contained
in and used in connection with the Premises including, but not limited to, all
machinery, motors, elevators, fittings, radiators, awnings, shades, screens, and
all plumbing, heating, lighting, ventilating, refrigerating, incinerating, air
conditioning and sprinkler equipment and fixtures and appurtenances thereto; and
all items of furniture, furnishings, equipment and personal property owned by
Trustor used or useful in the operation of the Premises; and any and all general
intangibles, contract rights and accounts receivable in connection with the
Premises; and all renewals or replacements thereof or articles in substitution
therefor, whether or not the same are or shall be attached to said buildings or
improvements in any manner; provided, however, that the Premises shall not
include the personal property of Trustor located in Trustor's offices at 310
Ward Parkway, Kansas City, Missouri 64112, except for any such personal property
necessary to the continuing operation of the Premises; it being mutually agreed,
intended and declared that all the aforesaid property owned by Trustor and
placed by it on the real estate or used in connection with the operation or
maintenance of the Premises shall, so far as permitted by law, be deemed to form
a part and parcel of the real estate and for the purpose of this Deed of Trust
to be real estate and covered by this Deed of Trust, and this Deed of Trust is
hereby deemed to be, as well, a Security Agreement under the Uniform Commercial
Code for the purpose of creating hereby a security interest in the property
aforesaid, including "fixtures" (as such term is defined in the Uniform
Commercial Code) which Trustor as Debtor hereby grants to Trustee and
Beneficiary as Secured Part, and is also hereby deemed to be effective as a
financing statement filed as a fixture filing.
Together with all right, title and interest of Trustor, now or hereafter
acquired, in and to any and all strips and gores of land adjacent to and used in
connection with the Premises and all right, title and interest of Trustor, now
owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks
and alleys adjoining the Premises.
TO HAVE AND TO HOLD the same unto Trustee, Trustee's successors and
assigns, upon the trusts, covenants and agreements herein expressed.
Trustor represents that it is the absolute owner in fee simple of the
Premises described in Exhibit A, which Premises are free and clear of any liens
or encumbrances except as set out in Exhibit B attached hereto, except for
tenants currently in possession under leases of the Premises or any part
thereof, and except for taxes which are not yet due or delinquent. Trustor
shall forever warrant and defend the title to the Premises against all claims
and demands of all persons whomsoever and will on demand execute any additional
instrument which may be required to give Trustee a valid first lien on all of
the Premises, except as stated in Exhibit B.
Trustor further represents that to the best of its actual knowledge after
due inquiry and investigation: (i) the Premises is not subject to any casualty
damage in excess of $250,000.00 except as disclosed in the engineering report
regarding the Premises prepared by EAC Audit, Inc. and dated December 14, 1993;
(ii) except as disclosed in the environmental assessment of the Premises
prepared by Ramsay Schilling Consulting Group and dated November 30, 1993, there
3
<PAGE>
is no Hazardous Material (as hereinafter defined) on the Premises, nor has any
Hazardous Material been discharged from the Premises or penetrated any surface
or subsurface rivers or streams crossing or adjoining the Premises or the
aquifer underlying the Premises; (iii) Trustor has complied and caused the
Premises to comply with all statutes, laws, ordinances, rules and regulations of
all local, state or federal authorities having jurisdiction over the Premises or
its use relative to any Hazardous Material; and (iv) there is no Hazardous
Material on any other property presently owned or used by Trustor from which the
existence or discharge of Hazardous Material would result in any charge or lien
upon the Premises. Hazardous Material as used in this Deed of Trust means any
hazardous or toxic material, substance or waste which is defined by those or
similar terms or is regulated as such under any statute, law, ordinance, rule or
regulation of any local, state or federal authority having jurisdiction over the
Premises or its use, including but not limited to any material, substance or
waste which is: (a) defined as a hazardous substance under Section 311 of the
federal Water Pollution Control Act (33 U.S.C. Section 1317) as amended; (b)
defined as a hazardous waste under Section 1004 of the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et. seq.) as amended; or (c) defined as a
hazardous waste substance under section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act, (42 U.S.C. Section 9601 et. seq.) as
amended.
TRUSTOR COVENANTS AND AGREES AS FOLLOWS:
1. Trustor shall
(a) pay each item of indebtedness secured by this Deed of Trust when due
according to the terms hereof and of the Note;
(b) pay a late charge equal to two percent (2%) of any payment of
principal, interest or premium which is not paid on the due date
thereof to cover the expense involved in handling such late payment;
(c) pay on or before the due date thereof any indebtedness which may be
secured by a lien or charge on the Premises, and upon request of
Beneficiary exhibit satisfactory evidence of the discharge thereof;
(d) complete within a reasonable time the construction of any building now
or at any time in process of construction upon the real estate;
(e) make no material alteration to the Premises without the prior written
consent of Beneficiary, except such as are required by law or
ordinance, subject, however, to the terms of Section 20 hereinbelow;
(f) remove or demolish no building or other improvement at any time a part
of the Premises, subject, however, to the terms of Section 20
hereinbelow, and shall keep the Premises, including the buildings and
improvements, in good condition and
4
<PAGE>
repair, without waste, and free from mechanics' liens or other liens
or claims for liens or other liens or claims for liens and
encumbrances not expressly subordinated to the lien hereof;
(g) comply, and shall exercise its best efforts to cause each lessee or
other user of the Premises to comply, with all requirements of law and
ordinance, and with all rules and regulations, now or hereafter
enacted, by authorities having jurisdiction of the Premises and the
use thereof, all orders and directions of the National Fire Protection
Association or similar body, and all restrictions of record pertaining
to the Premises, including the building and improvements, and the use
thereof;
(h) cause or permit no change to be made in the general nature of the
occupancy of the Premises without Beneficiary's prior written consent;
(i) initiate or acquiesce in no zoning reclassification or material change
in zoning with respect to the Premises without Beneficiary's prior
written consent;
(j) make or permit no use of the Premises that could with the passage of
time result in the creation of any right of use, or any claim of
adverse possession or easement on, to or against any part of the
Premises in favor of any person or the public;
(k) subject to Section 5 hereinbelow, promptly repair, restore or rebuild
any buildings or improvements now or hereafter a part of the Premises
which may become damages or be destroyed by any cause whatsoever, so
that upon completion of the repair, restoration and rebuilding of the
building and improvements, there will be no liens of any nature
arising out of the construction and the Premises will be of
substantially the same character and will have a commercial value at
least as great as the commercial value thereof prior to the damage or
destruction;
(l) not, directly or indirectly, due to assignment of beneficial interest
under a trust, partnership interest in a partnership, or otherwise,
cause or permit any sale, transfer or conveyance of the Premises, or
any part thereof or interest therein, or create, suffer or permit any
encumbrance or lien on the Premises or any part thereof or interest
therein, other than the lien hereof, the leases of the Premises
assigned to Beneficiary and other exceptions expressly referred to
herein, it being understood and agreed that in agreeing to advance the
indebtedness evidenced by the Note Beneficiary has relied upon what it
perceived as the willingness and ability of Trustor to perform its
obligations hereunder, under the Note, and as lessor under leases of
the Premises (provided, however, that the transfer of stock in Trustor
shall not be deemed a violation of this Section 1(1)); Beneficiary may
consent to a sale, transfer, conveyance or encumbrance and expressly
waive this provision in writing to Trustor, provided, however, that
any such consent and waiver shall not constitute any consent or waiver
of this provision as to any sale,
5
<PAGE>
transfer, conveyance or encumbrance other than that for which the
consent and waiver was expressly granted; Beneficiary's ability to
consent to any sale, transfer conveyance or encumbrance and waive this
provision implies no standard of reasonableness in determining whether
or not such consent shall be granted and the same may be based upon
what Beneficiary solely deems to be in its best interest; without
limiting Beneficiary's right to withhold its consent and waiver
entirely, such consent and waiver may be conditioned upon an increase
in the rate of interest under the Note and the imposition of other
terms and conditions thereunder or hereunder; any sale, transfer,
conveyance or encumbrance made, created or permitted in violation of
this provision shall be null and void and in addition to the other
rights and remedies available to Beneficiary hereunder, Beneficiary
shall have the option of declaring the unpaid principal balance of the
Note, together with all accrued and unpaid interest, premium, if any
and all other sums and charges evidenced thereby or owing hereunder,
immediately due and payable;
(m) not cause or permit any Hazardous Material to exist on or discharge
from the Premises in any unlawful manner or amount, and promptly: (i)
pay any claim against Trustor or the Premises, (ii) remove any charge
or lien upon the Premises, and (iii) indemnify and hold Beneficiary
harmless from any and all loss or damage, resulting from any Hazardous
Material that exists on or is discharged from the Premises;
(n) not knowingly after due inquiry and investigation cause or permit any
Hazardous Material to exist on or discharge from any property owned or
used by Trustor which would result in any charge or lien upon the
Premises;
(o) notify Beneficiary of any Hazardous Material that exists on or is
discharged from the Premises in any unlawful manner or amount within
ten (10) days after Trustor first has knowledge of such existence or
discharge;
(p) deliver to Beneficiary within thirty (30) days after such coverage
becomes available at a reasonable cost from an ALTA member title
insurance company doing business in the state where the Premises is
located, a new title policy, endorsement or amendment in form and
substance acceptable to Beneficiary which provides Beneficiary with
affirmative coverage against loss of priority of the lien of this Deed
of Trust resulting from the existence of any Hazardous Material on the
Premises;
(q) if other than a natural person, to preserve and keep in full force and
effect its existence, franchises, rights and privileges under the laws
of the state of its formation and, if other than its state of
formation, the state where the Premises is located;
6
<PAGE>
(r) do all things necessary to preserve and keep in full force and effect
Beneficiary's title insurance coverage insuring the lien of this Deed
of Trust as a first and prior lien, subject only to the exceptions
stated in Exhibit B, including without limitation, delivering to
Beneficiary not less than thirty (30) days prior to the effective date
of any rate adjustment, modification or extension of the Note, any new
policy or endorsement which may be required to assure Beneficiary of
such continuing coverage;
(s) furnish to Beneficiary within one hundred twenty (120) days after the
end of each fiscal year of Trustor a detailed financial report in form
and substance comparable to financial reports of Trustor previously
provided by Trustor to Beneficiary covering the full and complete
operation of the Premises, and all parts thereof including without
limitation: (i) income and expense statements with a listing of sales
volumes attained by lessees of the Premises under percentage leases
for the immediately preceding year, and (ii) a report of the leasing
status of the Premises as of the end of such year, identifying the
lessee, square footage leased, rental amount, rental concessions
and/or rental deferments, if any, escalation rentals and occupancy and
expiration date under each lease of the Premises, which reports shall
be prepared by the treasurer of Trustor, or in the event there is no
treasurer of Trustor, the chief financial officer of Trustor;
(t) submit (i) within ninety (90) days of the end of each quarter
unaudited quarterly balance sheets, income statements, and statements
of cash flows for Trustor; (ii) within one hundred twenty (120) days
of year-end of each said fiscal year annual audited balance sheets,
income statements and statements of change for Trustor; and (iii)
within one hundred twenty (120) days of year-end a statement certified
by the chief financial officer of Trustor providing calculations that
Trustor is in compliance with the covenants in Section 1(u) below;
(u) maintain its ownership of real estate properties in the following
percentages of the investment portfolio of Trustor as of December 31,
1992:
- 66.6% of the total rentable square feet of real estate properties
improved with office buildings or retail centers, not including
the Premises;
- 60% of the total number of individual apartment units for real
estate properties improved with apartment projects or apartment
buildings; and
(v) in the event that Trustor desires to designate any company other than
Trustor, or any wholly owned or controlled subsidiary or affiliate of
Trustor, to manage or otherwise operate all or any other part of the
Premises, secure the prior written approval by Beneficiary of such
other company and the terms of the management agreement.
7
<PAGE>
2. Subject to the final sentence of this paragraph, Trustor shall pay when due
and before any penalty attaches or interest accrues all general taxes,
special taxes, assessments (including assessments for benefits from public
works or improvements whenever begun or completed), water charges, sewer
service charges, vault or space charges and all other like charges against
or affecting the Premises or against any property or equipment located on
the Premises, or which might become a lien on the Premises, and shall, upon
request of Beneficiary, within sixty (60) days following the last day on
which any such tax, assessment or charge may be paid without incurring any
penalty or interest for nonpayment thereof, furnish to Beneficiary a copy
of receipt of such payment. If any such tax, assessment or charge may
legally be paid in installments, Trustor may, at its option, pay such tax,
assessment or charge in installments.
To prevent default hereunder Truster shall pay in full, under protest
in the manner provided by law, any tax assessment or charge with
Trustor may desire to contest; provided, however, that
(a) if contest of any tax, assessment or charge may be made without the
payment thereof, and
(b) such contest shall have the effect of preventing the collection of the
tax, assessment or charge so contested and the sale or forfeiture of
the Premises or any part thereof or any interest therein to satisfy
the same,
Trustor may at its option and in its discretion and upon the giving of
written notice to Beneficiary of its intended action and upon the
furnishing to Beneficiary of such security or bond as Beneficiary may
require, contest any such tax, assessment or charge in good faith and
in the manner provided by law, except that such security or bond shall
not be required if Trustor pays such tax assessment or charge under
protest. All costs and expenses incidental to such contest shall be
paid by Trustor. In the event of a ruling or adjudication adverse to
Trustor, Trustor shall promptly pay such tax, assessment or charge.
Trustor shall indemnify and save harmless the Beneficiary from any
loss or damage arising from any such contest and shall, if necessary
to prevent sale, forfeiture or any other loss or damage to the
Premises or the Beneficiary, pay such tax, assessment or charge or
take whatever action is necessary to prevent any sale, forfeiture or
loss.
3. Trustor shall at all times keep all buildings and improvements which now
are or hereafter become a part of the Premises insured under an all "risk"
form of insurance policy containing both a replacement cost and an agreed
amount endorsement, or endorsements providing equivalent protection, as
determined by Beneficiary in its sole discretion (and against all other
hazards as reasonably may be required by Beneficiary, which may include,
without limitation, insurance against loss or damage by flood) and, if
requested
8
<PAGE>
by Beneficiary, shall procure and maintain in force boiler insurance (if
any building or improvement has a boiler) and rent insurance against loss
of rent due to fire or other casualties named in standard policies of
insurance against loss of rents for a period not exceeding twelve (12)
months. All insurance shall be in form, content and amounts reasonably
approved by Beneficiary and written by an insurance company or companies or
governmental agency or instrumentality with a Best's A+ VII rating,
provided, however, if the standards change respecting such rating,
Beneficiary may change the rating from time to time to one that is
substantially equivalent to the Best's A + VII on the date hereof. The
policies for such insurance shall have attached thereto standard mortgagee
clauses in favor of and permitting Beneficiary to collect any and all
proceeds payable under all such insurance. All such policies or
certificates thereof shall be delivered to and held by Beneficiary as
further security for the payment of the Note and other moneys herein
mentioned, with evidence of renewal coverage delivered to Beneficiary at
least thirty (30) days before the expiration date of any policy. Not less
frequently than once every three years, Trustor, at its expense, will
furnish Beneficiary with a letter from Trustor' insurance company or
companies to the effect that Trustor is currently carrying insurance on the
Premises in the amount of the full insurable replacement cost value of the
Premises. Trustor shall also carry public liability insurance protecting
Trustee and Beneficiary against liability for injuries to persons and
property occurring in, on or adjacent to the Premises, in forms, companies
and amounts reasonably satisfactory to Beneficiary. All policies
evidencing insurance required by this Section 3 shall contain a thirty (30)
day notice of cancellation clause in favor of Beneficiary. Trustor shall
not carry separate insurance, concurrent in kind or form and contributing
in the event of loss, with any insurance required herein.
4. Upon the occurrence of an Event of Default, and after request by
Beneficiary, Trustor shall deposit with and pay to Beneficiary, on each
payment date specified in the Note secured by this Deed of Trust, a sum
equivalent to: (1) the taxes and assessments assessed or levied against
and next due on the Premises divided by the number of payments that will
become due and payable under the Note before the date when such taxes and
assessments will become due and payable, PLUS (2) the premiums that will
next become due and payable for insurance required by this Deed of Trust to
be furnished by Trustor divided by the number of payments that will become
due and payable under the Note before the date when such premiums will
become due and payable. Beneficiary shall use such deposits to pay the
taxes, assessments and premiums when the same become due. Beneficiary shall
not be liable for interest on such deposits. Trustor shall procure and
deliver to Beneficiary, in advance, statements for such charges. If the
total payments made by Trustor under this section exceed the amount of
payments actually made by Beneficiary for taxes, assessments and insurance
premiums, such excess shall be credited by Beneficiary on subsequent
deposits to be made by Trustor. If, however, the deposits are insufficient
to pay the taxes, assessments and insurance premiums when the same shall be
due and payable, Trustor will pay to Beneficiary any amount necessary to
make up the deficiency, on or before the date when payment of such taxes,
assessments and insurance
9
<PAGE>
premiums shall be due. If at any time Trustor shall tender to Beneficiary,
in accordance with the provisions of the Note secured by this Deed of
Trust, full payment of the entire indebtedness represented thereby,
Beneficiary shall, in computing the amount of such indebtedness, credit to
the account of Trustor any balance remaining in the funds accumulated and
held by the Beneficiary under the provisions of this section. If there is
a default under any of the provisions of this Deed of Trust resulting in a
public sale of the Premises, or if Beneficiary otherwise acquires the
Premises after default, Beneficiary shall apply, at the time of
commencement of such proceedings, or at the time the Premises is otherwise
acquired, the balance then remaining in the funds accumulated under this
section as a credit on the interest accrued and unpaid and the balance to
the principal then remaining unpaid under the Note, it being agreed,
however, that this shall in no way constitute a cure of any defaults. The
enforceability of the covenants relating to taxes, assessments and
insurance premiums provided for in this Deed of Trust shall not be affected
except to the extent that said obligations have been actually met by
compliance with this section.
5. In the event of any damage to or destruction of any of the buildings or
improvements which are a part of the Premises:
(a) Trustor will immediately notify Beneficiary thereof in the manner
provided in this Deed of Trust for the giving of notices. Trustor
may, as long as no Event of Default exists, settle and adjust any
insurance claims of less than $250,000.00, and, in such case, the
proceeds shall be paid to Trustor; provided, however, that any
settlements or adjustments where the claim is $250,000.00 or more
shall require the written approval of Beneficiary not to be
unreasonably withheld, and, in such case, the proceeds shall be paid
to Beneficiary and Beneficiary is authorized to collect and to give
receipts therefor.
(b) Provided no Event of Default exists, the proceeds of insurance claims
of $250,000.00 or more, after deducting therefrom any expenses
incurred in the collection thereof, including reasonable attorneys'
fees and costs, but not including any internal administrative fees of
Beneficiary, shall be provided to Trustor. The proceeds of any
insurance claims hereunder shall be applied by Trustor to the cost of
rebuilding and restoring the buildings and improvements; provided,
however, that if an Event of Default exists or Trustor fails to
perform its obligation to rebuild and/or restore the buildings and
improvements hereunder, such proceeds may, at Beneficiary's election,
be applied in reduction of the indebtedness secured hereby or used by
Beneficiary in rebuilding or restoring the buildings and improvements.
Any excess proceeds remaining after said indebtedness is fully paid
shall be promptly remitted to Trustor.
(c) Regardless of the cause of the damage or destruction or the
availability or sufficiency of insurance proceeds until all
indebtedness secured hereby shall be
10
<PAGE>
fully paid, Trustor shall be obligated to repair, restore and rebuild
any buildings or improvements so damaged or destroyed. Repair and
restoration of the buildings and improvements shall be commenced
promptly after the occurrence of the loss and shall be prosecuted to
completion diligently, and the buildings and improvements shall be so
restored and rebuilt as to be of at least equal value and
substantially the same character as prior to such damage and
destruction. In the event the estimated costs of rebuilding and
restoration exceed $500,000.00, the drawings and specifications
pertaining to such rebuilding and restoration shall be subject to the
prior written approval of Beneficiary.
(d) In the event that Trustor is to be reimbursed out of the insurance
proceeds, such proceeds shall be made available from time to time upon
the furnishing to Beneficiary of satisfactory evidences of the
estimated cost of completion thereof and such architect's
certificates, waivers of lien, contractor's sworn statements, and
other evidence of cost and of payment and of the continued priority of
the lien hereof over any potential liens of mechanics and materialmen
as Beneficiary may require and approve. No payment made by
Beneficiary prior to the final completion of the work shall, together
with all payments theretofore made, exceed ninety-five percent (95%)
of the value of the work performed to the time of payment, and at all
times the undisbursed balance of said proceeds shall be at least
sufficient to pay for the cost of completion of the work free and
clear of liens. Any proceeds remaining after payment of the cost of
rebuilding and restoration shall, at the option of Beneficiary, either
be applied in reduction of the indebtedness secured hereby or paid to
Trustor; provided, however, that if no Event of Default has occurred
and Beneficiary has not otherwise accelerated the whole or any part of
the indebtedness secured hereby, any such reduction shall be without
premium.
(e) Should such damage or destruction occur after an Event of Default has
occurred, the proceeds of any such insurance policy or policies, if
not applied in rebuilding or restoration of the buildings or
improvements, may be applied by Beneficiary to any of the indebtedness
hereby secured, in such order and manner as the Beneficiary shall, in
the sole discretion, elect; any such application shall in no way
constitute a cure of any defaults. Following any foreclosure sale, or
other sale of the Premises by Beneficiary pursuant to the terms
hereof, Beneficiary is authorized without the consent of Trustor to
assign any and all insurance policies to the purchaser at the sale and
to take such other steps as Beneficiary may deem advisable to cause
the interests of such purchaser to be protected by any such insurance
policies.
6. Trustor hereby assigns, transfers and sets over to Beneficiary the entire
proceeds of any award or claim for damage to any of the Premises taken or
damaged under the power of
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<PAGE>
eminent domain or by condemnation. In the event of the commencement of any
eminent domain or condemnation proceeding affecting the Premises:
(a) Trustor shall notify Beneficiary thereof in the manner provided in
this Deed of Trust for the giving of notices. Both Beneficiary and
Trustor may participate in such proceeding, and Trustor shall deliver
to Beneficiary all documents requested by it to permit such
participation by Beneficiary. Trustor may, as long as no Event of
Default exists, settle any eminent domain or condemnation proceeding
affecting the Premises; provided, however, that any settlement where
the amount of the award is $250,000.00 or more shall require the
written approval of Beneficiary, not to be unreasonably withheld.
(b) Provided no Event of Default exists, such condemnation proceeds, after
deducting therefrom any expenses incurred in connection thereof, shall
be provided to Trustor and shall be applied by Trustor to the cost of
restoring and rebuilding the buildings and improvements in accordance
with plans and specification to be submitted to and approved by
Beneficiary; provided, however, that if an Event of Default exists or
if Trustor fails to perform its obligation to rebuild and/or restore
the buildings and improvements hereunder, such proceeds may, at
Beneficiary's election, be applied in reduction of the indebtedness
secured hereby or used by Beneficiary in rebuilding or restoring the
buildings and improvements.
(c) In the event that Trustor is to be reimbursed out of the condemnation
proceeds for the costs of restoring and rebuilding the affected part
of the Premises, then the proceeds of the award shall be paid out in
the same manner as provided in this Deed of Trust for the payment of
insurance proceeds in reimbursement of the costs of rebuilding and
restoration. If the amount of such award is insufficient to cover the
cost of restoring and rebuilding, Trustor shell pay such cost in
excess of the award before being entitled to reimbursement out of the
award. Any proceeds remaining after payment of cost of restoring and
rebuilding shall, at the option of Beneficiary, either be applied on
account of the indebtedness secured hereby or be paid to Trustor;
provided, however that if no Event of Default has occurred and
Beneficiary has not otherwise accelerated the whole or any part of the
indebtedness secured hereby, any such reduction shall be without
premium.
7. If by the laws of the United States of America or of any state of
governmental subdivision having jurisdiction of Trustor or of the Premises
or of the transaction evidenced by the Note and this Deed of Trust, any tax
or fee is due or becomes due in respect of the issuance of the Note hereby
secured or the making, recording and registration of this Deed of Trust,
Trustor covenants and agrees to pay such tax or fee in the manner required
by such law, and to hold harmless and indemnify Trustee and Beneficiary,
their successors and assigns, against any liability incurred by reason of
the imposition of any such tax or fee.
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<PAGE>
8. In the event of the enactment after the date hereof of any applicable law
deducting from the value of land for the purpose of taxation any lien
thereon, or imposing upon Trustee or Beneficiary the payment of the whole
or any part of the taxes or assessments or charges or liens herein required
to be paid by Trustor, or changing in any way the laws relating to the
taxation of deeds of trust or debts secured by deeds of trust or the
interest of Trustee or Beneficiary in the Premises, or the manner of
collection of taxes, so as to affect this Deed of Trust or the debt secured
hereby or the holder thereof, then and in any such event Trustor shall,
upon demand by the Beneficiary, pay such taxes or assessments or reimburse
Beneficiary therefore; PROVIDED, HOWEVER, that, if in the opinion of
counsel of Beneficiary (a) it is unlawful to require Trustor to make such
payment, or (b) the making of such payment might be construed as imposing a
rate of interest beyond the maximum permitted by law, then and in such
event Beneficiary may elect to declare all of the indebtedness secured
hereby to be and become due and payable nine (9) months from the giving of
written notice of such election to Trustor, such payment to be without
premium.
9. Upon the occurrence of any Event of Default under this Deed of Trust,
Beneficiary may, but need not, make any payment or perform any act herein
required of Trustor, in any form and manner deemed expedient and may, but
need not, make full or partial payments of principal or interest on prior
encumbrances, if any, and purchase, discharge, compromise or settle any tax
lien or other prior lien or title or claim thereof, or redeem from any tax
sale or forfeiture affecting said Premises, or contest any tax or
assessment. All moneys paid for any of the purposes herein authorized and
all reasonable expenses paid or incurred in connection therewith, including
reasonable attorneys' fees and costs and reasonable attorneys' fees and
costs on appeal, and any other money advanced by Beneficiary to protect the
Premises and the lien hereof, shall be so much additional indebtedness
secured hereby and shall become immediately due and payable without notice
and with interest thereon at the Default Rate (as hereinafter defined) from
the date of expenditure or advance until paid.
In making any payment hereby authorized relating to taxes or assessments or
for the purchase, discharge, compromise or settlement or any prior lien,
Beneficiary may make such payment according to any bill, statement or
estimate secured from the appropriate public office without inquiry into
the accuracy thereof or into the validity of any tax, assessment, sale
forfeiture, tax lien or title or claim thereof or without inquiry as to the
validity or amount of any claim for lien which may be asserted.
10. If one or more of the following events (herein called "Events of Default")
shall have occurred:
(a) default shall be made in the payment of any principal, interest or
premium when due under either Note A or Note B or this Deed of Trust;
or
13
<PAGE>
(b) Trustor shall be dissolved, or a decree or order for relief shall be
entered by a court having jurisdiction in the Premises in respect of
Trustor in a voluntary or involuntary case under the Federal
Bankruptcy Code as now or hereafter constituted, or Trustor shall file
a voluntary petition in bankruptcy or for reorganization or an
arrangement or any composition, readjustment, liquidation, dissolution
or similar relief pursuant to any similar present or future state or
federal bankruptcy law, or shall be adjudicated a bankrupt or become
insolvent, or shall commit any act or bankruptcy as defined in such
law, or shall take any action in furtherance of the foregoing; or
(c) a petition or answer shall be filed proposing the adjudication of
Trustor as a bankrupt or its reorganization or arrangement, or any
composition, readjustment, liquidation, dissolution or similar relief
with respect to it pursuant to any present or future federal or state
bankruptcy or similar law, and Trustor shall consent to the filing
thereof, or such petition or answer shall not be discharged within
ninety (90) days after the filing thereof; or
(d) by the order of a court of competent jurisdiction, a receiver,
trustee, custodian or liquidator of the Premises or any part thereof
shall be appointed and shall not be discharged or dismissed within
ninety (90) days after such appointment, or if Trustor shall consent
to or acquiesce in such appointment; or
(e) default shall be made in the due observance or performance of any
other covenant, condition or agreement of the Trustor contained herein
or in the Note or in any other instrument further securing the Note,
and such default shall have continued for thirty (30) days after
notice specifying such default is given by Beneficiary to Trustor; or
(f) any representation or warranty made by Trustor herein or in the Note
or in any instrument further securing the Note shall prove to be
untrue or inaccurate in any material respect;
then, in each and every such case, the whole of said principal sum hereby
secured shall, at the option of the Beneficiary and without further notice
to Trustor, become immediately due and payable together with accrued
interest thereon and a Make Whole Premium calculated in accordance with the
provisions hereof, and whether or not Beneficiary has exercised said
option, interest shall accrue on the entire principal balance and any
interest or premium then due, at the Default Rate until fully paid or if
Beneficiary has not exercised said option, for the duration of any Event of
Default. If any Event of Default under "(e)" above shall be of such nature
that it cannot be cured or remedied within thirty (30) days, Trustor shall
be entitled to a reasonable period of time to cure or remedy such Event of
Default, provided Trustor commences the cure or remedy thereof within the
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<PAGE>
thirty (30) day period following the giving of notice and thereafter
proceeds with diligence to complete such cure or remedy.
11. Trustor agrees that if Beneficiary accelerates the principal sum hereby
secured, or applies any proceeds as if such application had been made as a
result of such acceleration, pursuant to the provisions hereof, or pursuant
to the Note or any other documents or instruments that evidence, secure or
otherwise related to the indebtedness thereunder, Trustor waives any right
to prepay the principal sum hereby secured in whole or in part without
premium and agrees to pay, as liquidated damages and not as a penalty, a
"Make Whole Premium"; provided, however, that the Make Whole Premium shall
not be payable if the Beneficiary (i) accelerates the Note upon the
Beneficiary's failure to receive Obligor's acceptance of the adjusted
interest rate under Section 2.B. or Section 2.E. or either Note A or Note
B, (ii) applies any insurance proceeds to reduce the indebtedness
thereunder pursuant to Section 5 of this Deed of Trust, or (iii) applies
any proceeds of an award to reduce the indebtedness thereunder pursuant to
Section 5 of this Deed of Trust, or (iii) applies any proceeds of an award
to reduce the indebtedness thereunder pursuant to Section 6 of this Deed of
Trust. The Make Whole Premium shall be the greater of one percent (1%) of
the principal amount to be prepaid or a premium calculated as follows:
(a) Determine the "Reinvestment Yield." The Reinvestment Yield will be
equal to the yield on the respective U.S. Treasury Issue, Bond, Note
or Bill for the appropriate period as indicated on the "Prepayment
Period Table" at the end of this Section 11 published two weeks prior
to the date of prepayment and converted to an equivalent monthly
compounded nominal yield. Beneficiary will, at any time a calculation
is necessary, choose that U.S. Treasury Issue, Bond, Note or Bill
which Beneficiary reasonably deems to be similar to the
characteristics of the indebtedness being paid (i.e., rate, maturity,
remaining time to maturity, yield).
(b) Calculate the "Present Value of the Mortgage," The Present Value of
the Mortgage is the present value of the payments to be made in
accordance with the Note (all installment payments and any remaining
payment due up to and including the Applicable Rate Index Period Date)
discounted at the Reinvestment Yield for the number of months
remaining from the date of the Applicable Rate Index Period Date (as
said term is defined in Note A and Note B).
(c) Subtract the amount of the prepaid proceeds from the Present Value of
the Mortgage as of the date of prepayment. Any resulting positive
differential shall be the premium.
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<PAGE>
- --------------------------------------------------------------------------------
PREPAYMENT PERIOD TABLE
- --------------------------------------------------------------------------------
U.S. TREASURY ISSUE PREPAYMENT PERIOD
- --------------------------------------------------------------------------------
* Commencing on the Continuing to the date on which
date of funding the 120th payment is due
- --------------------------------------------------------------------------------
* Commencing on the Continuing through the date on
date the 120th which the 180th payment is due
payment is due if the Five Year Adjusted Rate
(as defined in the Note) is in
effect
- --------------------------------------------------------------------------------
* Commencing on the Continuing through maturity if
date the 120th the Ten Year Adjusted Rate (as
payment is due defined in the Note) is in
effect
- --------------------------------------------------------------------------------
* Commencing on the Continuing through maturity if
date the 180th the Second Five Year Adjusted
payment is due Rate (as defined in the Note)
is in effect
- --------------------------------------------------------------------------------
* This will be determined pursuant to the last sentence of Section 11(a)
hereof.
12. Upon the occurrence of any Event of Default, Beneficiary shall have the
right to cause the Premises or any part thereof to be sold in order to
accomplish the object of these trusts and upon demand by Beneficiary,
Trustee, without demand on Trustor, shall sell the Premises, or such part
thereof as Trustee in its sole discretion may deem necessary to accomplish
the objects of these trusts, at public vendue, to the highest bidder, at
the customary place in the country in which the Premises is located, for
cash, first giving the public notice required by law of the time, terms and
place of sale, and of the property to be sold.
Trustee may postpone such sale from time to time in such manner as its
provided for by law. Beneficiary or any holder or holders of said Note or
their agents may bid and purchase at such sale. Trustee may establish as
one of the conditions of such sale that all bids and payments for said
Premises be made in cash.
Beneficiary shall have the option to direct the Trustee to proceed with
foreclosure or sale under the power of sale contained in this Deed of Trust
in satisfaction of any part of the indebtedness and obligations secured
hereby without declaring the whole of said indebtedness and obligations as
immediately matured, and such foreclosure or sale may be made subject to
the unmatured part of the indebtedness and obligations secured hereby, and
it is agreed that such foreclosure of sale, if so made, shall not in any
manner affect the unmatured part of the indebtedness and obligations
secured hereby, but as to such
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<PAGE>
unmatured part, this Deed of Trust, as well as the other documents an
instruments evidencing, securing or otherwise relating to the Note, shall
remain in full force and effect just as though no foreclosure or sale had
been made. Several foreclosures or sales may be made without exhausting
the right of foreclosure or power of sale for any unmatured part of the
indebtedness and obligations secured hereby, it being the purpose to
provide for a foreclosure or sale of the security of this Deed of Trust for
any matured portion of the indebtedness and obligations secured hereby
without exhausting the power of foreclosure or power of sale respecting the
balance of the Premises for any other part of the indebtedness and
obligations secured hereby.
Until a sale shall be held hereunder, Trustee hereby lets the Premises to
Trustor, upon the following terms and conditions, to-wit: Trustor, and
every and all persons claiming or possessing the Premises, or any part
thereof, by, through, or under Trustor, shall or will pay rent therefor
during said term at the rate of one cent ($.01) per month, payable monthly
upon demand and shall and will surrender peaceable possession of the
Premises, and any and every part thereof, to Trustee, its successors,
assignees, or purchasers thereof, without notice or demand therefor, upon
the occurrence of any Event of Default.
Notwithstanding anything herein to the contrary, Beneficiary shall not
accelerate any of the indebtedness evidenced by either Note A or Note B
except by accelerating the entire indebtedness evidenced by the Note.
13. Upon such sale, Trustee shall make, execute, and after due payment is made,
deliver to the purchaser or purchasers a deed or deeds for the Premises or
part thereof sold and shall apply the proceeds of the sale, first, to all
of the expenses of such sale including the reasonable expenses of this
trust or the Trustee and the reasonable fees and costs of any attorneys for
this trust, the Trustee or Beneficiary, all of which shall accrue and
become due from and after any Event of Default, together with any sums
which Trustee or Beneficiary shall have paid for procuring any abstract,
certificate or report of title to the Premises and, second, to all sums or
amounts due under said Note or agreed or provided to be paid by Trustor
herein or in any other of the Loan Documents as herein defined. The
remainder of such proceeds, if any, shall be paid to such parties as are
entitled thereto by law.
14. In the event of a sale of the Premises or any part thereof and the
execution of a deed or deeds therefor under these trusts, any recital
therein of the occurrence of an Event of Default or of the giving or
recording of any notice or demand by Trustee or Beneficiary regarding such
sale shall be conclusive proof thereof, and the receipt of the purchase
money recited therein shall fully discharge the purchaser from any
obligation for the proper application of the proceeds of sale in accordance
with these trusts.
15. During the continuance of any Event of Default, Trustor shall forthwith
upon demand of Trustee or Beneficiary surrender to Beneficiary possession
of the Premises or any part
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thereof, and Beneficiary shall be entitled to take actual possession of the
Premises or any part thereof personally or by its agents or attorneys, as
for condition broken, and Beneficiary in its discretion may, with or
without force and with or without process of law, enter upon and take and
maintain possession of all or any part of the Premises together with all
documents, books, records, papers and accounts of the Trustor or the then
owner of the Premises relating thereto, and may exclude Trustor, its agents
or assigns wholly therefrom, and may as attorney-in-fact or agent of the
Trustor, or in its own name as Beneficiary and under the powers herein
granted:
(a) hold, operate, manage or control the Premises, or said part thereof,
and conduct the business, if any, thereof, either personally or by its
agents, and with full power to use such measures, legal or equitable,
as in its discretion it deems proper or necessary to enforce the
payment or security of the income, rents, issues and profits of the
Premises, or said part thereof, including actions for the recovery of
rent, actions in forcible detainer and actions in distress for rents,
hereby granting full power and authority to exercise each and every of
the rights, privileges and powers herein granted at any and all times
hereafter, without notice to Trustor;
(b) cancel or terminate any lease or sublease for any cause or on any
ground which would entitle Trustor to cancel the same;
(c) elect to cancel any lease or sublease made subsequent to this Deed of
Trust unless this Deed of Trust has specifically been made subordinate
to such lease or sublease or subordinated to the lien hereof;
(d) extend or modify any then existing leases and make new leases, which
extensions, modifications or new leases may provide for terms to
expire, or for options to lessees to extend or renew terms to expire,
beyond the maturity date of the Note and the issuance of a deed or
deeds to a purchaser or purchasers at a foreclosure sale, it being
understood and agreed that any such leases, and the options or other
such provisions to be contained therein, shall be binding upon Trustor
and all persons whose interests in the Premises, or said part thereof,
are subject to the lien hereof and shall be binding also upon the
purchaser or purchasers at any foreclosure sale, notwithstanding any
redemption from sale, discharge of the indebtedness secured hereby,
satisfaction of any foreclosure decree, or issuance of any certificate
of sale or deed to any purchaser;
(e) make all necessary or proper repairs, decorating, renewals,
replacements, alterations, additions, betterments and improvements to
the Premises, or said part thereof, as it may deem judicious, insure
and reinsure the same and all risks incidental to Beneficiary's
possession, operation and management thereof, and receive all income,
rents, issues and profits.
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Neither Trustee nor Beneficiary shall be obligated to perform or discharge,
nor does either hereby undertake to perform or discharge, any obligation,
duty or liability under any lease, and the Trustor shall and does hereby
agree to indemnify and to hold Trustee and Beneficiary harmless of and from
all liability, loss or damage which either might incur under said leases or
under or by reason of the assignment thereof, and of and from any and all
claims or demands whatsoever which may be asserted against either of them
by reason of any alleged obligations or undertakings on the part of either
of them to perform or discharge any of the terms, covenants or agreements
contained in said leases. Should Trustee or Beneficiary incur any such
liability, loss or damage under any of said leases, or under or by reason
of the assignment thereof, or in the defense of any claims or demands, the
amount thereof, including costs, expenses and reasonable attorneys' fees
and costs, including reasonable attorneys' fees and costs on appeal, shall
be secured hereby and Trustor shall reimburse Trustee or Beneficiary
therefor immediately upon demand, together with interest at the Default
Rate from the date of payment by Trustee or Beneficiary to the date of
reimbursement.
16. Trustee and Beneficiary in the exercise of the rights and powers
hereinabove conferred upon them shall have the full power to use and apply
the avails, rents, issues and profits of the Premises to the payment of or
on account of the following, in such order as beneficiary may determine:
(a) to the payment of the expenses of operating the Premises, including
cost of management and leasing thereof (which shall include reasonable
compensation to Trustee, Beneficiary and their respective agent or
agents if management is delegated to an agent or agents, and shall
also include lease commissions and other compensation and expenses of
seeking and procuring tenants and entering into leases), established
claims for damages, if any, and premiums on insurance as hereinabove
authorized;
(b) to the payment of taxes and special assessments now due on which may
hereafter become due on the Premises;
(c) to the payment of all repairs, decorating, renewals, replacements,
alterations, additions, betterments and improvements of the Premises
and of placing the Premises in such condition as will in the judgment
of Beneficiary make it readily rentable;
(d) to the payment of any indebtedness secured hereby or any deficiency
which may result from any foreclosure sale hereunder.
17. A. During the continuance of any Monetary Event of Default (as herein
defined) under this Deed of Trust, Beneficiary may apply to any court
having jurisdiction of the Premises for the appointment of a receiver
of the Premises or any part thereof and
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of all rents, incomes, profits, issues and revenues thereof, from
whatever source derived; and thereupon it is hereby expressly
covenanted and agreed that the court shall forthwith appoint such
receiver with the usual powers and duties of receivers in like cases;
and said appointment shall be made by the court EX PARTE as a matter
of strict right to Beneficiary, and without reference to the adequacy
or inadequacy of the value of the Premises, or said part thereof, or
to the solvency or insolvency of Trustor or any party defendant to
such suit. Trustor hereby specifically waives the right to object to
the appointment of a receiver as aforesaid; provided, however, that
this waiver shall not be effective if, but only if, Trustor deposits
the Fund in accordance with Section 17.B. hereof. Trustor further
hereby expressly consents that such appointment shall be made EX PARTE
and without notice to Trustor as an admitted equity and as a matter of
absolute right to Beneficiary. In order to maintain and preserve the
Premises, or said part thereof, and to prevent waste and impairment of
its security, Beneficiary may, at its option, advance monies to the
appointed receiver and all such sums advanced shall become secured
obligations and shall bear interest from the date of such advance at
the Default Rate. To the extent permitted by applicable law,
Beneficiary or any holder of note A or Note B may be appointed as such
receiver. The receiver shall have power to collect the rents, issues
and profits of the Premises, or said part thereof, during the pendency
of any foreclosure proceedings and, in case of a sale, during the full
statutory period of any redemption period as well as during any
further times when Trustor, except for the intervention of such
receiver, would be entitled to collect such rents, issues and profits.
In addition, the receiver shall have all other powers which shall be
necessary or are usual in such cases for the protection, possession,
control, management and operation of the Premises, or said part
thereof, during the whole of said period. The court from time to time
may authorize the receiver to apply the net income in his hands in
payment in full or in part of:
(i) the indebtedness secured hereby, or any part thereof, or any tax,
special assessment or other lien which may be or become superior
to the lien hereof or of such decree, provided such application
is made prior to foreclosure sale; and
(ii) any deficiency.
B. The waiver by Trustor of its right to object to the appointment of a
receiver as set forth in Section 17.A., above shall not be binding on
Trustor if, by the close of business on the next business day after
Beneficiary files its said application for appointment of a receiver,
Trustor deposits in an account approved by the Court to which said
application is made a sum equal to the principal and interest payments
that will become due on both Note A and Note B for the next two (2)
payments due thereunder (said sum referred to herein as the "Fund").
If Beneficiary prevails in its application for the receiver, or in
otherwise establishing
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its right to rents, incomes, profits and issues, then the Fund,
together with any interest earned thereon, shall be paid to, and be
the absolute property of Beneficiary. However, if Beneficiary does
not so prevail, then the Fund, together with any interest thereon,
shall be paid to and be the property of Trustor. Beneficiary shall,
notwithstanding the depositing of the Fund by Trustor or its payment
pursuant to the above terms (whether to Trustor or Beneficiary), keep,
possess and retain each and all of its rights and remedies hereunder
and under any of the Loan Documents and such depositing or payment
shall not constitute or be deemed to constitute a waiver or release
thereof or a waiver, release or rescission of any acceleration of Note
A and Note B. Beneficiary shall be considered to have prevailed or
not prevailed upon (i) the entry of a final judgment and (ii) the time
for appeal from such final judgment shall have expired (which shall
be deemed to be 30 days from the entry of any final judgment), or, if
any appeal is taken, the expiration of 5 days after such appeal shall
have been finally determined by the highest court before which
appellate review is sought (and the final judgment being affirmed
without material modification) and without being subject to further
appeal or review. A Monetary Event of Default shall be an Event of
Default as described in Section 10(a) hereof or any other Event of
Default respecting the payment of money.
18. A. Trustor agrees that all reasonable costs, charges and expenses,
including reasonable attorneys' fees and costs, incurred or expended
by Trustee or Beneficiary arising out of or in connection with any
action, proceeding or hearing, legal, equitable or quasi-legal,
including the preparation therefor and any appeal therefrom, in any
way affecting or pertaining to this Deed of Trust, the Note or the
Premises, shall be promptly paid by Trustor. All such sums not
promptly paid by Trustor shall be added to the indebtedness secured
hereby and shall bear interest at the Default Rate from the date of
such advance and shall be due and payable on demand.
B. Trustor hereby agrees that upon the occurrence of an Event of Default
and the acceleration of the principal sum secured hereby, to the full
extent that such rights can be lawfully waived, Trustor hereby waives
and agrees not to insist upon/plead, or in any manner take advantage
of, any stay, extension, homestead, marshaling or moratorium law or
any law providing for the valuation or appraisement of all or any part
of the Premises prior to any sale or sales thereof under any provision
of this Deed of Trust or before or after any decree, judgment or order
of any court of confirmation thereof, or claim or exercise any right
to redeem all or any part of the Premises so sold and hereby expressly
waives to the full extent permitted by applicable law on behalf of
itself and each and every person or entity acquiring any right, title
or interests in or to all or any part of the Premises, all benefit and
advantage of any such laws which would otherwise be available to
Trustor or any such person or entity, and agrees that neither Trustor
nor any such person or entity will invoke or utilize any such law to
otherwise hinder, delay or impede the
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exercise of any remedy granted or delegated to Beneficiary herein but
will permit the exercise of such remedy as though any such laws had
not been enacted. Trustor hereby further expressly waives to the full
extent permitted by applicable law on behalf of itself and each and
every person or entity acquiring any right, title or interest in or to
all or any part of the Premises any and all rights of redemption from
any sale or any order or decree or foreclosure obtained pursuant to
provisions of this Deed of Trust.
19. Trustor hereby assigns to Beneficiary the rents, issues, profits,
royalties, and payments payable under any lease of the Premises, or portion
thereof, including any oil, gas or mineral lease, or any installments of
money payable pursuant to any agreement for any sale of the Premises or any
part thereof. Upon the occurrence of any Event of Default, Beneficiary,
without regard to the adequacy of any security for the indebtedness hereby
secured shall be entitled to (a) collect such rents, issues, profits,
royalties, payments and installments of money and apply the same as more
particularly set forth in this section, all without taking possession of
the Premises, or (b) enter and take possession of the Premises or any part
thereof, in person, by agent, or by a receiver to be appointed by the court
and to sue for or otherwise collect such rents, issues, profits, royalties,
payment and installments of money. Beneficiary may apply any such rents,
issues, profits, royalties, payments and installments of money so
collected, less costs and expenses of operation and collection, including
reasonable attorneys' fees and costs and reasonable attorneys' fees and
costs on appeal, upon any indebtedness secured hereby, in such order as
Beneficiary may determine, and, if such costs and expenses and reasonable
attorneys' fees and costs shall exceed the amount collected, the excess
shall be immediately due and payable. The collection of such rents,
issues, profits, royalties, payments and installments of money and the
application thereof as aforesaid shall not cure or waive any Event of
Default or notice of default hereunder or invalidate any act done pursuant
to such notice, except to the extent any such Event of Default fully is
cured. Failure or discontinuance of Beneficiary at any time, or from time
to time, to collect any such moneys shall not impair in any manner the
subsequent enforcement by Beneficiary of the right, power and authority
herein conferred on Beneficiary. Nothing contained herein, including the
exercise of any right, power or authority herein granted to Beneficiary,
shall be, or be construed to be, an affirmation by Beneficiary of any
tenancy, lease or option, or an assumption of liability under, or the
subordination of the lien or charge of this Deed of Trust to any such
tenancy, lease or option. Trustor hereby agrees that, in the event
Beneficiary exercises its rights as in this section provided, Trustor
waives any right to compensation for the use of Trustor's furniture,
furnishings or equipment in any part of the Premises for the period such
assignment of rents or receivership is in effect, it being understood that
the rents, issues, profits, royalties, payments and installments of money
derived from the use of any such items shall be applied to Trustor's
obligations hereunder as above provided.
20. A. Trustor has executed and delivered that certain Assignment of Leases
and Rents of even date herewith assigning to Beneficiary the interest
of Trustor as lessor under
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the existing leases of the Premises, as well as all other leases which
may hereafter be made in respect of the Premises, and the rents and
other income arising thereunder and from the use of the Premises.
Said Assignment of Leases and Rents grants to Beneficiary specific
rights and remedies in respect of said leases and the collection of
rents and other income thereunder and from the use of the Premises,
and such rights and remedies so granted shall be cumulative of those
granted herein.
B. Trustor shall keep and perform all terms, conditions and covenants
required to be performed by it as lessor under the aforesaid leases;
shall promptly advise Beneficiary in writing of any claim of default
by Trustor made by a lessee under any such lease or of any default
thereunder by a lessee; and shall promptly provide Beneficiary with a
copy of any notice of default or other notice served upon Trustor by
any such lessee. Subject to Section 20.C. hereof, Trustor will not
cancel, modify or alter, or accept the surrender of, any existing or
future lease of the Premises or any part thereof without first
obtaining written consent of Beneficiary.
C. Trustor may enter into leases of the Premises subsequent to the date
hereof and may cancel, modify, alter or accept the surrender of such
leases, or make tenant improvements and alterations in connection with
said leases, provided Trustor does so consistently with good business
practices in the normal course of business and sound, prudent real
estate management practices. Trustor shall give Beneficiary notice of
any lease entered into, canceled, modified, altered or surrendered
pursuant to this section, or of any tenant improvements or alterations
made hereunder, together with a complete copy of such lease, or such
cancellation, modification or alteration or any documentation related
to such improvements and alterations, including without limitation any
drawings and plans, not later than ten (10) days after the execution
or approval thereof. If Beneficiary determines, in its sole
discretion, that Trustor, in taking any action in connection with any
lease pursuant to this section, is not doing so consistently with good
business practices in the normal course of business, or sound, prudent
real estate management practices, Beneficiary may revoke its pre-
approval hereunder, and, thereafter, Trustor shall be required to
obtain Beneficiary's prior written consent before entering into any
lease of the Premises, or any cancellation, modification or alteration
thereof, or accepting the surrender of any lease, or making any tenant
improvements or alterations.
D. With respect to any and all leases and tenancies of the Premises, or
any part thereof, entered into subsequent to the date hereof,
Beneficiary shall have the right, at its election made from time to
time,
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(i) to require that Trustor executor and secure execution by tenant
and, if Beneficiary requires, record among the land records of
the jurisdiction where this Deed of Trust is recorded,
subordination statements with respect to such of said leases as
Beneficiary may reasonably designate, whereby the leases so
designated by Beneficiary will be made superior to the lien of
this Deed of Trust; from and after the recordation of such
subordination statements, the leases therein referred to shall be
superior to the lien of this Deed of Trust and shall not be
affected by any foreclosure hereof; all future leases and
tenancies shall contain a provision to the effect that the tenant
or other party recognizes the right of the Beneficiary and
Trustee to effect such subordination of this Deed of Trust and
consents thereto; or
(ii) to require that Trustor and any tenant under any lease entered
into subsequent to the date hereof which is approved by
Beneficiary or deemed approved by Beneficiary pursuant to the
provisions set forth above to execute in triplicate and in
recordable form a subordination, non- disturbance and attornment
agreement ("SNDA") on the Beneficiary's customary form at the
time of the execution of any such lease; the partially executed
SNDAs shall be submitted to Beneficiary for execution and
provided such lease has been approved by Beneficiary or deemed
approved as aforesaid, Beneficiary agrees to execute and deliver
to Trustor duplicate originals thereof, one for retention by
Trustor and one for delivery to the tenant.
E. The Trustor will make no assignment of any such lease or of any rent
payable under any lease or tenancy of the Premises, or any part
thereof, without the prior written consent of Beneficiary and unless
such assignment shall expressly recognize the priority of the
assignment of leases and rents made in this Deed of Trust and the
Assignment of Leases and Rents of even date herewith additionally
securing the repayment of the indebtedness:
F. If at the time of the execution and delivery hereof, Trustor has not
delivered to beneficiary all of the required estoppel certificates
and/or subordination, non- disturbance and attornment agreements,
Trustor shall exercise its best, reasonable efforts to secure the same
and deliver them to Beneficiary as soon as practicable.
21. A. All rights and remedies granted to Trustee or Beneficiary herein or in
the Note or in any other of the Loan Documents ("Loan Documents" being
this Deed of Trust, Note A, Note B and any and all other instruments
evidencing, securing or otherwise relating to the indebtedness secured
hereby) shall be in addition to and not in limitation of any rights
and remedies to which it is entitled in equity, at law or by statute
(including but not limited to the right to judicial foreclosure), and
the invalidity of any right or remedy herein provided by reason of its
conflict with
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applicable law or statute shall not affect any other valid right or
remedy afforded to Trustee or Beneficiary. No waiver of any Event of
Default or of any default in the performance of any covenant contained
in the Note or any other Loan Documents shall at any time thereafter
be held to be a waiver of any rights of the Trustee or Beneficiary
hereunder, nor shall any waiver of a prior Event of Default or default
operate to waive any subsequent Event of Default or default. All
remedies provided for herein, in the Note and in any other Loan
Documents are cumulative and may, at the election of Beneficiary, be
exercised alternatively, successively, or concurrently. No act of
Trustee or Beneficiary shall be construed as an election to proceed
under any one provision herein to the exclusion of any other provision
or to proceed against one portion of the Premises to the exclusion of
any other portion.
B. This Deed of Trust is upon the condition that all covenants and
agreements of Trustor herein shall be fully or timely performed, time
being of the essence under this Deed of Trust and that no breach of
any such condition or agreement shall be permitted, for any breach of
which this Deed of Trust shall be subject to foreclosure as provided
for herein or otherwise by law.
22. By accepting payment of any sum secured hereby after its due date,
Beneficiary does not waive its right either to require prompt payment when
due of all other sums or installments so secured or to declare a default
for failure to pay such other sums or installments. The acceptance by
Beneficiary after acceleration of any sums shall not be considered as a
cure of any default.
23. Notwithstanding anything herein or in the Note to the contrary, no
provision contained herein or in the Note which purports to obligate
Trustor to pay any amount of interest or any fees, costs or expenses which
are in excess of the maximum permitted by applicable law, shall be
effective to the extent that it calls for the payment of any interest or
other sums in excess of such maximum. Any such excess shall, at the option
of the Beneficiary, either be paid to Trustor or be credited to principal
on the Note without premium.
24. In the event one or more provisions of this Deed of Trust or of the Note or
in any other of the Loan Documents shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Deed
of Trust shall be construed as if any such provision had never been
contained herein.
25. If the payment of the indebtedness secured hereby or of any part thereof
shall be extended or varied, or if any part of the security be released,
all persons now or at any time hereafter liable therefor, or interested in
said Premises, shall be held to assent to such extension, variation or
release, and their liability and the lien and all provisions hereof
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shall continue in full force, the right or recourse against all such
persons being expressly reserved by Beneficiary notwithstanding such
variation or release.
26. Upon payment in full of the indebtedness secured hereby and the performance
by Trustor of all of the obligations imposed on Trustor herein and in both
Note A and Note B and in the other Loan Documents, Trustee shall release
this Deed of Trust and the lien hereof by proper instrument executed in
recordable form.
27. If no Event of Default has occurred and is continuing under this Deed of
Trust, the Trustor shall have the privilege of making prepayments on the
principal of the Note (in addition to the required payments) if and only to
the extent and upon the terms and conditions, if any, expressly set forth
in the Note. If not expressly set forth, the Note is not subject to such
prepayment.
28. Beneficiary, its agents, employees or assigns shall have the right to
inspect the Premises at all reasonable terms, and except in cases of
emergency upon reasonable notice to Trustor, and access thereto shall be
permitted for that purpose.
29. Within fifteen (15) days after any written request by Beneficiary, Trustor
shall certify, by a written statement duly acknowledged, the amount of
principal and interest then owing on the Note and whether any offsets or
defenses against the indebtedness secured hereby are known.
30. Trustor, for itself and its respective officers and directors, affiliates,
its successors and assigns represents and warrants that: (i) it has
thoroughly read and reviewed the terms and provisions are clearly
understood and have been fully and unconditionally consented to by it; (ii)
it has had a full and complete opportunity for advice of counsel of its own
selection in regard to understanding the terms, meaning and effect of this
Deed of Trust and any and all other Loan Documents; (iii) it has freely and
voluntarily executed this Deed of Trust and any and all other Loan
Documents, with full knowledge of the consequences thereof and without
duress; (iv it has not relief on representations, either written or oral,
express or implied made to it by Beneficiary or an attorney or agent acting
on behalf of Beneficiary, except as expressly set forth in the Deed of
Trust and related documents; (v) it is a commercially sophisticated
borrower with substantial experience in dealing in the financial
marketplace; and (vi) it has received actual and adequate consideration
pursuant to the Deed of Trust.
31. In the event that Trustor shall be dissolved, or a decree or order for
relief shall be entered by the court having jurisdiction in the premises in
respect of Trustor in a voluntary or involuntary case under the Federal
Bankruptcy Code as now or hereafter constituted, or Trustor shall file a
voluntary petition in bankruptcy or for reorganization or an arrangement or
any composition, readjustment, liquidation, dissolution or similar relief
pursuant to any similar present or future state or federal bankruptcy law,
or shall be
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adjudicated a bankrupt or become insolvent, or shall commit any act of
bankruptcy as defined in such law or shall take any action in furtherance
of any of the foregoing, Trustor agrees that any automatic stay applicable
to any such above-mentioned action, case or proceeding which would
otherwise prevent Beneficiary from pursuing or exercising any of its rights
or remedies against Trustor shall automatically be lifted and released
against Beneficiary and Beneficiary shall then be entitled to pursue and
exercise any and all rights, remedies and recourses available to
Beneficiary against Trustor arising under or in connection with the Loan
Documents or which may otherwise be available at law or in equity with
respect to the loan transaction pursuant to the Loan Documents. In the
event this provision is otherwise deemed unenforceable by a court of
competent jurisdiction, then Trustor agrees that Trustor will cooperate
with Beneficiary if and when Beneficiary brings a motion to lift such
automatic stay.
32. Any notice which any party hereto may desire or be required to give to the
other shall be deemed to be an adequate and sufficient notice if given in
writing and service is made by registered or certified mail or overnight
air courier, or by facsimile communication, addressed to Trustor or Trustee
at its address given on the first page hereof, or to Beneficiary at 711
High Street, Des Moines, Iowa 50392-1450, Attn: Commercial Real Estate
Loan Administration, Loan Nos. 750037 and 750038, or to such other place as
any party may by notice in writing to the other parties designate as a
place for service of notice.
33. Beneficiary, from time to time, may substitute another Trustee in place of
the Trustee named herein, to execute the trusts hereby created; and upon
such appointment, and without conveyance to the successor trustee, the
successor trustee shall be vested with all the title, interest, powers,
duties and trusts in the Premises hereby vested in or conferred upon
Trustee herein named. Each such appointment and substitution shall be made
by written instrument executed by the Beneficiary containing reference to
this Deed of Trust sufficient to identify it, which instrument, when
recorded in the office of the County Recorder of the country or counties in
which the Premises is situated, shall be conclusive proof of proper
appointment of the successor trustee. The recital or statement, in any
instrument executed by Trustee in pursuance of any of said trusts, of the
due authorization of any agent of the Trustee executing the same shall for
all purposes be conclusive proof of such authorization.
34. Trustee at any time, at Trustee's option, may commence and maintain suit in
any court of competent jurisdiction and obtain the aid and direction of
said court in the execution by him of the trusts or any of them, herein
expressed or contained, and, in such suit, may obtain the orders or
decrees, interlocutory or final of said court directing the execution of
said trusts, and confirming and approving Trustee's acts, or any of them,
or any sales or conveyances made by Trustee, and adjudging the validity
thereof, and directing that the purchasers of the property sold and
conveyed be let into immediate possession thereof, and providing for orders
or court or other process requiring the Sheriff of the county in which
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said property is situated, or any other proper party, to place and maintain
said purchasers in quiet and peaceable possession of the property so
purchased by them, and the whole thereof.
35. Trustor, forthwith upon request, at any and all times hereafter, at the
expense of Trustor, will cause to be made, executed, acknowledged and
delivered to Trustee, any and every deed or assurance in law which Trustee
or counsel of Trustee, or Beneficiary or counsel of Beneficiary, shall
reasonably advise or require for the more sure, effectual and satisfactory
granting and confirming of said Premises unto Trustee.
36. Trustee shall not be liable or responsible with respect to its acts or
omissions hereunder, except for Trustee's own gross negligence or willful
default, or be liable or responsible for any acts or omissions of any
agent, attorneys or employee by him employed hereunder, if selected with
reasonable care.
37. Trustee accepts this trust when this Deed of Trust executed and
acknowledged is made a public record as provided by law.
38. This is not a purchase money deed of trust.
39. The undersigned Trustor requests that a copy of any notice of an Event of
Default required hereby and of any notice of sale hereunder required by law
to be mailed to it in the manner provided in this Deed of Trust for the
giving of notices.
40. This Deed of Trust and all provisions hereof shall extend to and be binding
upon Trustor and all persons claiming by, under and through Trustor, and
the word "Trustor" when used herein shall include all such persons and all
persons liable for the payment of the indebtedness secured hereby or any
part thereof, whether or not such parties shall have executed the Note or
this Deed of Trust. The word "Beneficiary" when used herein shall include
the successors and assigns of the Beneficiary named herein, and the holder
or holders from time to time of Note A and Note B.
41. This Deed of Trust shall be governed by, and construed in accordance with,
the laws of the State of Missouri.
42. As used herein, the term "Default Rate" means two percent (2%) per annum
above the then applicable interest rate payable under the Note.
43. In the event of any interest rate adjustment as provided for in Section 2
of Note A or Section 2 of Note B, Trustor shall provide Beneficiary, at
Trustor's cost, with a new policy of title insurance or an endorsement to
the existing title insurance, whichever Beneficiary requires, which shall,
in form and manner required by Beneficiary and from a title company
approved by Beneficiary, insure this Deed of Trust with the adjusted
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interest rate to be a first and prior lien on the Premises, subject only to
those exceptions in existence as of the date of recording hereof, and to
any additional exceptions approved by Beneficiary; provided, however, that
Beneficiary shall, if Trustor request, accept an endorsement to the
existing title insurance if an endorsement is less expensive than a new
policy but provides equivalent coverage, as determined by Beneficiary in
its sole discretion. Trustor shall also provide to Beneficiary such
additional documentation respecting any such interest rate adjustment as
Beneficiary shall require which may include, but not necessarily be limited
to, an opinion of counsel acceptable to the Beneficiary that all interest
and other charges are lawful.
44. A. Subject to the exceptions and qualifications hereinafter described,
Trustor shall have no personal liability for the payment of any
principal, interest or premium due under the Note, and Beneficiary
shall not seek any deficiency judgment against Trustor or make any
resort therefor to any property of Trustor other than the Premises and
the rents, issues, proceeds and profits thereof.
B. The foregoing limitation of personal liability shall be subject to the
following exceptions and qualifications:
(i) The provisions of subsection A. of this Section 44
shall not (a) limit Trustor's personal liability for its
obligations under this Deed of Trust for operation or maintenance
of the Premises, or payment of taxes, assessments, utility
charges and insurance or for its obligation to indemnify and hold
Beneficiary harmless from any loss or damage from any Hazardous
Material that exists on or its discharged from the Premises; (b)
limit or impair the lien or enforcement of this Deed of Trust or
any other instrument or agreement by which the Note is secured or
the right of Beneficiary to collect all sums due under the Note
or this Deed of Trust or other than as expressly limited in this
Section 44; (c) cause the failure of Trustor to make all payments
of principal, interest and premium or to perform any obligation
within the time periods provided herein from being an Event of
Default under this Deed of Trust; (d) be construed as limiting
the obligations of Trustor under any lease of the Premises; or
(e) limit the obligations of any indemnitor or guarantor, if any,
of Trustor's obligations under this Deed of Trust, the Note or
any other instrument or agreement by which it is secured; and
(ii) Trustor shall be fully and personally liable for the
following: (a) any rents or other income from the Premises
received by Trustor after default hereunder or under any other
document by which the Note is secured which are not applied to
the fixed and operating expenses of the Premises; (b) any sums
expended by Beneficiary in fulfilling the obligations of Trustor
as lessor, under any lease of the Premises or for any security
29
<PAGE>
deposits of tenants not turned over to the Beneficiary upon
foreclosure or sale pursuant to power of sale or for any
misapplication of security deposits, prepaid rents or other
similar sums paid to or held by Trustor or its agents, employees,
property managers and subsidiaries in connection with the
operation of the Premises; (c) any waste committed by Trustor
with respect to the Premises; (d) any insurance or condemnation
proceeds or other similar funds or payments applied by Trustor in
a manner other than as expressly provided in the Deed of Trust
and any other instruments or agreements by which the Note is
secured; and (e) the indebtedness secured hereby to the extent of
the Maximum Amount as defined in Note A and Note B.
C. [Intentionally Omitted].
D. Nothing herein shall be deemed to be a waiver of any right which
Beneficiary may have under the United States Bankruptcy Code to file a
claim for the full amount of the debt owed to Beneficiary by Trustor
or to require that all the Premises shall continue to secure all of
the indebtedness owing to Beneficiary in accordance with the Loan
Documents. Nothing herein stated shall impair the right of
Beneficiary to accelerate the maturity of the indebtedness evidenced
by the Note (or to avail itself of any of its other rights and
remedies) upon the occurrence of an Event of Default or under any
other instruments securing or evidencing the indebtedness secured by
this Deed of Trust, nor shall anything herein stated impair or be
construed to impair the right of Beneficiary to seek personal
judgments and all rights and remedies to enforce same allowed by law,
jointly and severally, with respect to the personal liability of
Trustor as described in subsection B of this Section 44. The
provisions set forth in this Section 44 are not intended as any
release or discharge of the indebtedness secured hereby or any monies
due under the Note or under any of the other Loan Documents, but are
intended as a limitation on Beneficiary's right to sue for deficiency
or personal judgment except as provided in this Section. Anything in
the Deed of Trust, the Note or any other instrument or agreement by
which it is secured to the contrary notwithstanding, this limited
agreement not to pursue recourse liability SHALL BECOME NULL AND VOID
and shall be of no further force and effect in the event: (x) that
there shall be any breach or violation of Trustor's agreement not to,
directly or indirectly, due to assignment of beneficial interest under
a trust, partnership interest in a partnership, or otherwise, cause or
permit any sale, transfer or conveyance of the Premises or create,
suffer or permit any encumbrance or lien on the Premises other than
the lien of the Deed of Trust and any other instrument or agreement by
which the Note is secured, the leases of the Premises assigned to
Beneficiary and such other transfers, liens or encumbrances, if any,
as expressly permitted under the Deed of Trust or any other instrument
or agreement by which the Note is secured (and other than a non-
material breach or violation of such sections such as the filing of
30
<PAGE>
a non-material mechanic's lien affecting the Premises, the granting of
any utility or other easement or servitude burdening the Premises, or
any other transfer or encumbrance not in the nature of transfer,
reduction or impairment of any material economic interest in the
Premises); (y) Trustor should file, or there should be filed against
Trustor (and the same is not dismissed within ninety (90) days), a
petition in bankruptcy or insolvency or a petition or answer seeking
any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the bankruptcy laws
of the United States or under any other applicable federal, state or
other statute or law, or a bankruptcy related receiver, trustee, or
liquidator should be appointed with respect to Trustor for the
Premises; or (z) of any fraud or willful misrepresentation by Trustor
regarding the Premises, the making or delivery of the Note or any
other instrument or agreement by which it is secured or in any
materials or information provided by Trustor in connection with the
loan evidence thereby.
45. Trustor hereby waives any and all of its rights as landlord or lessor under
any existing lease of the Premises or any part thereof, or any such lease
hereafter entered into, to subject and subordinate such lease to the lien
of any mortgage or mortgages now or hereafter placed on Trustor's interest
in the Premises and to cause or demand that any tenant under any such lease
execute and delivery any instrument subordinating any such lease to the
lien of any such mortgage, and Trustor hereby expressly agrees that Trustor
will not exercise any such right without the prior written consent of
Beneficiary. Further, Trustor shall, immediately upon receipt, delivery to
Beneficiary any notices or other forms of communication received by Trustor
from the holders of liens, mortgages or other interest on any leasehold
estate in the premises or from the holders of any other liens or mortgages
on the Premises, it being agreed, however, that this requirement shall not
in any way alter or lessen the obligations of Trustor under Section 1 (l)
hereof.
46. This Deed of Trust and the indebtedness secured hereby is for the sole
purpose of conducting or acquiring a lawful business, professional or
commercial activity or for the acquisition or management of real or
personal property as a commercial investment, and all proceeds of such
indebtedness shall be used for said business or commercial investment
purpose. Such proceeds will not be used for the purchase of any security
within the meaning of the Securities Exchange Act of 1934, as amended, or
any regulation issued pursuant thereto, including without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve
System. This is not a purchase money mortgage and the Premises secured
hereby is not a residence or homestead or used for mining, grazing,
agriculture, timber or farming purposes.
47. Notwithstanding anything to the contrary set forth in this Deed of Trust,
and provided that no Event of Default shall be in existence (beyond any
applicable notice and cure period), Trustor shall not be required to deal
with more than one Servicer (as hereafter defined) at any time with respect
to the administration of its rights, duties and obligations under this
31
<PAGE>
Deed of Trust, Note A, Note B, the Assignment of Leases and Rents and any
other documents evidencing or securing the Note. Accordingly, whether or
not Note A and Note B continue to be held by the original holders thereof,
Trustor shall not be required to deliver notices or requests to, or
otherwise deal with, any person or entity other than Servicer, or any New
Servicer (as hereafter defined) respecting the foregoing documents and the
loan evidenced thereby, except upon the existence and continuance of an
Event of Default (and expiration of applicable notice and cure periods, if
any).
Beneficiary agrees that is shall designate a servicer for the loan
secured by this Deed of Trust (the "Servicer") which shall be authorized to
act on behalf of the Beneficiary (whether one or more) in accordance with
the terms of any agreement between the Beneficiary and the Servicer, with
respect to the Loan secured by this Deed of Trust. The Beneficiary hereby
designates Principal Mutual Life Insurance Company as Servicer. Any
notices, requests, approvals, consents, deliveries, or other forms of
communication from Trustor to Servicer shall be deemed adequate and
sufficient as if given to Beneficiary if given in writing and service is
made by registered or certified mail or overnight air courier, or by
facsimile communication, addressed to Principal Mutual Life Insurance
Company at 711 High Street, Des Moines, Iowa 50392-1450, Attn: Commercial
Real Estate Loan Administration, Loan Nos. 750037 and 750038, or to such
other place as the Servicer may, by notice given in writing to Trustor,
designate as a place for service of notice. It is agreed that should the
Servicer cease to service this loan, that the Beneficiary shall, by written
notice given in accordance with Section 32 hereof, substitute and appoint
any other party (who may or may not be the holder of one of the Notes
evidencing this loan) as servicer (the "New Servicer") and upon such
appointment, the New Servicer shall receive all notices, requests,
approvals, consents, deliveries and other forms of communication from
Trustor to New Servicer at the address specified in the written notice from
the Servicer as set forth above. Beneficiary has and reserves the right to
revoke the designation of Servicer upon the occurrence of an Event of
Default (and expiration of any applicable notice and cure period).
48. Note A and Note B shall be equally and ratably secured by this Deed of
Trust.
IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be duly
executed and delivered as of the date first hereinabove written.
J. C. NICHOLS COMPANY, a
Missouri corporation
By_____________________________________________
Walter C. Janes
Vice President and Treasurer
ATTEST:
32
<PAGE>
By_____________________________
Robert L. Jackson, Jr.
Assistant Secretary and Vice President
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
On this ____ day of ______________, 19___, before me personally appeared
Walter C. Janes, to me personally know, who being by me duly sworn did say that
he is the Vice President and Treasurer of J.C. NICHOLS COMPANY, a Missouri
corporation, and that the seal affixed to the foregoing instrument is the
corporate seal of said corporation and that said instrument was signed and
sealed on behalf of said corporation by authority of its Board of Directors, and
said Walter C. Janes acknowledged said instrument to be the free act and deed of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in ____________________ the day and year last above written.
(SEAL)
_______________________________________________
Printed Name: __________________________________
Notary Public in and for said State
Commissioned in _______________ County
My Commission Expires:
_____________________
33
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT, made as of December 27, 1993, by J.C. NICHOLS COMPANY, a
Missouri corporation, having a post office address at 310 Ward Parkway, Kansas
City, Missouri 64112, as Assignor ("Assignor" to be construed as "Assignors" if
the context so requires), to PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa
corporation having its principal place of business and post office address at
711 High Street, Des Moines, Iowa 50392, as Assignee.
WITNESSETH THAT:
WHEREAS, Assignor, to evidence and secure a loan indebtedness in the
aggregate amount of Seventy Million and 00/100 Dollars ($70,000,000.00) (herein
sometimes referred to as the "Loan "), has this day made and delivered to
Assignee the following two promissory notes (herein sometimes referred to as the
"Note") of Assignor:
A. Secured Promissory Note in the original principal amount of FORTY
MILLION and 00/100 Dollars ($40,000,000.00) ("Note A") payable as
provided for in said Note A and finally maturing on December 15, 2013,
with interest as therein expressed; and
B. Secured Promissory Note in the original principal amount of THIRTY
MILLION and 00/100 Dollars $30,000,000.00) ("Note B") payable as
provided for in said Note B and finally maturing on December 15, 2013,
with interest as therein expressed (Note A and Note B shall sometimes
be referred to herein collectively as the "Note"),
and has executed and delivered a Deed of Trust, Security Agreement and
Assignment of Rents (the "Mortgage," it being agreed that "Mortgage" as
hereinafter used shall be construed to mean "deed of trust" or "trust deed" or
"deed to secure debt" if the context so requires) bearing the aforesaid date to
secure the Note and creating a lien on Assignor's interest in certain real
estate in the County of Jackson, State of Missouri, more particularly described
in Exhibit A attached hereto and made a part hereof, including the improvements
now or hereafter thereon and the easements, rights and appurtenances thereunto
belonging, all of which are hereinafter called the "Mortgaged Premises"; and
WHEREAS, Assignor is the lessor under those certain written leases of the
Mortgaged Premises described on Exhibit B attached hereto and made a part hereof
and Assignor may hereafter make other leases of the Mortgaged Premises or parts
thereof; and
WHEREAS, Assignee has required the assignment hereafter made as a condition
to making the above Loan;
<PAGE>
NOW, THEREFORE, Assignor, for good and valuable considerations the receipt
of which is hereby acknowledged, does hereby bargain, sell, transfer, assign,
convey, set over and deliver unto Assignee, all rights of the lessor under the
above described leases and all other leases affecting the Mortgaged Premises, or
any part thereof, now existing or which may be executed at any time in the
future during the life of this Assignment, and all amendments, extensions and
renewals of said leases and any of them, all of which are hereinafter called the
"Leases," and all rents, income and other payments which may now or hereafter be
or become due or owing under the Leases, and any of them, or on account of the
use of the Mortgaged Premises. It is intended hereby to establish a present and
complete transfer of all the Leases and all rights of the lessor thereunder and
all the rents, and other payments arising thereunder on account of the use of
the Mortgaged Premises unto Assignee, with the right, but without the
obligation, to collect all of said rents, income and other payments which may
become due during the life of this Assignment. Assignor agrees to provide
Assignee with copies of all leases of all or any portion of the Mortgaged
Premises.
Assignor hereby appoints Assignee the true and lawful attorney of Assignor
with full power of substitution and with power for it and in its name, place and
stead, to demand, collect, receipt and give complete acquittances for any and
all rents and other amounts herein assigned which may be or become due and
payable by the lessees and other occupants of the Mortgaged Premises, and at its
discretion to file any claim or take any other action or proceeding and make any
settlement of any claims, either in its own name or in the name of Assignor or
otherwise, which Assignee may deem necessary or desirable in order to collect
and enforce the payment of any and all rents and other amounts herein assigned.
Lessees of the Mortgaged Premises, or any part thereof, are hereby expressly
authorized and directed to pay all rents and other amounts herein assigned to
Assignee or such nominee as Assignee may designate in writing delivered to and
received by such lessees who are expressly relieved of any and all duty,
liability or obligation to Assignor in respect of all payments so made.
Assignee is hereby vested with full power to use all measures, legal and
equitable, deemed by it necessary or proper to enforce this Assignment and to
collect the rents and other amounts assigned hereunder, including the right to
enter upon the Mortgaged Premises, or any part thereof, and take possession
thereof forthwith to the extent necessary to effect the cure of any default on
the part of Assignor as lessor in any of the Leases. Assignor hereby grants
full power and authority to Assignee to exercise all rights, privileges and
powers herein granted at any and all times hereafter, without notice to
Assignor, with full power to use and apply all of the rents and other amounts
assigned hereunder to the payment of the costs of managing and operating the
Mortgaged Premises and of any indebtedness or liability of Assignor to Assignee,
including but not limited to the payment of taxes, special assessments,
insurance premiums, damage claims, the costs of maintaining, repairing,
rebuilding and restoring the improvements on the Mortgaged Premises or of making
same rentable, reasonable attorney fees and costs incurred in connection with
the interpretation and/or enforcement of this Assignment, and of principal and
interest payments due from Assignor to Assignee on the Note and the Mortgage,
all in such order as Assignee may determine. Assignee shall be under
2
<PAGE>
no obligation to press any of the rights or claims assigned to it hereunder or
to perform or carry out any of the obligations of the lessor under any of the
Leases and does not assume any of the liabilities in connection with or arising
or growing out of the covenants and agreements of Assignor in the leases; and
Assignor covenants and agrees that it will faithfully perform all of the
obligations imposed under any and all of the Leases and hereby agrees to
indemnify Assignee and to hold it harmless from any liability, loss or damage
which may or might be incurred by it under the Leases or by reason of this
Assignment, and from any and all claims and demands whatsoever which may be
asserted against Assignee by reason of any alleged obligations or undertakings
on its part to perform or discharge any of the terms, covenants or agreements
contained in any of the Leases. This Assignment shall not operate to place
responsibility for the control, care, management or repair of the Mortgaged
Premises, or parts thereof, upon Assignee nor shall it operate to make Assignee
liable for the carrying out of any of the terms and conditions of any of the
Leases, or for any waste of the Mortgaged Premises by the lessee under any of
the Leases or any other party, or for any dangerous or defective condition of
the Mortgaged Premises or for any negligence in the management, upkeep, repair
or control thereof resulting in loss or injury or death to any lessee, licensee,
invitee, employee or stranger.
Any amounts collected hereunder by Assignee which are in excess of those
applied to pay in full the aforesaid liabilities and indebtedness at the time
due shall be promptly paid to Assignor.
Assignor hereby represents and warrants to Assignee that it is the sole
owner of the entire lessor's interest in each of the Leases; that the Leases are
not in default and are valid and enforceable and have not been altered, modified
or amended in any manner whatsoever except as set forth on Exhibit B attached
hereto and made a part hereof; that Assignor has not heretofore transferred or
assigned the Leases or any of the rents thereunder or any right or interest
therein, nor has it collected more than one (1) month in advance or anticipated
any of the rents thereunder; and Assignor except as provided in any Lease
represents and warrants that it is not indebted to the lessees under the Leases
in any manner whatsoever so as to give rise to any right of set-off against, or
reduction of, the rents payable under the Leases.
3
<PAGE>
Subject to the rights granted to Assignor in Section 20.C. of the Deed of
Trust, Assignor covenants not to alter, modify, amend or change the terms of any
of the Leases or give any consent or permission or exercise any option required
or permitted by the terms thereof or waive any obligation required to be
performed by any lessee or execute, cancel or terminate any of the Leases or
accept a surrender thereof without prior written consent of Assignee. Assignor
will not make any further transfer or assignment of any of the Leases, or convey
or transfer or suffer a conveyance or transfer of the Mortgaged Premises or of
any interest therein so as to effect, directly or indirectly, a merger of the
estates and rights of, or a termination or diminution of the obligations of, any
lessee thereunder.
Upon payment in full of the principal sum, interest and other indebtedness
secured hereby, this Assignment shall be released by Assignee; otherwise, it
shall remain in full force and effect as herein provided and, with the
covenants, warranties and power of attorney herein contained, shall inure to the
benefit of Assignee and any subsequent holder of Note A and/or Note B and shall
be binding upon Assignor, and its heirs, legal representatives, successors and
assigns, and any subsequent owner of the Mortgaged Premises.
Notwithstanding any provision herein to the contrary, prior to a default by
Assignor in the payment of any indebtedness secured hereby or in the performance
of any of any obligation, covenant or agreement of Assignor contained herein or
in Note A and/or Note B or the Mortgage, or in any of the Leases, Assignee
hereby grants to Assignor the license to collect as the same become due and
payable, but in any event for not more than one calendar month in advance, all
rents and other income arising under the Leases and from the Mortgaged Premises,
and to enforce all provisions contained in the Leases. Assignor shall render
such accounts of collections as Assignee may reasonably require. The license
herein granted to Assignor shall terminate immediately upon default in payment
of any indebtedness secured hereby or in the performance of any other
obligation, covenant or agreement of Assignor contained in the Note, the
Mortgage, this Assignment, any other document or instrument that evidences,
secures or otherwise relates to the Loan, or in any of the Leases; and upon
written notice of Assignor's default at any time hereafter given by Assignee to
any lessee, all rentals thereafter payable and all agreements and covenants
thereafter to be performed by the lessee shall be paid and performed by the
lessee directly to Assignee in the same manner as if the above license had not
been granted, without prosecution of any legal or equitable remedies under the
Mortgage. Any lessee of the Mortgaged Premises or any part thereof is
authorized and directed to pay to Assignor any rent herein assigned currently
for not more than one calendar month in advance and any payment so made prior to
receipt by such lessee of notice of Assignor's default shall constitute a full
acquittance to lessee therefor.
4
<PAGE>
Upon the occurrence of a Monetary Event of Default, (as defined in the Deed
of Trust), Assignee shall be entitled without notice to Assignor to apply at any
time to a court having jurisdiction thereof for the appointment of a receiver of
the Mortgaged Premises or any part thereof and of all rents, incomes, profits,
issues and revenues thereof, from whatever source derived; and thereupon it is
hereby expressly covenanted and agreed that the court shall forthwith appoint
such receiver with the usual powers and duties of receivers in like cases; and
said appointment shall be made by the court EX PARTE as a matter of strict right
to Assignee, and without reference to the adequacy or inadequacy of the value of
the Mortgaged Premises, or to the solvency or insolvency of Assignor or any
party defendant to such suit. Subject to Sections 17.A. and B. of the Deed of
Trust, Assignor hereby specifically waives the right to object to the
appointment of a receiver as aforesaid. Further, Trustor expressly consents
that such appointments shall be made EX PARTE and without notice to Assignor as
an admitted equity and as a matter of absolute right to Assignee. In order to
maintain and preserve the Mortgaged Premises and to prevent waste and impairment
of its security, Assignee may, at its option, advance monies to the appointed
receiver and all such sums advanced shall become secured obligations and shall
bear interest from the date of such advance at the delinquent rate specified in
the Note or, if no delinquent rate is specified, then at the Note rate.
Concurrently, with the execution of any lease covering the Mortgaged
Premises, Assignor will notify the lessee, by U.S. Certified Mail, of the
existence of this Assignment and will deliver an executed copy of this
Assignment to such lessee, directing such lessee to make all payments under its
lease to Assignor or its nominee in accordance with the terms of this
Assignment.
Assignor hereby waives any and all of its rights as landlord or lessor
under any existing Lease of the Mortgaged Premises, or any such lease hereafter
entered into, to (a) subject and subordinate such lease to the lien of the
Mortgagor, or any mortgage or mortgages now or hereafter placed on Assignor's
interest in the Mortgaged Premises, or (b) to cause or demand that any tenant
under any such lease execute and deliver any instrument subordinating any such
lease to the lien of any such mortgage, and Assignor hereby expressly agrees
that it will not exercise any such right without the prior written consent of
Assignee.
It is understood and agreed that this Assignment shall become effective
concurrently with the Note and the Mortgage.
It is expressly understood and agreed that this Assignment is subject to
the provisions of Paragraph 7 of Note A and Paragraph 7 of Note B regarding non-
recourse liability of Assignor and certain exceptions and limitations thereto.
Note A and Note B shall be equally and ratably secured by this Assignment.
This Assignment shall be governed by and construed in accordance with the
laws of the State where the Mortgage Premises is located.
5
<PAGE>
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
On this _____ day of December, 1993, before me personally appeared Robert
L. Jackson, Jr., to me personally known, who being by me duly sworn did say that
he is the Assistant Secretary and Vice President of J.C. NICHOLS COMPANY, a
Missouri corporation, and that the seal affixed to the foregoing instrument is
the corporate seal of said corporation and that said instrument was signed and
sealed on behalf of said corporation by authority of its Board of Directors, and
said Robert L. Jackson, Jr. acknowledged said instrument to be the free act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in ________________________ the day and year last above
written.
(SEAL) ___________________________________________
Printed Name: _____________________________
Notary Public in and for said State
Commissioned in ____________________ County
My Commission Expires:
__________________________
6
<PAGE>
HOTEL MANAGEMENT FEE PARTICIPATION SALE AGREEMENT
THIS HOTEL MANAGEMENT FEE PARTICIPATION SALE AGREEMENT ("Participation")
made and entered into as of the lst day of October, 1991, by and between THE
RAPHAEL HOTEL GROUP, L.P., a Missouri limited partnership ("Raphael") and J. C.
NICHOLS COMPANY, a Missouri corporation ("JCN").
W I T N E S S E T H:
WHEREAS, Raphael is the owner and holder of the manager's interest in and
to that certain Hotel Management Agreement dated December 10, 1987 originally
between Heartland Hotel Associates, L.P., as owner, and Alameda Plaza, Inc., as
manager, as the same manager's interest has subsequently been assigned by
various assignments to Raphael (the "Management Agreement"); and
WHEREAS, the Management Agreement requires the manager to operate and
manage the Allis Plaza Hotel, a luxury hotel complex in the City of Kansas City,
Jackson County, Missouri (the "Project"); and
WHEREAS, JCN desires to purchase and Raphael has agreed to sell to JCN a
participation in and to certain proceeds of the management fee received by
Raphael pursuant to the Management Agreement; and
WHEREAS, JCN and Raphael wish to set forth the purchase and sale of the
participation, the manner of participation by JCN in the Management Agreement
and the management, servicing and control of the Project;
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. ASSIGNMENT OF PARTICIPATION. In consideration of the sum of Five
Hundred Thousand Dollars ($500,000.00) from JCN, the receipt and sufficiency of
which is hereby acknowledged by Raphael, Raphael hereby sells and assigns to
JCN, its successors and assigns, the right, title and interest of Raphael in and
to fifty percent (50%) of the "Net Management Fees" (hereinafter defined)
received by Raphael for the operation of the Project as provided under the
Management Agreement for the remaining current term of the Management Agreement.
For purposes hereof, the term Net Management Fees shall be equal to all gross
management fees actually received by Raphael pursuant to the Management
Agreement, as the same may be modified or substituted during such remaining term
from time to time, less fifteen percent (15%)
<PAGE>
thereof to cover overhead and operating expenses of Raphael, and less such other
amounts as are set forth at paragraphs 4 and 6 below.
2. WARRANTIES AND REPRESENTATIONS.
(a) Raphael hereby warrants and represents that it holds good right,
title and interest in and to the Management Agreement without knowledge of
any defaults thereunder and that Raphael is a limited partnership in good
standing under the laws of the State of Missouri and this Participation and
the actions taken hereunder have been duly authorized by the Raphael
partnership.
(b) JCN hereby warrants and represents to Raphael that JCN is duly
formed and in good standing under the laws of the State of Missouri and
that the terms and provisions hereunder and the participation interests
received by JCN have been duly authorized by JCN.
3. RECORDS. The original Management Agreement and all files, books,
records and other documents relating to the Project and the Management Agreement
shall at all times be held and kept by Raphael; provided, however, JCN shall be
provided access upon reasonable times and notice for purposes of reviewing the
same.
4. AUTHORITY OF RAPHAEL . Raphael shall have full power and authority,
acting alone, to do any and all things in connection with the management and
administration of the Project which Raphael may deem necessary or desirable and
consistent with the terms of the Management Agreement. Consistent with the
terms of this Participation, Raphael may waive, modify or vary any term of the
Management Agreement or consent to the postponement of strict compliance with
any such term or in any manner grant indulgence to the owner thereunder,
including without limitation any amendment thereto which affects the term or
amount of such fee to be received thereunder, so long as (i) the economic impact
upon Raphael and JCN is essentially equivalent and, if applicable, (ii) in the
event of a sale or transfer of the Management Agreement, JCN receives a pro rata
fifty percent (50%) share of all proceeds of such sale or transfer, net of all
costs and expenses associated with such transaction, including without
limitation of a fifteen percent (15%) administrative fee to Raphael. Raphael
shall be entitled to seek and enforce compliance by the owner under the
Management Agreement and may file and enforce any such legal actions in its own
name as the sole manager thereunder, it being expressly agreed that the interest
of JCN hereunder is limited to a share of fees actually earned, and not a share
of the manager's interest thereunder. To the extent fees and expenses,
including reasonable attorney's fees, are expended by Raphael to enforce the
terms of the Management Agreement, such fees shall be deducted from and
excludable from Net Management Fees as hereinabove defined.
5. COMPLIANCE WITH MANAGEMENT AGREEMENT. Raphael agrees to use
reasonable diligence to comply in all respects with the Management Agreement and
to avoid any act or
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omission which will or may result in termination thereof or provide any default
thereunder pursuant to which the owner may terminate the Management Agreement.
6. DISBURSEMENT; ACCOUNTING. Raphael shall pay to JCN its fifty percent
(50%) share of Net Management Fees within ten (10) days after receipt of such
fees by Raphael in good funds; provided, however, in no event shall Raphael be
required to pay such share more often than monthly. Raphael will furnish to
JCN, within ninety (90) days after the end of each fiscal year of Raphael, a
statement showing all receipts by Raphael pursuant to the Management Agreement
and its computation of the Net Management Fees due to JCN. Raphael shall be
entitled to deduct from Net Management Fees any extraordinary expenses which are
beyond the reasonable control of Raphael and which are directly related to the
management and operation of the Project as required by the Management Agreement.
7. LIABILITY. Neither Raphael nor any of its partners nor any of their
respective directors, officers, employees or agents, shall be under any
liability to JCN for any action taken or for refraining from the taking of any
action in good faith pursuant to this Participation, or for errors in judgment;
provided, however, that this provision shall not protect any such parties
against any breach of warranties or representations made herein.
8. TERMINATION. The respective obligations and rights hereunder shall
terminate upon the expiration of the current term of the Management Agreement or
upon any other termination of such Management Agreement, with or without cause,
pursuant to the terms thereof or applicable law. Any renewal, extension or
other arrangement beyond the current term of the Management Agreement between
Raphael and the Project owner shall not by virtue of this Participation run to
the benefit of JCN and this Participation shall be inapplicable to such renewal,
extension or other arrangement.
9. MISCELLANEOUS. This Participation and the rights and obligations
hereunder may from time to time be assigned or transferred by the parties
hereto, without liability or recourse to such transferring party. This
Participation shall be construed in accordance with the laws of the State of
Missouri. All notices pertaining hereto shall be in writing and deemed to be
given when personally delivered or mailed by certified mail, return receipt
requested, postage prepaid to: if to Raphael: The Raphael Hotel Group, L.P., c/o
Allis Plaza Hotel, 200 West 12th Street, Kansas City, Missouri 64105; and if to
JCN: J. C. Nichols Company, 310 Ward Parkway, Kansas City, Missouri 64112. If
any one or more of the provision of this Participation shall be held invalid,
such invalidity shall in no way affect the validity or enforceability of other
provisions of this Participation. Nothing herein shall be deemed or construed
to create a partnership or joint venture between the parties.
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IN WITNESS WHEREOF, the parties hereto have caused the execution of these
presents by their respective representatives as of the day and year first above
written.
THE RAPHAEL HOTEL GROUP, L.P.,
a Missouri limited partnership
By: Hotel Partners, Inc.
Managing General Partner
By:
--------------------------
Philip Pistilli
Its: President
J. C. NICHOLS COMPANY,
a Missouri corporation
By:
--------------------------
Its:
--------------------------
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RESTATED JOINT VENTURE AGREEMENT
THIS AGREEMENT is made and entered into as of the _____ day of _________,
1994, by and between THE J. C. NICHOLS REALTY COMPANY, a Missouri corporation
("Nichols"), and NEW MILLENNIUM KANSAS CITY, INC., a Kansas corporation
("NMKC").
WITNESSETH:
WHEREAS, Nichols and NMKC have entered into a Joint Venture Agreement dated
February 1, 1990 (the "Original Agreement") and have continuously operated a
Joint Venture from such date to the date hereof; and
WHEREAS, the parties desire to modify certain provisions of the Original
Agreement and to embody such modifications in this restated and modified Joint
Venture Agreement (the "Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual promises
set out herein, the parties hereto agree as follows:
1. FORMATION. The parties hereby acknowledge and ratify the continuation
of the joint venture described in the Original Agreement (the "Joint Venture")
to be governed by the following terms and conditions.
2. NAME. The Joint Venture's name shall be "J. C. Nichols Real Estate"
or such other name as the joint venturers shall determine.
3. DEFINITIONS.
(a) A joint venturer's "interest in the Joint Venture" includes its
interest in the Joint Venture's capital, profits, losses and distributions, its
rights in specific Joint Venture property, and its right to participate in Joint
Venture management, all as provided in this Agreement and by law. A
transferee's "interest in the Joint Venture" only includes its interest in the
Joint Venture's capital, profits, losses and distributions, all as provided in
this Agreement.
(b) The term "joint venturer" refers to each of Nichols and NMKC, and
to any other person who is admitted to the Joint Venture pursuant to paragraph
19, until such time as any such person shall cease to be a joint venturer as set
out in paragraph 17(b). The term "joint venturers" refers collectively to a
group composed of each person who is a joint venturer (but does not include any
transferee).
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(c) The term "Policy Committee" refers to the Policy Committee as
described in paragraph 14.
(d) The term "Nichols Assets" means specific items of furniture,
fixtures, equipment, supplies and leasehold improvements, used by Nichols in the
operation of a realty sales and marketing business which are identified in
Exhibit I attached hereto.
(e) The term "Nichols Leaseholds" refers to the leases Nichols held
as Lessee on the date of the original Agreement for the real estate offices
identified on Exhibit 2 attached hereto.
(f) The terms "transfer" and "transferred" mean the passage of a
legal or equitable interest in the Joint Venture pursuant to a sale, exchange,
gift, assignment, pledge, grant of a security interest, foreclosure,
garnishment or other conveyance, disposition or encumbrance and shall include
without limitation the passage of any interest by judicial order, bequest,
intestate succession or other operation of law.
(g) The term "transferee" refers individually to each person who
acquires by a transfer (except any transfer pursuant to paragraph 20 of this
Agreement) all or any portion of an interest in the Joint Venture, which person
is not admitted to the Joint Venture as a joint venturer pursuant to paragraph
19. The term "transferees" refers to a group composed of each person who is a
transferee (but does not include any joint venturer).
4. PURPOSES.
(a) The purposes of the Joint Venture shall be:
(i) To operate a residential and commercial realty sales and
marketing company; and
(ii) To engage in any business activity related or incidental to
the foregoing purpose, including, but not limited to, the provisions of
mortgage, franchise, insurance, title, and escrow services.
(b) The Joint Venture purposes shall not be extended, by implication
or otherwise, beyond those so stated.
(c) The parties acknowledge and agree that the Joint Venture shall
not engage in any business which is competitive with that of Nichols or J. C.
Nichols Company, a Missouri corporation, including, but not limited to,
subdivision development; provided, however, that the Joint Venture may enter
into an agreement with J. C. Nichols Company to carry out marketing and sales
activities for J. C. Nichols Company's subdivision developments.
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5. PRINCIPAL PLACE OF BUSINESS. The Joint Venture's principal place of
business shall be at 7500 College Blvd., Suite 100, Overland Park, Kansas 66210.
The joint venturers may decide to change the Joint Venture's principal place of
business or to establish additional places of business in other states as
required by the Joint Venture's business. Any leases by the Joint Venture of
office space from Nichols or J. C. Nichols Company shall be at market rates and
upon terms and conditions as shall customarily exist in the marketplace.
6. TERM. The Joint Venture shall be deemed to have commenced on the date
of the Original Agreement and shall continue until the earlier of January 31,
2090 or the date the Joint Venture is terminated and liquidated pursuant to this
Agreement.
7. CAPITAL CONTRIBUTIONS. The joint venturers have made initial capital
contributions as follows: Nichols has contributed Four Thousand and no/100
Dollars ($4,000.00) in cash; and NMKC has contributed Six Thousand and no/100
Dollars ($6,000.00) in cash to the Joint Venture.
8. CAPITAL ACCOUNTS. A separate capital account shall be maintained for
each joint venturer and transferee. No joint venturer or transferee shall be
entitled to receive interest on its capital account balance. Each joint
venturer's and transferee's allocated share of Joint Venture profits and losses
pursuant to paragraph 11 shall be credited or debited to its capital account.
All Joint Venture distributions of cash or property to any joint venturer or
transferee shall be debited to the distributee's capital account, except
distributions in repayment of loans made to the Joint Venture, salary payments,
expense reimbursements and any other distributions which the joint venturers
shall determine are not in reduction of the distributee's capital account. As
of the date of the Original Agreement, NMKC's initial capital account balance
was Six Thousand and no/ 100 Dollars ($6,000.00), and Nichols' initial capital
account balance was Four Thousand and no/100 Dollars ($4,000.00).
9. PROFIT AND LOSS DETERMINATIONS. Joint Venture profits and losses
shall be determined at the end of each fiscal year by the use of generally
accepted accounting principles. Any gains and losses from the sale of Joint
Venture property in excess of the difference, if any, between the fair value of
an asset and the basis of such asset on the date it was contributed to the Joint
Venture shall be included in determining such profits and losses. All material
decisions as to the Joint Venture's accounting and income tax elections shall be
made by the Policy Committee. Any Joint Venture property distributed in kind to
the joint venturers or transferees (whether pursuant to liquidation of the Joint
Venture or otherwise) shall be valued and treated as though the property were
sold and the cash proceeds were distributed, and for Joint Venture accounting,
the difference between the fair value of each property distributed in kind and
its fair value on the date it was contributed to the Joint Venture shall be
treated as a gain or loss for the Joint Venture. For the purpose of Joint
Venture accounting and income tax reporting, the Joint Venture shall operate on
a December 31 fiscal year.
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10. ACCOUNTING RECORDS AND BANK ACCOUNTS.
(a) The Joint Venture shall maintain complete and accurate books and
records of all Joint Venture transactions. Such books and records shall be open
at all reasonable times for inspection by any joint venturer or its agent at
such joint venturer's expense. The Joint Venture shall prepare monthly a
statement showing the financial condition of the Joint Venture and its profits
or losses from operation. Copies of such statements shall be promptly furnished
to each joint venturer. An audit of such books and records at the end of each
fiscal year may, at the discretion of the Policy Committee, be conducted by an
independent certified public accountant retained by the Joint Venture. The
Joint Venture shall furnish each person who owned any interest in the Joint
Venture during a calendar year such tax information as shall be necessary for
the preparation of such person's federal and state income tax returns with
respect to the Joint Venture operations for such fiscal year.
(b) The Joint Venture shall maintain checking and other bank accounts
and all funds received by or for the Joint Venture shall be deposited therein.
Withdrawals shall be made on such signatures as the Chief Executive Officer
shall determine.
11. ALLOCATION OF PROFITS AND LOSSES.
(a) Pursuant to Internal Revenue Code Section 704(c), the Joint
Venture shall allocate the gain, if any, recognized by the Joint Venture upon
the subsequent sale or other disposition of any property contributed to the
Joint Venture to the joint venturer who contributed such property to the Joint
Venture; provided, however, such gain shall not exceed the lesser of (i) the
excess of the net sales price for such contributed property over the tax basis
of the property when contributed to the Joint Venture; or (ii) the excess of the
property's fair market value at the time of its contribution to the Joint
Venture over its tax basis at the time it was contributed to the Joint Venture.
(b) All adjusted net profits and losses shall be allocated for tax
purposes as follows: Sixty Percent (60%) to NMKC and Forty Percent (40%) to
Nichols. For purposes of this paragraph, "adjusted net profits" shall mean the
net profits of the Joint Venture for tax purposes reduced by the amount of any
gain allocated to any joint venturer pursuant to paragraph 11(a). For purposes
of this paragraph, the term "adjusted net losses" shall mean the net losses of
the Joint Venture for tax purposes increased by any gain allocated to any joint
venturer pursuant to paragraph 11(a).
12. DISTRIBUTIONS. If from time to time the Policy Committee shall
determine that the Joint Venture has cash in excess of its needs, such excess
cash shall be distributed Sixty Percent (60%) to NMKC and its transferees and
Forty Percent (40%) to Nichols and its transferees.
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13. ADDITIONAL CAPITAL CONTRIBUTIONS AND GUARANTIES.
(a) The Policy Committee may from time to time decide that the joint
venturers and transferees shall make additional cash contributions to the Joint
Venture's capital. The Policy Committee shall notify each joint venturer and
transferee of each such decision, and each joint venturer and transferee shall
contribute cash to the Joint Venture's capital within twenty days after such
joint venturer's receipt of such notice in the amount of such joint venturer's
pro rata share, based upon the cash distribution percentages as provided in
paragraph 12 hereof, of the total amount decided to be contributed.
(b) Notwithstanding anything contained in this Agreement to the
contrary, if a joint venturer or transferee fails to pay timely any additional
capital contribution required by paragraph 13(a), any other joint venturer may
pay such contribution, and upon such payment all of the Joint Venture's cash
distributions which otherwise would be distributed to the defaulting joint
venturer or transferee pursuant to this Agreement shall be distributed to the
paying joint venturer until such paying joint venturer shall have received from
cash distributions otherwise attributable to the defaulting joint venturer or
transferee in an amount equal to 100% of such defaulted contribution plus
interest at the rate of 15% per annum compounded quarterly. Thereafter the
defaulting joint venturer or transferee shall be entitled to participate in the
Joint Venture's cash distributions in the same manner as if such person had paid
such defaulted contribution.
(c) In the event it is determined from time to time by the Policy
Committee that the Joint Venture has insufficient cash on hand to pay its
obligations as they become due, to operate the enterprise and otherwise to
conduct the Joint Venture's operations, it may be determined by the Policy
Committee that, as an alternative to additional contributions of cash as
capital, each joint venturer and transferee shall be called upon to guarantee
loans to the Joint Venture. No such guarantee shall increase the guarantor's
capital account. The guarantees described in this paragraph, and the exercise
and performance of the rights and obligations created by each such guarantee,
are intended to be and shall be deemed to be transactions between the Joint
Venture and one who is not a joint venturer.
(d) If a joint venturer or transferee shall be required to pay any
amounts in connection with any guarantee under paragraph 13(c) and related
obligations, each joint venturer and transferee shall pay that portion of such
amount equal to its cash distribution percentage as provided in paragraph 12
hereof and each joint venturer and transferee shall indemnify and hold the other
joint venturers and transferees harmless, on demand, from and against any
liability, loss, damages or expenses (including attorneys' fees) resulting from
a failure by one of them to pay its share of said amounts when due.
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14. MANAGEMENT AND POLICY DECISIONS.
(a) The day-to-day management and conduct of the business and affairs
of the Joint Venture shall be vested in Jack Frost, who shall be designated as
the chief executive officer of the Joint Venture. Included within Jack Frost's
obligations and authority shall be the ordinary and customary responsibilities
for conducting the regular operations of a business of the type of the Joint
Venture such as budgeting, marketing, advertising, personnel, administration,
legal, accounting, vendors, and suppliers.
(b) All other matters pertaining to the overall policy and direction
of the Joint Venture shall be vested in a Policy Committee until modified by a
majority in interest of the joint venturers. The Policy Committee shall consist
of two individuals, with one selected by Nichols (as of the execution hereof,
the Nichols designee shall be Lynn McCarthy or his designee) and one selected by
NMKC (as of the execution hereof, the NMKC designee shall be Jack Frost). All
decisions affecting the policy and direction of the Joint Venture shall be made,
on behalf of the Joint Venture by the Policy Committee. Such decisions
affecting policy and direction include, but are not limited to, expansion or
contraction of the business of the Joint Venture, the sale or other transfer of
the assets of the Joint Venture or any additional interests therein, calls for
additional capital, licensing matters, borrowing, incurring any obligations
other than those which pertain to the routine day-to-day conduct of the business
of the Joint Venture, distribution of profits, and the compensation of Jack
Frost (which shall be Two Hundred Thousand Dollars ($200,000) per year at the
commencement of this Agreement, subject to later adjustment). Subject to the
final sentence of this Paragraph 14(b), no decisions or actions of the Policy
Committee shall be made or taken without the unanimous consent of the members of
the Policy Committee. The Policy Committee may select, designate or authorize
an individual to perform specific tasks on behalf of the Policy Committee and
the Joint Venture, including, but not limited to, executing documents on behalf
of the Joint Venture. Policy Committee meetings shall be called and conducted
pursuant to paragraphs 18(c) and (d). Notwithstanding anything to the contrary
in this paragraph 14(b), in the event that Lynn McCarthy or his designee is no
longer serving as the Nichols appointee to the Policy Committee, then all
decisions and determinations by the Policy Committee (other than with respect to
the compensation of Jack Frost, which determination shall require unanimity)
shall be made by Jack Frost or any other duly designated NMKC representative.
(c) All decisions and determinations to be decided, determined,
approved or considered "by the joint venturers" (as such phrase is used
throughout this Agreement) shall be made at a meeting of the joint venturers
called pursuant to paragraph 18(a) by the affirmative vote of joint venturers
whose combined interests in the Joint Venture's profits shall be at least
Seventy- five Percent (75%) of the total of all joint venturers' combined
interests in the Joint Venture's profits or pursuant to the written approval of
all of the joint venturers, which written approval shall be obtained pursuant to
paragraph 18(b). All decisions and determinations made by the joint venturers
by either of said methods shall constitute and be valid and binding act of the
Joint Venture. Notwithstanding anything to the contrary in this paragraph
14(c), in the event that the J. C. Nichols Co. ownership of the voting stock of
Nichols falls below 50% (whether directly or
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indirectly by means of transfer of stock or voting rights to any trustee,
nominee, or other third party), or in the event that Lynn McCarthy or his
designee is no longer serving as the Nichols appointee to the Policy Committee,
decisions and determinations by the "joint venturers" shall be made by the
affirmative vote of a joint venturer or venturers whose interests in the Joint
Venture's profits are at least Fifty Percent (50%) of the total of all joint
venturers' combined interests.
(d) No joint venturer, no transferee and no other person who has or
claims any interest whatsoever in or with respect to the Joint Venture or its
property shall have any right or authority to take any part in or interfere in
any manner with the conduct or the management of the business or affairs of the
Joint Venture; provided, each joint venturer shall have the right to participate
in the management of the Joint Venture as specifically provided in this
Agreement. No joint venturer, no transferee and no other person who has or
claims any interest whatsoever in or with respect to the Joint Venture or its
property shall have any right, power or authority to act for or bind the Joint
Venture in any manner or respect whatsoever, including, without limitation, the
right, power or authority to: (i) borrow or lend money on behalf of the Joint
Venture, (ii) transfer any Joint Venture property, (iii) enter into any lease,
agreement, brokerage arrangement, commitment or undertaking on behalf of or with
respect to the Joint Venture or its property, (iv) compromise, transfer, modify
or release any debts due to the Joint Venture, or (v) otherwise engage in or
enter into any transaction or agreement on behalf of the Joint Venture.
15. RESIGNATION, REMOVAL AND REPLACEMENT OF A MEMBER OF THE POLICY
COMMITTEE. A member of the Policy Committee may resign from such capacity by
delivering not less than thirty (30) days prior written notice of such
resignation to all of the joint venturers. The joint venturer that selected the
resigning member shall select a replacement member. A joint venturer may remove
and replace a member of the Policy Committee selected by that joint venturer at
any time and for any reason.
16. TRANSFER OF JOINT VENTURER'S INTEREST.
(a) Without the prior consent of all of the joint venturers, no joint
venturer or transferee shall voluntarily or involuntarily transfer all or any
portion of its interest in the Joint Venture, and any act in violation of this
restriction shall be null and void, except as otherwise provided by law, and
except as follows:
(i) Nichols or NMKC may, with the consent of the other (but of
no other subsequent joint venturer), transfer all of its interest in the Joint
Venture to any subsidiary, parent or affiliated corporation or entity of such
party, and such transferee shall be admitted as a joint venturer and shall have
all of the rights of the transferring joint venturer.
(ii) In addition, NMKC and Nichols shall have the right to sell,
transfer and assign all of their interests in the Joint Venture subject to the
provisions of paragraph 20.
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(b) Upon the dissolution or other cessation to exist as a legal
entity of a joint venturer or transferee (but not upon a statutory merger or
consolidation), or upon the bankruptcy or insolvency of a joint venturer or
transferee, or upon any other involuntary transfer by operation of law or
otherwise of all or any portion of a joint venturer's or transferee's interest
in the Joint Venture, or if all or any portion of a joint venturer's or
transferee's interest in the Joint Venture is deemed by law to have been
transferred, the Joint Venture shall not be terminated and its tax year shall
not close; rather, the trustee, receiver, court, agency, person or other
successor in interest (a "transferee") of such joint venturer or transferee
shall succeed to such joint venturer's or transferee's interest in the Joint
Venture's profits to the extent so transferred; provided, such transferee shall
be a mere transferee (and not a joint venturer) with respect to the interest so
transferred.
(c) Prior to the Joint Venture's recognition of any claimed rights or
interests of a person claiming to be a transferee, the Joint Venture may require
such acknowledgments of transfer, consents, indemnifications and ratifications
as the Policy Committee shall determine.
(d) Any person who acquires by a transfer all or any part of a joint
venturer's or transferee's interest in the Joint Venture shall be subject to and
bound by this Agreement as if it were an original party hereto; and no such
person shall become an additional or substituted joint venturer except as
provided in paragraph 19.
17. STATUS OF TRANSFEREE: TERMINATION OF JOINT VENTURER'S STATUS,
CONTINUATION WITH ONE JOINT VENTURER.
(a) No transferee of a joint venturer's or transferee's interest in
the Joint Venture shall have any right or authority to interfere in the
management or administration of the Joint Venture's business or affairs, or to
require any information or account of Joint Venture transactions, or to inspect
the Joint Venture's books, or to act for or bind the Joint Venture, or to
otherwise have any rights of a joint venturer; except such transferee shall have
the right to receive to the extent transferred such joint venturer's interest in
and right to the Joint Venture's profits, losses, capital and distributions as
set out in this Agreement.
(b) If a joint venturer shall attempt to transfer all or any part of
its interest in the Joint Venture in contravention of this Agreement, or if a
joint venturer shall transfer its in terest in the Joint Venture pursuant to
paragraph 20 of this Agreement, or if all or any part of a joint venturer's
interest in the Joint Venture is involuntarily transferred or otherwise deemed
by law to have been transferred, or if a joint venturer shall retire or withdraw
from the Joint Venture in contravention of this Agreement, then the joint
venturer whose interest in the Joint Venture is the subject of such transfer or
attempted transfer or who so wrongfully retired or withdrew shall thereupon
cease to be a joint venturer of the Joint Venture and, with respect to any
interest in the Joint Venture which was not so transferred, shall thereafter
have no right or interest in or to the Joint Venture except such right or
interest as a transferee would have.
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(c) If all except one of the joint venturer's interests in the Joint
Venture shall be transferred to one or more transferees or all except one joint
venturer shall be deemed to be a transferees with respect to its interest in the
Joint Venture, the sole remaining joint venturer shall continue the Joint
Venture and its business pursuant to this Agreement on behalf of itself and such
transferees and shall make all decisions and determinations with respect to the
Joint Venture's management.
18. JOINT VENTURERS' MEETINGS; POLICY COMMITTEE'S MEETINGS.
(a) A meeting of the joint venturers may be called at any time by any
joint venturer by giving each and every joint venturer written notice of the
time and place of such meeting, which notice must be given to all joint
venturers at least (10) days before the date of such meeting. Any such notice
may be waived by the joint venturer entitled thereto by signing a written waiver
of notice, either before or after the time of the meeting, and such waiver shall
be deemed the equivalent of such joint venturer's receipt of timely formal
notice of the meeting. A joint venturer's attendance in person or by
representative at a meeting shall constitute such joint venturer's waiver of
notice thereof unless the meeting is attended for the express purpose, stated at
the opening of the meeting, of objecting to the transaction of any business
because the meeting is not lawfully called. Each meeting of the joint venturers
shall be held in the greater Kansas City metropolitan area unless the joint
venturers agree otherwise and at a reasonably convenient time and place as the
joint venturer calling the meeting shall designate. Attendance at a meeting of
joint venturers whose combined interests in the Joint Venture's profits is at
least seventy-five percent (75%) of all joint venturers' combined interests in
the Joint Venture's profits shall constitute a proper quorum. Notwithstanding
anything contained to the contrary in this paragraph 18(a), in the event that
the J. C. Nichols Co. ownership of the voting stock of Nichols falls below fifty
percent (50%) (whether directly or indirectly by means of transfer of stock or
voting rights to any trustee, nominee, or other third party), or in the event
that Lynn McCarthy or his designee is no longer serving as the Nichols designee
to the Policy Committee, a proper quorum shall consist of attendance by a joint
venturer or venturers whose combined interests in the joint venture's profits is
at least fifty percent (50%) of all joint venturers' combined interests.
(b) Any decision or determination which may be made or any action
which may be taken at a meeting of the joint venturers may be made or taken
without a meeting in the manner provided by this paragraph 18(b). Any joint
venturer may circulate among all of the joint venturers documents describing in
sufficient detail any question or matter which said joint venturer wants to be
decided or determined by the joint venturers. If all of the joint venturers
shall sign and return to the Policy Committee statements setting out their
approval of a decision or determination with respect to the question or matter
described in such documents, such decision or determination shall constitute and
be a valid and binding act of the Joint Venture. Said statement may be so
signed and returned in two or more counterparts, all of which shall be deemed to
be a single document.
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(c) A meeting of the Policy Committee may be called at any time by
any member of the Policy Committee by giving each and every other member written
notice of the time and place of such meeting, which notice must be given to all
members at least (10) days before the date of such meeting. Any such notice may
be waived by the members entitled thereto by signing a written waiver of notice,
either before or after the time of the meeting, and such waiver shall be deemed
the equivalent of such member's receipt of timely formal notice of the meeting.
A member's attendance at a meeting shall constitute such member's waiver of
notice thereof unless the meeting is intended for the express purpose, stated at
the opening of the meeting, of objecting to the transaction of any business
because the meeting is not lawfully called. Each meeting of the members shall be
held in the greater Kansas City metropolitan area unless the members agree
otherwise and at a reasonably convenient time and place as the member calling
the meeting shall designate. Attendance at a meeting of the Policy Committee of
all of the members shall constitute a proper quorum. Notwithstanding anything
contained to the contrary in this paragraph 18(c), in the event that Lynn
McCarthy or his designee is no longer serving as the Nichols appointee to the
Policy Committee, a proper quorum of the Policy Committee shall consist solely
of Jack Frost or any other duly designated NMKC representative.
(d) Any decision or determination which may be made or any action
which may be taken at a meeting of the Policy Committee may be made or taken
without a meeting in the manner provided by this paragraph 18(d). Any member of
the Policy Committee may circulate among all of the members documents describing
in sufficient detail any question or matter which said member wants to be
decided or determined by the Policy Committee. If all of the members of the
Policy Committee shall sign statements setting out their approval of a decision
or determination with respect to the question or matter described in such
documents, such decision or determination shall constitute and be a valid and
binding act of the Joint Venture. Said statement may be so signed in two or
more counterparts, all of which shall be deemed to be a single document.
19. ADDITIONAL JOINT VENTURERS. Upon the unanimous decision of all of the
joint venturers, any person (including, without limitation, a transferee) may be
admitted as an additional joint venturer to the Joint Venture upon such terms
and conditions as the joint venturers and the proposed new joint venturer shall
mutually agree.
20. PURCHASE OPTION.
(a) In the event that any joint venturer ("offering venturer")
decides to sell, transfer or assign all or any portion of its interest in the
Joint Venture, the offering venturer shall first give written notice to the
other venturer of its intent to transfer such interest specifying the identity
of the proposed transferee and the consideration and terms of payment ("offering
terms"). Such written notice by the offering venturer shall constitute an offer
to sell to the other venturer all or such portion of the offering venturer's
interest in the Joint Venture on the offering terms, except that the purchase
price to the other joint venturer shall be the lower of that offered by the
proposed transferee or the purchase price determined in accordance with the
provisions of the
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Purchase Price Determination document attached hereto as Exhibit 3, as such may
be amended from time to time.
(b) For a period of thirty (30) days after receipt of the notice from
the offering venturer, the other venturer shall have the option to purchase all
or such portion of the offering venturer's interest in the Joint Venture on the
offering terms. If the other venturer desires to exercise its purchase option,
it shall provide written notice of such acceptance to the offering venturer, and
confirming its acceptance of the offering terms. The closing of the purchase
shall occur within thirty (30) days after the other venturer gives written
notice of acceptance to the offering venturer.
(c) If the other venturer fails to exercise its purchase option, the
offering venturer shall be free to transfer its interest in the Joint Venture,
but only to the proposed transferee upon the offering terms as set forth in the
initial notice. The sale to the proposed transferee must be closed within
thirty (30) days after the expiration of the purchase option period and, if not
so closed, all of the restrictions contained in this Agreement shall again
apply. If the interest is transferred to the proposed transferee, the
transferee shall be subject to the terms and conditions of this Agreement and
the transferee shall be required as a condition to the transfer to execute an
agreement by which it binds itself to the terms of this Agreement.
(d) In the event that any joint venturer has any notice or knowledge
of any attempted, impending or consummated involuntary transfer of or lien or
charge upon its interest in the Joint Venture, whether by operation of law or
otherwise, such venturer shall give immediate written notice thereof to the
other venturer. If a venturer's interest is subject to any such involuntary
transfer, lien or charge, the other venturer shall be deemed to have the
immediate and continuing option to purchase all of such interest pursuant to the
purchase option structure contained in paragraph 20(a) above. To exercise its
purchase option, a venturer shall give written notice of the exercise of the
option to the other venturer. Closing of the purchase shall occur within thirty
(30) days after giving notice of the exercise of the option to purchase. The
purchase price and terms shall be in accordance with the provisions of
Exhibit 3.
(e) Payment of the purchase price for any interest purchased pursuant
to any of the above subparagraphs shall be made in accordance with the
provisions of Exhibit 3.
(f) In the event that all, but not less than all of NMKC's Joint
Venture interest is purchased by Nichols pursuant to paragraph 20, NMKC and Jack
Frost hereby covenant and agree that for a period of three (3) years immediately
following any closing described in paragraph 20, NMKC and Jack Frost will not,
within the Kansas City metropolitan area served by the Joint Venture at the time
of such closing, directly or indirectly, either individually or jointly or on
behalf of or in concert with any other person, business, partnership, joint
venture, corporation or other entity, as a shareholder, partner, manager, joint
venturer, agent, owner, financial backer or in any other capacity, work for,
own,
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manage, operate, control, engage in or become interested in any business or
entity that is competitive with or pertains in any way to the business of the
Joint Venture. The parties hereto recognize that irreparable damage will result
to Nichols and the Joint Venture from any violation of this paragraph 20(f) by
NMKC or Jack Frost. The parties expressly agree that, in addition to any and
all of the remedies available to the Joint Venture for any such violation,
Nichols and the Joint Venture shall have the remedy of restraining order and
injunction or any such equitable relief as may be declared or issued by a court,
and NMKC and Jack Frost agree not to claim in any such equitable proceedings
that any remedy at law is available to Nichols or the Joint Venture. If any one
or more of the provisions contained in this paragraph 20(f) shall for any reason
be held to be excessively broad as to duration, geographical scope, activity or
subject, such provision shall be construed by limiting and reducing it so as to
be enforceable to the extent compatible with the applicable law of such
jurisdiction as it shall then appear.
21. NICHOLS' ASSETS, LEASEHOLDS AND OTHER MATTERS.
(a) Nichols has sold the Nichols Assets listed on Exhibit 1, free and
clear of all liens and encumbrances, to the Joint Venture for cash for the
purchase price set forth on Exhibit 1.
(b) Nichols has transferred and assigned the Nichols Leaseholds
listed on Exhibit 2 to the Joint Venture and the Joint Venture has assumed and
paid all of Nichols duties and obligations under such leaseholds.
(c) The Joint Venture shall assume no other liabilities of Nichols or
NMKC except as may be specifically provided herein.
(d) The Joint Venture has entered into a License Agreement, in
substantially the form attached hereto, with J. C. Nichols Company pursuant to
which the Joint Venture has obtained the right to utilize the name "J. C.
Nichols" as part of the name under which the Joint Venture does business,
subject to the terms of said License Agreement. The Joint Venture shall pay an
annual license fee to J. C. Nichols Company in an amount determined pursuant to
such License Agreement. The joint venturers acknowledge and agree that the
Joint Venture has no rights whatsoever to use the name "J. C. Nichols" in the
Joint Venture name absent the grant of such rights of usage pursuant to the
License Agreement.
22. REPRESENTATIONS AND WARRANTIES OF NMKC. NMKC represents and warrants
to Nichols and to the Joint Venture as of the date hereof as follows:
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(a) NMKC is a corporation duly organized and validly existing under
the laws of the State of Kansas. NMKC has the full legal right, power and
authority to enter into this Agreement and to perform its obligations hereunder.
All actions necessary to authorize NMKC to enter into this Agreement and to
undertake its duties hereunder have been duly and properly taken. This
Agreement is the legal, valid and binding obligation of NMKC enforceable in
accordance with its terms.
(b) The execution and delivery of this Agreement by NMKC and the
performance of its obligations hereunder will not contravene or conflict with
any law, order, rule or regulation presently in effect and will not conflict
with or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of NMKC pursuant to the terms of,
any agreement or instrument to which NMKC is a party or by which it is bound or
to which any of its property or assets are subject. Such performance by NMKC
will not violate any provision of its charter or bylaws.
(c) There are no actions, suits, claims, proceedings or
investigations pending or threatened with respect to the business or properties
of NMKC, or with respect to Jack Frost, individually.
(d) NMKC has complied in all material respects with all laws,
ordinances, licensing requirements, regulations and orders applicable to the
business being conducted by it and has filed with the proper authorities all
other material required statements, returns and reports.
(e) NMKC and Jack Frost are not parties to or obligated under any
written or oral contracts, agreements, leases, plans, commitments or obligations
(including but not limited to, employment contracts) which may adversely affect
the operations of the Joint Venture.
(f) NMKC and Jack Frost, Dave Cooper and Larry Wallace hereby
represent and warrant that as of the date hereof, neither of them is subject to
any agreement or restrictive covenant that would (i) prevent any of them from
becoming employees of or participants in the Joint Venture in the capacities
contemplated by this Agreement, or (ii) subject either of them to a claim for
injunctive relief or damages on account of becoming employees of or participants
in the Joint Venture.
(g) No representation or warranty relating to NMKC in this Agreement
and no statements, exhibits or certificates attached, furnished or to be
furnished by NMKC
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pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein not misleading.
23. NICHOLS' REPRESENTATIONS AND WARRANTIES. Nichols represents and
warrants to NMKC and to the Joint Venture, as of the date hereof, as follows:
(a) Nichols is a corporation duly organized and validly existing
under the laws of the State of Missouri. Nichols has the corporate power to own
and lease its properties and carry on its business as and where now presently
being conducted. Nichols has the full legal right, power and authority to enter
into this Agreement and to perform its obligations hereunder. All actions
necessary to authorize Nichols to enter into this Agreement and to undertake its
duties hereunder have been duly and properly taken. This Agreement is the
legal, valid and binding obligation of Nichols, enforceable in accordance with
its terms.
(b) The execution and delivery of this Agreement by Nichols and the
performance of its obligations hereunder will not contravene or conflict with
any law, order, rule or regulation presently in effect and will not conflict
with or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of Nichols pursuant to the terms
of, any agreement or instrument to which Nichols is a party or by which it is
bound or to which any of its property or assets are subject. Such performance
by Nichols will not violate any provision of its charter or bylaws.
(c) There are no actions, suits, claims, proceedings or
investigations pending or threatened with respect to the business or properties
of Nichols which would adversely affect Nichols' performance of its obligations
under this Agreement.
(d) Nichols has complied in all material respects with all laws,
ordinances, licensing requirements, regulations and orders applicable to the
business being conducted by it and has filed with the proper authorities all
other required statements, returns and reports.
(e) Nichols is not a party to or obligated under any written or oral
contracts, agreements, leases, plans, commitments or obligations which may
adversely affect the operations of the Joint Venture.
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(f) No representation or warranty relating to Nichols in this
Agreement and no statements, exhibits or certificates attached, furnished or to
be furnished by Nichols pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein not misleading.
24. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The statements,
representations and warranties of the parties contained herein and in any
exhibit attached hereto shall be deemed material and to have been relied upon by
the parties hereto, notwithstanding any investigation made by the parties. All
such statements, representations and warranties and the agreements of the
parties contained herein shall continue in effect after execution of this
Agreement and the formation of the Joint Venture contemplated hereby. The
waiver of any misrepresentation or breach of any warranty shall not constitute a
waiver of any other misrepresentation or breach of warranty hereunder.
25. CONDITIONS PRECEDENT TO NICHOLS'S OBLIGATIONS. The obligations of
Nichols hereunder are subject to the fulfillment or satisfaction on or prior to
the date hereof of the following conditions:
(a) The representations, warranties and agreements made by NMKC in
this Agreement and in the exhibits hereto shall be true and accurate.
(b) NMKC shall have performed and complied with its obligations under
this Agreement which are to be performed and complied with by it prior to or as
of the Closing.
(c) All necessary real estate sales licenses, including real estate
brokers licenses, shall be obtained and maintained by appropriate individuals so
as to enable the Joint Venture to conduct a real estate business as contemplated
by this Agreement in the states of Kansas and Missouri.
26. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF NMKC. The obligations of
NMKC are subject to the fulfillment or satisfaction on or prior to the date
hereof of the following conditions:
(a) The representations and warranties made by Nichols in this
Agreement shall be true and accurate.
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(b) Nichols shall have performed and complied with its obligations
under this Agreement which are to be performed and complied with by it prior to
the date hereof.
27. INDEMNIFICATION BY NMKC. NMKC hereby agrees to and does hereby
indemnify and hold harmless Nichols, the Joint Venture and their assigns,
agents, employees, officers, directors, and stockholders, on demand, from and
against any losses, damages or expenses (including attorneys' fees) which may be
sustained, suffered or incurred by Nichols or the Joint Venture arising from or
by reason of the inaccuracy or misleading character of any warranty, statement
or representation of NMKC contained herein or in any exhibit hereto or document
delivered pursuant to this Agreement, by reason of any actions, inactions, or
any activities of any nature whatsoever of NMKC (or its associates, agents,
brokers, sales people, employees, or Jack Frost, Dave Cooper, or Larry Wallace)
which occurred or arose prior to the execution hereof, or by the failure by NMKC
to perform any covenant contained in this Agreement or in any document or
instrument delivered hereunder or in connection with the transactions
contemplated hereby. Nichols shall give NMKC written notice of any claim,
demand, suit or action with respect to which indemnity may be sought pursuant to
this paragraph and NMKC in every such case shall have the right at its sole
expense and cost to participate in contesting the validity or the amount of any
such claim, demand, suit or action. All references to NMKC in this Paragraph 27
concerning indemnification shall be deemed to include the representations and
warranties of Jack Frost, Dave Cooper and Larry Wallace which are contained in
Paragraph 22 of this Agreement.
28. INDEMNIFICATION BY NICHOLS. Nichols hereby agrees to and does hereby
indemnify and hold harmless NMKC, the Joint Venture and their assigns, agents,
employees, officers, directors, and stockholders, on demand, from and against
any losses, damages and expenses (including attorneys' fees) which may be
sustained, suffered or incurred by NMKC or the Joint Venture arising from or by
reason of the inaccuracy or misleading character of any warranty, statement or
representation of Nichols contained herein or in any exhibit or document
delivered pursuant to this Agreement, by reason of any actions, inactions, or
any activities of any nature whatsoever of Nichols (or J. C. Nichols Company or
its associates, agents, brokers, sales people, or employees) which occurred or
arose prior to the execution hereof, or by the failure of Nichols to perform any
covenant contained in this Agreement or in any document or instrument delivered
hereunder or in connection with the transactions contemplated hereby. NMKC
shall give Nichols written notice of any claim, demand, suit or action with
respect to which indemnity may be sought pursuant to this paragraph and Nichols
in every such case shall have the right at its sole expense and cost to
participate in contesting the validity or the amount of any such claim, demand,
suit or action.
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29. TERMINATION AND LIQUIDATION.
(a) The Joint Venture shall be terminated on January 31, 2090, or
upon the prior happening of any one of the following events:
(i) The Joint Venture or the last remaining joint venturer
becomes insolvent or generally fails to pay, or admits in writing its inability
to pay, debts as they become due, or applies for, consents to or acquiesces in
the appointment of a trustee, receiver or other custodian for it or any of its
property, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for it or for a substantial part of its property
and is not discharged within sixty (60) days; or any bankruptcy, reorganization,
debt arrangement or other case or proceeding under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding, is commenced in respect of
the Joint Venture or the last remaining joint venturer, and if such case or
proceeding is not commenced by the Joint Venture or such joint venturer, it is
consented to or acquiesced in by the Joint Venture or such joint venturer, or
remains for sixty (60) days undismissed; or the Joint Venture or the last
remaining joint venturer takes any corporate action to authorize, or in
furtherance of, any of the foregoing; or,
(ii) the determination of the joint venturers to terminate
and liquidate the Joint Venture; or,
(iii) the death, withdrawal or cessation to exist as a legal
entity of the sole remaining joint venturer; or
(iv) the termination of the Joint Venture by operation of law or
by judicial decree.
(b) Upon termination of the Joint Venture, the last remaining joint
venturer (or, if no joint venturer is then remaining, the successor-in-interest
of the last remaining joint venturer) shall make full account of the Joint
Venture's property and liabilities, and shall commence to wind up the Joint
Venture's affairs as promptly as is consistent with obtaining the fair value of
its property. The Joint Venture's property may be liquidated and its property
or the proceeds thereof shall be applied and distributed, to the extent
sufficient, as follows:
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first, all debts and liabilities of the Joint Venture and the
expenses of liquidation shall be paid, except debts and liabilities
owed to joint venturers or transferees (in their capacities as such);
second, the person required by law to wind up the Joint Venture's
affairs shall set up such reserves as such person may reasonably deem
necessary for any contingent liabilities or obligations of the Joint
Venture, provided that any such reserve shall be paid over by such
person to an independent escrow agent, to be held by the agent or its
successors for such period as such person shall deem advisable for the
purpose of applying the reserves to the payment of the liabilities or
obligations, and, at the expiration of the period, the balance of such
reserves, if any, shall be distributed as set out in the following
clauses;
third, all debts and liabilities of the Joint Venture owed to
joint venturers or transferees (in their capacities as such) shall be
paid;
fourth, the balance, if any, shall be distributed to and among
the joint venturers and transferees in accordance with the cash
distribution percentages as provided in paragraph 12 hereof.
(c) Distributions upon termination shall be cash unless the joint
venturers and transferees, if any, agree upon a fair market value of specific
Joint Venture property; in which event, said property may be distributed at its
fair market value in lieu of cash.
(d) The joint venturers and transferees shall continue to share
profits and losses during the winding up of Joint Venture affairs in the same
proportions as if the Joint Venture were not winding up its affairs.
(e) If the Joint Venture's termination was caused by a joint
venturer's wrongful withdrawal from the Joint Venture or from a joint venturer's
or transferee's wrongful transfer of an interest in the Joint Venture's profits,
each of the other joint venturers and transferees shall be entitled to damages
from such joint venturer or transferee for breach of this Agreement.
30. JOINT VENTURE PROPERTY. All property, real, personal or mixed, from
time to time owned by the Joint Venture shall be held in the Joint Venture's
name unless the joint venturers shall determine that, for convenience, legal
title to any such property shall be held in the name of one or more joint
venturers; provided, all Joint Venture property held in the
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name of one or more joint venturers shall be equitable and beneficially owned by
the Joint Venture and such joint venturer or joint venturers shall be the Joint
Venture's nominee and trustee of the recorded legal title to such property for
the Joint Venture's sole benefit. Each joint venturer who holds an interest in
Joint Venture property as the Joint Venture's nominee and trustee shall fully
account to the joint venturer with respect to all transactions and matters
regarding such property and shall deal with such property only as determined by
the managing joint venturer.
31. OTHER AGREEMENTS. Each joint venturer agrees: (i) to refrain from
voluntarily causing a dissolution of the Joint Venture; (ii) to pay and satisfy
its own individual obligations; and (iii) to inform the other joint venturers of
any and all business transactions that might adversely affect the Joint Venture.
Each joint venturer and transferee shall and agrees to indemnify, keep
indemnified and hold the Joint Venture and each other joint venturer and
transferee harmless, on demand, from and against all liability, loss, damage and
out-of-pocket expense (including reasonable attorneys' fees) which the Joint
Venture or such other joint venturer or transferee may suffer as a result of or
arising out of the indemnifying joint venturer's or transferee's breach of any
provision of this Agreement.
32. DOCUMENTS OF FURTHER ASSURANCE. NMKC, upon reasonable request of
Nichols or its counsel, will from time to time after the date hereof execute and
deliver to the Joint Venture all such instruments and documents of further
assurance, transfer, conveyance, confirmation of title or otherwise, and will do
any and all such acts and things as may be reasonably requested by the Joint
Venture or Nichols, or its counsel, to carry out the obligations of NMKC
hereunder and to consummate the transactions contemplated hereby. Nichols, upon
reasonable request of NMKC or its counsel, will from time to time after the date
hereof execute and deliver to the Joint Venture all such instruments and
documents of further assurance, transfer, conveyance, confirmation of title or
otherwise, and will do any and all such acts and things as may be reasonably
requested by the Joint Venture or NMKC, or its counsel, to carry out the
obligations of Nichols hereunder and to consummate the transactions contemplated
hereby.
33. NOTICES. Any notice, consent, approval or other communication
required or permitted hereunder shall be sufficient if made in writing, signed
by the communicator and delivered: (i) to a joint venturer or transferee in
person or by mailing the same postage prepaid by registered or certified mail,
return receipt requested, to the joint venturer or transferee at its business
address or residence address as set out in the Joint Venture's records; or (ii)
to the Joint Venture by delivering the same in person to each member of the
Policy Committee or by mailing the same postage prepaid by registered or
certified mail, return receipt requested, to the Joint Venture's principal place
of business, with a copy to
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each of the other joint venturers delivered pursuant to (i) above. All Joint
Venture distributions made pursuant to this Agreement shall be made to a joint
venturer or transferee at its business address as set out in the Joint Venture's
records.
34. OTHER PROVISIONS.
(a) This Agreement shall become effective when it has been signed by
Nichols and by NMKC and thereafter this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and all other persons
who shall be deemed to be parties to this Agreement and their respective heirs,
personal representatives, successors and assigns. This Agreement shall be
governed by the laws of the State of Kansas. In the event any one or more of
the provisions contained in this Agreement or any application thereof shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement or any other
application thereof shall not in any way be affected or impaired thereby. The
application of any provisions of this Agreement may be waived by any party or
parties entitled to the benefit thereof; provided, no delay or failure on the
part of any party hereto in exercising any rights hereunder, and no partial or
single exercise thereof, shall constitute a waiver of any other rights
hereunder. Paragraph headings herein have no legal significance. Whenever the
context hereof shall require, the use of any gender shall include all genders,
and the singular shall include the plural, and vice versa.
(b) This Agreement represents the entire Joint Venture agreement of
the parties hereto and shall not be amended except by a written agreement signed
by all of the joint venturers of the Joint Venture. The Original Agreement is
hereby terminated and replaced and superseded by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ATTEST: THE J. C. NICHOLS REALTY COMPANY
By:
- ----------------------------- ------------------------------
Secretary President
ATTEST: NEW MILLENNIUM KANSAS CITY, INC.
By:
- ----------------------------- ------------------------------
Secretary President
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J.C. NICHOLS COMPANY
1996 STOCK OPTION PLAN
(AMENDED AND RESTATED EFFECTIVE MAY 30, 1996)
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees of J.C. Nichols
Company and any Parent or Subsidiary of the Company, and to promote the success
of the Company's business. Options granted under the Plan may be Incentive
Stock Options or Nonstatutory Stock Options, as determined by the Administrator
at the time of grant of an option and subject to the applicable provisions of
Section 422 of the Code and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "BOARD" means the board of directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
(d) "COMMITTEE" means a committee appointed by the Board pursuant to
Section 4 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means J.C. Nichols Company.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE" means employment with the
Company, any Parent or Subsidiary of the Company that is not interrupted or
terminated. Continuous Status as an Employee shall not be considered
interrupted in the case of (i) any leave of absence approved by the Company or
(ii) transfers between locations of the Company or between the Company, its
Parent, or any Subsidiary of the Company. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal leave.
For purposes of Incentive Stock Options, no such leave may exceed 90 days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract, including Company policies. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on the 181st day
of such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
<PAGE>
(h) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(i) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended. Reference to a specific section of the Exchange Act or regulation
thereunder shall include such section or regulation, any valid regulation
promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing or suspending such section or
regulation.
(k) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in THE WALL STREET JOURNAL or such other source
as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices rare not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of the conditions expressed in (i) or (ii)
above, the Fair Market Value shall be determined in good faith by the
Administrator.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "OPTION" means a stock option granted pursuant to the Plan.
(o) "OPTIONED STOCK" means the Common Stock subject to an Option.
(p) "OPTIONEE" means an Employee who receives an Option.
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(q) "PARENT" means a "parent corporation," whether how or hereafter
existing, as defined in Section 424(e) of the Code.
(r) "PLAN" means this 1996 Stock Option Plan, as amended from time to
time.
(s) "RULE 16b-3" means new Rule 16b-3 promulgated under Section 16(b)
and made effective on August 15, 1996, or any rule or regulation amending,
supplementing or superseding such rule.
(t) "SECTION 16(b)" means Section 16(b) of the Exchange Act, or any
provision of any future legislation or regulation amending, supplementing or
superseding such section.
(u) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.
(v) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 480,000 Shares (which number has been increased only to take
into account the 80:1 stock split completed in 1996). The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option expires or
becomes unexercisable without having been exercised in full, or is surrendered
pursuant to an option exchange program authorized by the Administrator, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); PROVIDED,
HOWEVER, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that invested Shares acquired by the Company shall be
returned to the Plan and shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which the
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
(b) PLAN PROCEDURE UPON BECOMING SUBJECT TO THE EXCHANGE ACT. After
the date, if any, upon which the Company becomes subject to the Exchange Act,
the Plan may be administered by: (A) the Board, if the Board may administer the
Plan in a manner complying with Rule 16b-3, or (B) a committee designated by the
Board to administer the Plan, which committee shall be composed solely of two or
more "non-employee directors," as defined in Rule 16b-3 or (B) a committee
designated by the Board to administer the Plan, which committee shall be
composed solely of two or more "non-employee directors," as defined in Rule
16b-3, and which satisfies the legal requirements, if any, relating to the
administration of incentive stock plans under state corporate and securities
laws, the Code, and any stock exchange or
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national market system upon which the Common Stock is then listed or traded (the
"Applicable Laws"). Once appointed, such committee shall continue to serve in
its designated capacity until otherwise directors by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by Rule
16b-3 and Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange or national market
system upon which the Common Stock is then listed, the Administrator shall have
the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Employees to whom Options may from time to
time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of Shares to be covered by each
Option granted hereunder;
(V) to approve forms of a written granting instruments or
agreements for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions may include the exercise price, the time or times when Options
may be exercised, restrictions on transfer, forfeiture conditions,
acceleration of any vesting schedule or waiver of forfeiture restrictions,
and any other restriction or limitation regarding any Option or the Shares
relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 9(d) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
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<PAGE>
(ix) to provide for the early exercise of Options for the
purchase of invested Shares, subject to such terms and conditions as the
Administrator may determine; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) TYPE OF OPTION GRANTED. Nonstatutory Stock Option and Incentive
Stock Options may be granted only to Employees of the Company or any Parent or
Subsidiary of the Company. An Employee who has been granted an Option may, if
otherwise eligible, be granted additional Options.
(b) DESIGNATION OF TYPE OF GRANT. Each Option shall be designated in
the written instrument evidencing such Option as either an Incentive Stock or a
Nonstatutory Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first by the Optionee during any
calendar year (under all plans of the Company and any Parent or Subsidiary of
the Company) exceeds $100,000, such Options shall be treated as Nonstatutory
Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted and the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(c) ADDITIONAL RIGHTS. The Plan shall not confer upon any Optionee
any right with respect to the continuation of the Optionee's employment with the
Company, nor shall it interfere in any way with the Optionee's right or the
Company's right to terminate the Optionee's employment at any time, with or
without cause.
(d) EFFECT OF BECOMING SUBJECT TO SECTION 162(m) OF THE CODE. Upon
the Company or a successor corporation becoming subject to Section 162(m) of the
Code and for so long as the Company remains subject to Section 162(m) of the
Code, the following limitations shall apply to grants of Options to Employees:
(i) No Employees shall be granted Options to purchase more than
240,000 Shares (which number has been increased only to take into account
the 80:1 stock split completed in 1996) in any fiscal year of the Company.
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(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 80,000
Shares (which number has been increased only to take into account the 80:1
stock split completed in 1996) which shall not count against the limit set
forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described
in Section 11.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 11), the cancelled Option will be counted
against the limit set forth in subsection (i) above. For this purpose, if
the exercise price of an Option is reduced, the transaction will be treated
as a cancellation of the Option and the grant of a new Option.
6. Term of Plan. The original version of the Plan was adopted by the
Board on March 28, 1996, and became effective March 28, 1996. It shall
continue in effect for a term of ten (10) years from the date of its original
adoption on March 28, 1996, unless sooner terminated under Section 13 of the
Plan.
7. TERM OF OPTION. The term during which each Option shall be
exercisable shall be determined by the Administrator, provided, however, that
the term of any Incentive Stock Option shall be no more than ten (10) years
from the date of grant thereof. However, in the case of an Incentive Stock
Option granted to an Optionee who, together will persons whose stock
ownership at the time the Option is granted is attributed to such Optionee
pursuant to Section 424(d) of the Code, owns stock representing more than ten
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Option shall be five (5) years from the
date of grant thereof or such shorter term as may be provided in the written
instrument evidencing the Option.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator, provided that in the case of an Incentive Stock Option:
(i) granted to an Employee who, together with persons whose stock
ownership at the time of the grant of such Incentive Stock Option is
attributed to such Employee pursuant to Section 424(d) of the Code, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
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(ii) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be no less than
100% of the Fair Market Value per Share on the date of grant.
(b) CONSIDERATION TO BE PAID. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator at the time of grant and may consist
entirely of (1) cash, (2) check, (3) previously acquired Shares which have a
Fair Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which such Option shall be exercised, (4) delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price, or (5) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; FRACTIONAL SHARES. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan and the provisions of the Code, including Section 162(m). An Option
may not be exercised for a fraction of a Share. An Option shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Administrator, consist of any consideration and method of payment allowable
under Section 8(b) of the Plan. Exercise of an Option is any manner shall
result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) RIGHTS AS A SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan.
(c) DEATH, DISABILITY OR TERMINATION OF EMPLOYMENT. Subject to the
provisions of the Plan, the Administrator may make and include in the written
instrument evidencing an Option
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such provisions concerning exercise or lapse of the Option on death,
Disability or termination of Continuous Status as an Employee as it shall in
its discretion determine. No Incentive Stock Option shall be exercisable
after the date which is three months following the Optionee's termination of
Continuous Status as an Employee for any reason other than death or
Disability, unless (a) the Optionee dies during such three-month period, and
(b) the written instrument evidencing the Option or the Administrator permits
later exercise. No Incentive Stock Option may be exercised more than one
year after the Optionee's termination of Continuous Status as an Employee on
account of Disability, unless (a) the Optionee dies during such one-year
period and (b) the written instrument evidencing the Option or the
Administrator permits later exercise. No Incentive Stock Option may be
exercised more than one year after the Optionee's termination of Continuous
Status as an Employee on account of death, unless the written instrument
evidencing the Option or the Administrator permits later exercise. In the
event that the Optionee dies prior to exercising any Incentive Stock Options
during the three-month period following termination for any reason other than
Disability, or during the one-year period following termination on account of
Disability, such Incentive Stock Options may not be exercised after the date
which is six months after the date of death or the expiration of such
three-month or one-year period, as the case may be, whichever is later.
Notwithstanding any provision of this Section 9(c) to the contrary, the
written instrument evidencing the Option may provide that an Incentive Stock
Option may be exercisable on or before the date that is twelve months
following the Optionee's termination of Continuous Status as an Employee
PROVIDED, HOWEVER, that on the 91st day following such termination for any
reason other than death or disabilities, and if Optionee is still living,
then the Option shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option.
(d) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to
the Optionee at the time that such offer is made.
(e) RULE 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16(b)-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
10. Non-Transferability of Options. Except for certain transfers of
Nonstatutory Stock Options to family members, trusts and charities which the
Administrator, in its sole discretion, may permit, Options may not be sold,
pledged, assgned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and, except for
such family members, trusts and charities. Options may be exercised, during
the lifetime of the Optionee, only by the Optionee.
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<PAGE>
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option and the limitations on
the number of Options that can be granted to a single individual, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify
each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable.
In addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option shall lapse as
to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company, each outstanding Option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee
shall have the right to exercise the Option as to all of the Optioned Stock,
including Shares as to which it would not otherwise be exercisable. If an
Option is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that
the Option shall be fully exercisable for a period of fifteen (15) days from
the date of such notice, and the Option shall terminate upon the expiration
of such period. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets, the Option
confers the right to
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<PAGE>
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale
of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the merger or sale of assets was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent
of the successor corporation, provide for the consideration to be received
upon the exercise of the Option, for each Share of Optioned Stock subject to
the Option, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Optionee
to whom an Option is so granted within a reasonable time after the date of
such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Sections 162(m)(4) and 422 of
the Code (or any other applicable law or regulation, including the requirements
of any stock exchange or national market system upon which the Common Stock is
then listed), no amendment shall be effected unless shareholder approval is
obtained in the manner and to the degree required.
(b) EFFECT OF AMENDMENTS OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange or
national market system upon which the Common Stock is then listed or traded,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. As a condition to the exercise of an Option, the
Company may require the person exercising such Option to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and
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without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. LIABILITY FOR UNLAWFUL ISSUANCE. The inability of the Company,
after a good faith effort, to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sells such Shares as to which such requisite authority shall not have been
obtained.
17. AGREEMENTS. Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.
18. WITHHOLDING. To the extent required by applicable federal, state,
local or foreign law, an Optionee shall make arrangements satisfactory to the
Administrator for the satisfaction of any withholding tax obligations that
arise by reason of an Option exercise or any sale of Shares. The Company
shall not be required to issue Shares until such obligations are satisfied.
The Administrator may permit these obligations to be satisfied by having the
Company withhold a portion of the Shares that otherwise would be issued to
the Optionee upon exercise of the Option, or to the extent permitted, by
tendering Shares previously acquired.
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INDEMNIFICATION AGREEMENT
THIS AGREEMENT, made and entered into as of this _____ day of March, 1996,
by and between J.C. NICHOLS COMPANY, a Missouri corporation ("Corporation"), and
________________________________ ("Indemnitee"), a director or officer of the
Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers the most capable persons available; and
WHEREAS, the substantial increase in corporate litigation exposes directors
and officers to the risks of personal liability at the same time that the
availability and affordability of Directors' and Officers' Insurance ("D & O
Insurance") has been severely impacted; and
WHEREAS, the Bylaws ("Bylaws") of the Corporation provide for the
indemnification of the directors and officers of the Corporation as authorized
by Mo.Rev.Stat. Section 351.355 (1991), (the "Statute"); and
WHEREAS, pursuant to the Statute, the Bylaws dealing with indemnification
(including further indemnification) were adopted and approved by a vote of a
majority of the shareholders of the Corporation at the Annual Meeting of the
Shareholders held on April 24, 1989; and
WHEREAS, the Bylaws expressly provide and the Statute specifically permits
that their provisions are not exclusive and that agreements may be entered into
between the Corporation and its directors and officers granting further
indemnification without further approval of the shareholders; and
WHEREAS, Indemnitee regards the protection extended under the Statute and
Bylaws as beneficial, but Indemnitee may not be willing to serve or continue to
serve as a director or officer of the Corporation without additional
inducements, and the Corporation desires Indemnitee to serve in such capacity,
and in other capacities; and
WHEREAS, this Agreement shall supersede any prior written Indemnification
Agreement between the Corporation and Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's service subsequent to the
date hereof, the Corporation and Indemnitee do hereby agree as follows:
1. AGREEMENT TO SERVE: Indemnitee agrees to serve or continue to serve
as a director and/or officer of the Corporation for so long as such person is
duly elected or appointed or until such person tenders his or her resignation in
writing.
2.
(a) The Corporation shall indemnify Indemnitee if Indemnitee was or
is a party or is threatened to be made a party to or otherwise
involved in any action, suit or proceeding, whether brought by or
in the right of the Corporation or otherwise and whether of a
civil, criminal, administrative or investigative nature, in which
Indemnitee may be or may have been involved as a party or
otherwise by reason of the fact that Indemnitee is or was a
director or officer of the Corporation, by
<PAGE>
reason of any action taken by him or her or any inaction on his
or her part while acting as such a director or officer, or by
reason of the fact that he or she is or was serving at the
request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust
or other enterprise (including service with respect to any
employee benefit trust or plan), and to the full extent permitted
or authorized by the Statute, as hereafter amended.
(b) The indemnification set forth above shall cover all expenses,
including, but without limitation, expenses of investigations,
judicial or administrative proceedings or appeals, amounts paid
in settlement by or on behalf of Indemnitee, attorneys' fees and
disbursements, judgments, fines (including any excise tax
assessed with respect to any employee benefit trust or plan),
penalties, and any and all expenses of establishing a right to
indemnification under this Agreement (after written request
therefor) or under the Bylaws or the Statute, all as may be
actually and reasonably incurred by Indemnitee, but only to the
extent Indemnitee's conduct was not finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful
misconduct.
(c) The termination of any such action, suit or proceeding, by
judgment, order of court, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself,
create a presumption that Indemnitee's conduct was knowingly
fraudulent, deliberately dishonest, or willful misconduct. The
burden of proving that indemnification is not appropriate shall
be on the Corporation.
3. ADVANCEMENT OF EXPENSES: Expenses incurred by Indemnitee under
circumstances that may give rise to indemnification pursuant to paragraph 2 of
this Agreement shall be paid by the Corporation in advance of final disposition
upon the written request of Indemnitee, provided that Indemnitee shall undertake
to repay any such amount if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified by the Corporation.
4. NOTIFICATION AND DEFENSE OF CLAIM:
(a) Indemnitee shall, within a reasonable period of time after
receipt of notice of the commencement of any action, suit, or
proceeding or threat thereof, and if a claim in respect thereof
is to be made against the Corporation under this Agreement,
notify the Corporation of the commencement or threat thereof.
Omission to so notify the Corporation shall not relieve the
Corporation from any liability it may have to Indemnitee: (i)
hereunder, except to the extent the Corporation is prejudiced in
its defense of such action, suit, or proceeding as a result of
such failure, or (ii) other than under this Agreement.
(b) The Company shall have the right to employ its counsel at its own
expense to participate in any action, suit or proceeding that
gives rise to an indemnification claim under this Agreement.
(c) In defense of any claim or threat thereof, Indemnitee shall give
the Corporation such information and cooperation as the
Corporation may reasonably request.
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The Corporation shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any action
or claim effected without the prior written consent of the
Corporation. The Corporation shall not settle any action or
claim in any manner which will impose any penalty or limitation
on Indemnitee without Indemnitee's prior written consent. Both
the Corporation and Indemnitee agree that they will not
unreasonably withhold their consent to any proposed settlement.
5. PERIOD OF INDEMNITY: The indemnification provided under this
Agreement shall: (i) continue even though Indemnitee may have ceased to be a
director or officer, and for so long as Indemnitee may be subject to any
possible claim or threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal or investigative, by reason of the fact that Indemnitee
was a director or officer of the Corporation or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
service with respect to any employee benefit trust or plan), and (ii) inure to
the benefit of the heirs, assigns and personal representatives of Indemnitee.
6. PARTIAL INDEMNIFICATION: If an Indemnitee is entitled under any
provision of this Agreement to indemnification by the Corporation for some or a
portion of the expenses, judgments, fines or penalties actually and reasonably
incurred by him or her in the investigation, defense, appeal or settlement of
any action, suit or proceeding but not, however, for the total amount thereof,
the Corporation shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
7. LIMITATION ON INDEMNIFICATION: No indemnification shall be paid
except and only to the extent the amounts paid by Indemnitee, including the
advancement of expenses, exceed such amounts paid to or for the benefit of
Indemnitee pursuant to any D & O Insurance or other liability insurance policies
purchased and maintained by the Corporation.
8. INSURANCE: The Corporation hereby agrees that, so long as Indemnitee
shall continue to serve the Corporation (or shall continue at the request of the
Corporation to serve as director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit trust or plan)) and thereafter so long as Indemnitee shall
be subject to any possible claim or threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative, by reason of the
fact that Indemnitee was a director or officer of the Corporation (or served in
any of said other capacities), the Corporation will purchase and maintain in
effect for the benefit of Indemnitee one or more valid, binding and enforceable
policies of D & O Insurance or other liability insurance policies providing, in
all respects, coverage at least comparable to that presently provided under the
Corporation's D & O and other policies of liability insurance in force at the
date hereof.
9. SEVERABILITY: If this Agreement, or any portion hereof, shall be held
to be invalid or unenforceable for any reason, the Corporation shall
nevertheless indemnify Indemnitee as to all expenses, judgments, fines and
penalties with respect to any action, suit or proceeding, whether threatened or
commenced, to the full extent permitted by any portion of this Agreement that
shall not have been held to be invalid or unenforceable or by the Bylaws or the
Statute. Such invalidity or unenforceability shall not otherwise affect the
validity or enforceability of the other provisions hereof.
10. AMENDMENT AND TERMINATION: No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing, signed by
both parties hereto.
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11. BINDING EFFECT: This Agreement shall be binding upon the Corporation
and its successors and assigns and shall inure to the benefit of Indemnitee and
his or her heirs, assigns and personal representatives.
12. DOCUMENT TO SUPERSEDE: This Agreement shall supersede any other prior
written Indemnification Agreement between the Corporation and Indemnitee.
13. GOVERNING LAW: This Agreement shall be construed and enforced in
accordance with the laws of the State of Missouri.
14. COUNTERPARTS: This Agreement shall be executed in any number of
counterparts, each of which shall constitute the original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
J.C. NICHOLS COMPANY
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INDEMNITEE
---------------------------------------------
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<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of __________, 1996, by and between J.C. NICHOLS
COMPANY, a Missouri corporation ("Employer" or "Company"), and ______________
("Employee").
WHEREAS, Employer desires to employ Employee in the capacity described
herein and Employee desires to work for Employer in such capacity;
WHEREAS, Employer and Employee desire to set forth the terms and conditions
for their agreement and understandings;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises set forth below, Employer and Employee agree as follows:
1. DUTIES. Employer hereby agrees to employ Employee, and Employee
agrees to accept such employment, for the term described in Paragraph 2 of this
Agreement. Employee shall hold the position of General Counsel, or such other
comparable position as may be designated by the Board of Directors, and shall
perform such executive duties and services for Employer and its subsidiaries as
may be assigned or delegated to him from time to time by the Chief Executive
Officer. Employee agrees at all times to use his best efforts to preserve and
maintain the business of Employer and its subsidiaries. Employee agrees to
serve subject to the supervision of the Chief Executive Officer and, further,
agrees to serve as an officer and/or director of one or more of Employer's
subsidiaries at the request of the Chief Executive Officer. Employee shall
devote his full time and attention to advance the interests of Employer in the
performance of his duties hereunder. Except as expressly approved by the Chief
Executive Officer, Employee shall not be engaged in or concerned with any other
commercial duties which would conflict with his obligations hereunder or require
services on his part to the detriment of the performance of his obligations
under this Agreement.
2. TERM OF EMPLOYMENT. Employer shall employ Employee for a term of
three (3) years ending ____________, subject to the termination and notice
provisions of Paragraph 8 hereof.
3. BASE SALARY. Employer shall pay to Employee a base salary at an
annualized rate of $_________________ per year, subject to annual review and
adjustment at the discretion of the Board of Directors.
4. INCENTIVE COMPENSATION AND ADDITIONAL BENEFITS.
(a) Employee shall be entitled to participate in an annual incentive
discretionary bonus as may be authorized from time to time by the Board of
Directors of Employer.
(b) Employee shall be entitled to participate in and receive the
benefits of any health, dental, and life benefits, and other similar
employee benefits plans now in existence or which hereafter may be adopted
by Employer and which are made available to Employer's other employees.
Nothing herein shall be construed to require Employer to establish, or
shall preclude Employer, in its absolute discretion, from changing or
amending, in whole or in part, or revoking, any one or more of such
employee benefit plans or benefits.
<PAGE>
(c) During the term hereof, Employee shall receive annually three (3)
weeks of paid vacation time in accordance with and in the same manner as
vacation benefits provided by Employer to other employees. Employee's
vacation shall be taken at such time or times as are scheduled by the
agreement of Employer and Employee. Unused vacation time shall not be
accumulated or carried over beyond the term hereof.
(d) Employee will be provided with a vehicle allowance of $400 per
month. Employee shall be reimbursed for the monthly access charges
associated with, and the business calls made from, a cellular telephone.
Employer shall also either pay to Employee, or reimburse Employee for, all
reasonable professional dues and continuing education costs related to
Employee's status as a member in good standing of the Missouri Bar.
5. DISCLOSURE OF CONFIDENTIAL INFORMATION, COVENANT AGAINST COMPETITION,
AND INJUNCTIVE RELIEF.
(a) Employee acknowledges that (i) Employer's business is highly
specialized and (ii) the documents and information regarding Employer's
clients, tenants, services, methods of operation, sales, and the
specialized needs of Employer's clients, tenants, and customers are highly
confidential and constitute trade secrets. Employee further acknowledges
that Employee has had and will have access to trade secrets and
confidential information belonging to Employer, the loss of which cannot
adequately be compensated by damages in an action at law.
(b) During the term of this Agreement and at all times following the
voluntary or involuntary termination of Employee's employment for any
reason whatsoever, Employee shall not use for any purpose or disclose to
any person or entity, without the prior written consent of Employer or
unless required by law or by any court having authority to impose such a
requirement, any trade secrets or confidential information acquired during
the course of his employment with either Employer or any other business to
which Employer has succeeded by reason of purchase, merger, or otherwise.
(c) Employee shall not, other than in the ordinary course of
business, directly or indirectly, copy, take, or remove from Employer's
premises any of Employer's books, records, files, customer lists, tenant
information, documents or materials, or copies of any of the foregoing,
without the prior written consent of Employer.
(d) During the term of this Agreement, Employee will not, directly or
indirectly, own, manage, operate, control, be employed by, perform services
for, consult with, solicit business for, participate in, or be connected
with the ownership, management, operation, or control of any business that
is either directly or indirectly competitive with the property or services
of Employer in the Kansas City metropolitan area as defined by the Standard
Metropolitan Statistical Area. Employer and Employee have attempted to
limit Employee's right to compete only to the extent necessary to protect
Employer from unfair competition so if a court should determine that the
restrictions contained herein are of too long duration or too broad in
geographic scope to be reasonable and enforceable in equity, such a
provision shall be amended only so much as shall be necessary in order for
the restrictions contained herein to be enforceable.
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<PAGE>
(e) The term "confidential information" as used in this Paragraph 5
includes, but is not limited to, records, lists, and knowledge of
Employer's clients, customers, tenants, services, methods of operation,
trade secrets, methods of determination of prices or rents, financial
condition, profits, sales, net income, indebtedness, and trade rights as
the same may exist from time to time, but shall not include information in
the public domain at the time it was acquired or which comes into the
public domain otherwise than through a disclosure by Employee.
(f) In addition to all of the remedies otherwise available to
Employer, including, but not limited to, the recovery of damages from
Employee, Employer shall have the right to injunctive relief to restrain
and enjoin any actual or threatened breach of the provisions of this
Paragraph 5.
6. REASONABLENESS OF RESTRICTIONS. Employee has carefully read and
considered the provisions hereof and, having done so, agrees that the
restrictions set forth in Paragraph 5 hereof are fair and reasonable and are
reasonably required for the protection of the interests of Employer.
7. AUTHORITY. Employee represents and warrants that he is not subject to
any agreement, instrument, order, judgment, or decree of any kind which would
prevent him from legally entering into this Agreement and fully performing his
duties and obligations hereunder.
8. TERMINATION.
(a) TERMINATION WITH CAUSE. Employer may terminate this Agreement
with cause at any time by written notice to Employee if Employee shall
refuse to carry out the reasonable and lawful directions of the Employer or
if Employee shall defraud Employer, embezzle funds of Employer, engage in
proven fraud, dishonesty, or conduct that would, if proven, result in
conviction of a felony or engage in wilful misconduct in connection with
the fulfillment of Employee's duties and responsibilities hereunder. Upon
termination for cause, the Employee shall leave the Employer as directed in
the notice of termination, and the Employee and Employer shall be relieved
of any obligation hereunder except for the payment by Employer of any base
salary for periods worked but for which base salary has not been paid and
for accrued benefits during that time.
(b) VOLUNTARY RESIGNATION. Employee may resign and terminate his
employment at any time by written notice to Employer, in which event the
Employee and Employer shall be relieved of any obligation hereunder except
for the payment by Employer of any base salary for periods worked but for
which base salary has not been paid and for accrued benefits during that
time. Provided, however, if Employee resigns his employment by reason of:
(i) the assignment of Employee by Employer to responsibilities
which are a material diminution of his executive duties as General
Counsel; or
(ii) a reduction by the Employer of the Employee's rate of base
salary,
then his resignation shall be deemed to have been a termination without
cause and shall be treated accordingly under paragraph 8(d) herein.
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<PAGE>
(c) TERMINATION BY DEATH. If the Employee dies during the term of
his employment, the Employer shall be relieved of any obligation hereunder
except for the payment of any base salary for periods worked but for which
base salary has not been paid and for accrued benefits during that time.
In addition, Employer shall continue to provide medical insurance coverage,
at Employer's sole cost, to Employee's spouse and dependents for a period
of 3 months following his death. Such insurance coverage shall be at the
same level of benefits which were provided to Employee at the time of his
death. If coverage cannot be continued by reason of law, insurance
regulations or policies, or other reasons beyond the control of Employer,
Employee's spouse and dependents shall be paid cash in an amount equal to
the premium cost of such insurance.
(d) TERMINATION WITHOUT CAUSE. If Employer elects to terminate the
employment of Employee for any reason other than those described in
subparagraphs (a), (b), or (c) above, or if Employer elects not to renew
the term of this Agreement upon the expiration thereof for reasons other
than those described in subparagraph (a) above, it shall give written
notice to the Employee and Employee shall leave the Employer as directed in
the notice of termination. In such event, Employer shall be obligated to
continue payments equivalent to base salary (determined by the base salary
being paid at the time of termination) plus, at Employer's sole expense,
health, dental, and life benefits for the greater of the balance of the
contract period or 12 months following the date of termination, subject to
the same conditions as contained in subparagraph (c) herein above. Such
payments shall be continued for the appropriate period to Employee or to
his estate, notwithstanding the subsequent death or disability of
Employee. In the event that Employee shall accept any other employment
following the termination of his employment without cause, the amount of
the continued payments and benefits hereunder shall be reduced by any
compensation or benefits he may receive from such other employer.
(e) The severance benefits provided Employee under this Paragraph 8
shall be reduced by any severance benefits to which Employee is entitled
under Employer's severance benefits policies for terminated employees
generally. However, it is expressly agreed that such severance benefits
shall not reduce in any way the aggregate payments or benefits to which
Employee is entitled under this Agreement.
9. TAX WITHHOLDINGS. All payments made under this Agreement shall be
subject to all required withholdings.
10. SURVIVAL. The obligations contained in Paragraph 5 hereof shall
survive the termination of this Agreement.
11. SUCCESSORS AND ASSIGNMENT. This Agreement shall be binding upon and
shall operate for the benefit of the parties hereto and their respective legal
representatives, legatees, distributees, heirs, and successors and assigns.
Employee shall not have the right to assign any of the rights contained in this
Agreement or delegate any of his duties hereunder.
12. SEVERABILITY. In the event that any provision of this Agreement shall
be held to be void or unenforceable, the remaining provisions of this Agreement
shall continue in full force and effect.
13. NOTICES. Any notice required or permitted to be given by either party
hereto upon the other shall be given in accordance with the provisions of this
Agreement if such notice is in writing and is delivered by hand or is mailed by
United States registered or certified mail, postage prepaid, properly addressed
as follows:
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IF TO EMPLOYER: J.C. Nichols Company
310 Ward Parkway
Kansas City, MO 64112
IF TO EMPLOYEE:
-------------------------------------
-------------------------------------
-------------------------------------
Each mailed notice or communication shall be deemed to have been given to the
party to which it is addressed three (3) days after the date the same is
deposited in the United States mail in the manner provided herein. Each such
notice or communication delivered by hand shall be deemed to have been given to
the party to whom delivered immediately upon the delivery thereof. Either party
may change the address specified above by written notice to the other.
14. WAIVER OF BREACH. The waiver of a breach of any provision of this
Agreement shall not operate or be construed to be a waiver of any other or a
subsequent breach.
15. GOVERNING LAW. The parties agree that any legal proceeding concerning
this Agreement will be brought in either state or federal district court located
in the State of Missouri and consent to the jurisdiction thereof and the law of
Missouri shall apply to all actions.
16. HEADINGS. The headings contained herein are for convenience only and
shall not be considered in construing or interpreting any provision hereof.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof including, but not limited to, any
previous written agreement concerning Employee's employment. This Agreement may
not be modified or discharged orally, but only by an agreement in writing signed
by the party against whom enforcement of any change, modification, waiver,
extension, or discharge is sought.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first written above.
EMPLOYER: EMPLOYEE:
J.C. NICHOLS COMPANY ----------------------------------------
By: By:
-------------------------- -------------------------------------
Title:
-----------------------
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<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 1, 1996, by and between J. C. NICHOLS
COMPANY, a Missouri corporation ("Employer" or "Company"), and BARRETT BRADY
("Employee");
WHEREAS, Employer desires to employ Employee in the capacity described
herein and Employee desires to work for Employer in such capacity;
WHEREAS, Employer and Employee desire to set forth the terms and conditions
for their agreement and understandings;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises set forth below, Employer and Employee agree as follows:
1. DUTIES. Employer hereby agrees to employ Employee, and Employee
agrees to accept such employment, for the term described in Paragraph 2 of this
Agreement. Employee shall hold the position of President and Chief Executive
Officer or such other comparable position as may be designated by the Board of
Directors and shall perform such executive duties and services for Employer and
its subsidiaries as may be assigned or delegated to him from time to time by the
Board of Directors. Employee agrees at all times to use his best efforts to
preserve and maintain the business of Employer and its subsidiaries. Employee
agrees to serve subject to the supervision of the Board of Directors and,
further, agrees to serve as an officer and/or director of one or more of
Employer's subsidiaries at the request of the Board of Directors. Employee
shall devote his full time and attention to advance the interests of Employer in
the performance of his duties hereunder. Except as expressly approved by the
Board of Directors, Employee shall not be engaged in or concerned with any other
commercial duties which would conflict with his obligations hereunder or require
services on his part to the detriment of the performance of his obligations
under this Agreement.
2. TERM OF EMPLOYMENT. Employer shall employ Employee for a term of five
(5) years ending December 31, 2000, subject to the termination and notice
provisions of Paragraph 9 hereof.
3. BASE SALARY. Employer shall pay to Employee a base salary at an
annualized rate of $225,000 a year, subject to annual review and adjustment at
the discretion of the Board of Directors.
<PAGE>
4. INCENTIVE COMPENSATION AND ADDITIONAL BENEFITS.
(a) Employee shall be entitled to participate in an annual incentive
discretionary bonus based on achievement of goals with an opportunity to
earn up to 80% of base with a target of 40% of base. The probability of
achieving target shall be set at 80% with the probability of achieving 80%
of base being 20%. Employer shall annually set goals for incentive
compensation with as much specificity as practical after consulting with
Employee. The incentive bonus for each year shall be earned and payable as
of December 31 of that year.
(b) Employee shall be entitled to participate in and receive the
benefits of any health, dental, life and long-term disability benefits, and
other similar employee benefits plans now in existence or which hereafter
may be adopted by Employer and which are made available to Employer's other
employees. Nothing herein shall be construed to require Employer to
establish, or shall preclude Employer, in its absolute discretion, from
changing or amending, in whole or in part, or revoking, any one or more of
such employee benefit plans or benefits.
(c) During the term hereof, Employee shall receive annually four (4)
weeks of paid vacation time in accordance with and in the same manner as
vacation benefits provided by Employer to other employees. Employee's
vacation shall be taken at such time or times as are scheduled by the
agreement of Employer and Employee. Unused vacation time shall not be
accumulated or carried over beyond the term hereof.
(d) Employee shall be provided a fixed supplemental retirement
benefit of $78,000 per year payable for a period of fifteen (15) years,
such payments to commence upon the earlier to occur of the death or
disability of Employee or when Employee reaches age sixty (60). This
supplemental benefit shall be in addition to any other retirement or fringe
benefit plan in which Employee may be entitled to participate. The
supplemental benefit shall vest as follows:
January 1, 1996 40%
December 31, 1996 20%
December 31, 1997 10%
December 31, 1998 10%
December 31, 1999 10%
December 31, 2000 10%
Notwithstanding the foregoing vesting schedule, if: (i) Employee is terminated
for cause pursuant to Paragraph 9(a) below, this entire supplemental retirement
benefit shall be forfeited, or (ii) Employee is terminated without cause (as set
forth in Section 9(d) below), dies or becomes disabled, or is terminated or
terminates employment pursuant to a Change in Control (as set forth in Section
9(e) below), this entire supplemental benefit shall be fully vested. The right
of Employee to receive these payments shall be personal to Employee and may not
be assigned,
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<PAGE>
transferred, pledged, or encumbered, except that Employee shall be entitled to
designate in writing a beneficiary to receive such payments in the event of his
death. If no written beneficiary designation is received by Employer, payments
on death shall be made to the beneficiary designated by Employee to receive
benefits from the qualified plan maintained by Employer, or failing that, to his
estate. For purposes of this Agreement, "disability" shall have the meaning
ascribed to such term under the Social Security Act as in effect on the date of
such disability. Nothing in this paragraph shall create a trust or any
obligation upon Employer to fund this retirement benefit and Employee's rights
hereunder shall be no greater than the right of any unsecured creditor of
Employer.
(e) Employee will be provided with a vehicle, paid parking, reserved
space, reasonable business expense account, and dues and business expenses
of current country club membership.
5. EQUITY PARTICIPATION.
(a) Employee shall be provided with equity participation in the
Company in the form of options on 800 shares of the common stock of the
Company ("Common Stock") with an exercise price of $1 per share ("Dollar
Options") and options on 2,000 shares of Common Stock with an exercise
price equal to fair market value of $1,550 per share ("FMV Options").
(b) The Dollar Options shall vest 50% on the date of this Agreement
and 50% on January 1, 1997. The FMV Options shall vest on the last day of
each calendar year (with the first vesting date being December 31, 1996) as
follows:
Year One: 10%
Year Two: 15%
Year Three: 25%
Year Four: 25%
Year Five: 25%
(c) Employer and Employee intend for the Dollar Options to be treated
as non-qualified options under the Internal Revenue Code ("Code").
Employer and Employee further intend that the FMV Options shall be treated
as incentive stock options under Code Section 422 to the extent of the
limitation under Code Section 422(d) and as non-qualified options to the
extent the Code Section 422(d) limitation is exceeded.
(d) The terms of the FMV Options and the Dollar Options shall
include, but not be limited to, the following:
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(i) The expiration date for the FMV Options shall be the date
that is ten (10) years from the date of grant of the FMV Options. The
expiration date for the Dollar Options shall be December 31, 2010.
Notwithstanding the foregoing and in the event Employee's employment
hereunder is terminated for any reason, the FMV Options shall expire
on the date that is one year from the date of such termination.
(ii) Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Employee:
(A) cash or check;
(B) surrender of other shares of Common Stock that have a
fair market value on the date of surrender equal to the
exercise price of the shares of Common Stock as to which the
FMV Options or the Dollar Options are being exercised. If
at the time of such surrender the Employer is a reporting
company subject to the rules and regulations of the
Securities Exchange Act of 1934, the shares of Common Stock
surrendered must have been held by the Employee for more
than six (6) months on the date of surrender.
(iii) No shares of Common Stock will be issued pursuant to the
exercise of FMV Options or Dollar Options unless such issuance and
such exercise shall comply with all relevant provisions of law and the
requirements of any stock exchange or national market system upon
which the Common Stock is then listed. If the shares of Common Stock
acquired pursuant to the exercise of FMV Options or Dollar Options
have not been registered under the Securities Act of 1933, as amended,
at the time of exercise, Employee shall, if required by the Company,
concurrently with the exercise of all or any portion of the FMV
Options or the Dollar Options, deliver to the Company an investment
representation statement in suitable form to establish an exemption
from registration of such shares of Common Stock.
(iv) Neither the FMV Options nor the Dollar Options may be
exercised if the issuance of shares of Common Stock upon such exercise
or the method of payment of consideration for such shares would
constitute a violation of any applicable federal or state securities
or other law or regulation. As a condition to the exercise, the
Company may require Employee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
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<PAGE>
(v) Neither the FMV Options nor the Dollar Options may be
transferred in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of
Employee only by Employee. The terms of the FMV Options and the
Dollar Options shall be binding upon the executors, administrators,
heirs, successors and assigns of the Employee.
(vi) The FMV Options shall be subject to such other provisions as
may be necessary to obtain incentive stock option treatment to the
maximum extent possible.
6. DISCLOSURE OF CONFIDENTIAL INFORMATION, COVENANT AGAINST COMPETITION,
AND INJUNCTIVE RELIEF.
(a) Employee acknowledges that (i) Employer's business is highly
specialized and (ii) the documents and information regarding Employer's
clients, tenants, services, methods of operation, sales, and the
specialized needs of Employer's clients, tenants, and customers are highly
confidential and constitute trade secrets. Employee further acknowledges
that Employee has had and will have access to trade secrets and
confidential information belonging to Employer, the loss of which cannot
adequately be compensated by damages in an action at law.
(b) During the term of this Agreement and at all times following the
voluntary or involuntary termination of Employee's employment for any
reason whatsoever, Employee shall not use for any purpose or disclose to
any person or entity without the prior written consent of Employer any
trade secrets or confidential information acquired during the course of his
employment with either Employer or any other business to which Employer has
succeeded by reason of purchase, merger, or otherwise.
(c) Employee shall not, other than in the ordinary course of
business, directly or indirectly, copy, take, or remove from Employer's
premises any of Employer's books, records, files, customer lists, tenant
information, documents or materials, or copies of any of the foregoing,
without the prior written consent of Employer.
(d) During the term of this Agreement and for a period of one (1)
year after the giving of notice of termination, except in the case of
termination by Employer without cause as described in Paragraph 9(d) below
or termination by Employer with cause as defined in Paragraph 9(a) below,
Employee will not, directly or indirectly, own, manage, operate, control,
be employed by, perform services for, consult with, solicit business for,
participate in, or be connected with the ownership, management, operation,
or control of any business that is either directly or indirectly
competitive with the property or services of Employer in the Kansas City
metropolitan area as defined by the Standard Metropolitan Statistical Area.
Employer and Employee have attempted to limit Employee's right to compete
only to the extent necessary to protect Employer from
5
<PAGE>
unfair competition so if a court should determine that the restrictions
contained herein are of too long duration or too broad in geographic scope
to be reasonable and enforceable in equity, such a provision shall be
amended only so much as shall be necessary in order for the restrictions
contained herein to be enforceable.
(e) The term "confidential information" as used in this Paragraph 6
includes, but is not limited to, records, lists, and knowledge of
Employer's clients, customers, tenants, services, methods of operation,
trade secrets, methods of determination of prices or rents, financial
condition, profits, sales, net income, indebtedness, and trade rights as
the same may exist from time to time, but shall not include information in
the public domain at the time it was acquired or which comes into the
public domain otherwise than through a disclosure by Employee.
(f) In addition to all of the remedies otherwise available to
Employer, including, but not limited to, the recovery of damages from
Employee, Employer shall have the right to injunctive relief to restrain
and enjoin any actual or threatened breach of the provisions of this
Paragraph 6.
7. REASONABLENESS OF RESTRICTIONS. Employee has carefully read and
considered the provisions hereof and, having done so, agrees that the
restrictions set forth in Paragraph 6 hereof are fair and reasonable and are
reasonably required for the protection of the interests of Employer.
8. AUTHORITY. Employee represents and warrants that he is not subject to
any agreement, instrument, order, judgment, or decree of any kind which would
prevent him from legally entering into this Agreement and fully performing his
duties and obligations hereunder.
9. TERMINATION.
(a) Termination with Cause. Employer may terminate this Agreement
with cause at any time by written notice to Employee if Employee shall
refuse to carry out the reasonable and lawful directions of the Employer or
if Employee shall defraud Employer, embezzle funds of Employer, engage in
proven fraud, dishonesty, or conduct that would, if proven, result in
conviction of a felony or engage in wilful misconduct in connection with
the fulfillment of Employee's duties and responsibilities hereunder. Upon
termination for cause, the Employee shall leave the Employer as directed in
the notice of termination, and the Employee and Employer shall be relieved
of any obligation hereunder except for the payment by Employer of any base
salary for periods worked but for which base salary has not been paid and
for accrued benefits during that time.
(b) Voluntary Resignation. Employee may resign and terminate his
employment at any time by written notice to Employer, in which event the
Employee and Employer shall be relieved of any obligation hereunder except
for the payment by Employer of any base salary for periods worked but for
which base salary has not been
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<PAGE>
paid and for accrued benefits during that time. Provided, however, if
Employee resigns his employment by reason of:
(i) the assignment of Employee by Employer to responsibilities
which are a material diminution of his executive duties as Chief
Executive Officer; or
(ii) a material reduction by the Employer of the Employee's rate
of base salary,
then his resignation shall be deemed to have been a termination without cause
and shall be treated accordingly under paragraph 9(d) herein.
(c) Termination by Death. If the Employee dies during the term of
his employment, the Employer shall be relieved of any obligation hereunder
except for the payment of any base salary for periods worked but for which
base salary has not been paid and for accrued benefits during that time.
In addition, Employer shall continue to provide medical insurance coverage,
at Employer's sole cost, to Employee's spouse and dependents for a period
of 24 months following his death. Such insurance coverage shall be at the
same level of benefits which were provided to Employee at the time of his
death. If coverage cannot be continued by reason of law, insurance
regulations or policies, or other reasons beyond the control of Employer,
Employee's spouse and dependents shall be paid cash in an amount equal to
the premium cost of such insurance.
(d) Termination without Cause. If Employer elects to terminate the
employment of Employee for any reason other than those described in
subparagraphs (a), (b), or (c) above, or if Employer elects not to renew
the term of this Agreement upon the expiration thereof for reasons other
than those described in subparagraph (a) above, it shall give written
notice to the Employee and Employee shall leave the Employer as directed in
the notice of termination. In such event, Employer shall be obligated to
continue payments equivalent to base salary (determined by the base salary
being paid at the time of termination) plus, at Employer's sole expense,
health, dental, life, and long-term disability benefits for the greater of
the balance of the contract period or 24 months following the date of
termination, subject to the same conditions as contained in subparagraph
(c) herein above. Such payments shall be continued for the appropriate
period to Employee or to his estate, notwithstanding the subsequent death
or disability of Employee. In the event that Employee shall accept any
other employment following the termination of his employment without cause,
the amount of the continued payments and benefits hereunder shall not be
reduced by any compensation or benefits he may receive from such other
employer. In addition, any stock options granted to Employee as described
in Paragraph 5 and to which Employee would have been entitled on the last
day of the year of termination shall become immediately vested, and the
vehicle furnished by Employer for his use shall be transferred to him for
no additional consideration.
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(e) Termination by Reason of Change of Control. In the event
Employee's employment is terminated or non-renewed by either party
following a "Change in Control" of the Company, Employee may elect to: (i)
receive payments equivalent to base salary (determined by the base salary
being paid at the time of termination or non-renewal) plus, at Employer's
sole expense, health, dental, life, and long-term disability benefits for
the greater of the contract period or 24 months, and (ii) cause all stock
options described in Section 5 to become immediately vested. In addition,
the parties agree that in the event of a "Change in Control", Employee
shall have the right for a period of six (6) months to terminate his
employment hereunder and receive the benefits described in this Paragraph
9(e).
The term "Change in Control" as used in this Paragraph 9(e) shall mean
the occurrence of any of the following: (i) any "person" (as such term is
defined in Sections 3(a)(9) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act")) or Allen & Company or the Nichols Family (each
as defined below) shall be or become the "beneficial owner" (as described
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities representing 35% or more of the combined voting power of the
then outstanding securities of the Company; PROVIDED, HOWEVER, that
ownership of any percentage of Company securities by the Company's Employee
Stock Ownership Plan (the "ESOP") shall not be deemed a "Change in
Control"; (ii) the Company shall merge, consolidate, sell substantially all
of its assets, or enter into any other transaction requiring stockholder
approval or resulting within 24 months in the dissolution or liquidation of
the Company; or (iii) the Company experiences any other event that would,
if the Company were a reporting company under the Exchange Act, be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
under the Exchange Act.
For purposes of determining a "Change in Control" under this
Agreement, the phrase: (i) "Allen & Company" shall include AHI Metnall
L.P., AHI Kansas, Inc., Allen & Company, Incorporated, any managing
director, partner, shareholder, or director of any of such entities, or any
entity controlled by any such individuals; and (ii) "Nichols Family" shall
include all of the persons who are lineal descendants of Miller Nichols,
or who are siblings or lineal descendants of siblings of Miller Nichols.
For the purpose of determining whether the threshold set forth in this
Paragraph 9(e) has been passed, the beneficial ownership of stock of the
Company by all individuals and entities included within the definition of
"Allen & Company" shall be aggregated and the beneficial ownership of stock
of the Company by all individuals included within the definition of the
"Nichols Family" shall be aggregated. Notwithstanding the foregoing, the
term "Change in Control" shall not include any transaction: (i) in which
Employee participates as an equity investor; or (ii) that is approved in
advance by Employee in his capacity as a member of the Board of Directors
of the Company.
8
<PAGE>
(f) The severance benefits provided Employee under this Paragraph 9
shall be reduced by any severance benefits to which Employee is entitled
under Employer's severance benefits policies for terminated employees
generally. However, it is expressly agreed that such severance benefits
shall not be offset against or reduce in any way any payments or benefits
to which Employee is entitled under this Agreement.
10. TAX WITHHOLDINGS. All payments made under this Agreement shall be
subject to all required withholdings. Employer, pursuant to such procedures as
it may specify from time to time, shall permit Employee to satisfy such tax
withholding obligation, in whole or in part, on the receipt of stock or the
exercise of options under Paragraph 5 by electing to have the Employer withhold
otherwise deliverable Shares having a fair market value equal to the amount
required to be withheld. The amount of the withholding requirement shall be
deemed to include any amount that Employer agrees may be withheld at the time
any such election is made, not to exceed the amount determined by using the
maximum federal, state or local marginal income tax rates applicable to Employee
with respect to the stock on the date that the amount of tax to be withheld is
to be determined. The fair market value of the stock to be withheld shall be
determined as of the date that such taxes are required to be withheld.
11. CODE SECTION 162(M) ADJUSTMENTS. Notwithstanding anything in this
Agreement to the contrary, if any portion of any payments to Employee by
Employer under this Agreement and any other present or future plan of Employer
or other present or future agreement between Employee and Employer would not be
deductible by Employer for federal income tax purposes by reason of application
of Code Section 162(m), then payment of that portion to Employee shall be
deferred until the earliest date upon which payment thereof can be made to
Employee without being non-deductible pursuant to Code Section 162(m). In the
event of such deferral, Employer, as the case may be, shall pay interest to
Employee on the deferred amount at 120% of the applicable federal rate provided
for in Code Section 1274(d)(1).
12. REDUCTION OF PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by
Employer to or for the benefit of Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by Employer for Federal
income tax purposes because of Code Section 280G, then the aggregate
present value of amounts payable or distributable as severance benefits
hereunder shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the aggregate
present value of such severance benefits without causing any Payment to be
nondeductible by Employer because of Code Section 280G. Anything to the
contrary notwithstanding, if the Reduced Amount is zero and it is
determined further that any Payment which is not part of the severance
benefits payable hereunder would nevertheless be nondeductible by Employer
for Federal income tax purposes because of Code Section 280G, then the
aggregate present value of Payments which are not severance benefits under
this Agreement shall also be
9
<PAGE>
reduced (but not below zero) to an amount expressed in present value which
maximizes the aggregate present value of Payments without causing any
payment to be nondeductible by Employer because of Code Section 280G. For
purposes of this Paragraph 12, present value shall be determined in
accordance with Code Section 280G(d)(4). In the event that a reduction of
benefits and payments is required pursuant to this Paragraph 12, Employer
shall, to the extent practicable, permit Employee to select which payments
and benefits provided for hereunder will be paid as provided by Employer to
Employee.
(b) Anything in this Agreement to the contrary notwithstanding, a
reduction of any Payment under Paragraph 12(a) during the portion of the
term of this Agreement that ends on December 31, 1997 shall occur only to
the extent that the excess of (i) the net after-tax benefit of the Payment
to Employee before reduction over (ii) the net after-tax benefit of the
Payment to Employee after reduction is less than $45,000. Examples of the
impact of this Section are set forth on Schedule 1.
13. SURVIVAL. The obligations contained in Paragraph 6 hereof shall
survive the termination of this Agreement.
14. SUCCESSORS AND ASSIGNMENT. This Agreement shall be binding upon and
shall operate for the benefit of the parties hereto and their respective legal
representatives, legatees, distributees, heirs, and successors and assigns.
Employee shall not have the right to assign any of the rights contained in this
Agreement or delegate any of his duties hereunder.
15. SEVERABILITY. In the event that any provision of this Agreement shall
be held to be void or unenforceable, the remaining provisions of this Agreement
shall continue in full force and effect.
16. NOTICES. Any notice required or permitted to be given by either party
hereto upon the other shall be given in accordance with the provisions of this
Agreement if such notice is in writing and is delivered by hand or is mailed by
United States registered or certified mail, postage prepaid, properly addressed
as follows:
If to Employer: J. C. Nichols Company
310 Ward Parkway
Kansas City, MO 64112
If to Employee: Barrett Brady
5317 Mission Woods Terrace
Shawnee Mission, KS 66205
10
<PAGE>
Each mailed notice or communication shall be deemed to have been given to the
party to which it is addressed three (3) days after the date the same is
deposited in the United States mail in the manner provided herein. Each such
notice or communication delivered by hand shall be deemed to have been given to
the party to whom delivered immediately upon the delivery thereof. Either party
may change the address specified above by written notice to the other.
17. WAIVER OF BREACH. The waiver of a breach of any provision of this
Agreement shall not operate or be construed to be a waiver of any other or a
subsequent breach.
18. GOVERNING LAW. The parties agree that any legal proceeding concerning
this Agreement will be brought in either state or federal district court located
in the State of Missouri and consent to the jurisdiction thereof and the law of
Missouri shall apply to all actions.
19. HEADINGS. The headings contained herein are for convenience only and
shall not be considered in construing or interpreting any provision hereof.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof including, but not limited to, any
previous written agreement concerning Employee's employment. This Agreement may
not be modified or discharged orally, but only by an agreement in writing signed
by the party against whom enforcement of any change, modification, waiver,
extension, or discharge is sought.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first written above.
EMPLOYER: EMPLOYEE:
J. C. NICHOLS COMPANY BARRETT BRADY
By:
--------------------------- -----------------------------------
Title:
---------------------------
11
<PAGE>
SETTLEMENT AGREEMENT
[FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, CONFIDENTIAL
TREATMENT OF ENTIRE AGREEMENT SOUGHT UNDER RULE 24b-2 OF THE SECURITIES
EXCHANGE ACT OF 1934]
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES/AFFILIATES OF THE COMPANY
DIRECT AND INDIRECT STATE OF
WHOLLY-OWNED CORPORATE SUBSIDIARIES D/B/A ORGANIZATION
----------------------------------- ----- ------------
<S> <C> <C>
Alameda Towers Development Company Alameda Towers Development Company MO
The Bay Plaza Companies, Inc. N/A FL
Bay Plaza Development Group, Inc. N/A FL
Bay Plaza Realty Company Bay Plaza Realty FL
Board of Trade Redevelopment Corporation N/A MO
Challenger, Inc. N/A KS
CPI II, Inc. N/A KS
1st Geary Corp. N/A CA
Guardian Mangement, Inc. Guardian Management KS
Harwood Operating Co., Inc. Harwood Operating KS
Ictan, Inc. N/A MO
The J.C. Nichols Realty Company N/A MO
KC Condor, Inc. N/A MO
Landmark Diversified, Corp. N/A MO
MAPC of Missouri, Inc. N/A MO
Nichols Equity, Inc. N/A MO
Nichols Plaza West, Inc. N/A MO
Nichols Resources, Ltd. N/A MO
Oak Park Landco, Inc. N/A KS
Ozark Mountain Village Inc. Ozark Mountain Village MO
Plaza Land Company N/A FL
Someday, Inc. N/A KS
T.W.B.T., Inc. N/A MO
<CAPTION>
DIRECT AND INDIRECT STATE OF
WHOLLY-OWNED AFFILIATES D/B/A GOVERNANCE
------------------------ ----- ----------
Bay Plaza Development Group-Joint Venture Bay Plaza Development Group FL
Shannon Valley Venture - Joint Venture N/A KS
World Resources Company - Partnership N/A MO
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES/AFFILIATES OF THE COMPANY
DIRECT AND INDIRECT NON-WHOLLY STATE OF ORGANIZATION
OWNED CORPORATE SUBSIDIARIES D/B/A OR GOVERNANCE % OWNERSHIP
- ---------------------------- ----- ------------- -----------
<S> <C> <C> <C>
Board of Trade Investment, Co. N/A MO 49.0%
Forty-Sixth Street Redevelopment
Corporation N/A MO 12.5%
47th Street Development Corp. N/A MO 33.3%
<CAPTION>
AFFILIATES IN WHICH COMPANY HAS
DIRECTLY OR INDIRECTLY AN STATE OF ORGANIZATION
INTEREST GREATER THAN 10% D/B/A OR GOVERNANCE % OWNERSHIP
------------------------- ------ ------------- -----------
Center Court Partners N/A FL 50.0%
Corporate Center Associates L.P. N/A IA 85.0%
Country Club Associates, L.P. N/A KS 49.0%
Creekview Partners II, L.P. N/A MO 51.3%
Dallas County Partners N/A IA 50.0%
Dallas County Partners II N/A IA 50.0%
Dallas County Partners III L.C. N/A IA 50.0%
FHDFT Limited Partnership N/A MO 33.3%
4600 Madison Associates, L.P. N/A MO 12.5%
Fountain One N/A IA 90.0%
Fountain Two N/A IA 60.0%
Fountain Three N/A IA 50.0%
Grand Street Partners I, L.P. N/A MO 51.3%
J.C. Nichols Iowa Partners N/A IA 86.7%
J.C. Nichols Real Estate-Joint
Venture J.C. Nichols Real Estate MO 40.0%
Marley Continental Homes of Kansas N/A KS 99.0%
Meredith Drive Associates, L.P. N/A IA 49.5%
Neptune Building Partners, L.P. N/A IA 94.4%
Sun Mountain Village Partners, L.P. N/A NM 44.1%
Terrace Place Parters N/A IA 50.0%
Village Court Associates N/A IA 65.0%
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 48,500 11,815
<SECURITIES> 0 38,114
<RECEIVABLES> 19,630 21,378
<ALLOWANCES> 1,557 1,594
<INVENTORY> 30,060 32,344
<CURRENT-ASSETS> 0 0
<PP&E> 347,744 345,448
<DEPRECIATION> 154,767 149,261
<TOTAL-ASSETS> 314,422 328,695
<CURRENT-LIABILITIES> 0 0
<BONDS> 312,817 332,007
0 0
0 0
<COMMON> 100 100<F1>
<OTHER-SE> (34,781) (36,825)
<TOTAL-LIABILITY-AND-EQUITY> 314,422 328,695
<SALES> 4,289 6,047
<TOTAL-REVENUES> 80,825 99,305
<CGS> 3,486 3,944
<TOTAL-COSTS> 45,463 115,803
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 1,901
<INTEREST-EXPENSE> 12,062 27,696
<INCOME-PRETAX> 35,362 (16,498)
<INCOME-TAX> (13,225) 5,746
<INCOME-CONTINUING> 22,137 (10,752)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,137 (10,752)
<EPS-PRIMARY> 4.53 (0.74)<F1>
<EPS-DILUTED> 4.53 (0.74)<F1>
<FN>
<F1>ITEM HAS BEEN ADJUSTED FOR AN 80:1 STOCK SPLIT EFFECTIVE MAY 29, 1996.
</FN>
</TABLE>
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASES AS OF JUNE 30, 1995
AHI Metnall, L.P., by its sole general partner AHI Kansas, Inc.
(hereinafter "Metnall"), Allen & Company Incorporated (hereinafter "Allen"),
James E. Mitchell, individually and as general partner of Mitchell Partners,
L.P., (hereinafter "Mitchell"), J. C. Nichols Company (hereinafter "JCN" or the
"Company"), John L. Flake, Marci V. Medina, Constance R. Worden and Kathleen K.
Rottinghaus (hereinafter "the Medina plaintiffs"), Kay Nichols Callison, William
P. McGugin, Clarence L. Roeder, George A. Russell, Jack W. Frost, Daniel P.
Rupprecht, Miller Nichols and Anthony J. Sweeney (hereinafter referred to
collectively as "Director-Defendants"), Philip Pistilli, Fred R. Gibson, Jr.,
Frederick Brady and Robert D. O'Byrne (hereinafter referred to collectively as
"Former Directors"), Walter C. Janes, Anthony J. Sweeney, David L. Cody, Miller
Nichols, Lynn L. McCarthy and William E. Bell (hereinafter referred to
collectively as "the Trustees"), Lynn L. McCarthy (hereinafter "McCarthy"),
Kelly Sherman (hereinafter "Sherman"), the Miller Nichols Living Trust, the John
and Kelly McCarthy Trust, the Lynn L. McCarthy Living Trust, Charles P.
Schleicher (hereinafter "Schleicher"), Walter C. Janes (hereinafter "Janes"),
the Walter C. Janes Living Trust, John Patrick McCarthy, Bowser Limited
Partnership (hereinafter "Bowser"), Whitermorn Corporation (hereinafter
"Whitermorn"), Chisum, Inc. (hereinafter "Chisum"), SunChase Capital, Inc.
(hereinafter "SunChase"), and Realty Capital Company (hereinafter "Realty
Capital") agree to settle claims, demands, and causes of action asserted in the
lawsuits styled AHI METNALL, L.P., ET AL. V. J. C. NICHOLS COMPANY, ET AL., Case
No. 95-0341-CV-W-1, AHI
<PAGE>
METNALL, L.P. V. J. C. NICHOLS COMPANY, ET AL., Case No. 95-0176-CV-W-1, MARCI
V. MEDINA, ET AL., V. LYNN L. MCCARTHY, ET AL., Case No. 95-0075-CV-W-1
(referred to collectively as the "Consolidated Action" or "Consolidated
Litigation") and J. C. NICHOLS COMPANY V. MCCARTHY, ET AL., Case No.
95-0502-CV-W-1, and certain additional claims, pursuant to the terms and
conditions set forth below and subject to the approval of the United States
District Court for the Western District of Missouri (hereinafter the "District
Court").
All parties to this Agreement, while denying all wrongdoing of any kind
whatsoever and denying any liability in the Consolidated Action or in Case No.
95-0502-CV-W-1, and relying on the fact that nothing herein shall be construed
or deemed to be evidence, or an admission, or a concession on the part of any of
them, of any fault or liability whatsoever and without conceding any infirmity
in any claim, counterclaim, crossclaim, third-party claim or defense filed by
them, consider it desirable that these actions be dismissed with prejudice on
the terms set forth herein in order to avoid further expense, to dispose of
burdensome litigation, to permit the continued operation of their affairs and
the affairs of JCN, unhindered by expensive litigation and distractions of
themselves and the personnel of JCN, and to terminate all controversy concerning
the Consolidated Action and Case No. 95-0502-CV-W-1.
THE DERIVATIVE ACTION
1. On April 20, 1995, Metnall and Mitchell (referred to collectively as
the "Derivative-Plaintiffs") filed, on behalf of JCN, a derivative action in the
District Court styled AHI METNALL, L.P., ET AL. V. J.C. NICHOLS COMPANY, ET AL.,
Case No. 95-0341-CV-W-1 (hereinafter the "derivative action").
2
<PAGE>
2. The derivative action involves claims under state common law as more
fully set forth below against the following parties:
(a) McCarthy, the former President, Chief Executive Officer and
Chairman of JCN's Board of Directors;
(b) Janes, a former Vice President and the Treasurer and a former
director of JCN;
(c) Sherman, a former Vice President and director of JCN;
(d) Schleicher, a former director of JCN;
(e) the Director-Defendants; and
(f) Bowser, an Illinois limited partnership.
In addition, in Case No. 95-0502-CV-W-1, JCN made claims against Chisum, as the
general partner of Bowser.
3. Among other things, the Derivative-Plaintiffs allege breaches of
fiduciary duties by Director-Defendants, McCarthy, Janes, Sherman and Schleicher
and claim that McCarthy and Janes engaged in insider transactions from which
they benefitted personally at the expense of JCN. The derivative action
challenged purchases and sales of real estate between McCarthy and JCN and the
valuation of that real estate, purchases and sales of JCN stock by McCarthy and
other alleged insider transactions that were allegedly detrimental to JCN.
4. The challenged transactions are set forth in greater detail in the
Complaint, First Amended Complaint and Second Amended Complaint filed in the
derivative action all of which are adopted and incorporated by reference herein.
5. All defendants in the derivative action have vigorously denied and
continue to deny all liability to the Derivative-
3
<PAGE>
Plaintiffs and JCN, all allegations of wrongdoing directed at them, and all
allegations of damages in the derivative action, including all statements set
forth in the report of Arthur Andersen & Company. Metnall and Allen deny all
allegations of wrongdoing directed at them by counterclaim or otherwise in the
derivative action and in Case No. 95-0502-CV-W-1.
6. All parties to the derivative action, through their counsel, have made
a thorough investigation of the facts and circumstances relevant to the claims
and possible claims in that action. In connection with that investigation, in
January 1995, the board of directors of JCN appointed a special investigative
committee of the board of directors that retained independent outside counsel.
On May 26, 1995, the board of directors, including the Director-Defendants,
voted in favor of adopting the resolutions proposed by the special investigative
committee relating to the claims in these actions. On that same day, the Board
resolved to adopt procedures and safeguards that would apply to any transactions
involving directors or officers. All parties conducted a thorough investigation
of any and all claims made by the Derivative-Plaintiffs and conducted discovery,
including inspections of thousands of pages of documents produced by party and
non-party witnesses. They have considered the complexity, expense, and length
of time necessary to prosecute this action, the uncertainties of the outcome of
this complex litigation, the relative strength of the proof and claims available
against each of the defendants in the derivative action, the relative strength
of the proof and potential counterclaims available to the defendants in the
derivative action, the financial condition and best
4
<PAGE>
interests of JCN, the availability and amounts of its officers and directors
liability insurance coverage, and the substantial benefit to JCN provided by the
proposed settlement. Based upon these considerations, the parties to the
derivative action have concluded that it is in their best interests and in the
best interests of JCN to settle the actions on the terms set forth below.
7. For ease of reference only, settlement of the derivative action is
divided into claims against: (a) Director-Defendants and Former Directors; (b)
McCarthy and Bowser; (c) Kelly Sherman; (d) Walter Janes; and (e) Charles
Schleicher.
SETTLEMENT OF CLAIMS AGAINST DIRECTOR-DEFENDANTS AND FORMER DIRECTORS
8. The parties hereto agree that all claims which are or could have been
asserted against the Director-Defendants and Former Directors in the derivative
action shall be compromised and dismissed with prejudice, subject to the
approval of the District Court pursuant to Rule 23.1 of the Federal Rules of
Civil Procedure, upon and subject to the terms and conditions set forth below.
9. In full settlement of any and all claims, individual and
representative, that are, or could have been, or might be in the future asserted
by Derivative-Plaintiffs or JCN in the derivative action against Director-
Defendants and Former Directors, and in further consideration of the releases of
McCarthy, Sherman, and Janes, set forth in Paragraphs 33, 44, and 55, and the
covenant not to sue Schleicher, set forth in Paragraph 62, upon execution of a
Release in the form of Exhibit A.1 and a Release and Settlement
5
<PAGE>
Agreement in the form of Exhibit A.2 hereto and the occurrence of all conditions
precedent set forth in Paragraph 71:
(a) Federal Insurance Company ("Federal") has agreed to pay to JCN
the sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00) under
the Executive Liability and Indemnification Coverage Section of Executive
Protection Policy (Policy No. 8108-58-82-G) issued to JCN for the policy
period September 27, 1994 to September 27, 1995; and
(b) National Union Fire Insurance Company of Pittsburgh, Pa.
("National Union") has agreed to pay to JCN the sum of Two Million Three
Hundred Thousand Dollars ($2,300,000.00) under the Directors and Officers
Insurance and Company Reimbursement Policy (Policy No. 443-79-09) issued to
JCN for the policy period September 27, 1994 to September 27, 1995.
10. The Director-Defendants and the Former Directors shall pay, within ten
days of the Derivative Effective Date, all current debts and outstanding
promissory notes, if any, and personal accounts receivable balances, if any,
held by JCN on their behalf.
11. JCN shall indemnify the Director-Defendants and the Former Directors,
for all reasonable attorneys' fees and all reasonable expenses, costs and
disbursements and other amounts incurred in defending this litigation. JCN
shall pay all amounts described in this Paragraph directly upon receipt of the
statements therefor. Nothing in Paragraph 9 or its subparagraphs shall alter,
amend, restrict or otherwise change the Company's indemnification obligation.
12. With respect to any present or future litigation, other than the
Consolidated Litigation and Case No. 95-0502-CV-W-1, the
6
<PAGE>
Director-Defendants and Former Directors shall remain entitled to any
indemnification rights they have pursuant to the Company Bylaws, or contractual
agreements, or arising under applicable law.
13. The Derivative-Plaintiffs, JCN and the Director-Defendants shall
withdraw with prejudice all motions seeking leave to file claims, crossclaims,
counterclaims, or third-party claims and shall dismiss with prejudice all
claims, crossclaims, counterclaims or third-party claims they have filed in the
derivative action.
14. JCN shall dismiss with prejudice the separate suit it has filed
against McCarthy, Janes, Metnall and Allen numbered No. 95-0502-CV-W-1.
15. Subject to the provisions of Paragraphs 10 and 16 and the occurrence
of the Derivative Effective Date, the Derivative-Plaintiffs, Allen, JCN, and
their respective predecessors, successors, parents, subsidiaries, affiliates and
assigns, and each of them, and the Director-Defendants and the Former Directors
including each parties' respective heirs, spouses, executors, administrators and
assigns, for good and sufficient consideration, release and forever discharge
each other from any and all manner of actions, causes of actions, suits,
obligations, claims, debts, demands, agreements, promises, liabilities,
controversies, costs, expenses and attorneys' fees, whatsoever, whether in law
or in equity, and whether based on any Federal law, state law, a common law
right of action or otherwise, known or unknown, accrued or not accrued, which
any of them now have or ever had, can have or shall or may hereafter have, by
7
<PAGE>
reason of, or in any manner related to: (a) any breach or claim of breach of
fiduciary duties or obligations, or due to any failures or claims of failure in
performance of the Director-Defendants' or Former Directors' duties as a
director, officer, committee member, trustee, agent, employee or shareholder of
JCN or any entity the Director-Defendants or Former Directors served at the
request of JCN; (b) the alleged acts, failures to act, omissions,
misrepresentations, facts, events, transactions, occurrences, or other subject
matter which were or could have been set forth in the Consolidated Action or in
Case No. 95-0502-CV-W-1; or (c) any prior transactions or business activities or
decisions of JCN or Metnall or Allen or their agents, affiliates, subsidiaries,
successors or assigns during the tenure of the Director-Defendants or Former
Directors; provided, however, that, except as expressly provided in
subparagraphs 15(a) and (b), the foregoing release shall not affect any
entitlements or contract rights or obligations that the Director-Defendants or
the Former Directors or their affiliates, successors, or assigns may have under
any existing contract with JCN or its affiliates, nor shall the foregoing
release affect any entitlements or contract rights of the Director-Defendants or
the Former Directors as employees, officers, directors or shareholders of JCN,
or as former employees, officers, directors or shareholders of JCN, including,
without limitation, the JCN Employee Retirement Plan, the JCN Employee Stock
Ownership Plan, the JCN Employee Stock Ownership Trust (including benefits
conferred on Plan participants as a result of this Agreement), the JCN Group
Health Insurance Plan, deferred compensation arrangements, life insurance,
employment agreements and JCN personal account balances.
8
<PAGE>
16. The Director-Defendants have represented to JCN that they have not
obtained improper personal benefits at the expense of JCN as a result of a
breach of their duties of loyalty to JCN; and JCN represents and agrees that no
such improper personal benefit to any Director-Defendant has been discovered as
of August 8, 1995. Director-Defendants agree that if JCN's ongoing
investigations: (a) discover in the future a material and improper personal
benefit to a Director-Defendant at the expense of JCN, as a result of an
actionable failure, omission or act by a Director-Defendant that breaches his or
her fiduciary duties of loyalty to JCN; and (b) such a claim is made and a legal
proceeding initiated by the later of (i) September 30, 1995, or (ii) 30 days
from the earlier of the date on which (A) a majority of the board of directors
of JCN consists of members who are not defendants in the Consolidated Litigation
or (B) a new board is elected by the shareholders of JCN, then the general
release of such Director-Defendants set forth in Paragraph 15 of this Agreement
shall not prevent recovery by JCN limited to the amount of such improper
personal benefit to the Director-Defendant at the expense of JCN. Nothing in
this Paragraph shall be deemed to extend any otherwise applicable statute of
limitations.
17. The Director-Defendants and Former Directors, for good and sufficient
consideration, release and forever discharge all individual defendants in the
Consolidated Action and in Case No. 95-0502-CV-W-1, including their heirs,
spouses, executors, administrators and assigns, from any and all claims, demands
and causes of action: (a) for contribution or indemnification based upon claims
made in the Consolidated Litigation or in Case No. 95-
9
<PAGE>
0502-CV-W-1; or (b) based upon any error, misstatement, misleading statement,
act, omission, neglect, or breach of duty committed, attempted, or allegedly
committed or attempted, by any individual defendant, in his or her capacity as
an employee, director, or officer of JCN, or as a trustee of the JCN Employee
Stock Ownership Trust, including without limitation, all claims of fraud, or
other intentional misconduct, and acts resulting in a personal benefit to the
released party, committed in the scope of such employment. Except as provided
in Paragraph 17.1 of this Agreement, no trust, foundation, account, or other
entity of which any of the Director-Defendants or Former Directors is a trustee,
administrator, or beneficiary, except as expressly provided in this Agreement,
gives any release hereby to any person or entity.
17.1 The Miller Nichols Living Trust, for good and sufficient
consideration, releases and forever discharges all individual defendants in the
Consolidated Action and in Case No. 95-0502-CV-W-1 and the Former Directors,
including their heirs, spouses, executors, administrators and assigns, from any
and all claims, demands, or causes of action based upon: (a) the alleged acts,
failures to act, omissions, misrepresentations, facts, events, transactions or
occurrences or other subject matter set forth in the Consolidated Action or in
Case No. 95-0502-CV-W-1; or (b) any acts or omissions by the individual
defendants within the scope of his or her employment as a director, officer or
employee with and on behalf of JCN, including without limitation, all claims of
fraud, or other intentional misconduct, and acts resulting in a personal benefit
to the released party, committed in the scope of such employment. Except as
specifically set forth in Paragraph
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17.1(a), the Miller Nichols Living Trust does not release any claims, demands,
or causes of action based on acts, omissions, or breaches of any duties by any
individual defendant involving transactions in which the individual defendant
was acting in his or her individual capacity or as a trustee of the Miller
Nichols Living Trust (even though such individual defendant may have been
serving in the capacity of a trustee of the Miller Nichols Living Trust as a
result of his being an employee, officer, or director of JCN), or transactions
in which the individual defendant was acting beyond the scope of his or her
responsibilities as an employee, officer, or director of JCN.
SETTLEMENT OF CLAIMS AGAINST MCCARTHY AND BOWSER
18. The parties hereto agree that all actions by and between the
Derivative-Plaintiffs, Allen, JCN, McCarthy, Chisum, Bowser, Whitermorn, the
John and Kelly McCarthy Trust and the Lynn L. McCarthy Living Trust in the
derivative action and in Case No. 95-0502-CV-W-1 shall be compromised and
dismissed with prejudice subject to the approval of the District Court pursuant
to Rule 23.1 of the Federal Rules of Civil Procedure, upon and subject to the
terms and conditions set forth below.
19. Within ten days following the Derivative Effective Date, Bowser and
McCarthy shall take all steps necessary to effect or finalize the transfers and
forfeiture set forth in Paragraphs 20 and 22-27.
20. McCarthy and Bowser shall convey to JCN all shares of JCN stock held
by Bowser, including 125,242 shares of JCN stock acquired by Bowser pursuant to
the May 14, 1992 transaction with the JCN Employee Stock Ownership Trust, except
that, at the sole
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option of JCN, JCN may direct McCarthy and Bowser to convey 8,500 shares to the
JCN Employee Stock Ownership Plan. Subject to the occurrence of the Derivative
Effective Date, all parties to this Agreement consent to this transfer and
hereby relinquish any claim thereto on their own behalf or on behalf of the ESOT
or its participants and beneficiaries.
21. The principal amount of the debt of Bowser to JCN, assumed by Bowser
from the JCN Employee Stock Ownership Trust and secured by the JCN stock held in
the name of Bowser, shall be deemed satisfied through the conveyance of that
stock to JCN. Unpaid interest on the principal amount of the debt, accrued
since May 14, 1992, will be forgiven and cancelled.
22. McCarthy and Bowser shall forfeit all rights under the May 14, 1992
option agreements with the ESOT. Subject to the occurrence of the Derivative
Effective Date, no other party, including SunChase and Realty Capital, claims
any interest in or rights with respect to that option agreement.
23. McCarthy and/or the Lynn McCarthy Living Trust shall convey to JCN
5,719 shares of JCN stock and 193,976 shares of Shawnee Mission Bancshares, Inc.
stock. The stock shall be conveyed to the Company free of encumbrance.
24. McCarthy and/or the Lynn L. McCarthy Living Trust shall convey to the
Company, subject to pledge, all his or its rights, title, and interest in 6,508
shares of JCN stock that currently stand as security for the promissory note, in
the approximate amount of $6,065,000, to the Miller Nichols Living Trust.
Within ten days following the Derivative Effective Date, the Company shall
execute all documents necessary to assume the debt of McCarthy to
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the Miller Nichols Living Trust and the Miller Nichols Living Trust shall
execute all documents necessary to release McCarthy from the debt.
25. SunChase and Realty Capital, or either of them, may retain the 1,987
shares of JCN stock that are evidenced by Stock Certificate Nos. 6353 and 6358,
that are currently registered on the stock record books of JCN as being issued
to Realty Capital, and that were previously conveyed to SunChase and/or Realty
Capital by McCarthy and/or certain of his affiliates (which JCN shares are
hereinafter collectively referred to as the "SunChase Retained Shares").
26. McCarthy and/or the Lynn L. McCarthy Living Trust shall convey to the
Company all other shares of JCN stock that were either: (a) held in McCarthy's
name, in the name of any affiliate or immediate family member, or in the name of
any trust of which he is a beneficiary, including the Lynn L. McCarthy Living
Trust; or (b) which he or any of his related interests owned, on April 11, 1995,
and subsequently conveyed. That stock shall be conveyed to the Company free of
encumbrance.
27. The Company shall retain 6,474 shares of stock conveyed to it by
McCarthy in the February 18, 1992 Whitermorn transaction. Whitermorn shall
convey to JCN the six parcels of real property conveyed to it in the February
18, 1992 Whitermorn exchange including the Whitehorse property, the Harpster
property, the Corinth Gardens and Corinth Paddock Apartments, the Eureka Savings
land, and the land at 135th Street in Olathe, Kansas. With the exception of
Corinth Paddock, all real property shall be conveyed to the Company free of
encumbrance. Corinth Paddock shall be
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conveyed subject to the May 16, 1974 note and mortgage held by New York Life
Insurance Company. The Wrap-Around Purchase Money Mortgage and Promissory Note
made by TBLTA, Inc. to the Company on February 18, 1992 shall be cancelled and
forgiven. All deeds by the Company to McCarthy or Whitermorn shall be
cancelled. The balance held by the Company, as of June 30, 1995, in the
Whitermorn Management Accounts shall be retained by JCN. Whitermorn and/or
McCarthy shall be responsible to pay all taxes on the income of Whitermorn,
including, without limitation, any tax liability incurred as a result of the
transfer of the Whitermorn properties to the Company under this Agreement. The
responsibility for expenses, the right to receive profits, and the obligation to
pay taxes on profits received in respect of the Whitermorn properties shall
shift, as of June 30, 1995, to JCN.
28. Subject to the occurrence of the Derivative Effective Date, each of
the parties to this Settlement Agreement agrees that the shares of stock
referred to in Paragraphs 20 and 22 through 27 are free and clear of any lien,
claim, charge or encumbrance of any type, kind, nature or description whatsoever
in favor of any of such parties (in each case, however, other than any claim of
any party who is to receive or retain such JCN shares as provided in this
Settlement Agreement), any of their successors or assigns, or any person or
entity that may be entitled to make any claim by, through, under or on behalf of
any such party, and that such party is forever barred from making any claim that
all or any of the SunChase Retained Shares are not non-assessable, duly and
validly issued, and outstanding. It is further agreed by JCN, Bowser, McCarthy,
and the Lynn McCarthy Living Trust, that all of the
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<PAGE>
SunChase Retained Shares are in all respects deemed to have been fully paid for,
are non-assessable and are duly and validly issued and outstanding.
29. The Company shall retain the property at 135th Street and Mission Road
in Johnson County, Kansas, conveyed to it as a result of the October 31, 1994
exercise of the World Resources option.
30. The Company shall pay McCarthy Three Million Six Hundred Thousand
Dollars ($3,600,000.00). That payment will be made upon completion of all steps
necessary to effect or finalize the transfers and forfeiture set forth in
Paragraphs 20 and 22- 27.
31. McCarthy agrees that he will not, at any time in the future, serve as
a director, officer, or employee of the Company or any entity in which the
Company holds an ownership interest of 50% or more.
32. The Derivative-Plaintiffs, JCN, McCarthy and Bowser shall withdraw
with prejudice all motions seeking leave to file claims, crossclaims,
counterclaims or third-party claims and shall dismiss with prejudice all claims
they have in the derivative action and in Case No. 95-0502-CV-W-1.
33. Subject to the occurrence of the Derivative Effective Date and upon
completion of all steps necessary to effect or finalize the transfers and
forfeiture set forth in Paragraphs 20 and 22-27, the Derivative-Plaintiffs,
Allen, JCN, SunChase and Realty Capital, their predecessors, successors,
parents, subsidiaries, affiliates, and assigns, and each of them, and McCarthy,
John Patrick McCarthy, individually, and their spouses, heirs, executors,
administrators, and assigns, and Bowser, Chisum, Whitermorn, the John and Kelly
McCarthy Trust and the Lynn L.
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<PAGE>
McCarthy Living Trust, for good and sufficient consideration, mutually release
and forever discharge each other from any and all manner of actions, causes of
actions, suits, obligations, claims, debts, demands, agreements, promises,
liabilities, controversies, costs, expenses and attorneys' fees, whatsoever,
whether in law or in equity, and whether based on any Federal law, state law, a
common law right of action or otherwise, known or unknown, accrued or not
accrued, which any of them now have or ever had, can have or shall or may
hereafter have, based on transactions, events or occurrences prior to June 30,
1995 or based on the matters referred to in subparagraph 33(h), including
without limitation those relating in any manner to: (a) any breach or claim of
breach of fiduciary duties or obligations, or due to any failures or claims of
failure in performance of McCarthy as a director, partner, officer, committee
member, trustee, agent, employee or shareholder of JCN, any entity McCarthy
served at the request of JCN, Bowser, Chisum, or Whitermorn; or (b) the alleged
acts, failures to act, omissions, misrepresentations, facts, events,
transactions, occurrences, or other subject matter which were set forth in the
Consolidated Action or Case No. 95-0502-CV-W-1 or in any pleading or other
document filed therein, or sought to be filed therein, by any party; (c) any
prior transactions or business activities or decisions of JCN or of Metnall or
Allen or their agents, affiliates, parent or subsidiary corporations, successors
or assigns during McCarthy's tenure, including, without limitation, McCarthy's
termination as an employee of JCN and McCarthy's resignation as a director of
JCN; (d) any claim for personal injuries, damage to reputation, or negligent
infliction of
16
<PAGE>
emotional distress McCarthy may have, which McCarthy asserts have a settlement
value of $2,850,000, based on a total payment of $3,600,000; (e) any current
debts, promissory notes, or personal account receivable balances; (f) any rights
or obligations of indemnity under the Company's Bylaws, contracts of indemnity,
and any undertaking to repay JCN with respect to prior advancement of fees and
expenses in defending claims in the Consolidated Litigation and related actions;
(g) the transfer, pledge, assignment, ownership, or payment of dividends on the
shares of stock referred to in Paragraph 20 and 22 through 27 above; or (h) any
effort, prior to June 30, 1995 or in connection with the consummation of the
transactions contemplated hereunder, by SunChase or Realty Capital to acquire,
and any acquisition by SunChase or Realty Capital of, any JCN shares, any
interest in JCN and any option rights relating to JCN shares, including, without
limitation, through proposals made in May and June of 1995. As a result the
following debts owed by McCarthy to JCN, including principal and interest, are
cancelled and forgiven: the debt evidenced by a December 31, 1990 Promissory
Note in the principal amount of $1,595,000; open account 01 0050 0002
1476284076, which, as of June 30, 1995, had a balance owing of $4,564,221.38;
and other accounts receivable totalling, as of June 30, 1995, $891,708.25. All
collateral securing any debt released pursuant to this Paragraph shall be
released and returned to the debtor on the debt released, including, without
limitation, promissory notes made by Red Oak Manor, Robert Jackson, and James
Levitt, which secured a debt owed by McCarthy to JCN in the principal amount of
17
<PAGE>
$1,595,000. McCarthy represents that these notes are the only collateral on
any debt owed by him to the Company.
34. With respect to any present or future litigation other than the
Consolidated Litigation and Case No. 95-0502-CV-W-1, McCarthy shall remain
entitled to any indemnification rights he has pursuant to the Company's Bylaws
or contractual agreements between the Company and McCarthy or arising under
applicable law.
35. The release referred to in Paragraph 33 shall not affect any rights
McCarthy has to deferred compensation under existing contracts with the Company;
McCarthy shall be paid all deferred compensation in accordance with his existing
Deferred Compensation Agreement, provided that McCarthy does release, in
accordance with Paragraph 33, any claim under Paragraphs 9 through 18,
inclusive, of the January 31, 1995 Employment Agreement between McCarthy and the
Company, and any claim for other similar severance benefits. McCarthy shall
also retain all vested benefits to which he is currently entitled under the JCN
Employee Retirement Plan, the JCN Employee Stock Ownership Plan and the JCN
Employee Stock Ownership Trust (including benefits conferred on Plan
participants as a result of this Agreement), and the JCN Group Health Insurance
Plan. McCarthy shall be responsible for payment of all future premiums or other
consideration necessary to perfect or retain those benefits.
36. The releases referred to in Paragraphs 33 and 44 shall not extend to
any obligation of the Company on the June 29, 1992 promissory note to Great
Plains Service Corporation, Inc., which was subsequently assigned to John
Patrick McCarthy and Kelly Sherman.
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<PAGE>
37. The split dollar life insurance policy on the life of McCarthy, on
which the Company has paid premiums, will be handled, subject to approval of the
insurer, as follows:
(a) the Company will pay no further premiums;
(b) McCarthy shall elect (i) to take on the responsibility to pay
premiums; (ii) to transfer the policy from the Company to any new employer;
or (iii) to surrender the policy for its cash value; and
(c) the Company will retain its interest in the benefit or cash
surrender value of the policy, up to the amount of the premiums already
paid by the Company.
If McCarthy elects to transfer the policy under subparagraph (b)(ii), he shall
pay the Company the amount of the premiums paid by the Company, and the Company
agrees to cooperate with McCarthy in effecting the transfer. The refusal of the
insurer to approve of the matters agreed to in this Paragraph and the resulting
inability to accomplish those matters is not a condition precedent to this
Agreement. JCN and McCarthy shall use best efforts to obtain the insurer's
approval.
38. McCarthy, for good and sufficient consideration, releases and forever
discharges all individual defendants in the Consolidated Action and in Case No.
95-0502-CV-W-1 and the Former Directors, including their heirs, spouses,
executors, administrators and assigns from any and all claims, demands and
causes of action, (a) for contribution or indemnification based upon claims
made in the Consolidated Litigation or in Case No. 95-0502-CV-W-1; or (b) based
upon any error, misstatement, misleading statement, act, omission, neglect, or
breach of duty committed,
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<PAGE>
attempted, or allegedly committed or attempted, by any individual defendant, in
his or her capacity as an employee, director, or officer of JCN, or as a trustee
of the JCN Employee Stock Ownership Trust, including without limitation, all
claims of fraud, or other intentional misconduct, and acts resulting in a
personal benefit to the released party, committed in the scope of such
employment.
39. Within ten (10) days of the Derivative Effective Date, McCarthy shall
cause to have dismissed, as moot, his appeal from the District Court's April 11,
1995 Order, now pending in the Eighth Circuit Court of Appeals as Case No. 95-
1207-WMKC.
40. Within ten days following the Derivative Effective Date, the parties
to Case No. 95-0176-CV-W-1 shall jointly request that the Court enter an Order:
(a) dissolving, as moot the April 11, 1995, Preliminary Injunction
Order;
(b) dissolving the bond given by Metnall as security for the
injunction and discharging Metnall and its surety on that bond;
(c) permitting all parties, including JCN, to issue, solicit, and
exercise proxy statements upon entry of the Order by the District Court;
and
(d) permitting JCN to hold its 1995 shareholders meeting within a
period between 30 and 60 days following the Derivative Effective Date of
this Settlement Agreement, as defined in Paragraphs 71 and 72.
Metnall shall dismiss, with prejudice, all other claims in Case No.
95-0176-CV-W-1.
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<PAGE>
SETTLEMENT OF CLAIMS AGAINST KELLY SHERMAN
41. The parties hereto agree that all claims against Sherman in the
derivative action shall be compromised and dismissed with prejudice subject to
the approval of the District Court pursuant to Rule 23.1 of the Federal Rules of
Civil Procedure, upon and subject to the terms and conditions set forth below.
42. Sherman shall receive all compensation, deferred compensation, or
other benefits to which she is entitled under contractual agreements with the
Company, including, without limitation, all vested benefits to which she is
currently entitled under the JCN Employee Retirement Plan, the JCN Employee
Stock Ownership Plan and the JCN Employee Stock Ownership Trust (including
benefits conferred on Plan participants as a result of this Agreement), and the
JCN Group Health Insurance Plan. Sherman shall be responsible for payment of
all future premiums or other consideration necessary to perfect or retain those
benefits. Sherman shall be entitled to receive payment by the Company of
savings account balances in the name of Kelly Sherman, in the amount of
$7,890.54 and in the name of James or Kelly Sherman in the amount of $5,069.74.
The balances stated are with interest, to July 19, 1995. Subsequent payment
shall include additional interest that accrues in the interim. Those balances
are payable on demand any time after the Derivative Effective Date of this
Agreement. For purposes of determining the amount of deferred compensation to
be paid under Paragraph 5 of the November 25, 1994 Employment Agreement between
Sherman and JCN, Sherman shall be considered to have been terminated as an
employee, as of June 30, 1995. The amount of deferred compensation she is to
receive under
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<PAGE>
the Employment Agreement shall be offset by salary payments made to Sherman by
JCN in respect of the period following June 30, 1995.
43. The Derivative-Plaintiffs, JCN and Sherman shall withdraw with
prejudice all motions seeking leave to file claims, crossclaims, counterclaims
or third-party claims and shall dismiss with prejudice all claims they have in
the derivative action and in Case No. 95-0502-CV-W-1.
44. Subject to the provisions of Paragraph 42 and the occurrence of the
Derivative Effective Date, the Derivative-Plaintiffs, Allen and JCN, their
predecessors, successors, parents, subsidiaries, affiliates and assigns, and
each of them, and Sherman, her spouse, heirs, executors, and administrators, for
good and sufficient consideration, mutually release and forever discharge each
other from any and all manner of actions, causes of actions, suits, obligations,
claims, debts, demands, agreements, promises, liabilities, controversies, costs,
expenses and attorneys' fees, whatsoever, whether in law or in equity, and
whether based on any Federal law, state law, a common law right of action or
otherwise, known or unknown, accrued or not accrued, which any of them, now have
or ever had, can have or shall or may hereafter have, by reason of, or in any
manner related to: (a) any breach or claim of breach of fiduciary duties or
obligations, or due to any failures or claims of failure in performance of
Sherman as a director, an officer, committee member, agent, employee or
shareholder of JCN or any entity Sherman served at the request of JCN; (b) the
alleged acts, failures to act, omissions, misrepresentations, facts, events,
transactions, occurrences, or other subject matter which were or could have been
set forth in the
22
<PAGE>
Consolidated Action or Case No. 95-0502-CV-W-1; (c) any prior transactions or
business activities or decisions of JCN or of Metnall or Allen or their agents,
affiliates, parent or subsidiary corporations, successors or assigns during
Sherman's tenure; or (d) the termination of Sherman as an employee of JCN,
Sherman's resignation as a director of JCN, and any claim for personal injuries,
damage to reputation, or negligent infliction of emotional distress Sherman may
have as a result of those matters.
45. Sherman shall be indemnified by JCN for reasonable attorneys' fees and
expenses in defending claims in the Consolidated Action, provided that the
Sonnenschein law firm shall demonstrate that the attorneys' fees for which
indemnification is sought were incurred exclusively in defense of Sherman.
46. Sherman, for good and sufficient consideration, releases and forever
discharges all individual defendants in the Consolidated Action and in Case No.
95-0502-CV-W-1 and the Former Directors, including their heirs, spouses,
executors, administrators and assigns from any and all claims, demands and
causes of action, (a) for contribution or indemnification based upon claims
made in the Consolidated Litigation or in Case No. 95-0502-CV-W-1; or (b) based
upon any error, misstatement, misleading statement, act, omission, neglect, or
breach of duty committed, attempted, or allegedly committed or attempted, by any
individual defendant, in his or her capacity as an employee, director, or
officer of JCN, or as a trustee of the JCN Employee Stock Ownership Trust,
including without limitation, all claims of fraud, or other intentional
misconduct, and acts resulting in a personal benefit to the released party,
committed in the scope of such employment.
23
<PAGE>
SETTLEMENT OF CLAIMS AGAINST WALTER JANES
47. The parties hereto agree that all claims against Janes and all
potential claims by Janes in the derivative action and Case No. 95-0502-CV-W-1
shall be compromised and dismissed with prejudice subject to the approval of the
Federal District Court pursuant to Rule 23.1 of the Federal Rules of Civil
Procedure, upon and subject to the terms and conditions set forth below.
48. The adjusted outstanding balance on the debt incurred by Westport
Brewing Company, Inc. ("Westport Brewing"), in the total amount of $1,161,845,
shall be consolidated and evidenced by a new promissory note, with an effective
date of July 1, 1995. The note shall be made by Westport Brewing and by Janes
individually. It shall bear interest at a floating rate of the commercial bank
prime rate set by Commerce Bank, plus 1/2 point. The terms of the note shall
be: interest only for five years, payable yearly, with the principal balance
due on July 1, 2000. The first interest payment, due July 1, 1996, shall be in
the amount of $50,000. The remaining unpaid interest, if any, accrued between
July 1, 1995 and July 1, 1996 shall be added to the principal balance. Interest
payable subsequent to July 1, 1996 shall be based upon that adjusted principal
balance. The note shall be secured by all assets, including the leasehold
interest, of Westport Brewing. Janes represents that Westport Brewing's assets
are currently unencumbered through any mortgage or security agreement, except
for security agreements as to leased equipment valued at approximately $100,000.
The note shall contain a clause providing for a notice and opportunity to cure
by the borrowers, and a clause providing for prepayment without penalty. The
parties shall execute an
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<PAGE>
appropriate promissory note and security agreement within fifteen days of
execution of this Agreement.
49. Upon demand, Janes shall pay any outstanding promissory notes and
personal accounts except that the outstanding debt incurred in connection with
Westport Brewing shall be paid in accordance with Paragraph 48 of this
Agreement. Open accounts 01 0050 0002 5509325698; 01 0020 0002 0509325698;
01 0050 0002 3509325698; 01 0050 0002 4509325698; and 01 0050 0002 6509325698;
and any unpaid interest on those accounts, shall be deemed compromised, settled,
and satisfied in consideration for the release of JCN's obligations under note
payable 01 0609 0015; the release of JCN's obligations on account number 01 0611
0136; the pledge of collateral described in paragraph 48; the promises set forth
in paragraph 50; the release by Janes of claims for humiliation, mental
suffering, anguish, grief, emotional distress, and damage to reputation; and the
release by Janes of Federal under Policy No. 8108-58-82-G and National Union
under Policy No. 443-79-09. Janes and JCN represent that they are not aware of
any other notes, accounts receivable or personal accounts owed by Janes to JCN.
50. Janes shall, to the extent permitted under the December 29, 1993
Shareholder Agreement between Steven Summers and Janes, hold his stock in Plaza
Insurers, Inc. ("Plaza") in trust for the benefit of the Company during the term
of the December 29, 1993 Exclusive Brokerage Agreement between Plaza and JCN.
During the term of that Agreement, Janes shall use best efforts to provide for
direct payment, net of any taxes, to JCN of any dividends or distributions Janes
would receive in respect of his stock in Plaza
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Insurers after June 30, 1995, and any such payments that are not made directly
to the Company shall be paid immediately upon receipt by Janes over to the
Company, net of any taxes. Janes shall be entitled to any refund from the
Internal Revenue Service or other taxing authority for taxes paid by him with
respect to dividends or distributions received for the year 1994. Nothing in
this Paragraph is intended to effect a transfer of Janes' stock in Plaza or any
interest in that stock.
51. Janes hereby waives any rights and releases the Company from any
liability or obligation with respect to his deferred compensation and any
severance pay arrangement with the Company. Janes shall retain all vested
benefits to which he is currently entitled under the JCN Employee Retirement
Plan, the JCN Employee Stock Ownership Plan and the JCN Employee Stock Ownership
Trust (including benefits conferred upon Plan participants as a result of this
Agreement), and the JCN Group Health Insurance Plan. Janes shall be responsible
for the payment of all future premiums or other consideration necessary to
perfect or retain those benefits.
52. The split dollar life insurance policy on the life of Janes, No.
4514602, on which the Company has paid premiums, will be handled, subject to
approval of the insurer, as follows:
(a) the Company will pay no further premiums;
(b) Janes shall elect (i) to take on the responsibility to pay
premiums; (ii) to transfer the policy from the Company to any new employer
paying premiums; or (iii) to surrender the policy for its cash value; and
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<PAGE>
(c) the Company will retain its interest in the benefits or cash
surrender value of the policy up to the amount of the premiums already paid
by the Company.
If Janes elects to transfer the policy under subparagraph (b)(ii), he shall pay
the Company the cash surrender value of the policy, as of the date of the
transfer, and the Company agrees to cooperate with Janes in effecting the
transfer. The refusal of the insurer to approve of the matters agreed to in
this Paragraph and the resulting inability to accomplish those matters is not a
condition precedent to this Agreement. JCN and Janes shall use best efforts to
obtain the insurer's approval.
53. Janes shall be indemnified by JCN for reasonable attorneys' fees and
expenses in defending claims in the Consolidated Litigation and in Case No. 95-
0502-CV-W-1, except fees incurred subsequent to June 6, 1995 in defending claims
that relate to the Plaza Insurers transaction, provided that the firm of
Douthit, Frets, Rouse, & Gentille, L.L.C., demonstrates that the fees for which
indemnification is sought were not incurred in the defense of Janes with respect
to Plaza Insurers. JCN shall pay the amounts subject to indemnification
directly upon the receipt of statements therefor.
54. The Derivative-Plaintiffs, JCN, and Janes shall withdraw with
prejudice all motions seeking leave to file claims, crossclaims, counterclaims
or third-party claims and shall dismiss with prejudice all claims they have in
the derivative action and in Case No. 95-0502-CV-W-1.
55. Subject to the provisions of Paragraphs 48-53 and 57-58 and the
occurrence of the Derivative Effective Date, the
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<PAGE>
Derivative-Plaintiffs, Allen and JCN, their predecessors, successors, parents,
subsidiaries, affiliates and assigns, and each of them, and Janes, his spouse,
heirs, executors, and administrators, for good and sufficient consideration
mutually release and forever discharge each other from any and all manner of
actions, causes of actions, suits, obligations, claims, debts, demands,
agreements, promises, liabilities, controversies, costs, expenses and attorneys'
fees, whatsoever, whether in law or in equity, and whether based on any Federal
law, state law, a common law right of action or otherwise, known or unknown,
accrued or not accrued, which any of them, now have or ever had, can have or
shall or may hereafter have, by reason of, or in any manner related to: (a) any
breach or claim of breach of fiduciary duties or obligations, or due to any
failures or claims of failure in performance of Janes as a director, an officer,
committee member, trustee, agent, employee or shareholder of JCN or any entity
Janes served at the request of JCN; (b) the alleged acts, failures to act,
omissions, misrepresentations, facts, events, transactions, occurrences, or
other subject matter which were or could have been set forth in the Consolidated
Action or Case No. 95-0502-CV-W-1; (c) any prior transactions or business
activities or decisions of JCN or of Metnall or Allen or their agents,
affiliates, parent or subsidiary corporations, successors or assigns during
Janes' tenure, including, without limitation, Janes' retirement or alleged
termination as an employee of JCN, Janes' removal as a director of JCN, Janes'
removal as a trustee of the JCN Employee Stock Ownership Trust, and any claim
for personal injuries, humiliation, mental suffering, anguish, grief, damage to
reputation, or
28
<PAGE>
negligent infliction of emotional distress Janes may have as a result of those
matters; (d) a promissory note dated September 30, 1993, made by the Company to
Janes and reflected in account 01 0609 0015, in the principal amount of $65,500,
including any unpaid interest; or (e) the accounts listed in Paragraph 49. In
addition the Walter C. Janes Living Trust releases the Company from liability on
account number 01 0611 0136, which as of May 8, 1995 carried a balance of
$3,050.06. Any promissory notes evidencing debts that are compromised in this
Agreement shall be returned to the maker. The Company and Janes shall execute
and record any documents necessary to release the mortgage against Janes'
residence that stands as security for a debt in the amount of $75,000, reflected
in account 01 0050 0002 3509325698.
56. Janes, for good and sufficient consideration, releases and forever
discharges all individual defendants in the Consolidated Action and in Case No.
95-0502-CV-W-1 and the Former Directors, including their heirs, spouses,
executors, administrators and assigns from any and all claims, demands and
causes of action, (a) for contribution or indemnification based upon claims made
in the Consolidated Litigation or in Case No. 95-0502-CV-W-1; or (b) based upon
any error, misstatement, misleading statement, act, omission, neglect, or breach
of duty committed, attempted, or allegedly committed or attempted, by any
individual defendant, in his or her capacity as an employee, director, or
officer of JCN, or as a trustee of the JCN Employee Stock Ownership Trust,
including without limitation, all claims of fraud, or other intentional
misconduct, and acts resulting in a personal benefit to the released party,
committed in the scope of such employment.
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57. Janes has represented to JCN that he has not obtained improper
personal benefits at the expense of JCN as a result of a breach of his duties of
loyalty to JCN; and JCN represents and agrees that no such improper personal
benefit to Janes has been discovered to date. Janes agrees that if JCN's
ongoing investigations: (a) discover in the future a material and improper
personal benefit to Janes at the expense of JCN, as a result of an actionable
failure, omission or act by Janes that breaches his fiduciary duties of loyalty
to JCN; and (b) such a claim is made and a legal proceeding initiated by the
later of (i) September 30, 1995 or (ii) 30 days from the earlier of the date
on which (A) a majority of the board of directors of JCN consists of members who
are not defendants in the Consolidated Litigation or (B) a new board is elected
by the shareholders of JCN, then the general release of Janes set forth in
Paragraph 55 of this Agreement shall not prevent recovery by JCN limited to the
amount of such improper personal benefit to Janes at the expense of JCN,
provided that this Paragraph does not apply to the transaction by which Janes
obtained stock in Plaza Insurers, the debt incurred by Westport Brewing and
adjusted under Paragraph 48 and the accounts listed in Paragraph 49. Nothing in
this Paragraph shall be deemed to extend any otherwise applicable statute of
limitations.
58. With respect to any present or future litigation other than the
Consolidated Litigation and Case No. 95-0502-CV-W-1, Janes shall remain entitled
to any indemnification rights he has pursuant to the Company's Bylaws or
contractual agreements between the Company and Janes or arising under applicable
law. The continuing right of indemnification shall, without limitation, apply
to GRAVES
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V. J.C. NICHOLS, Case No. CV95-7526 in the Circuit Court of Jackson County,
Missouri.
59. Janes shall be considered to have retired from the Company effective
May 26, 1995. Janes hereby resigns his position as trustee of the J.C. Nichols
Company Retirement Plan.
60. The settlement represents a compromise of disputed claims.
SETTLEMENT OF CLAIMS AGAINST CHARLES SCHLEICHER
61. The parties hereto agree that all actions against Charles Schleicher
in the derivative action, in his capacity as an officer or director of JCN,
shall be dismissed without prejudice subject to the approval of the District
Court pursuant to Rule 23.1 of the Federal Rules of Civil Procedure, upon and
subject to the terms and conditions set forth below.
62. Subject to the provisions of Paragraph 64 and the occurrence of the
Derivative Effective Date, the Derivative-Plaintiffs, Allen, and JCN, and their
respective predecessors, successors, parents, subsidiaries, affiliates, and
assigns, and each of them, and Schleicher, his spouse, heirs, executors, and
administrators, for good and sufficient consideration, mutually covenant not to
sue one another for any cause of action, claim, or demand, whether in law or in
equity, and whether based on any federal law, state law, or common law right of
action or otherwise, known or unknown, accrued or not accrued, which any of them
now have or ever had, can have or shall or may hereafter have, by reason of any
breach or claim of breach of fiduciary duty or obligations, or due to any
failures or claims of failure in the performance of Schleicher's duties as a
director, officer,
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committee member, employee, or shareholder of JCN or any entity Schleicher
served at the request of JCN. This covenant not to sue shall forever bar any
claim by or on behalf of JCN, Derivative Plaintiffs, or Allen, based on any
error, misstatement, misleading statement, failure to act, omission, neglect,
misrepresentation or breach of duty, committed, attempted, or allegedly
committed or attempted, by Schleicher, in his capacity as a director or officer
of JCN. However, the Derivative Plaintiffs, on behalf of JCN, and JCN expressly
reserve the right to bring any claims, demands, or cause of action, if any
exists, against Schleicher or any law firm with which or lawyers with whom
Schleicher was affiliated for any breach or claim of breach of fiduciary duties
or obligations as attorney or attorneys for JCN, or due to any failures or
claims of failure in the performance of duties as attorney or attorneys for JCN.
In any action brought against Schleicher or any individual lawyer with whom
Schleicher was affiliated, for breach or claim of breach of fiduciary duties or
obligations or due to any failure or claims of failure in the performance of
duties as an attorney for JCN, JCN and the Derivative-Plaintiffs on behalf of
JCN shall execute on any judgment entered against Schleicher or such lawyer only
through prosecution of claims against any insurer or insurers who have issued
applicable liability policies insuring Schleicher or such lawyer against legal
malpractice, provided that the prosecution of such claims may take the form of
garnishment proceedings against those insurers, an action prosecuted in the name
of Schleicher or such lawyer based upon any breach of the duty of good faith and
fair dealing by such insurer or insurers, or any other appropriate method of
proceeding to enforce the obligations
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of the insurers to Schleicher or such lawyer based on any judgment entered
against any of them. To induce this Agreement, Schleicher has represented that
there are no debts, promissory notes, or personal account receivable balances
owed by him to JCN.
63. Paragraph 63 is intentionally omitted.
64. Schleicher has represented to JCN that he has not obtained improper
personal benefits at the expense of JCN as a result of a breach of his duties of
loyalty to JCN as a director of JCN; and JCN represents and agrees that no such
improper personal benefit to Schleicher has been discovered. Schleicher agrees
that if JCN's ongoing investigations: (a) discover in the future material and
improper personal benefit to Schleicher at the expense of JCN, and as a result
of an actionable failure, omission or act by Schleicher that breaches his or her
fiduciary duties of loyalty to JCN as a director; and (b) such a claim is made
and a legal proceeding initiated by the later of (i) September 30, 1995, or
(ii) within 30 days from the earlier of the date on which (A) a majority of the
board of directors of JCN consists of members who are not defendants in the
Consolidated Litigation or (B) a new board is elected by the shareholders of
JCN, then the covenant not to sue Schleicher in his capacity as director of JCN
shall not prevent recovery by JCN limited to the amount of such improper
personal benefit at the expense of JCN. Nothing in this Paragraph shall be
deemed to extend any otherwise applicable statute of limitations.
65. The Derivative-Plaintiffs, JCN, and Schleicher shall withdraw with
prejudice all motions seeking leave to file claims, crossclaims, counterclaims
or third-party claims and shall dismiss
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without prejudice all claims they have in the derivative action and in Case No.
95-0502-CV-W-1.
66. Schleicher, for good and sufficient consideration, releases and
forever discharges all individual defendants in the Consolidated Action and in
Case No. 95-0502-CV-W-1 and the Former Directors, including their heirs,
spouses, executors, administrators and assigns from any and all claims, demands
and causes of action: (a) for contribution or indemnification based upon claims
made in the Consolidated Litigation or in Case No. 95-0502-CV-W-1; or (b) based
upon any error, misstatement, misleading statement, act, omission, neglect, or
breach of duty committed, attempted, or allegedly committed or attempted, by any
individual defendant, in his or her capacity as an employee, director, or
officer of JCN, or as a trustee of the JCN Employee Stock Ownership Trust,
including without limitation, all claims of fraud, or other intentional
misconduct, and acts resulting in a personal benefit to the released party,
committed in the scope of such employment.
67. With respect to any present or future litigation, other than the
Consolidated Litigation, Schleicher shall remain entitled to any indemnification
rights he has pursuant to the Company's Bylaws or contractual agreements between
the Company and Schleicher or arising under applicable law.
68. JCN shall indemnify Schleicher for all reasonable attorneys' fees and
all reasonable expenses, costs and disbursements and other amounts incurred in
defending this litigation. JCN shall pay all amounts described in this
Paragraph directly upon receipt of the statements therefor. Nothing in
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Paragraph 62 shall alter, amend, restrict or otherwise change the Company's
indemnification obligation.
NOTICE TO SHAREHOLDERS
69. The parties to this Agreement shall promptly submit the Agreement to
the District Court and jointly request that the District Court:
(a) enter the Implementing Order in substantially the form attached
hereto as Exhibit B;
(b) schedule a hearing pursuant to Rule 23.1 of the Federal Rules of
Civil Procedure (the "Settlement Hearing"):
(i) to determine whether the proposed settlement of the claims
in the derivative action on the terms and conditions provided in this
Agreement are fair, reasonable and adequate and should be approved by
the District Court;
(ii) to determine whether a judgment should be entered dismissing
the derivative action on the merits, with prejudice;
(iii) to consider the applications by all Derivative-Plaintiffs'
counsel for awards of attorneys' fees, costs and disbursements;
(c) approve the form and manner of the notice to be provided to the
shareholders;
(d) direct that the Notice of Pendency of Derivative Actions,
Proposed Compromise and Settlement of Actions and Settlement Hearing
attached hereto as Exhibit D be mailed; and
(e) set forth schedules and procedures for the implementation of the
terms and conditions of the proposed
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settlement including, among other things, provisions for the filing by
Shareholders of objections to the proposed settlement.
70. The holders of record of JCN stock as of September 1, 1987 or such
other date as the Court may prescribe, or thereafter, who do not file
objections, as specified in the Implementing Order, shall not be heard to object
to or complain of the Settlement Agreement or any of the conditions, provisions,
releases, provisos or other terms thereof.
CONDITIONS PRECEDENT TO FINAL SETTLEMENT OF ALL DERIVATIVE CLAIMS
71. All parties acknowledge that all of the following conditions precedent
must be satisfied before the portions of the Settlement Agreement relating to
the derivative litigation become effective:
(a) The submission by counsel for the Director-Defendants, prior to
entry of a final judgment by the District Court, of an affidavit detailing
the efforts undertaken to complete notice to the shareholders of the
pendency and settlement of these actions, and stating that such efforts
comply fully with the applicable orders of the District Court;
(b) Entry by the District Court of an order and final judgment
substantially in the form attached hereto as Exhibit C; and
(c) if objections are made to the approval of the Settlement
Agreement and those objections are overruled, the expiration of the time in
which to appeal the Order and Final Judgment, which shall be deemed to be
thirty three days from
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the date of the entry of judgment, unless the date to take an appeal shall
have been extended by the District Court or otherwise, without any review
or appeal having been taken, or if such review or appeal is taken, after
such appeal or review shall have been withdrawn or finally determined by
the highest court from which review is sought, but only in the event that
any period of time in which to seek any further appellate review or appeal
has expired, and all such further proceedings shall have been resolved in
such a manner as to permit the consummation of the proposed settlement in
accordance with all of its terms and provisions.
THE EFFECTIVE DATE OF THE PROPOSED SETTLEMENT
72. The proposed settlement of the derivative litigation encompassed in
this Agreement shall become effective when all the conditions precedent set
forth in Paragraph 71 have been satisfied (the "Derivative Effective Date").
VOIDING OF SETTLEMENT AGREEMENT
73. The provisions of this Agreement relating to the derivative
litigation shall become null and void if any of the conditions precedent set
forth in Paragraph 71 fail to occur, or if final approval of the proposed
settlement provided for in this Agreement and a final judgment is not obtained
from the District Court for any reason, or is reversed or substantially modified
on appeal.
APPLICATIONS FOR ATTORNEYS' FEES, COSTS AND DISBURSEMENTS
74. All attorneys' fees, costs and disbursements that the District Court
may allow on behalf of Derivative-Plaintiffs'
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counsel shall be paid in such a manner as the District Court may direct and
shall be paid entirely by JCN.
75. At the hearing on approval of this Agreement, Derivative-Plaintiffs'
counsel shall apply to District Court for awards of reasonable attorneys' fees,
costs, and disbursements to be paid by JCN. At the date of this Agreement,
Derivative-Plaintiffs' fees, costs and disbursements in these actions are
approximately One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00). JCN agrees that it will not assert that fees of $1,500,000.00
are unreasonable. JCN reserves the right upon review of fee statements to
challenge the reasonableness of any specific component of that amount. McCarthy
has no objection to these fees. Neither the Director-Defendants, the Former
Directors, McCarthy, Bowser, Chisum, Whitermorn, Sherman, Janes nor Schleicher
shall be liable for any fees, costs, or disbursements of any other parties'
counsel or for any award of such fees and expenses.
THE MEDINA LAWSUIT
76. The Medina plaintiffs commenced the action MARCI V. MEDINA, ET AL., V.
LYNN L. MCCARTHY, ET AL., Case No. 95-0075-CV-W-1, in the United States District
Court for the Western District of Missouri (hereinafter "the Medina Lawsuit").
The subject matter of this agreement includes, but is not limited to, the
resolution of the claims made by the Medina plaintiffs from the formation,
administration, maintenance, operation and any other related activity of the
J. C. Nichols Employee Stock Ownership Plan and the J. C. Nichols Employee Stock
Ownership Trust (hereinafter collectively "the ESOP"). The term ESOP includes
the Plan and the Trust.
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77. The purpose and intent of this Agreement and mutual release is to
settle, dispose, and satisfy all claims and potential claims arising out of the
formation, administration, maintenance, operation and any other related activity
of the ESOP and all potential liabilities the defendants and their agents,
servants, officers, directors, employees and insurers may have to the Class as
defined in Paragraph 79 hereof, (and anyone claiming an interest in and on
behalf of the ESOP) resulting from the formation, administration, maintenance,
operation and any other related activity of the ESOP in whatever proportion and
in whatever amount, for all money damages and other types of relief of any
nature whatsoever all persons and entities may have sustained from the years
1987 through the date of the Implementing Order. The parties acknowledge that
this mutual release covers all claims known and unknown, including those claims
discovered in the course of the Medina Lawsuit that were and could have been
asserted before any federal or state court or administrative agency, including,
but not limited to, claims for attorneys' fees and litigation expenses and
costs. Notwithstanding any of the above, this release does not include the
release of any claims against the ESOP for benefits under the terms and
provisions of the ESOP plan. As used in the preceding sentence, the term
"claims for benefits" does not include any claim relating to valuation of the
JCN stock which occurred prior to the filing of the Medina Lawsuit. The term
JCN or the Company shall include the Company and its subsidiaries and their
affiliates, including, but not limited to, their agents, employees, officers,
and directors.
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78. This Agreement is not an admission of guilt, fault or liability by any
party. All of the defendants in the Medina Lawsuit expressly deny any liability
in connection with the acts alleged in the Medina Lawsuit. The claims settled
in this Agreement are disputed and are settled solely for the purpose of
avoiding the expense and risk of litigation.
79. The settlement class consists of all persons who participate in or
have participated in, or are alternate payees under a qualified domestic
relations order, or who have been beneficiaries of deceased participants of the
J.C. Nichols Employee Stock Ownership Plan, between 1987 and the date of the
Implementing Order, hereinafter referred to as "the Class," "members of the
Class" or "participants." The Class does not include any employee who
terminated employment without any vested interest in the ESOP prior to January
1, 1990 and, as of the date of the Implementing Order, has incurred at least
five consecutive one-year breaks in service, as defined in the ESOP.
80. Subject to the final approval of this Agreement by the District Court
following the certification of the Class, plaintiffs, the Class, defendants, and
the Former Directors finally and forever release, acquit and discharge each
other and their heirs, assigns, and affiliates, including but not limited to,
their agents, servants, employees, officers, directors and insurers from any and
all liability, actions, claims, demands or suits which they, or any of them, may
now or at any time have on account of any injuries, damages, loss of profits,
loss of benefits, expenses, claims of indebtedness, impairment or loss of any
right, cost or damage of any and every nature known or unknown, sustained by or
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accruing to them as a result of the formation, administration, maintenance,
operation and any other related activity of the ESOP through the date of the
Implementing Order.
81. This Settlement Agreement is in consideration of the following:
(a) If the Derivative Effective Date occurs, in accordance with
Paragraph 20, the parties agree that the JCN stock held by Bowser will be
transferred to JCN to be returned to the JCN treasury, except that, at the
sole option of JCN, 8,500 shares of stock may be transferred directly from
Bowser to the ESOP. If the Derivative Effective Date occurs, in accordance
with Paragraph 22, the parties agree to cancel the option of Bowser to
acquire the allocated stock held by the ESOP which option was allegedly
assigned by Bowser to Sunchase and Realty Capital, without reimbursement of
any option price paid by Bowser to the ESOP in connection with the option
or any extension thereof. If the Derivative Effective Date does not occur,
JCN agrees to the transfer of the shares in subparagraph (g) and the
parties to the Consolidated Litigation (except defendants McCarthy and
Bowser) agree to use their best efforts to accomplish the transfer of stock
by Bowser to JCN and, to the extent that it has not already expired,
cancellation of the Bowser option.
(b) The Company agrees to pay the ESOP the cash sum of Two Million
and No/100 Dollars ($2,000,000.00) to be allocated to the participants'
accounts in accordance with Paragraph 82 herein.
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(c) Upon execution of a Release in the form of Exhibit A.1 and a
Release and Settlement Agreement in the form of Exhibit A.2 hereto and the
occurrence of all conditions precedent set forth in Paragraph 87:
(i) Federal has agreed to pay to JCN the sum of Nine Hundred and
Ninety Thousand Dollars ($990,000.00) under the Fiduciary Liability
Coverage Section of Executive Protection Policy (Policy No. 8108-98-
82-G) issued to JCN for the policy period September 27, 1994 to
September 27, 1995; and
(ii) National Union has agreed to pay to JCN the sum of Eight
Hundred Thirty-Seven Thousand Five Hundred Dollar ($837,500) under the
Pension Trust Liability Policy (Policy No. 443-71-48) issued to JCN
for the policy period September 27, 1994 to September 27, 1995.
(d) The Company agrees to pay Marci Medina the cash sum of Ten
Thousand and No/100 Dollars ($10,000.00) in settlement of her retaliation
claim and to dismiss with prejudice the action styled J. C. NICHOLS COMPANY
V. MARCI MEDINA, pending in the Circuit Court of Jackson County, Missouri,
Associate Circuit Division, Case No. CV95-1898.
(e) The Company agrees to pay the four nominal plaintiffs five
thousand dollars ($5,000) each for the expenses incurred and substantial
time devoted to these proceedings.
(f) The Company agrees to rescind the ESOP plan amendment adopted in
April 1993, provided that the Company is reasonably satisfied by an IRS
private letter ruling or
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otherwise in its sole discretion that such a rescission will not cause a
disqualification of the plan under Section 401(a) of the Internal Revenue
Code (the "Code"), and provided further that such a rescission will not
decrease the amount of any distribution made from the ESOP prior to the
date of this Agreement. In the event the Company after its best efforts to
obtain an IRS private letter ruling concludes that it cannot secure a
favorable ruling, the Company shall credit to the participants' accounts in
the ESOP as of January 2, 1992 cash in an amount equal to the January 6,
1992 cash dividend of $6.00 per share on the unallocated shares of JCN
stock that would have been allocated to such participants' accounts had
such cash dividend been allocated in proportion to the ESOP account
balances as of January 2, 1992, reduced by the amount of such dividend that
was actually allocated to such participants' accounts, and will adopt any
ESOP amendment that may be required in order to accomplish the foregoing.
The Company may, in its sole discretion, elect to make such payments in
lieu of securing an IRS private letter ruling.
(g) As previously referred to in subparagraph (a), the Company,
acknowledging that the ESOP is not indebted to the Company, agrees to
transfer or to have Bowser transfer 8,500 shares of JCN stock free and
clear of any debt or encumbrances to the ESOP in accordance with Paragraph
82 herein. Any future sale or transfer of stock by the ESOP to the Company
shall be for no less than "adequate consideration" as described in Section
3(18) of the Employee Retirement Income Security Act of 1974 ("ERISA") and
any sale or transfer of any
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shares of JCN stock by any ESOP participant to the Company and any
repurchase obligation of the Company with respect to such stock shall be in
accordance with a fair valuation formula as described in section 409(h) of
the Code. For the purpose of this subparagraph 81(g), in evaluating the
extent to which "adequate consideration" and the fair valuation formula are
affected by any control price premium, the fact that the ESOP previously
owned 125,242 shares of JCN stock prior to the transfer to Bowser shall be
irrelevant.
(h) In accordance with the procedure set forth in Paragraph 85, the
parties to the Medina Lawsuit agree to request and use their best efforts
so that the District Court will certify the Class to facilitate the
performance of this Agreement. This Agreement shall be conditional upon
the certification of the Class and the approval of the District Court after
a settlement hearing relating to this Agreement.
(i) The Company shall use its best efforts to appoint an
independent institutional trustee for the ESOP to replace the current
Trustees. The Company will provide written notice of such appointment to
Class Counsel, and, if requested, pursuant to reasonable agreements
concerning confidentiality, any information obtained by the Company
regarding the qualifications and suitability of the proposed trustee to
serve. If Class counsel have any objection to the appointment, Class
counsel shall advise the Company in writing within ten days, and file a
written objection with the District Court within twenty days, of its
receipt of notice of the appointment. In the event that Class counsel
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objects, the Court shall approve or reject the Company's appointment of
such trustee. Cody, Bell and, if necessary, Janes shall resign as trustees
for the ESOP at the time when the appointment of the replacement trustee
becomes effective.
(j) The Company agrees to pay attorneys' fees in the amount of One
Million One Hundred Eighty Thousand and No/100 Dollars ($1,180,000) to
Class counsel for all legal services related to the litigation and to
reimburse such attorneys and ESOP participants One Hundred and Fifty
Thousand and No/100 Dollars ($150,000) for their litigation expenses. This
payment shall be in full and complete satisfaction of all claims for
attorneys' fees and expense reimbursement of Class counsel in this
litigation.
(k) All parties to the Medina Lawsuit agree to execute any documents
that may be necessary to fulfill the purposes of this Agreement.
82. (a) The Company shall:
(i) make payments and stock transfers called for under
subparagraphs 81(b) and 81(g) within thirty days following the
District Court's entry of an order and final judgment substantially in
the form attached hereto as Exhibit F;
(ii) take the steps called for under subparagraph 81(f) with
respect to the 1993 ESOP plan amendment; and
(iii) allocate the cash payment called for
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under subparagraph 81(b) in proportion to the account balances in the
ESOP of the members of the Class as of December 31, 1992, and to
allocate the stock transfers called for under subparagraph 81(g) in
proportion to the amount of covered compensation of each eligible
member of the Class and participant in the ESOP for each plan year
from 1988 through 1995, taking into consideration Company
contributions made for such plan years as if they had all been
allocated in proportion to covered compensation during such periods
respectively;
provided that the Company is reasonably satisfied by an IRS private letter
ruling, or otherwise in its sole discretion, that: (1) the payments and
stock transfer are currently fully deductible for federal income tax
purposes; (2) the Company will not be subject to any federal tax penalties
or excise taxes solely as a result of the payments and stock transfers; and
(3) doing so will have no adverse impact on the ESOP's qualification under
Section 401(a) of the Internal Revenue Code. Price Waterhouse, L.L.P.,
Chicago office, shall calculate the increase in each participant's account
by applying the formula set forth in subparagraph 82(a)(iii). Such
calculation shall govern the allocation of the payment and stock transfers
(i) in the event that the Company receives satisfaction that enables it to
comply immediately with the obligations set forth in subparagraph 82(a)(i),
(ii) and (iii); or (ii) to the extent that any of the payments and
transfers may be allocated retroactively, subject to such adjustments as
are required by applicable law. Such calculation shall be subject to
review and confirmation by the Company, and the Company shall bear the
reasonable expenses of Price Waterhouse's services in this regard.
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(b) The Company shall pay the Two Million Dollars and transfer the
8,500 JCN shares as soon as those payments and transfers can be made
subject to assuring compliance with goals (1), (2) and (3) described in
subparagraph 82(a) hereof; however, the parties acknowledge that tax and
ERISA constraints may prolong the period over which the Company may
actually make such payments and transfers in observance of these goals. It
is the intention of the parties to this Agreement that, regardless of the
alternative used by the Company to effect the transfer of cash and shares,
the participants will receive the benefit of the Two Million dollar payment
and the transfer of the 8,500 JCN shares as if all such payments and
transfers were made within thirty (30) days following the District Court's
approval of this Agreement and entry of its Final Order and Judgment. To
address those issues, the Company, at its sole discretion, shall have the
option to transfer to an irrevocable grantor's trust (the "Grantor's
Trust") for the benefit of the ESOP and the Class, the settlement proceeds.
The Company shall make its best efforts to appoint an independent trustee
for the Grantor's Trust that is the same institution that is the trustee
for the ESOP. If the Company elects that option, it will use its best
efforts to structure the trust instrument and any other necessary documents
in a manner that assures, without adversely affecting the qualified status
of the ESOP, that the participants receive all benefits of the settlement
proceeds in accordance with the intention expressed in the second sentence
of this subparagraph. Such documents shall permit
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the Company to direct the trustee of the Grantor's Trust to make cash
payments including, but not limited to, payments of the proceeds of
investments made by and dividends paid to the Grantor's Trust, and stock
transfers to the ESOP, to the maximum extent that those payments and
transfers are deductible under Section 404 of the Internal Revenue Code,
or, if any such payments and transfers are determined to be nondeductible,
in accordance with Paragraph 82(c).
(i) In the event that it is necessary to extend the cash
payments to the ESOP beyond thirty (30) days after the date of the
District Court's approval of this Agreement and the Company elects not
to make those payments to the Grantor's Trust, the Company agrees to
transfer the cash first before transferring the stock and to increase
the cash payment to the ESOP in an amount equal to the average of the
balance outstanding at the beginning of this Agreement and the balance
outstanding as of the first anniversary of this Agreement multiplied
by the commercial bank prime rate as quoted in the WALL STREET JOURNAL
Money Rates as of such anniversary. As of each subsequent anniversary
of this Agreement, any balance outstanding shall be increased in the
same manner.
(ii) In the event that it is necessary to extend the stock
transfers to the ESOP beyond thirty (30) days after the date of the
District Court's approval of this Agreement and entry of its Final
Order and Judgment and the Company elects not to make those transfers
to the
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Grantor's Trust, the Company agrees to use its best efforts:
(A) to pay the ESOP for the benefit of the participants an
amount equal to the cash dividends that would have been paid on
the balance of such shares that have not been transferred to the
ESOP on the dividend payment date. Such payments shall be made
within thirty (30) days following the dividend payment date;
(B) to cause the ESOP to receive immediately for the
benefit of the participants the voting rights associated with all
8,500 shares;
(C) to the extent necessary to preserve the benefits or
potential benefits that are intended to be made available under
this Agreement, to adjust the number and kind of shares held by
the ESOP for the benefit of the participants in the event of a
stock or non-cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, sale or
exchange of shares or securities, issuance of warrants or rights,
issuance of stock for less than adequate consideration, or other
similar corporate event affecting the 8,500 JCN shares prior to
the transfer of all of such shares to the ESOP;
(D) to cause the ESOP to receive immediately for the
benefit of the participants the other incidents of ownership of
all 8,500 shares.
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(c) In the event that all or any part of the payments and stock
transfers to the ESOP, regardless of when they are made, are not deductible
for federal income tax purposes at any time and under any circumstances,
the Company shall make the nondeductible payments and stock transfers, or
cash in lieu thereof, within sixty (60) days following the receipt of an
IRS private letter ruling conveying that conclusion. In that event, the
Company agrees to comply with the provisions in subparagraphs 82(b)(i) and
(ii) and to make the cash payments and transfers of stock, or cash in lieu
thereof, to the respective Class members in accordance with the formula
described in subparagraph 82(a)(iii). In the event that making such
payments or transfers to the ESOP would result in either the imposition of
a federal excise tax or disqualification of the ESOP under Section 401(a)
of the Internal Revenue Code, the Company shall have the option to make the
payments and/or transfers directly to the appropriate Class members.
(d) The Company shall make the payments called for under
subparagraphs 81 (d), (e), and (j) within thirty days following the
District Court's entry of an order and final judgment substantially in the
form attached hereto as Exhibit F.
83. The parties agree that the Company, in its discretion, may make all or
part of the payments and/or stock transfers sooner than contemplated under
subparagraphs 82(a), (b) and (c).
84. The parties agree that the Company, in its discretion, may seek either
an IRS private letter ruling, an individual prohibited transaction exemption, or
both, in connection with its
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option to cause Bowser to convey 8,500 shares of stock directly to the ESOP.
85. The parties to the Medina Lawsuit shall promptly submit the Agreement
to the District Court and jointly request that the District Court:
(a) conditionally certify the Class and conditionally certify the
Medina plaintiffs as class representatives;
(b) enter the Class Action Implementing Order in substantially the
form attached hereto as Exhibit E;
(c) approve the form and manner of the notice to be provided to
members of the Class;
(d) direct that the Notice of Class Action Determination, Settlement
of Class Action, and Settlement Hearing and Claim and Release attached
hereto as Exhibit G be mailed;
(e) set forth schedules and procedures for the implementation of the
terms and conditions of the proposed settlement including, among other
things, provisions for the filing by members of the Class of objections to
the proposed settlement; and
(f) schedule a hearing pursuant to Rule 23(e) of the Federal Rules of
Civil Procedure (the "Class Settlement Hearing");
(i) to certify the Class under Fed. R. Civ. P. 23(b)(1);
(ii) to determine whether the proposed settlement of the
claims in the Medina Lawsuit on the terms and conditions provided in
the Agreement is fair, reasonable,
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and adequate and should be approved by the District Court; and
(iii) to determine whether a judgment should be entered
dismissing the Medina Lawsuit on the merits, with prejudice.
86. This release shall not apply to any future claim of ESOP participants
or their beneficiaries for any improper failure, omission or act by the
Trustee(s) or any fiduciary or other entity liable under ERISA or otherwise with
respect to the ESOP that occurs after the date of the Implementing Order.
CONDITIONS PRECEDENT TO FINAL SETTLEMENT OF THE MEDINA LAWSUIT
87. All parties to the Medina Lawsuit acknowledge that all of the
following conditions precedent must be satisfied before this Settlement
Agreement shall become effective, except as otherwise provided herein, as to the
Medina Lawsuit:
(a) The submission by Class counsel, prior to entry of a final
judgment by the District Court, of an affidavit detailing the efforts
undertaken to complete notice to the Class members of the pendency and
settlement of these actions, and stating that such efforts comply fully
with the applicable orders of the District Court;
(b) Entry by the District Court of an order and final judgment
substantially in the form attached hereto as Exhibit F; and
(c) if objections are made to the approval of the Settlement
Agreement and those objections are overruled, the expiration of the time in
which to appeal the Order and Final Judgment, which shall be deemed to be
thirty three days from
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the date of the entry of judgment, unless the date to take an appeal shall
have been extended by the District Court or otherwise, without any review
or appeal having been taken, or if such review or appeal is taken, after
such appeal or review shall have been withdrawn or finally determined by
the highest court from which review is sought, but only in the event that
any period of time in which to seek any further appellate review or appeal
has expired, and all such further proceedings shall have been resolved in
such a manner as to permit the consummation of the proposed settlement in
accordance with all of its terms and provisions.
THE EFFECTIVE DATE OF THE PROPOSED SETTLEMENT
88. The proposed settlement of the Medina Lawsuit encompassed in this
Agreement shall become effective, except as otherwise provided herein, when all
the conditions precedent set forth in Paragraph 87 have been satisfied (the
"Medina Effective Date").
VOIDING OF SETTLEMENT AGREEMENT
89. The provisions of this Agreement pertaining to the Medina Lawsuit
shall become null and void if any of the conditions precedent set forth in
Paragraph 87 fail to occur, or if final approval of the proposed settlement
provided for in this Agreement and a final judgment is not obtained from the
District Court for any reason, or is reversed or substantially modified on
appeal.
MISCELLANEOUS PROVISIONS APPLICABLE TO ALL SETTLEMENTS
90. Within twenty days from the Derivative Effective Date of this
Agreement, JCN at its sole option shall elect either (a) to purchase from
Westport Today, Inc. ("Westport"), a subsidiary of the Miller Nichols Charitable
Foundation, Inc., at the price at
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which JCN sold the properties to Westport and on terms to be negotiated
independently, the 83 properties sold by JCN to Westport or (b) to receive from
Westport, the balance due on the acquisition financing of the Westport Today
properties.
91. For good and sufficient consideration:
(a) subject to the occurrence of the Derivative Effective Date and the
Medina Effective Date, and upon completion of all steps necessary to effect or
finalize the transfers and forfeiture set forth in Paragraphs 20 and 22 through
27, the Medina plaintiffs, the Class, SunChase, and Realty Capital mutually
release and forever discharge each other; and
(b) subject to the occurrence of the Derivative Effective Date, and upon
completion of all steps necessary to effect or finalize the transfers and
forfeiture set forth in Paragraphs 20 and 22 through 27;
(i) the Director-Defendants, Former Directors, Janes,
Schleicher, Sherman, the Trustees, the Walter C. Janes Living Trust,
SunChase, and Realty Capital mutually release and forever discharge each
other; and
(ii) the Miller Nichols Living Trust, SunChase, and Realty Capital
mutually release and discharge each other;
and all of their predecessors, successors, parents, subsidiaries, affiliates and
assigns and their spouses, heirs, executors and administrators, from any and
all manner of action, causes of actions, suits, obligations, claims, debts,
demands, agreements, damages, loss of profits, loss of benefits, impairment and
loss of any rights, promises, liabilities, controversies, costs, expenses and
attorneys' fees, whatsoever, whether in law or in equity,
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whether based upon any Federal law, state law or common law right of action or
otherwise, known or unknown, accrued or not accrued, which any of them now have
or ever had, or can have or shall or may hereafter have, but only to the extent
the same in any manner relate to any attempt made by SunChase and/or Realty
Capital, prior to June 30, 1995 or in connection with the consummation of the
transactions contemplated hereunder, to acquire, and any acquisition by SunChase
and/or Realty Capital of, (i) any shares of JCN stock or any option rights
relating thereto, or (ii) any interest in JCN including, in each case and
without limitation, any proposals made in May and June of 1995, and any alleged
acts, failures to act, omissions, misrepresentations, facts, events,
transactions, occurrences or other subject matter which were set forth in the
Consolidated Action or Case No. 95-0502-CV-W-1.
92. All releases provided for in this Agreement shall be operative as of
the pertinent Effective Date.
93. All remedies at law or in equity shall be available for enforcement of
this Agreement. This Agreement may be pleaded as a full bar to the enforcement
of any claims, known and unknown, against any party hereto and their agents,
servants, employees, officers and directors arising out of the subject matter of
this Agreement. Except as specifically provided in Paragraph 62, it shall not
prevent, bar or otherwise limit claims by JCN against any of its retained
attorneys, accountants, consultants, or other outside professionals or
independent contractors. However, notwithstanding anything in this Agreement to
the contrary, the Agreement shall prevent and bar any claim by JCN based upon
any breach or alleged breach of duty to the Trustees by any attorney in
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his or her capacity as an attorney for the Trustees. In any subsequent court
action in which the validity or effect of this Agreement is an issue, any party
claiming the benefit of the validity of this Agreement who prevails in such
action shall be entitled to recover from the other party or parties its costs,
expenses and attorneys' fees incurred in prosecuting or defending such action.
94. The captions used in this Agreement are for convenience and
clarification and are not meant to be an aid in interpreting this Agreement.
95. The parties to the litigation and their attorneys agree to cooperate
fully with one another in seeking court approval of the Agreement, certification
of a settlement class in the Medina Lawsuit, discouragement of the Department of
Labor from intervention, dismissal of these actions with prejudice, and to use
their best efforts to effect consummation of this Agreement and the proposed
settlement provided for hereunder. The Company also agrees that counsel for the
Class may, at their discretion, participate in the application for the IRS
private letter ruling referenced in Paragraph 82 above.
96. This Agreement shall be binding upon, and inure to the benefit of, all
of the parties hereto, the Class and their respective heirs, executors,
administrators, predecessors, successors, assigns, agents, servants, directors,
officers, and employees, and upon any corporation or other entity into or with
which any party hereto may merge or consolidate. Except as specifically
provided in Paragraph 62, it shall not prevent, bar or otherwise limit claims by
JCN against any of its retained
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attorneys, accountants, consultants, or other outside professionals or
independent contractors. However, notwithstanding anything in this Agreement to
the contrary, the Agreement shall prevent and bar any claim by JCN based upon
any breach or alleged breach of duty to the Trustees by any attorney in his or
her capacity as an attorney for the Trustees.
97. This Agreement is to be governed by and interpreted pursuant to the
laws of the State of Missouri in effect on the date of the Agreement, including,
without limitation, Mo. Rev. Stat. Section 537.060, to the extent that such laws
are not inconsistent with ERISA or other applicable federal law.
98. The parties declare and represent that no promise, inducement or
agreement not expressed in this Agreement has been made or offered to them and
that this instrument contains the entire agreement between the parties and that
the terms of this instrument are contractual and not mere recitals.
99. In the event that the Settlement Agreement or a portion thereof
becomes null and void because of a failure of any of the conditions precedent in
Paragraph 71 or 87 to occur or for any reason whatsoever:
(a) This Agreement or the affected portion thereof shall have no
further force or effect and all negotiations, proceedings, statements and
releases made in connection herewith, shall be without prejudice to any
persons or entities, shall not be deemed or construed to be an admission or
concession by any party hereto, in any manner or for any purpose, and shall
not be used for any purpose whatsoever, in any subsequent proceedings, in
any court;
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(b) The parties to the Agreement or the affected portion thereof
shall be deemed to have reverted to their respective status as of the date
and time immediately prior to the execution of this Agreement, and the
parties shall proceed in all respects as if this Settlement Agreement or
the affected portion thereof and any orders issued in connection therewith
had not been executed; and
(c) Any amount paid or stock transferred in settlement of the Medina
Lawsuit shall be returned, with interest at the rate specified in Paragraph
82(b)(i), to the Company.
100. In the event that objections are made to approval of the Settlement
Agreement, those objections are overruled, and an appeal is taken or review
otherwise sought, the parties to the Consolidated Litigation, except McCarthy
and Bowser, shall jointly move the District Court for an Order that:
(a) permits the Company to hold its 1995 shareholders meeting within
a period between 30 and 60 days following the service of a notice of appeal
or other review;
(b) permits the Company to hold subsequent annual meetings pending
disposition of the appeal;
(c) permits all parties to engage in appropriate proxy activities;
and
(d) provides that, at all shareholders meetings held pending the
disposition of any appeal, shares of stock shall be voted in the same
manner as if this Agreement had been finally approved, with all conditions
precedent satisfied.
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101. Before executing this Agreement, the parties declare that they have
had a full opportunity to consult with counsel and that they understand the full
force and effect of this Agreement.
102. The exhibits to the Agreement are incorporated in and constitute an
integral part of the Agreement.
103. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
104. All proceedings with respect to the settlement described in the
Agreement and the determination of all controversies relating thereto, including
disputed issues of law and fact with respect to the validity of claims and
defenses, shall be subject to the jurisdiction of the District Court.
105. This Agreement and all negotiations relating to this Agreement and all
proceedings taken hereunder shall not in any event be construed as, or deemed to
be evidence of, an admission or concession by any party of any wrongdoing or
liability whatsoever.
106. The Agreement and each of its provisions shall not be offered or
received into evidence in the actions referenced above or any other action or
proceeding as evidence of an admission or concession of liability or wrongdoing
of any nature on the part of any party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Settlement
Agreement as of June 30, 1995.
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