UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 27, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File Number 1-8544
APL LIMITED
(Exact name of registrant as specified in its charter)
Delaware 94-2911022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 Broadway
Oakland, CA 94607
(Address of principal executive offices)
Registrant's telephone number: (510) 272-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, Par New York Stock Exchange
Value $.01 Pacific Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Junior Participating Preferred Stock Pacific Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
______________
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (x)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the
past 90 days. Yes (x) No ( )
______________
At February 28, 1997 the number of shares of Common Stock
outstanding was 24,590,789. Based solely upon the closing price
of the New York Stock Exchange on such date, the aggregate
market value of Common Stock held by non-affiliates of the
registrant was approximately $324.5 million.
Documents Incorporated by Reference
Portions of registrant's Proxy Statement for its 1997 Annual
Meeting of Stockholders are incorporated by reference into Part
III hereof.
______________
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TABLE OF CONTENTS
Page
PART I
Items 1. and 2. BUSINESS AND PROPERTIES 3-13
Item 3. LEGAL PROCEEDINGS 13-14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 14
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS 14
Item 6. SELECTED FINANCIAL DATA 14-15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 16-28
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 28-55
Item 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 56
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT 56
Item 11. EXECUTIVE COMPENSATION 57
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 57
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 57
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 57-66
SIGNATURES 67-68
<PAGE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
APL Limited and its subsidiaries (the "company") provide
container transportation and related services in the Americas,
Asia, the Middle East and Europe, through an intermodal system
combining ocean, rail and truck transportation.
The company provides transportation services for
containerized cargo in the trans-Pacific, intra-Asia, Asia-
Europe, Asia-Latin America and North American markets. Certain
of the services are provided through alliances with other
transportation companies. In addition, the company provides
cargo distribution and warehousing services in the U.S. and
freight consolidation services in Mexico, Asia, the Middle
East, Europe and Africa. The company also provides freight
deconsolidation services in several U.S. locations and acts as
a non-vessel operating common carrier in the intra-Asia market
and from Asia to Europe and Australia. The company provides
intermodal transportation and freight brokerage services to
North American and international shippers, as well as time-
critical cargo transportation and just-in-time delivery
(principally to the automotive manufacturing industry). These
services are provided through an integrated system of rail and
truck transportation, the primary element of which is train
services provided utilizing double-stack rail cars.
The company's international transportation operations are
conducted through American President Lines, Ltd., an ocean
common carrier with operations in the Pacific Basin, Europe and
Latin America. Another operating unit, American Consolidation
Services, Ltd., provides cargo distribution, warehousing and
freight consolidation services. Stevedoring and terminal
operations on the U.S. West Coast are conducted through Eagle
Marine Services, Ltd. American President Business Logistics
Services, Ltd. provides logistical consulting and management
services. The company's North America transportation
operations are conducted through APL Land Transport Services,
Inc., which provides intermodal transportation. The company
was engaged in real estate operations through Natomas Real
Estate Company until 1994, when its remaining real estate
holdings were sold.
TRANSPORTATION
International
The company provides ocean-going containerized cargo
transportation services primarily in the trans-Pacific market,
as well as in the intra-Asia, Asia-Europe and Asia-Latin
America markets. The company offers seven scheduled trans-
Pacific services per week between key ports in the United
States, Canada, Mexico, Latin America and Asia.
The company provides scheduled service between over 60
ports in the Pacific and Indian Oceans and in the Arabian Gulf.
In the intra-Asia market, the company provides service between
over 500 Asian cities and commercial centers. The company's
trans-Pacific services are provided between Asia and over 5,000
cities in North America via eight West Coast
<PAGE>
ports and three East Coast ports. In addition, service is
offered between Asia and Europe to over 2,000 cities in Europe
which are served through five northern European ports. Also,
in the market between Asia and the Caribbean, Latin America,
Central and South America, over 100 ports and cities are
served. The company's ocean transportation business maintains
313 offices and agencies located in 15 countries in North and
South America, 25 countries in Asia and the Middle East, 15
countries in Europe, three countries in Africa, and in
Australia.
Since 1991, the company and Orient Overseas Container Line
("OOCL") have been parties to agreements enabling them to
exchange vessel space and coordinate vessel sailings through
2005. These agreements permit both companies to offer faster
transit times and more frequent sailings between key markets in
Asia and the U.S. West Coast, and to share terminals and
several feeder operations within Asia. In September 1994, the
company, Mitsui OSK Lines, Ltd. ("MOL"), and OOCL signed an
agreement to exchange vessel space, coordinate vessel sailings
and cooperate in the use of port terminals and equipment for
ocean transportation services in the Asia-U.S. West Coast trade
through 2005. The carriers commenced service under this
agreement in January 1996. The agreement between the company
and OOCL is suspended so long as the agreement between the
company, OOCL and MOL is in effect.
The three carriers and Nedlloyd Lines B.V. ("NLL") are
parties to a separate agreement to exchange vessel space,
coordinate vessel sailings and cooperate in the use of port
terminals and equipment in an all-water service in the Asia-
U.S. East Coast trade for a minimum of three years. The four
carriers initiated service under this agreement in March 1995.
Additionally, the four carriers and Malaysian
International Shipping Corporation BHD ("MISC") have an
agreement to exchange vessel space, coordinate vessel sailings
and cooperate in the use of port terminals and equipment for
ocean transportation services in the Asia-Europe trade through
2001, with early termination rights upon six months notice to
the other parties beginning January 1, 1998. The carriers
commenced service under the agreement in January 1996. The
company entered the Asia-Europe trade in March 1995 by
chartering vessel space through MOL.
The above agreements between the company, OOCL, MOL, NLL
and MISC are collectively referred to as the Global Alliance.
NLL merged with the container line operations of The
Peninsular and Oriental Steam Navigation Company ("P&O") on
December 31, 1996 to form P&O Nedlloyd Container Line Limited
("P&O-NL"). NLL and P&O were each members of different
alliances, and the future alliance participation of P&O-NL has
not yet been determined. If P&O-NL does not continue in the
Global Alliance, there could be a significant impact on the
Global Alliance's operations. The company cannot predict when
the alliance participation of P&O-NL will be determined or the
resulting impact on the operations of the Global Alliance.
However, while no assurances can be given, the company believes
that acceptable alternatives may be available.
In September 1996, the company and Transportacion Maritima
Mexicana ("TMM") amended their existing agreement for the
reciprocal charter of vessel space. The amended agreement is
effective until late April 1999 and automatically renews for
one year unless terminated with one year's notice.
<PAGE>
The company and Matson Navigation Company, Inc. ("Matson")
commenced service under a 10-year alliance in February 1996.
In connection with the alliance, the company sold Matson six of
its U.S.-flag ships (three C9-class vessels and three C8-class
vessels) and certain of its assets in Guam for approximately
$163 million in cash. One of the ships was sold in December
1995, and the remaining five vessels were sold in January 1996.
Four of these vessels, together with a fifth Matson vessel, are
currently being used in the alliance. Matson is operating the
vessels in the alliance, which serves the U.S. West Coast,
Hawaii, Guam, Korea and Japan, and has the use of substantially
all the westbound capacity. The company has the use of
substantially all the alliance vessels' eastbound capacity.
The following tables show the company's line haul capacity
provided to and available from alliance partners (the Global
Alliance, TMM and Matson) under the company's alliance
agreements for 1996 and as estimated for 1997, in thousands of
twenty-foot equivalent units ("TEUs"):
Capacity provided by the company to the alliances: 1996 1997(1)
Trans-Pacific
Eastbound 604.7 602.8
Westbound 460.4 473.2
Capacity available to the company from the alliances:
Trans-Pacific
Eastbound 521.8 561.4
Westbound 384.3 418.5
Asia-Europe
Eastbound 43.6 50.1
Westbound 43.6 50.1
Asia-Latin America
Eastbound 27.9 27.9
Westbound 27.9 27.9
Matson
Westbound 26.3 28.6
TMM
Eastbound 29.8 43.2
Westbound 29.8 43.2
(1)Capacity for 1997 is based upon the current schedule for
delivery and deployment of newly constructed vessels and
implementation of the alliances and assumes currently
allocated vessel space, which is subject to adjustment.
Under the current alliance agreements, alliance partners
contribute and are allocated vessel space, which may be
adjusted from time to time. The agreements provide for, among
other things, settlement of the difference between the value of
vessel space provided by each partner and the value of vessel
space available to that partner, at specified vessel costs per
TEU per day. The value of vessel space provided by the company
to the alliances is less than the value of the total capacity
allocated to it through the alliances, resulting in an annual
net cash payment from the company to its
<PAGE>
alliance partners. The amount paid to alliance partners was
$51 million in 1996, and is currently estimated to be $56
million in 1997. Agreements covering terminal and equipment
sharing among the Global Alliance partners have not been
reached, and the company is unable to predict at this time
whether or when such agreements will be reached.
In connection with the sale of the company's K10-class
vessel construction contract to a third party in September 1995,
the company, MOL, OOCL and NLL formed a joint venture company,
in which their respective shares are each 25%, that agreed to
charter back the K10 vessels for seven years. OOCL has agreed
to subcharter the K10s from the joint venture for seven years
for use in the Asia-Europe trade, replacing three of its 2,800
twenty-foot equivalent unit F-class vessels. The three replaced
F-class vessels are being chartered to the joint venture for ten
years and subchartered by the company from the joint venture
through May 2000. The subcharters for two of such vessels have
been assumed by TMM through May 1999. TMM's remaining
obligations of $40.8 million under the assumed subcharters have
been guaranteed by the company. The company has been deploying
the third F-class vessel since May 1996 in its West Asia/Middle
East service.
International container transportation operations are
seasonal and subject to economic cycles and the growth of local
economies in the markets served, fluctuations in the relative
values of the U.S. dollar and various foreign currencies and
resulting changes in demand for transportation of import and
export products. The second and third quarters of each year
generally have been the company's strongest in terms of volume,
primarily due to the export of seasonal refrigerated goods from
the U.S. in both of these quarters and increased imports of
consumer goods into the U.S. in the third quarter for the
Christmas buying season.
The following table sets forth the amount and source of
the company's ocean shipping revenues for the past five years,
in millions of dollars:
1996 1995 1994 1993 1992
Trans-Pacific $1,228 $1,403 $1,390 $1,378 $1,329
Other Ocean
Transportation 482 418 352 329 296
Total $1,710 $1,821 $1,742 $1,707 $1,625
In its trans-Pacific markets, the company transports
imports into North America that include higher value goods such
as clothing, electronics, automotive and manufacturing
components and other consumer items. Generally, higher value
cargo is transported at higher rates due to its value, time
sensitivity or need for specialized services. U.S. export
cargoes transported by the company include refrigerated goods,
military shipments and lower value, semi-processed and raw
materials, as well as auto parts, oil field supplies and other
higher value finished products.
In the intra-Asia market, the industrialized economies
import food, raw materials and semi-processed goods from
developing Asian nations and export auto parts, electronics and
other technological and capital-intensive finished products.
<PAGE>
The Asia-Europe trade is similar in cargo mix to the
trades between North America and Asia. Shipments from Asia to
Northern Europe include higher value goods such as electronic
goods. Trade from Europe to Asia includes many lower value,
semi-processed and raw materials, as well as carpet and floor
coverings and chemicals.
Exports from Asia to Latin America and the Caribbean
include consumer products, auto parts, motorcycles and other
high value goods. Cargoes moving from Latin America to Asia
include raw materials such as coffee and cocoa, resins,
chemicals, and processed goods including foods and beverages.
The single largest customer of the company's international
transportation operations is the U.S. government, which ships
military and other cargo and accounted for approximately 2% in
1996 and 1995, and 3% in 1994, of consolidated revenues.
Historically, the company has bid competitively for contracts
to transport military and other cargo for the U.S. government.
In recent years, the U.S. military has been closing bases and
reducing the number of U.S. military personnel overseas. The
extent to which future U.S. military base closures and rollback
of personnel may impact shipments of U.S. military cargo by the
company cannot be estimated.
The company collected detention charges from the U.S.
government for containers transported for Operation Desert
Storm and held beyond an allowed time, which contributed $10
million, $6 million and $41 million to operating income in
1994, 1993 and 1992, respectively.
The following table shows the company's total
international transportation volumes in forty-foot equivalent
units ("FEU") for the past five years:
Year Volumes
1996 590,000
1995 570,000
1994 558,000
1993 543,000
1992 501,000
The company is a participant in freight conferences, which
are groups of carriers that may jointly establish common
tariffs and common rate levels in certain markets. Conferences
in trades from and to the U.S. are exempt from U.S. anti-trust
laws under the Shipping Act of 1984 (the "Shipping Act").
Conferences have historically been effective in establishing
and maintaining a stable rate environment for their members.
Recently, however, carriers which are members of freight
conferences, including the company, have been losing market
share to carriers which are not members of the conferences.
The company estimates that its share of the trans-Pacific
market was approximately 8% in 1996 and 1995, and 9% in 1994.
Non-conference carriers have been increasing their capacity,
improving their services and charging rates for transporting
cargo at increasingly lower levels than conference carriers.
In late 1995, the company reduced rates for specific
commodities in specific trade lanes in response to competitive
conditions and loss of market share in the Asia to North
America market. Competitors and the company have subsequently
lowered rates, and considerable rate instability persists in
this market, as well as in the
<PAGE>
company's other trade lanes. The company cannot predict
whether rate reductions will continue to be taken by the
company or its competitors in 1997, or the extent of such
reductions, if any. Continued destabilization of rates, if
extensive, could have a material adverse impact on the results
of operations of carriers, including the company.
Since 1989, the company and 13 other shipping companies,
representing approximately 85% of total trans-Pacific U.S.
import capacity, have been parties to the Trans-Pacific
Stabilization Agreement. Among other things, the agreement
limits import capacity of participating companies by amounts
mutually determined from time to time in an attempt to improve
the balance of supply and demand in the U.S. import market.
The agreement may be terminated upon the unanimous written
consent of the companies. The company's ability to be a party
to this agreement is based upon the Shipping Act, which is
discussed on page 11.
The company provides cargo distribution and warehousing
services in the U.S. and freight consolidation services in
Asia, the Middle East, Europe, Mexico and Africa through its
subsidiary, American Consolidation Services, Ltd. ("ACS"). ACS
also provides freight deconsolidation services in several U.S.
locations and acts as a non-vessel operating common carrier in
designated trade lanes. Freight consolidators combine various
shipments from multiple vendors into a single container load
for delivery to a single destination. The company also serves
shippers of less-than-containerload cargoes by combining their
shipments with others bound for the same or proximate
geographic locations.
The company has port terminal facilities in Oakland and
Los Angeles, California, Seattle, Washington and Dutch Harbor,
Alaska and major inland terminal facilities at South Kearny,
New Jersey, Chicago, Illinois and Atlanta, Georgia. Each port
terminal facility is operated under a long-term use agreement
providing for preferential, although non-exclusive, use of the
facility by the company. The company utilizes public terminals
in certain other locations. The company also operates major
port terminal facilities in Asia under long-term lease
agreements in Kobe and Yokohama, Japan and Kaohsiung, Taiwan,
and utilizes public terminals in other locations.
In 1993, the company entered into a contract with the Port
of Los Angeles to lease a new 226-acre terminal facility for 30
years. Occupancy of the new facility is scheduled for 1997
upon completion of construction. Additionally, in 1994, the
company and the Port of Seattle signed a lease amendment for
the improvement and expansion of its existing terminal
facility. Under the amended lease, the facility will be
expanded from 83 acres to approximately 160 acres. The
expansion is expected to be completed during 1997, and the
lease term will be 30 years from completion. In addition, the
company has the option to further expand both terminals.
The company and a Philippine terminal developer and
operator formed a joint venture for the development of terminal
facilities in Karachi, Pakistan, in which each share equally in
the venture's operations, profits and commitments. In June
1996, the joint venture entered into an implementation
agreement with an agency of the Republic of Pakistan regarding
construction and operation of these terminal facilities. The
joint venture is currently arranging financing for the project.
Subject to completion of the financing and other related
arrangements, the company currently anticipates construction to
begin in early 1997.
<PAGE>
In addition to performing stevedoring and terminal
services for the company's own operations, Eagle Marine
Services, Ltd., a subsidiary of the company, provides these
services to third parties at the company's U.S. port
facilities.
On December 27, 1996, the company owned and operated eight
U.S.-flag containerships and six foreign-flag containerships.
In addition, the company owned three U.S.-flag Pacesetter
vessels that were chartered to another carrier. The following
table sets forth the vessels deployed by the company in its
trans-Pacific and intra-Asia services at December 27, 1996:
Maximum
Number of Date Placed Capacity Service Speed
Type of Vessel Vessels in Service (in TEUs)
(in knots)
C-11 6 1995-1996 4,800 24.6
C-10 5 1988 4,300 24.0
J-9 2 1984 2,700 22.5
Pacesetter 1 1973 1,400 23.5
The company has the authority from the United States
Maritime Administration ("MarAd") to operate an unlimited
number of foreign-flag-feeder vessels in its intra-Asia and
Caribbean services. At December 27, 1996, the company operated
24 such vessels, 23 in its intra-Asia service and one in its
Caribbean service, which it leases for remaining terms of up to
three years.
The company took delivery of and made final payments on
five C11-class vessels in 1995 and one C11-class vessel in
1996, built pursuant to construction contracts with
Howaldtswerke-Deutsche Werft AG, of Germany and Daewoo
Shipbuilding and Heavy Machinery, Ltd., of Korea. The total
cost of the six C11-class vessels was $529 million, including
total payments to the shipyards of $503 million, of which $62
million was paid in January 1996.
At December 27, 1996, the company operated 134,600 dry
containers consisting of 20-, 40-, 45-, 48-, and 53-foot
containers, 43,100 of which were owned and 91,500 leased under
operating lease agreements. At that date, the company also
operated 8,900 refrigerated containers, 3,600 of which were
owned and 5,300 leased under operating leases. In addition,
the company operated 54,800 chassis for the carriage of
containers, 40,200 of which were owned and 14,600 leased under
capital and operating leases.
North America
The company provides intermodal transportation to North
American and international shippers, as well as time-critical
cargo transportation and just-in-time delivery (principally to
the automotive manufacturing industry). These services are
provided through an integrated system of contracted rail and
truck transportation, the primary element of which is train
services provided utilizing double-stack rail cars.
The company's double-stack train services principally are
provided to the North American long-haul full container load
freight markets, and the international (export-import)
intermodal market, through more than 50 U.S., Canadian and
Mexican inland terminal facilities. The company has agreements
<PAGE>
with certain railroads under which those railroads serve as the
company's rail carriers, providing locomotive power, rail cars,
trackage, terminal services and labor to transport the
company's containers on individual double-stack rail cars and
on dedicated unit trains.
The following table shows the company's total North
America stacktrain volumes, including automotive, in shipments:
Year Volumes
1996 460,000
1995 430,000
1994 416,000
1993 359,000
1992 328,000
A stacktrain comprises up to 28 double-stack rail cars and
has a capacity of up to 280 FEUs. At December 27, 1996, the
company controlled 370 such rail cars, 220 of which were owned
and 150 of which were leased. In addition, as part of
agreements with certain railroads, the company utilizes
additional rail cars owned or leased and operated by the
railroads. The company controlled 390 and 930 double-stack
rail cars in 1995 and 1994, respectively. The significant
reduction in the number of rail cars under direct company
control in 1995 was made pursuant to the company's agreement
with the railroads.
Information Systems
The company manages its fleet of containers and chassis
using its computer systems and specialized software, linked
through a telecommunications network with the company's ships
and offices. The company's cargo and container management
system processes cargo bookings, generates bills of lading,
expedites U.S. customs clearance and facilitates the management
of rail cars, containers and other equipment. The company has
also developed computer systems designed to optimize the
loading of containers onto ships and to facilitate the planning
of ship, rail and truck moves. The company's communications
system permits its customers to access information regarding
the location and status of their cargo via touch-tone
telephone, personal computer or computer-facsimile link.
Real Estate
In 1994, the company sold its remaining 86 acres of land.
COMPETITION AND REGULATION
International Transportation
The company is a U.S.-flag and foreign-flag carrier. It
faces vigorous competition, principally on the basis of price
and service, on all of its trade routes from approximately 19
major U.S.-flag and foreign-flag operators, some of which are
owned by foreign governments. Foreign-flag competitors
generally have cost and operating advantages over U.S.-flag
carriers. The timing of increases in capacity in the ocean
transportation industry can result in imbalances in industry-
wide supply and demand, which causes volatility in rates. A
number of competing ocean carriers,
<PAGE>
particularly in the trans-Pacific market, have placed orders
for the construction of a significant number of new vessels.
As a result, capacity in the trans-Pacific market is expected
to grow significantly more than demand, which could result in
further rate reductions.
The carriage of U.S. military cargo is reserved for U.S.-
flag shipping companies, and this trade is also subject to
vigorous competition among such carriers. The process by which
military cargo was awarded to shippers was revised. Under the
Uniform Commercial Rate contract, effective from June 1996 to
September 1997, the company shares equally in military cargo
volumes with one competitor in certain cargo routes. In
addition, under the Best Value Rate contract, effective from
February to September 1997, the company was awarded 65% of the
cargo volumes in certain cargo routes. The government is
currently evaluating which of the above programs is preferable
for the award of military cargo. The company is unable to
predict which program will be selected or the program's final
form.
In 1996, legislation was introduced in the U.S. House of
Representatives and the U.S. Senate that would substantially
modify the Shipping Act. The Shipping Act, among other things,
provides the company with certain immunity from antitrust laws
and requires the company and other carriers in U.S. foreign
commerce to file tariffs publicly. Although Congress failed to
adopt this legislation, it may be reintroduced in 1997. The
legislation proposed in 1996 contained provisions that would
have been phased in, would have eliminated government tariff
filing, allowed confidential and independent contracts between
shippers and ocean carriers, strengthened provisions that
prohibit predatory activities by foreign carriers, under
limited continuing oversight by the Federal Maritime Commission
or a successor agency, while continuing the company's existing
antitrust immunity. The company is unable to predict whether
this or other proposed legislation will be introduced or
enacted, and whether any such legislation will contain terms
similar to those proposed in 1996. Enactment of legislation
modifying the Shipping Act, depending upon its terms, could
have a material impact on the competitive environment in which
the company operates and on the company's results of
operations. The company is unable to predict the nature or
extent of the impact of this legislation, if enacted.
A substantial portion of the company's transportation
operations is subject to regulation by agencies of the U.S.
government that have jurisdiction over shipping practices,
maintenance and safety standards and other matters. The
company's wholly-owned subsidiary, American President Lines,
Ltd. ("APL") and MarAd are parties to a 20-year Operating-
Differential Subsidy Agreement ("ODS Agreement") expiring
December 31, 1997. This agreement provides for payments by the
U.S. government to partially compensate APL for the greater
labor expense of operating vessels under U.S. rather than
foreign registry. Under APL's ODS Agreement, APL must be
controlled by U.S. citizens and its vessels must be registered
and built in the U.S. (except as noted below) and manned by
U.S. crews. In addition, APL is required to serve such trade
routes within designated minimum and maximum numbers of annual
sailings, and, except for over-age vessels, APL may not,
without prior government approval, remove any of its vessels
from operation under its ODS agreement unless such agreement is
terminated.
<PAGE>
Since 1981, Congress has twice passed legislation
permitting U.S.-flag carriers to acquire a limited number of
foreign-built vessels and thereafter to operate such vessels
under existing subsidy agreements under U.S. flag. Under such
laws, APL had five C10-class vessels constructed in Germany
which are currently operated under this legislation.
In June 1993, MarAd awarded APL contracts to manage 10
Ready Reserve Force ("RRF") vessels for a period of five years
and 2 vessels for a period of two and one half years. In 1996,
2 RRF vessel contracts expired and were converted into General
Agent Agreements for two and one half years. APL receives a
per diem fee based upon the operating status of each vessel.
On October 8, 1996, the Maritime Security Act of 1996 was
signed into law. This legislation provides for a 9-year
Maritime Security Program ("MSP") administered by MarAd with up
to $100 million in payments per annum to be appropriated by
Congress on an annual basis. MSP provides $2.1 million per
vessel per year, compared with up to $3.6 million per vessel
per year under ODS, and will expire on October 1, 2005.
On January 21, 1997, the company signed operating
agreements under MSP for nine ships, including five C10-class
vessels and four C11-class vessels. The company has a one-year
period in which to begin the participation of those vessels in
the program. Vessels participating in MSP must be registered
under U.S. flag and manned by U.S. crews and must participate
in the Emergency Preparedness Program established by the
Maritime Security Act, and certain U.S. citizenship
requirements are applicable to the participating carrier.
Transfers of operating agreements and substitution of vessels
are permitted under specified circumstances, subject to the
prior approval of MarAd. The operating agreements are one-year
contracts, which will be automatically renewed through
September 30, 2005 subject to available funding. If annual
funding is not appropriated by the U.S. Congress, the operating
agreements may be terminated on 60-days notice by MarAd. The
agreements may also be terminated by the participating carrier
on 60-days notice at any time, provided that the carrier
continues to participate in the Emergency Preparedness Program
and the vessels continue under U.S. flag registry through the
end of the then-current fiscal year.
Due to the enactment of MSP, the company's collective
bargaining agreement covering its unlicensed personnel expired
and was renegotiated, and a new agreement was reached with
these unions on December 18, 1996. The new contract expires in
June 1999. Existing agreements covering licensed personnel
expire in December 1997 and June 1998, and the company has been
engaged in discussions with the related unions regarding
continuation of those agreements. The company is unable to
predict when or whether new agreements may be reached, and
labor disturbances could result which could have a material
adverse impact on the company.
In January 1995, the company and Columbia Shipmanagement
Ltd., a Cyprus company ("Columbia"), entered into an agreement
under which Columbia has agreed to provide crewing,
maintenance, operations and insurance for the company's six C11-
class vessels for a per diem fee per vessel. The agreement may
be terminated at any time by either party with notice.
<PAGE>
North America Transportation
The company's stacktrain operations compete with eight
trans-Pacific containership companies and two West Coast
railroads offering double-stack train service. In addition,
the company's stacktrain operations, together with its
contracted trucking services, compete with long-haul trucking
companies for truckload shipments. The company provides
brokerage services for major customers who require a full
spectrum of transportation and ancillary services.
EMPLOYEES
At February 1, 1997, the company and its subsidiaries
employed 182 seagoing and 3,798 shoreside personnel. The
seagoing personnel and 294 of the shoreside personnel were
employed under collective bargaining agreements with several
unions.
ITEM 3. LEGAL PROCEEDINGS
The company is a party to various pending legal
proceedings, claims and assessments arising in the course of
its business activities, including actions relating to trade
practices, personal injury or property damage, alleged breaches
of contracts, torts, labor matters, employment practices, tax
matters and miscellaneous other matters. Some of these
proceedings involve claims for punitive damages, in addition to
other specific relief.
Among these actions are approximately 3,290 cases pending
against the company, together with numerous other ship owners
and equipment manufacturers, involving injuries or illnesses
allegedly caused by exposure to asbestos or other toxic
substances on ships. In May 1996, an order was entered in the
United States District Court for the Eastern District of
Pennsylvania, which administratively dismissed most of such
cases without prejudice and with all statutes of limitation
tolled, and with reinstatement permitted upon fulfillment by
plaintiffs of certain specified conditions. In July 1996, the
Court issued an order to reinstate 29 cases against vessel
owners and to dismiss the vessel owners' third party claims and
cross-claims against manufacturers of asbestos products. A
motion for reconsideration of such dismissal is pending. The
company is presently unable to ascertain or predict the
potential impact of this order on the disposition or eventual
outcome of such cases.
The company insures its potential liability for bodily
injury to seamen through mutual insurance associations.
Industry-wide resolution of asbestos-related claims and
resolutions of claims against bankrupt shipping companies at
higher than expected amounts could result in additional
contributions to those associations by the company and other
association members.
In December 1989, the government of Guam filed a complaint
with the Federal Maritime Commission ("FMC") alleging that
American President Lines, Ltd. and an unrelated company charged
excessive rates for carrying cargo between the U.S. and Guam,
in violation of the Shipping Act and the Intercoastal Shipping
Act of 1933, and seeking an undetermined amount of
<PAGE>
reparations. Three private shippers are also complainants in
this proceeding. On June 3, 1996, the FMC administrative law
judge ordered that the complaint be dismissed on the merits.
The complainants filed its appeal with the FMC on July 25,
1996, and American President Lines, Ltd. filed its reply on
September 16, 1996. A decision by the FMC is expected in
August 1997.
Based upon information presently available, and in light
of legal and other defenses and insurance coverage and other
potential sources of payment available to the company,
management does not expect the legal proceedings described,
individually or in the aggregate, to have a material adverse
impact on the company's consolidated financial position or
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the company's
security holders during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The company's Common Stock is listed on the New York and
Pacific Stock Exchanges using the symbol APL. The reported
high and low closing sales prices per share of the company's
Common Stock and cash dividends declared for the preceding
eight fiscal quarters are set forth in Note 14 to the
consolidated financial statements, Part II, Item 8, on page 54
and are incorporated herein by reference.
On February 28, 1997, the company had 3,129 common
stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the five years
ending December 27, 1996 are derived from the consolidated
financial statements of the company, which have been examined
and reported upon by the company's independent public
accountants. The selected financial data should be read in
conjunction with the Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
<PAGE>
FIVE-YEAR FINANCIAL REVIEW
(Dollars in millions,
except per share amounts)1996 1995 1994 1993 1992
Results of Operations (1)
Revenues $2,739 $2,896 $2,794 $2,606 $2,516
Operating Income 141 68 123 133 140
Income Before Taxes 104 53 110 131 122
Income Before Cumulative
Effect of Accounting
Change 70 30 74 80 78
Net Income 70 30 74 80 56
Earnings Per Common Share,
Fully Diluted, Before
Cumulative Effect of
Accounting Change (2) 2.67 0.99 2.30 2.50 2.34
Earnings Per Common Share,
Fully Diluted (2) 2.67 0.99 2.30 2.50 1.69
Cash Dividends Per
Common Share (2) 0.40 0.40 0.40 0.30 0.30
Financial Position
Cash, Cash Equivalents
& Short-Term
Investments $ 283 $ 136 $ 255 $ 84 $ 132
Working Capital 226 65 206 51 (16)
Total Assets 1,880 1,879 1,664 1,454 1,436
Net Capital Expenditures 144 456 128 156 66
Long-Term Debt and Capital
Lease Obligations 696 687 386 267 242
Redeemable Preferred Stock 75 75 75
Stockholders' Equity 503 469 541 475 397
Capital 1,209 1,168 1,007 822 829
Book Value Per
Common Share (2) 20.47 18.28 19.82 17.72 15.25
Financial Ratios
Return on Equity (3) 14.3% 5.6% 12.7% 15.7% 11.6%
Cash Flow to Average
Total Debt (4) 17.7% 30.1% 53.3% 53.7% 43.4%
Return on Average Assets 3.7% 1.7% 4.8% 5.5% 3.8%
Total Debt to Equity (3) 140.4% 149.0% 63.4% 49.4% 75.5%
Total Debt to Capital (3) 58.4% 59.8% 38.8% 33.0% 43.0%
Current Ratio 1.6 1.1 1.5 1.1 1.0
(1)The company's fiscal year ends on the last Friday in
December. All years presented above were 52 weeks, except
for 1993 which was a 53-week year.
(2)Earnings Per Common Share, Cash Dividends Per Common Share
and Book Value Per Common Share have been computed for all
periods retroactively reflecting the effect of a 2-for-1
stock split effected on December 31, 1993. Earnings Per
Common Share also reflect the 1995 conversion of the
redeemable preferred stock into 4.0 million shares of
common stock and the repurchase of 1.3 million, 6.0 million
and 3.7 million shares of the company's common stock on a
post-split basis during 1996, 1995 and 1992, respectively.
(3)Redeemable preferred stock, which was converted into common
stock in 1995, is included in Equity for the purpose of
calculating these ratios.
(4)Cash Flow represents Cash Flows from Operating Activities.
<PAGE>
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Summary Results
(In millions) 1996 Change 1995 Change 1994
Revenues
Container Transportation $2,358 (8%) $2,577 3% $2,497
Logistics Services and Other 381 19% 319 8% 297
Total $2,739 (5%) $2,896 4% $2,794
Operating Income $141 106% $68 (44%) $123
Pretax Income $104 96% $53 (52%) $110
Overview
The company's pretax income excluding non-recurring items
was $62 million in 1996, as compared with $90 million in 1995
and $85 million in 1994. Non-recurring gains in 1996 included
$22 million in gains from asset sales, $13 million in gains
related to the curtailment of retirement obligations due to
workforce reductions, and $7 million in gains from the sale of
the company's domestic distribution services segment. In 1995,
non-recurring items included $11 million in gains from vessel
sales and liquidated damages from delayed vessel deliveries,
which were offset by a $48 million restructuring charge. Non-
recurring items in 1994 included $10 million related to the
collection of Desert Storm detention charges, $9 million in
gains from the sale of the company's remaining real estate
holdings, and $6 million from crane and container sales.
In 1996, the company's earnings were impacted by
reductions in rates from 1995 levels throughout its markets.
Partially offsetting these rate reductions were increased
volumes in all markets except North America to Asia and
Automotive, and reduced operating costs in all areas except
cargo handling, as compared with 1995. Sales, general and
administrative expenses, in particular, declined 20% in 1996
compared with 1995.
In 1995, the company's earnings were impacted by volume
growth in the company's North America to Asia market, an
improvement in average revenue per FEU in the company's ocean
transportation markets, and lower land transportation costs per
FEU in 1995, all as compared with 1994. These factors were
partially offset by lower volumes in the Asia to North America
market compared with 1994.
<PAGE>
Container Volumes
by Major Market(1) 1996 Change 1995 Change 1994
Asia To North America 187.9 7% 176.1 (8%) 190.6
North America to Asia 128.2 (13%) 146.8 11% 132.7
Intra-Asia 157.2 1% 155.2 (4%) 161.4
Asia-Europe 39.3 100% 19.6 100%
Latin America 9.2 56% 5.9 34% 4.4
Refrigerated 51.3 1% 50.9 4% 49.1
Stacktrain 405.0 7% 379.6 (1%) 383.6
Automotive 83.7 (10%) 93.5 30% 71.9
(1) Volumes are stated in thousands of FEUs, except Stacktrain
and Automotive, which are stated in thousands of shipments.
Volumes data are based upon shipments originating during the
period, which differs from the percentage-of-completion method
used for financial reporting purposes.
Asia to North America
Volumes increased in 1996 due primarily to strong export
activities in South China, Hong Kong and Indonesia. Lower
manufacturing costs in South China have shifted customer
production facilities to that region, thereby increasing
volumes from that area. Increased volumes in the Asia to North
America market in 1996 is also attributable to the company's
efforts to regain market share and related rate reductions.
Volumes in this market declined between 1994 and 1995 due to
increased competitive pressure from non-conference carriers and
lower demand.
North America to Asia
Volumes declined in this market in 1996 compared with 1995
due primarily to the company's sale of six vessels and its Guam
business to Matson in late 1995 and early 1996. Also, during
the first half of 1996, the company generally carried heavier
cargo than usual in this market, which constrained utilization
of vessel capacity and volumes.
Volumes in this market increased between 1994 and 1995,
primarily because of increased shipments of resins, wastepaper
and cotton to Hong Kong, the People's Republic of China and
India. These increases were partially offset by a significant
decrease in the company's U.S. military volumes in this market.
The company carried approximately 75% of trans-Pacific military
cargo from January to June 1994, and approximately 25% for the
remainder of 1994 and through May 1996. A new military
contract became effective in June 1996 whereby the company
shares equally in military cargo volumes with one competitor in
certain routes. The company's military volumes have also been
affected by a general decline in military cargo shipments in
recent years.
Intra-Asia
In 1996, the company's intra-Asia volumes increased from
1995 levels, due primarily to increased shipments between Asia
and the Middle-East. Also, the company's 1995 volumes in this
market were impacted by a drop in shipments to and from Kobe,
Japan due to the January 1995 earthquake in that region, as
well as poor cotton harvests in India and Pakistan. In 1995,
the company also reduced its shipments of lower-margin cargo in
this market compared with 1994.
<PAGE>
Asia-Europe
In 1996, volumes in this market increased significantly
over 1995. The company began Asia-Europe service in March 1995
with shipments to Denmark, the United Kingdom and the
Netherlands primarily from Hong Kong, the People's Republic of
China and Taiwan. Shipments from the Netherlands, Belgium and
Germany to Asia began in April 1995. In 1996, increased
shipments from the Netherlands, the United Kingdom, Denmark,
Hong Kong and Indonesia contributed to the overall increase in
volumes.
Latin America
The company's Latin America market includes shipments
between Asia and the Americas, including Central and South
America, the Caribbean and the U.S. East Coast. In 1995, the
company initiated all-water service between Asia and the U.S.
East Coast via the Panama Canal, which resulted in an increase
in volumes over 1994. Volumes in this market increased in 1996
from 1995 due primarily to an increase in shipments from Hong
Kong, the People's Republic of China and Korea to Panama and
Puerto Rico. An intra-Caribbean service was added in mid-1996,
which contributed to increased volumes in the Latin America
market in 1996 compared with 1995.
Refrigerated
Compared with 1995, volumes of commercial refrigerated
cargo increased slightly in 1996. This was due primarily to
increased volumes in the intra-Asia market, resulting from
increased exports from India and the company's allocation of
additional equipment to this market in 1996. These increases
were partially offset by declining refrigerated cargo volumes
in the U.S. export market, largely due to the sale by the
company of six vessels and its Guam business to Matson in late-
1995 and early-1996. Refrigerated cargo volumes increased
between 1994 and 1995 due to strong demand, particularly in the
North America-to-Asia and intra-Asia markets, and an increase
in the number of refrigerated containers owned and leased by
the company.
Stacktrain
North America stacktrain volumes increased in 1996
compared with 1995 due to continued improvement in the U.S.
economy and resulting growth in demand. Volumes declined in
1995 compared with 1994 due to increased competition from
trucking companies and the loss of several major customers
during the year.
Automotive
Automotive volumes declined in 1996 compared with 1995,
primarily due to a reduced volume of non-stacktrain shipments
by U.S. automobile manufacturers. This decline was partially
offset by increased volumes in automotive stacktrain shipments
between the U.S. and Mexico and intra-Asia shipments by
Japanese manufacturers. Between 1994 and 1995, automotive
volumes rose primarily because of increased automotive
shipments between the U.S. and Mexico, offset partially by
lower overall international automotive volumes.
<PAGE>
Average Revenue
per Unit (1) 1996 Change 1995 Change 1994
Trans-Pacific $3,390 (11%) $3,792 2% $3,721
Other Ocean
Transportation $2,122 1% $2,095 10% $1,909
Stacktrain $1,242 (7%) $1,337 (2%) $1,368
(1) Average revenue per unit is stated in FEUs, except for
Stacktrain, which is in shipments. Average revenue per unit data
are based upon shipments originating during the period, which
differs from the percentage-of-completion method used for
financial reporting purposes. Stacktrain revenue per unit
includes Automotive.
Trans-Pacific
In 1996, the company's trans-Pacific average revenue per
FEU declined substantially from 1995 due primarily to
considerable pressure on rates in the Asia to North America
market as a result of over-capacity, slower growth in trade and
rate instability, as well as the company's efforts to regain
market share by reducing rates. In late 1995, the company
reduced rates for specific commodities in specific trade lanes
in response to competitive conditions and loss of market share
in the Asia to North America market. Competitors and the
company have subsequently lowered rates, and considerable rate
instability persists in this market. The company cannot
predict whether rate reductions will continue to be taken by
the company or its competitors in 1997, or the extent of such
reductions, if any. Continued destabilization of rates, if
extensive, could have a material adverse impact on the results
of operations of carriers, including the company.
Average revenue per FEU in the company's trans-Pacific
markets increased in 1995 compared with 1994 primarily due to
general rate increases, currency adjustments in Japan and
Singapore, and an increased proportion of higher-rated
refrigerated cargo.
Other Ocean Transportation
In 1996, average revenue per FEU in the company's other
ocean transportation markets increased slightly from 1995, due
primarily to an increase in higher-rated, longer-leg and
refrigerated cargo in the intra-Asia market and rate increases
in the first half of the year. These increases were largely
offset by rate deterioration in the Asia-Europe market
throughout 1996. Between 1994 and 1995, average revenue per
FEU in the company's other ocean transportation markets
increased, a trend attributable to general rate increases and
an increase in the proportion of higher-rated refrigerated
cargo carried by the company in the intra-Asia market.
Stacktrain
Stacktrain average revenue per shipment declined in 1996
compared with 1995 primarily due to lower rates resulting from
increased competition, industry-wide softness in demand and
excess equipment capacity in this market. Stacktrain average
revenue per FEU declined in 1995 compared with 1994 due
primarily to lower rates resulting from increased competition
from trucking companies and other intermodal carriers.
<PAGE>
Outlook
The company expects rate pressures in most of its major
markets to continue through 1997 due to excess capacity and
slow market growth. Anticipated lower rates combined with
seasonal factors are expected to result in reduced earnings,
particularly in the first half of the year.
Sale of Domestic Distribution Services
In May 1996, the company sold its rights to service
certain domestic intermodal customers of APL Land Transport
Services, Inc. ("APLLTS"), a wholly owned subsidiary of the
company, for $2 million in cash and $6 million in notes, and
realized a pre-tax gain of $7 million. In addition, APLLTS and
the purchaser entered into a 10-year agreement whereby APLLTS
will provide stacktrain services to the purchaser. Revenues
related to the servicing rights sold represented approximately
4% of the company's consolidated 1996 revenues and
approximately 6% of consolidated 1995 revenues.
Logistics Services and Other Revenues
This category includes cargo handling, freight
consolidation, logistics services and charter hire revenues,
which totaled $381 million, $319 million and $297 million in
1996, 1995 and 1994, respectively. The 1996 increase is due
primarily to increased cargo handling revenues associated with
greater use of the company's terminals.
The increase from 1994 to 1995 resulted from growth in
cargo handling revenues in Asia and charter hire revenues.
Freight consolidation and logistics services revenues also
increased in 1995 from 1994 due to higher volumes. Included in
the amounts for 1994 were collections of Desert Storm detention
charges of $10 million.
During the first half of 1995, the company incurred lower
ocean freight revenues and incremental operating expenses as a
result of the January 1995 earthquake in Kobe, Japan, in which
the ocean terminal leased by the company was extensively
damaged. The company expects to recover substantially all of
these lost revenues and expenses through its business
interruption insurance and has submitted its claims to its
insurers. Management's best estimate of the recovery is
recorded in Other Revenues in 1995.
Alliances
The Global Alliance
The alliance agreements between the company, OOCL, MOL,
NLL and MISC, collectively referred to as the Global Alliance,
were fully implemented in the first quarter of 1996. Under the
current alliance agreements, alliance partners contribute and
are allocated vessel space, which may be adjusted from time to
time. The agreements provide for, among other things,
settlement of the difference between the value of vessel space
provided by each partner and the value of vessel space
available to that partner, at
<PAGE>
specified vessel costs per TEU per day. Agreements
covering terminal and equipment sharing among the Global
Alliance partners have not been reached, and the company is
unable to predict at this time whether or when such agreements
will be reached.
NLL merged with the container line operations of P&O on
December 31, 1996 to form P&O Nedlloyd Container Line Limited.
NLL and P&O were each members of different alliances, and the
future alliance participation of P&O-NL has not yet been
determined. If P&O-NL does not continue in the Global
Alliance, there could be a significant impact on the Global
Alliance's operations. The company cannot predict when the
alliance participation of P&O-NL will be determined or the
resulting impact on the operations of the Global Alliance.
However, while no assurances can be given, the company believes
that acceptable alternatives may be available.
TMM
In September 1996, the company and TMM amended their
existing agreement for the reciprocal charter of vessel space.
The amended agreement is effective until late April 1999 and
automatically renews for one year unless terminated with one
year's notice.
Matson
The company and Matson commenced service under a 10-year
alliance in February 1996. In connection with the alliance,
the company sold Matson six of its U.S.-flag ships (three C9-
class vessels and three C8-class vessels) and certain of its
assets in Guam for approximately $163 million in cash. One of
the ships was sold in December 1995, and the remaining five
vessels were sold in January 1996. Four of these vessels,
together with a fifth Matson vessel, are currently being used
in the alliance. The net gain on the sale of the four vessels
in the alliance and the Guam assets is estimated to be $2
million, depending upon final vessel modification and drydock
costs, and will be deferred and amortized over the 10-year term
of the alliance. The net gain on the sale of the fifth vessel
was $2 million and was recognized in the first quarter of 1996.
Matson is operating the vessels in the alliance, which serves
the U.S. West Coast, Hawaii, Guam, Korea and Japan, and has the
use of substantially all the westbound capacity. The company
has the use of substantially all the alliance vessels'
eastbound capacity.
The value of vessel space provided by the company to the
alliances is less than the value of the total capacity
allocated to it through the alliances, resulting in an annual
net cash payment from the company to its alliance partners.
The amount paid to alliance partners was $51 million in 1996,
and is currently estimated to be $56 million in 1997.
Maritime Regulation and Subsidy
Under the company's ODS agreement with the MarAd, which
expires December 31, 1997, payments to the company were
approximately $45 million, $62 million and $61 million in 1996,
1995 and 1994, respectively, and were recorded as a reduction
of expenses. Subsidy payments in 1996 declined because of the
sale of six U.S. flag vessels to Matson.
<PAGE>
On October 8, 1996, the Maritime Security Act of 1996 was
signed into law. This legislation provides for a 9-year
Maritime Security Program administered by MarAd with up to $100
million in payments per annum to be appropriated by Congress on
an annual basis. MSP provides $2.1 million per vessel per
year, compared with up to $3.6 million per vessel per year
under ODS, and will expire on October 1, 2005.
On January 21, 1997, the company signed operating
agreements under MSP for nine ships, including five C10-class
vessels and four C11-class vessels. The company has a one-year
period in which to begin the participation of those vessels in
the program. Vessels participating in MSP must be registered
under U.S. flag and manned by U.S. crews and must participate
in the Emergency Preparedness Program established by the
Maritime Security Act, and certain U.S. citizenship
requirements are applicable to the participating carrier.
Transfers of operating agreements and substitution of vessels
are permitted under specified circumstances, subject to the
prior approval of MarAd. The operating agreements are one-year
contracts, which will be automatically renewed through
September 30, 2005 subject to available funding. If annual
funding is not appropriated by the U.S. Congress, the operating
agreements may be terminated on 60-days notice by MarAd. The
agreements may also be terminated by the participating carrier
on 60-days notice at any time, provided that the carrier
continues to participate in the Emergency Preparedness Program
and the vessels continue under U.S. flag registry through the
end of the then-current fiscal year.
Due to the enactment of MSP, the company's collective
bargaining agreement covering its unlicensed personnel expired
and was renegotiated, and a new agreement was reached with
these unions on December 18, 1996. The new contract expires in
June 1999. Existing agreements covering licensed personnel
expire in December 1997 and June 1998, and the company has been
engaged in discussions with the related unions regarding
continuation of those agreements. The company is unable to
predict when or whether new agreements may be reached, and
labor disturbances could result which could have a material
adverse impact on the company.
In 1996, legislation was introduced in the U.S. House of
Representatives and the U.S. Senate that would substantially
modify the Shipping Act. The Shipping Act, among other things,
provides the company with certain immunity from antitrust laws
and requires the company and other carriers in U.S. foreign
commerce to file tariffs publicly. Although Congress failed to
adopt this legislation, it may be reintroduced in 1997. The
legislation proposed in 1996 contained provisions that would
have been phased in, would have eliminated government tariff
filing, allowed confidential and independent contracts between
shippers and ocean carriers, strengthened provisions that
prohibit predatory activities by foreign carriers, under
limited continuing oversight by the Federal Maritime Commission
or a successor agency, while continuing the company's existing
antitrust immunity. The company is unable to predict whether
this or other proposed legislation will be introduced or
enacted, and whether any such legislation will contain terms
similar to those proposed in 1996. Enactment of legislation
modifying the Shipping Act, depending upon its terms, could
have a material impact on the competitive environment in which
the company operates and on the company's results of
operations. The company is unable to predict the nature or
extent of the impact of this legislation, if enacted.
<PAGE>
EXPENSES
Expenses
(In millions) 1996 Change 1995 Change 1994
Transportation
Land $ 906 (10%) $1,010 0% $1,010
Ocean 424 (1%) 426 17% 366
Equipment 253 (1%) 257 6% 243
Cargo Handling 671 9% 615 9% 565
Sales, General & Administrative 386 (20%) 482 (4%) 502
Restructuring Charge (100%) 48 100%
Other (Income) Expense (42)(259%) (11) (31%) (16)
Total $2,598 (8%) $2,827 6% $2,670
Operating Ratio (1) 96% 96% 96%
(1)Other (Income)/Expense and the Restructuring Charge are
excluded from this calculation.
Land Transportation
Land transportation expenses declined from 1995 to 1996
due primarily to the company's sale of its domestic
distribution services segment in May 1996. Lower conventional
rail rates and lower truck expenses were other contributing
factors. Overall land transportation expenses were unchanged
between 1994 and 1995. In 1995, conventional rail expenses
declined due to lower volumes, but this was offset by an
increase in intermodal, rail and truck costs in the company's
international business.
Ocean Transportation
Ocean transportation expenses were lower in 1996 than in
1995, due primarily to the sale of six U.S.-flag vessels to
Matson in December 1995 and January 1996, and the return of
vessels leased from Lykes Bros. Steamship Co., Inc. ("Lykes")
to Lykes during 1996. These savings were partially offset by
increased costs related to the six new C11-class vessels, which
were placed in service in late-1995 and early-1996. Subsidy
payments declined in 1996 as a result of the vessel sales to
Matson. This drop was partially offset by favorable prior-year
subsidy adjustments. Depreciation expense rose between 1995
and 1996 because the new C11s were in service throughout 1996.
Between 1994 and 1995, ocean transportation expenses
increased due primarily to incremental vessel space purchased
from alliance partners in the Asia-Latin America and Asia-
Europe markets. Additionally, vessel fuel costs increased due
to addition of the five C11-class vessels during 1995 and an
increase in fuel prices. Depreciation expense increased from
1994 to 1995 due to delivery of five C11-class vessels and
other capital spending during 1995.
Transportation Equipment
Transportation equipment costs declined from 1995 to 1996
due primarily to lower maintenance and repair expenses in North
America, partially offset by higher maintenance and repair
costs in Asia and increased licensing fees. Costs increased
from 1994 to 1995 due to increased container leasing and repair
and maintenance costs.
<PAGE>
Cargo Handling
Cargo handling expenses rose from 1995 to 1996 due
primarily to higher stevedoring costs in Asia and North
America, resulting from handling an increased volume of
shipments and from higher labor rates. This increase was
partially offset by the strengthening value of the U.S. dollar
against the Japanese yen in 1996. The exchange rate averaged
108 yen to the dollar in 1996 versus 93 yen to the dollar in
1995.
Cargo handling expenses increased from 1994 to 1995 due to
higher stevedoring labor rates in Asia, increased cargo
handling volumes in Asia, and start-up of the Europe and Latin
America services in 1995. Another factor was the weakness of
the U.S. dollar relative to the Japanese yen in 1995,
particularly in the first half of the year.
Sales, General and Administrative
In 1996, sales, general and administrative ("SG&A")
expenses declined substantially from 1995, as the company
realized salary and benefit savings from the 1995 restructuring
which resulted in the elimination of certain positions in the
U.S. and Asia through the end of 1996. There was no spending
on corporate initiatives in 1996, compared with $25 million in
1995. Other factors were lower agency fees, lower accruals for
certain employee benefit costs due to workforce reductions, and
favorable insurance and other claims experience.
SG&A expenses declined in 1995 compared with 1994, due
primarily to lower employee-related and reengineering costs.
Expenditures for corporate initiatives related to reengineering
were approximately $25 million for 1995 and $31 million for
1994. The decline in 1995 was partially offset by a 1995
increase in agency fees resulting primarily from the company's
entrance into the Asia-Europe market, and by higher employee
relocation and telecommunication expenses. Included in 1994
SG&A expenses were $7 million in land costs and commission
expenses from final real estate sales.
Restructuring Charge
During the fourth quarter of 1995, the company recorded a
pretax restructuring charge of $48 million for the accelerated
completion of its reegineering program and other organizational
changes. The company has made a total of $24 million in
severance payments, and has written off $12 million in
equipment, leasehold improvements and other expenses related to
the restructuring.
Other Income and Expense
In 1996, the company recognized a gain of $11 million from
the sale of certain cranes in its Los Angeles and Oakland
terminals, and $9 million from the sale of residential property
in Singapore. The company sold its domestic distribution
services segment for a gain of $7 million, and a vessel for a
gain of $2 million. In 1996, the company also recorded a net
gain of $13 million from the curtailment of pension and post-
retirement obligations due to workforce reductions.
<PAGE>
In 1995, the company had $6 million of gains from sales of
vessels and $5 million in liquidated damages from delayed
vessel deliveries. In 1994, Other Income and Expense included
income of $10 million related to the collection of Desert Storm
detention charges and gains of $6 million from crane and
container sales.
Net Interest Expense
Net interest expense was $37 million in 1996, $15 million
in 1995, and $13 million in 1994. The 1996 expense includes
interest expense for the full-year on debt related to the
purchase of the C11-class vessels. This expense was partially
offset by an increase in interest income resulting from higher
cash balances in 1996 than in 1995.
The increase between 1994 and 1995 resulted primarily from
interest expense on the debt related to the purchase of C11-
class vessels purchased in 1995, partially offset by higher
interest income resulting from higher interest rates in 1995.
Income Taxes
The effective tax rates applicable to the company were 33%
in 1996, 43% in 1995, and 33% in 1994. The 1996 rate reflects
the availability of additional tax credits and deductions. The
1995 rate includes the increased effect of nondeductible items
on lower income. The 1994 rate includes the effects of
revising prior years' estimated tax liabilities. The effective
tax rate for 1997 is currently expected to be at the same level
or lower than the 1996 rate. However, the actual rate for 1997
will depend upon the level of actual earnings and upon tax law
changes, if any, among other factors.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Financial Resources
(In millions) 1996 1995 1994
Cash, Cash Equivalents and
Short-term Investments $ 283 $ 136 $ 255
Working Capital 226 65 206
Total Assets 1,880 1,879 1,664
Long-term Debt and Capital
Lease Obligations (1) 706 699 391
Cash Provided by Operations 125 164 177
Capital Expenditures
Ships $ 72 $ 392 $ 38
Containers, Chassis and Rail Cars 24 23 57
Leasehold Improvements and Other 48 41 33
Total $ 144 $ 456 $ 128
Financing Activities
Borrowings $ 62 $ 340 $ 147
Repayment of Debt and Capital Leases (55) (32) (28)
Common Stock Repurchases (29) (170)
Dividend Payments (10) (14) (18)
(1)Includes current and long-term portions.
<PAGE>
Cash Flows
In 1996, the company generated a total of $125 million in
cash from operations, compared with $164 million in 1995 and
$177 million in 1994. The 1996 decline results primarily from
lower recurring pretax earnings than in prior years. In 1996,
vessel sales to Matson, the sales of cranes in Los Angeles and
Oakland, and the sale of residential property in Singapore
generated $199 million in cash. Substantially all of these
proceeds were used to purchase short-term investments.
Capital Spending
The company took delivery of five C11-class vessels in
1995 and one C11-class vessel in 1996. The total cost of the
six C11-class vessels was $529 million, including total
payments to the shipyards of $503 million, of which $62 million
was paid in January 1996.
To finance a portion of these vessel purchases, the
company borrowed $402 million. Of this amount, $62 million was
borrowed in January 1996 and the remainder in 1995. The
company has entered into four interest rate swap agreements to
exchange the variable interest rates on certain vessel mortgage
notes for fixed rates over periods of 7 and 12 years.
Other 1996 capital expenditures included $48 million for
leasehold improvements for the new Los Angeles terminal, and
the remainder were containers and chassis purchases and vessel
modifications.
In 1995, in addition to vessel expenditures of $392
million, the company spent $64 million for purchases of
chassis, containers and terminal and leasehold improvements.
In 1994, in addition to vessel progress payments of $31
million, the company made capital expenditures totaling $97
million for purchases of chassis, vessel modifications and
terminal and leasehold improvements.
Capital expenditures in 1997 are currently expected to be
approximately $150 million, and will be primarily for terminal
and leasehold improvements, transportation equipment and
systems. The company has outstanding purchase commitments to
acquire cranes, facilities, equipment and services totaling $85
million.
Share Repurchases and Redemptions
In April 1996, the Board of Directors approved a program
to repurchase up to an aggregate of $50 million of the
company's common stock from time to time through open-market or
privately negotiated transactions. As of December 27, 1996,
the company had paid $29 million to repurchase approximately
1.3 million shares of its common stock under this program, as
more fully described in Note 10 of Notes to Consolidated
Financial Statements.
In July 1995, at the election of the holders, all
1,500,000 shares of 9% Series C Cumulative Convertible
Preferred Stock ("Series C Preferred Stock") were converted
into 3,961,498 shares of common stock, or 2.641 shares of
common stock for each share of Series C Preferred Stock (a
conversion price of $18.93 per share of common stock).
<PAGE>
In 1995, the Board of Directors authorized the repurchase
of up to 6 million shares of the company's common stock. This
repurchase was completed at prices ranging from $25.81 to $30
per share, plus expenses.
All repurchased shares were retired. The excess of the
purchase price of the common stock over its stated value has
been reflected as a decrease in Additional Paid-In Capital and
Retained Earnings.
Capital Resources
The company has a credit agreement with a group of banks
which provides for an aggregate commitment of $200 million
through March 1999. Under that agreement, the company also has
an option to sell up to $150 million of certain of its accounts
receivable to the banks as an alternative to borrowing. There
have been no borrowings under this agreement.
In January 1994, the company issued $150 million of 30-
year Senior Debentures, the proceeds from which were used to
finance vessel purchases, other capital expenditures and for
general corporate purposes.
The company believes its existing resources, cash flows
from operations and borrowing capacity under its existing
credit facilities will be adequate to meet its liquidity needs
for the foreseeable future.
CERTAIN FACTORS THAT MAY AFFECT OPERATING RESULTS
Statements prefaced with "expects", "anticipates",
"estimates", "believes" and similar words are forward-looking
statements based on the company's current expectations as to
prospective events, circumstances and conditions over which it
may have little or no control and as to which it can give no
assurances. All forward-looking statements, by their nature,
involve risks and uncertainties, including those discussed
above and below, that could cause actual results to differ
materially from those projected.
The company expects that it and the shipping industry
generally will face challenging conditions in coming years.
The adversity of the operating environment and its impact on
the company's operating results will depend on a variety of
factors, including: the timing and extent of an anticipated
slowing of market growth in certain markets served by the
company; the amount and timing of an anticipated significant
increase in industry capacity due to new vessel deliveries to
competing carriers; rate reductions in some market segments due
to this additional capacity and other factors; successful
implementation and continuation of the company's alliances,
which comprise a significant factor in the company's long-term
strategy to remain competitive; and the pace and degree of
industry deregulation.
As a result of excess capacity, slow market growth and
increased competition, considerable rate instability exists in
most of the company's major markets. Destabilization of rates,
if extensive, could have a material adverse impact on the
results of operations of carriers in these trades, including
the company.
<PAGE>
Demand in the trans-Pacific market is dependent on factors
such as the quantity of available import and export cargo and
economic conditions in the U.S. and other Pacific Basin
countries. The degree to which any growth or contraction in
the trans-Pacific market impacts the company will depend in
large part on the introduction of additional vessels into the
market by the company's competitors. Because a number of
competing ocean carriers have placed orders for the
construction of a significant number of new vessels, capacity
in the trans-Pacific market is expected to grow significantly
more than demand, which could result in further rate
reductions.
Other risks and uncertainties include: growth trends in
other markets served by the company, the company's ability to
respond to those trends, changes in the cost of fuel, the
status of labor relations, the amplitude of recurring seasonal
business fluctuations, and the continuation and effectiveness
of the Trans-Pacific Stabilization Agreement and the various
shipping conferences to which the company belongs. If the
company were unable to negotiate acceptable labor agreements,
the results could include work stoppages, strikes or other
labor difficulties, or higher labor costs, any of which could
have a material adverse affect on the company's operating
results. The company has experienced such difficulties at
times in the past, and can provide no assurance that they will
not occur in the future.
Also, the company is subject to inherent risks of
conducting business internationally, including changes in:
legislative or regulatory requirements, the relative values of
the U.S. dollar and the various foreign currencies with which
the company is paid and funds its local operations, tariffs and
other trade barriers and restrictions affecting its customers,
payment cycles, the difficulty of collecting accounts
receivable, taxes, and the burdens of complying with a variety
of foreign laws. In connection with its international
operations, the company is also subject to general geopolitical
risks, such as political and economic instability and changes
in diplomatic and trade relationships affecting the company or
its customers.
The company expressly disclaims any obligation or
undertaking to update any forward-looking statements contained
herein in the event of any change in the company's expectations
with regard thereto or with regard to current or prospective
conditions or circumstances on which any such statement is
based.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
INDEX TO FINANCIAL STATEMENTS
Report of Management 29
Report of Independent Public Accountants 30
Consolidated Financial Statements
Statement of Income 31
Balance Sheet 32
Statement of Cash Flows 33
Statement of Changes in Stockholders' Equity 34
Notes to Consolidated Financial Statements 35-54
Financial Statement Schedule
Schedule II 55
<PAGE>
REPORT OF MANAGEMENT
To the Stockholders of APL Limited:
The financial statements have been prepared by the
company, and we are responsible for their content. They are
prepared in accordance with generally accepted accounting
principles, and in this regard we have undertaken to make
informed judgments and estimates, where necessary, of the
expected effect of future events and transactions. The other
financial information in the annual report is consistent with
that in the consolidated financial statements.
The company maintains and depends upon a system of
internal controls designed to provide reasonable assurance that
our assets are safeguarded, that transactions are executed in
accordance with management's intent and the law, and that the
accounting records fairly and accurately reflect the
transactions of the company. The company has an internal audit
program which reviews the adequacy of the internal controls and
compliance with them.
The company engaged Arthur Andersen LLP as independent
public accountants to provide an objective, independent audit
of our financial statements.
There is an Audit Committee of the Board of Directors
which is composed solely of outside directors. The committee
meets whenever necessary to monitor and review with management,
the internal auditors and the independent public accountants,
the company's financial statements and accounting controls.
Both the independent public accountants and the internal
auditors have access to the Audit Committee, without management
being present, to discuss internal controls, auditing and
financial reporting matters.
To help assure that its affairs are properly conducted,
management has established policies regarding standards of
corporate behavior. The company regularly reminds its key
employees of significant policies and requires them to confirm
their compliance.
/s/ Timothy J. Rhein
Timothy J. Rhein
President and Chief Executive Officer
/s/ L. Dale Crandall
L. Dale Crandall
Executive Vice President and
Chief Financial Officer
/s/ William J. Stuebgen
William J. Stuebgen
Vice President, Controller and
Chief Accounting Officer
Oakland, California
February 7, 1997
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of APL Limited:
We have audited the accompanying consolidated balance
sheet of APL Limited (a Delaware corporation) and subsidiaries
as of December 27, 1996 and December 29, 1995, and the related
consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the period
ended December 27, 1996. These consolidated financial
statements and the schedule referred to below are the
responsibility of the company's management. Our responsibility
is to express an opinion on these consolidated financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of APL Limited and subsidiaries as of December 27,
1996 and December 29, 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended December 27, 1996, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
schedule listed in the index to financial statements is
presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the
basic financial statements. This information has been
subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen LLP
San Francisco, California
February 7, 1997
<PAGE>
APL Limited
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 27 December 29 December 30
(In thousands, except 1996 1995 1994
per share amounts)
Revenues $2,739,126 $2,895,982 $2,793,468
Expenses 2,598,432 2,827,609 2,670,320
Operating Income 140,694 68,373 123,148
Interest Income 26,998 23,098 16,150
Interest Expense (63,516) (38,318) (28,994)
Income Before Taxes 104,176 53,153 110,304
Federal, State and Foreign
Tax Expense 34,722 22,856 36,106
Net Income $ 69,454 $ 30,297 $ 74,198
Less Dividends on Preferred Stock 3,375 6,750
Net Income Applicable to
Common Stock $ 69,454 $ 26,922 $ 67,448
Earnings Per Common Share
Primary $ 2.67 $ 0.95 $ 2.38
Fully Diluted $ 2.67 $ 0.99 $ 2.30
Dividends Per Common Share $ 0.40 $ 0.40 $ 0.40
See notes to consolidated financial statements.
<PAGE>
APL Limited
CONSOLIDATED BALANCE SHEET
December 27 December 29
(In thousands, except share amounts) 1996 1995
ASSETS
Current Assets
Cash and Cash Equivalents $ 102,370 $ 76,564
Short-Term Investments 180,628 59,086
Trade and Other Receivables, Net 242,460 245,490
Fuel and Operating Supplies 29,220 40,358
Prepaid Expenses and Other Current Assets 61,804 80,840
Total Current Assets 616,482 502,338
Property and Equipment
Ships 903,227 1,091,991
Containers, Chassis and Rail Cars 764,294 801,274
Leasehold Improvements and Other 252,466 284,850
Construction in Progress 29,078 25,333
1,949,065 2,203,448
Accumulated Depreciation and Amortization (825,846) (961,971)
Property and Equipment, Net 1,123,219 1,241,477
Investments and Other Assets 140,477 134,968
Total Assets $1,880,178 $1,878,783
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt
and Capital Leases $ 9,866 $ 11,810
Accounts Payable and Accrued Liabilities 380,690 425,378
Total Current Liabilities 390,556 437,188
Deferred Income Taxes 173,867 157,480
Other Liabilities 116,569 127,858
Long-Term Debt 695,546 685,954
Capital Lease Obligations 801 1,133
Total Long-Term Debt and
Capital Lease Obligations 696,347 687,087
Commitments and Contingencies
Stockholders' Equity
Common Stock $.01 Par Value, Stated at $1.00
Authorized-60,000,000 Shares
Shares Issued and Outstanding-24,564,000 in
1996 and 25,669,000 in 1995 24,564 25,669
Additional Paid-In Capital 632 1,943
Retained Earnings 477,643 441,558
Total Stockholders' Equity 502,839 469,170
Total Liabilities and Stockholders' Equity $1,880,178 $1,878,783
See notes to consolidated financial statements.
<PAGE>
APL Limited
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 27December 29December 30
(In thousands) 1996 1995 1994
Cash Flows from Operating Activities
Net Income $69,454 $ 30,297 $ 74,198
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 113,326 112,418 106,274
Noncash Restructuring Charge 43,510
Deferred Income Taxes 30,160 (13,134) 14,865
Change in Receivables 12,001 4,118 (42,216)
Issuance of Notes Receivable on Sales
of Real Estate (7,470)
Change in Fuel and Operating Supplies 7,389 (3,809) (1,195)
Change in Prepaid Expenses and Other
Current Assets 528 (9,096) 8,335
Gain on Sale of Property and Equipment (24,102) (5,660) (5,583)
Gain on Sale of Distribution Services (6,900)
Change in Accounts Payable and
Accrued Liabilities (20,482) (11,456) 18,844
Change in Restructuring Charge
Liability (22,405)
Gain on Curtailment of Pension and
Postretirement Benefits (12,542)
Other (21,863) 16,921 10,519
Net Cash Provided by
Operating Activities 124,564 164,109 176,571
Cash Flows from Investing Activities
Capital Expenditures (144,278) (455,721) (127,757)
Proceeds from Sales of Property
and Equipment 197,321 44,937 9,297
Proceeds from Sales of
Distribution Services 2,000
Purchase of Short-Term Investments (505,995) (99,975) (453,870)
Proceeds from Sales of
Short-Term Investments 384,453 255,787 238,972
Transfer from Capital Construction Fund 5,372
Deposits to Capital Construction Fund (8,114)
Other 1,518 2,261 1,649
Net Cash Used in Investing Activities (67,723) (252,711) (331,709)
Cash Flows from Financing Activities
Repurchase of Common Stock (28,953) (170,364)
Issuance of Debt 62,215 339,897 147,348
Repayments of Capital Lease Obligations (11,806) (3,877) (3,278)
Repayments of Debt (43,290) (28,357) (24,897)
Dividends Paid (10,168) (14,359) (17,651)
Debt Issue Costs (1,624) (4,980)
Other 3,336 7,213 9,383
Net Cash Provided by (Used in)
Financing Activities (30,290) 125,173 110,905
Effect of Exchange Rate Changes on Cash (745) 239 (66)
Net Increase (Decrease) in Cash
and Cash Equivalents 25,806 36,810 (44,299)
Cash and Cash Equivalents at
Beginning of Year 76,564 39,754 84,053
Cash and Cash Equivalents at
End of Year $102,370 $ 76,564 $ 39,754
See notes to consolidated financial statements.
<PAGE>
APL Limited
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year Ended December 27December 29December 30
(In thousands, except share amounts) 1996 1995 1994
Common Stock
Beginning Balance $25,669 $ 27,318 $ 26,837
Stock Awards and Options Exercised, Net 161 390 481
Conversion of Redeemable Preferred Stock 3,962
Repurchase and Retirement of Common Stock (1,266) (6,001)
Ending Balance 24,564 25,669 27,318
Additional Paid-In Capital
Beginning Balance 1,943 70,853 61,656
Stock Awards and Options Exercised, Net 3,180 6,837 9,197
Conversion of Redeemable Preferred Stock 71,038
Repurchase and Retirement of Common Stock (4,491) (146,785)
Ending Balance 632 1,943 70,853
Retained Earnings
Beginning Balance 441,558 443,212 386,960
Net Income 69,454 30,297 74,198
Cash Dividends
Common (10,168) (10,984) (10,901)
Series C Redeemable Preferred (3,375) (6,750)
Repurchase and Retirement of
Common Stock (23,196) (17,578)
Other (5) (14) (295)
Ending Balance 477,643 441,558 443,212
Total Stockholders' Equity $502,839 $469,170 $541,383
See notes to consolidated financial statements.
<PAGE>
APL Limited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Fiscal Year
In 1996, American President Companies, Ltd. changed its
name to APL Limited. The consolidated financial statements
include the accounts of APL Limited and its majority-owned
subsidiaries (the "company"), after eliminating intercompany
accounts and transactions. The company's fiscal year ends on
the last Friday in December. The company's 1996, 1995 and 1994
fiscal years were 52 weeks.
Nature of Operations
The company provides transportation services for
containerized cargo in the trans-Pacific, intra-Asia, Asia-
Europe, Asia-Latin America and North American markets. Certain
of the services are provided through alliances with other
transportation companies. In addition, the company provides
cargo distribution and warehousing services in the U.S. and
freight consolidation services in Mexico, Asia, the Middle
East, Europe and Africa. The company also provides freight
deconsolidation services in several U.S. locations and acts as
a non-vessel operating common carrier in the intra-Asia market
and the markets from Asia to Europe and Australia. The company
provides intermodal transportation and freight brokerage
services to North American and international shippers, as well
as time-critical cargo transportation and just-in-time delivery
(principally to the automotive manufacturing industry). These
services are provided through an integrated system of rail and
truck transportation, the primary element of which is train
services provided utilizing double-stack rail cars. The
operations of the company in any one country, type of cargo or
customer are not significant in relation to the company's
overall operations.
Certain Significant Risks and Uncertainties
As a result of excess capacity, slow market growth and
increased competition, considerable rate instability exists in
most of the company's major markets. Destabilization of rates,
if extensive, could have a material adverse impact on the
results of operations of carriers in these trades, including
the company.
Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Revenues and Expenses
The company recognizes revenues on a percentage-of-
completion basis and expenses as incurred. Detention revenue
is recognized when cash is received.
<PAGE>
Sales, General and Administrative Expenses
Sales, General and Administrative Expense, included in
Expenses on the accompanying Consolidated Statement of Income,
was $386.3 million, $482.1 million and $502.5 million in 1996,
1995 and 1994, respectively.
Foreign Currency Transactions
The company's functional currency is the U.S. dollar.
Foreign entities translate monetary assets and liabilities at
period-end exchange rates while nonmonetary items are
translated at historical rates. Income and expense accounts
are translated at the average rates in effect during the year.
Net gains or (losses) from changes in exchange rates are
included in Expenses on the accompanying Consolidated Statement
of Income and for 1996, 1995 and 1994 were $(1.5) million,
$(1.7) million, and $0.5 million, respectively.
The company periodically enters into contracts to buy
foreign currencies in the future to hedge the impact of foreign
currency fluctuations on certain operating commitments. The
gains or losses on these contracts are deferred and recognized
when the related operating expenses are incurred, and are
recorded as a decrease or increase in Expense on the
accompanying Consolidated Statement of Income.
Cash, Cash Equivalents and Short-Term Investments
Cash and Cash Equivalents comprise cash balances and
investments with maturities of three months or less at the time
of purchase. Short-Term Investments consist of commercial
paper, auction rate preferred stock and other cash instruments
and are carried at cost, which approximates fair value.
Included in Cash and Cash Equivalents at December 27, 1996 is
$15.8 million held in trust and restricted for use in
purchasing certain terminal equipment.
Supplemental Disclosure of Cash Flow Information and Noncash
Investing and Financing Activities
(In thousands) 1996 1995 1994
Cash Paid for:
Interest, Net of
Capitalized Interest $62,865 $34,570 $24,158
Income Taxes, Net of Refunds $21,859 $31,459 $15,848
Noncash Items:
Notes Receivable from the Sale
of Distribution Services $ 6,000
Change in Trade Receivables Invested in
the Capital Construction Fund $(1,998) $27,178 $37,773
Conversion of Redeemable Preferred Stock $75,000
Allowance for Doubtful Accounts
The provision for doubtful accounts, included in Expenses
on the accompanying Consolidated Statement of Income, for 1996,
1995 and 1994 was $6.1 million, $14.9 million and $13.2
million, respectively. At December 27, 1996 and December 29,
1995, the allowance for doubtful accounts, included in Trade
and Other Receivables on the accompanying Consolidated Balance
Sheet, was $19.8 million and $22.5 million, respectively.
Property and Equipment
Property and Equipment are recorded at historical cost.
For assets financed under capital leases, the present value of
the future minimum lease payments is recorded at the date of
acquisition as Property and Equipment
<PAGE>
with a corresponding amount recorded as a capital lease
obligation. Depreciation and amortization are computed using
the straight-line method based upon the following estimated
useful lives:
Classification Estimated Useful Life
Ships 15 to 25 Years
Containers, Chassis and Accessories 5 to 20 Years
Rail Cars 5 to 10 Years
Other Property and Equipment Various
Assets Under Capital Lease Arrangements Term of Lease
Depreciation and amortization expense, included in
Expenses on the accompanying Consolidated Statement of Income,
was $113.3 million, $112.4 million and $106.3 million in 1996,
1995 and 1994, respectively.
During 1996, the company recorded gains of $11.5 million
and $9.2 million from the sale of certain cranes from its
terminals in Los Angeles and Oakland, and residential property
in Singapore, respectively. The company is obligated to enter
into agreements with third parties regarding movement of its
Oakland port facilities prior to a specified date. If no such
agreement is reached, the company would be obligated to
repurchase the Oakland cranes or pay increased rates for their
use.
Maintenance and repair expenditures of $118.0 million,
$126.3 million and $117.3 million were included in Expenses on
the accompanying Consolidated Statement of Income in 1996, 1995
and 1994, respectively, as incurred. At December 27, 1996 and
December 29, 1995, the balance of deferred costs for major
periodic dry dockings and rail car overhauls, which are
amortized over two to five years, was $10.8 million and $6.3
million, respectively, and was included in Investments and
Other Assets on the accompanying Consolidated Balance Sheet.
Long-Term Investments
The company has certain investments, long-term deposits
and receivables, which are included in Investments and Other
Assets on the accompanying Consolidated Balance Sheet. The
fair value of these assets approximates their carrying value at
December 27, 1996.
Software Costs
Costs related to internally developed software are charged
to expense as incurred. Purchases of major integrated software
systems are capitalized and amortized using the straight-line
method over five years.
Capitalized Interest
Interest costs of $0.9 million relating to cash paid for
construction of port facilities were capitalized in 1996. In
addition, interest costs of $8.4 million and $6.3 million
relating primarily to cash paid for the construction of vessels
were capitalized in 1995 and 1994, respectively.
Insurance Reserves
The company is self-insured for a significant portion of
its cargo, vessel, and personal injury exposures. Insurance
reserves are determined using actuarial estimates. These
estimates are based on historical information along with
certain assumptions about future events.
<PAGE>
Reclassifications
Certain 1995 and 1994 amounts have been reclassified to
conform with the 1996 presentation.
NOTE 2. UNITED STATES MARITIME AGREEMENTS AND LEGISLATION
Operating-Differential Subsidy Agreement
The company and MarAd are parties to an ODS agreement
expiring December 31, 1997, which provides for payment by the
U.S. government to partially compensate the company for the
relatively greater labor expense of vessel operation under
United States registry. The ODS amounts for 1996, 1995 and
1994 were $44.7 million, $61.5 million and $60.8 million,
respectively, and have been included as a reduction of
expenses. The reduction in subsidy in 1996 reflects the sale
by the company of six U.S.-flag vessels to Matson in December
1995 and January 1996 as discussed in Note 11.
On October 8, 1996, the Maritime Security Act of 1996 was
signed into law. This legislation provides for a 9-year
Maritime Security Program administered by MarAd with up to $100
million in payments per annum to be appropriated by Congress on
an annual basis. MSP provides $2.1 million per vessel per
year, compared with up to $3.6 million per vessel per year
under ODS, and will expire on October 1, 2005.
On January 21, 1997, the company signed operating
agreements under MSP for nine ships, including five C10-class
vessels and four C11-class vessels. The company has a one-year
period in which to begin the participation of those vessels in
the program. Vessels participating in MSP must be registered
under U.S. flag and manned by U.S. crews and must participate
in the Emergency Preparedness Program established by the
Maritime Security Act, and certain U.S. citizenship
requirements are applicable to the participating carrier.
Transfers of operating agreements and substitution of vessels
are permitted under specified circumstances, subject to the
prior approval of MarAd. The operating agreements are one-year
contracts, which will be automatically renewed through
September 30, 2005 subject to available funding. If annual
funding is not appropriated by the U.S. Congress, the operating
agreements may be terminated on 60-days notice by MarAd. The
agreements may also be terminated by the participating carrier
on 60-days notice at any time, provided that the carrier
continues to participate in the Emergency Preparedness Program
and the vessels continue under U.S. flag registry through the
end of the then-current fiscal year.
Due to the enactment of MSP, the company's collective
bargaining agreement covering its unlicensed personnel expired
and was renegotiated, and a new agreement was reached with
these unions on December 18, 1996. The new contract expires in
June 1999. Existing agreements covering licensed personnel
expire in December 1997 and June 1998, and the company has been
engaged in discussions with the related unions regarding
continuation of those agreements. The company is unable to
predict when or whether new agreements may be reached, and
labor disturbances could result which could have a material
adverse impact on the company.
<PAGE>
Capital Construction Fund
The company also has an agreement with MarAd pursuant to
which the company has established a Capital Construction Fund
("CCF") to which the company makes contributions to provide
funding for the acquisition of certain U.S.-built assets and
for the repayment of certain vessel acquisition debt. The CCF
is included in Investments and Other Assets on the accompanying
Consolidated Balance Sheet, and at December 27, 1996 and
December 29, 1995, totaled $65.7 million and $65.0 million,
respectively, which were primarily invested in the company's
trade accounts receivable.
The company receives a federal income tax deduction for
deposits made to the CCF, subject to certain restrictions.
Withdrawals from the CCF for investment in vessels or related
assets do not give rise to a tax liability, but reduce the
depreciable bases of the assets for income tax purposes. At
December 27, 1996, the total tax basis of assets purchased with
CCF funds was approximately $43.3 million less than net book
value. Deferred income taxes have been provided for amounts
held by the CCF and for such qualified amounts invested in
vessels or related equipment.
Shipping Act of 1984
In 1996, legislation was introduced in the U.S. House of
Representatives and the U.S. Senate that would substantially
modify the Shipping Act. The Shipping Act, among other things,
provides the company with certain immunity from antitrust laws
and requires the company and other carriers in U.S. foreign
commerce to file tariffs publicly. Although Congress failed to
adopt this legislation, it may be reintroduced in 1997. The
legislation proposed in 1996 contained provisions that would
have been phased in, would have eliminated government tariff
filing, allowed confidential and independent contracts between
shippers and ocean carriers, strengthened provisions that
prohibit predatory activities by foreign carriers, under
limited continuing oversight by the Federal Maritime Commission
or a successor agency, while continuing the company's existing
antitrust immunity. The company is unable to predict whether
this or other proposed legislation will be introduced or
enacted, and whether any such legislation will contain terms
similar to those proposed in 1996. Enactment of legislation
modifying the Shipping Act, depending upon its terms, could
have a material impact on the competitive environment in which
the company operates and on the company's results of
operations. The company is unable to predict the nature or
extent of the impact of this legislation, if enacted.
NOTE 3. RESTRUCTURING CHARGE
During the fourth quarter of 1995, the company recorded a
restructuring charge of $48.4 million related to the
accelerated completion of its reengineering program and other
organizational changes. The charge included $36.4 million
related to the elimination of certain positions in company
operations that were being reorganized or reduced in size. The
activity for the years ended December 29, 1995 and December 27,
1996 is as follows:
<PAGE>
(In thousands)
1995 Restructuring Charge $48,372
1995 Activity
Severance Payments (4,862)
Equipment and Leasehold Write-offs (4,645)
Balance at December 29, 1995 $38,865
1996 Activity
Severance Payments (19,323)
Lease Termination Payments (2,260)
Equipment and Other Asset Write-offs (5,323)
Balance at December 27, 1996 $11,959
NOTE 4. INCOME TAXES
The company records income taxes in accordance with
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", which requires the company to
compute deferred taxes based upon the amount of taxes payable
in future years, after considering known changes in tax rates
and other statutory provisions that will be in effect in those
years.
The reconciliation of the company's effective tax rate to
the federal statutory tax rate is as follows:
1996 1995 1994
U.S. Federal Statutory Rate 35% 35% 35%
Increases (Decreases) in Rate Resulting from:
State Taxes, Net of Federal Benefit 2% 3% 3%
Revisions of Prior Years' Tax Estimates (6%)
Permanent Book/Tax Differences and Other (4%) 5% 1%
Net Effective Tax Rate 33% 43% 33%
The following is a summary of the company's provision for
income taxes:
(In thousands) 1996 1995 1994
Current
Federal $(3,366) $24,798 $20,441
State 1,873 2,455 2,865
Foreign 9,557 8,008 6,746
8,064 35,261 30,052
Deferred
Federal 25,409 (11,108) 5,358
State 1,249 (1,297) 696
26,658 (12,405) 6,054
Total Provision $34,722 $22,856 $36,106
<PAGE>
The following table shows the tax effect of the company's
cumulative temporary differences and carryforwards included on
the company's Consolidated Balance Sheet at December 27, 1996
and December 29, 1995:
(In thousands) 1996 1995
Excess of Tax Over Book Depreciation
and Deductions $(198,846) $(196,071)
Pension and Postretirement Benefits 17,362 23,297
Excess Insurance Reserves Over Claims Paid 16,497 18,566
Allowance for Doubtful Accounts 6,627 8,998
Restructuring Charge Accrual 4,353 16,379
Accrued Liabilities 3,493 6,024
Other 4,247 6,700
Total Net Deferred Tax Liability $(146,267) $(116,107)
The company has federal alternative minimum tax credits of
$2.9 million at December 27, 1996, which do not expire.
The amount of deferred tax assets and liabilities at
December 27, 1996 and December 29, 1995 were as follows:
(In thousands) 1996 1995
Deferred Tax Assets $ 62,569 $ 85,032
Deferred Tax Liabilities (208,836) (201,139)
Total Net Deferred Tax Liability (146,267) (116,107)
Less Net Current Deferred Tax Asset (27,600) (41,373)
Deferred Income Taxes $(173,867) $(157,480)
The net current deferred tax asset is included in Prepaid
Expenses and Other Current Assets on the accompanying
Consolidated Balance Sheet.
NOTE 5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts Payable and Accrued Liabilities at December 27,
1996 and December 29, 1995 were as follows:
(In thousands) 1996 1995
Accounts Payable $ 52,316 $ 58,144
Accrued Liabilities 250,523 243,228
Current Portion of Insurance Claims 15,326 19,564
Income Taxes 5,855
Unearned Revenue 50,566 59,722
Restructuring Charge 11,959 38,865
Total Accounts Payable and Accrued Liabilities $ 380,690 $425,378
<PAGE>
NOTE 6. LONG-TERM DEBT
Long-term debt at December 27, 1996 and December 29, 1995
consisted of the following:
(In thousands) 1996 1995
Vessel Mortgage Notes Due Through 2008 (1) $ 380,880 $338,044
8% Senior Debentures $150 Million Face Amount,
Due on January 15, 2024 (2) 147,198 147,169
7 1/8% Senior Notes $150 Million Face Amount,
Due on November 15, 2003 (2) 148,399 148,227
Series I 8% Vessel Mortgage Bonds,
Due Through 1997 (3) 9,530 33,353
8% Refunding Revenue Bonds, Due on
November 1, 2009 (4) 12,000 12,000
Other 7,069 7,161
Total Debt 705,076 685,954
Current Portion (9,530)
Long-Term Debt $ 695,546 $685,954
(1)The company has taken delivery of six new C11-class vessels.
To finance a portion of the purchase price of these vessels,
the company borrowed $339.9 million in 1995 and $62.2
million in 1996 under a loan agreement with European banks
pursuant to vessel mortgage notes due through 2008.
Principal payments are due in semiannual installments over a
12-year period commencing six months after the delivery of
the respective vessels. The interest rates on the notes are
based upon various margins over LIBOR or the banks' cost of
funds, as elected by the company. Until the sixth
anniversary of the delivery date, the company may defer up
to four principal payments. Aggregate deferred payments are
due at the end of the term of the notes. Principal payments
on this debt are classified as long-term on the basis that
the company has the ability to defer at least two payments.
The notes issued under this loan agreement are
collateralized by the C11-class vessels, which had a net
book value of $503.0 million at December 27, 1996. Carrying
value of the vessel mortgage notes approximates fair value
because the interest rates on outstanding notes approximate
current interest rates that would be offered to the company
for similar debt.
The company entered into interest rate swap agreements on
four of the vessel mortgage notes, with a notional amount
of $261.3 million at December 27, 1996, to exchange the
variable interest rate obligations on such notes for fixed
rate obligations for periods ranging between 7 and 12
years. The current variable interest rates for all of the
vessel mortgage notes range between 6.415% and 6.86%. As a
result of the swaps, the effective interest rates range
between 6.625% and 7.531% for the first five years after
inception, and 6.625% and 7.656% for the remaining terms of
the swaps. Net payments or receipts under the agreements
are included in interest expense. The company is exposed
to credit losses in the event of counterparty
nonperformance, but does not currently anticipate any such
losses. Based on quoted dealer prices, immediate
termination of the interest rate swaps would result in a
gain of approximately $4.2 million at December 27, 1996.
<PAGE>
(2)The company issued 7 1/8% Senior Notes and 8% Senior
Debentures in November 1993 and January 1994, respectively.
Interest payments are due semiannually. The Senior Notes
had an effective interest rate of 7.325%, and an unamortized
discount of $1.6 million and $1.8 million at December 27,
1996 and December 29, 1995, respectively. The Senior
Debentures had an effective interest rate of 8.172%, and an
unamortized discount of $2.8 million at December 27, 1996
and December 29, 1995. Fair value of the Senior Notes and
Senior Debentures was approximately $151 million and $147
million, respectively, at December 27, 1996 based on quoted
dealer prices for similar issues.
(3) Principal payments on each of the company's Series I Vessel
Mortgage Bonds are due in equal semiannual installments of $2.4
million. The bonds issued under this loan agreement are
collateralized by the five C10-class vessels, which had a net
book value of $162.8 million at December 27, 1996. Fair value of
this debt is approximately $9.6 million at December 27, 1996.
(4)The Bonds are redeemable on or after November 1, 1999 at a
redemption price of 102% of the principal amount, reducing
to 100% of the principal amount on or after November 1,
2001. Carrying value of the Bonds approximates fair value
because the interest rates on outstanding debt approximate
current interest rates that would be offered to the company
for similar debt.
Principal payments scheduled on long-term debt during the
next five years, assuming the company exercises its options to
defer payments on the Vessel Mortgage Notes, are as follows:
(In thousands)
1997 $ 9,530
1998 11,382
1999 26,623
2000 28,762
2001 31,182
The company has a credit agreement with a group of banks
which provides for an aggregate commitment of $200 million
through March 1999. The credit agreement contains, among other
things, various financial covenants that require the company to
meet certain levels of interest and fixed charge coverage,
leverage and net worth. The borrowings bear interest at rates
based upon various indices as elected by the company. There
have been no borrowings under this agreement.
As an alternative to borrowing under its credit agreement,
the company has an option under that agreement to sell up to
$150 million of certain of its accounts receivable to the
banks. This alternative is subject to less restrictive
financial covenants than the borrowing option.
<PAGE>
NOTE 7. LEASES
The company leases equipment under capital leases expiring
in four years. Assets under capital lease included in Property
and Equipment on the accompanying Consolidated Balance Sheet at
December 27, 1996 and December 29, 1995 are as follows:
(In thousands) 1996 1995
Containers, Chassis and Rail Cars $ 3,266 $ 37,982
Other Property and Equipment 938 938
4,204 38,920
Accumulated Depreciation (3,513) (36,578)
Total $ 691 $ 2,342
The following is a schedule of future minimum lease
payments required under the company's leases that have initial
noncancelable terms in excess of one year at December 27, 1996:
Capital Operating
(In thousands) Leases Leases
1997 $ 414 $219,204
1998 414 113,547
1999 413 107,526
2000 45 90,922
2001 75,176
Later Years 1,405,956
Total Minimum Payments Required $ 1,286 $2,012,331
Amount Representing Interest (149)
Present Value of Minimum Lease Payments 1,137
Current Portion (336)
Long-Term Portion $ 801
The above schedule of operating leases includes minimum
payments under 30 year leases for terminal facilities in Los
Angeles and Seattle, which are currently scheduled for
occupancy upon completion of construction in 1997.
Total rental expense for operating leases and short-term
rentals was $319.7 million, $328.2 million and $334.3 million
in 1996, 1995 and 1994, respectively.
NOTE 8. EMPLOYEE BENEFIT PLANS
Pension Plans
The company has defined benefit pension plans covering
most of its employees, which generally call for benefits to be
paid to eligible employees at retirement based on years of
credited service and average monthly compensation during the
five years of employment with the highest rate of pay. The
company's general policy is to fund pension costs at no less
than the statutory requirement. Certain non-qualified plans
are secured through a grantor trust. The investment in this
trust at December 27, 1996 was $18.0 million and is included in
Investments and Other Assets on the accompanying Consolidated
Balance Sheet. The investments in the trust consist of life
insurance policies and other cash instruments, which are
carried at fair value.
<PAGE>
The following table sets forth the pension plans' funded
status and amounts recognized in the accompanying Consolidated
Balance Sheet at December 27, 1996 and December 29, 1995:
1996 1995
Assets in Accumulated Assets in Accumulated
Excess of Benefits Excess of Benefits
Accumulated in Excess Accumulated in Excess
(In thousands) Benefits of Assets Benefits of Assets
Actuarial Present Value of:
Vested Benefit Obligation $(118,660) $(10,334) $(108,061) $(10,149)
Accumulated Benefit
Obligation (124,557) (10,547) (116,458) (10,932)
Actuarial Present Value of
Projected Benefit
Obligation $(143,512) $(17,346) $(161,224) $(17,922)
Plan Assets at Fair Value 167,859 152,169 765
Funded Status 24,347 (17,346) (9,055) (17,157)
Unrecognized Net Loss (Gain) (7,588) 684 10,438 330
Unrecognized Prior Service
(Credit) Cost (16,402) 2,613 (14,998) 3,528
Unrecognized Transition
(Asset) Obligation (13,139) (2,050) (8,850) 829
Net Pension Liability $(12,782) $(16,099) $(22,465) $(12,470)
The following assumptions were made in determining the
company's net pension liability:
(Weighted Average of All Plans) 1996 1995 1994
Discount Rate 7.9% 7.5% 7.9%
Rate of Increase in Compensation Levels 5.3% 5.2% 5.2%
Expected Long-Term Rate of Return
on Plan Assets 8.2% 8.2% 8.2%
Net pension cost related to the company's pension plans
included the following components:
(In thousands) 1996 1995 1994
Service Cost $ 9,272 $ 8,333 $ 9,144
Interest Cost on Projected
Benefit Obligation 13,604 12,357 11,228
Actual Return on Plan Assets (19,649) (25,019) 414
Net Amortization and Deferral 5,106 12,648 (12,971)
Net Pension Cost $ 8,333 $ 8,319 $ 7,815
During 1996, the company recorded a net gain of $10.9
million related to its defined benefit pension plans in the
U.S., Hong Kong and Japan. These gains resulted from net
decreases in pension liabilities for employees who left the
company in 1995 and 1996 as a result of the company's
restructuring, which is discussed in Note 3.
The company also participates in collectively bargained,
multi-employer plans that provide pension and other benefits to
certain union employees. The company contributed $4.2 million
in 1996, $5.8 million in 1995, and $5.3 million in 1994 to such
plans. These contributions are
<PAGE>
determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours
worked and are expensed as incurred. Under certain of the
multi-employer pension plans in which the company participates,
the company has withdrawal liabilities of $6.7 million for
unfunded vested benefits at December 31, 1995, the latest
valuation date. However, the company has no present intention
of withdrawing from the plans, nor has the company been
informed that there is any intention to terminate the plans.
There are no other significant withdrawal liabilities
attributable to the company for multi-employer pension plans.
Postretirement Benefits Other than Pensions
The company shares the cost of its health care benefits
with the majority of its domestic shoreside retired employees
and recognizes the cost of providing health care and other
benefits to retirees over the term of employee service. During
1996, the company recorded a gain of $1.7 million resulting
from the curtailment of postretirement obligations due to
workforce reductions as a result of the company's
restructuring, which is discussed in Note 3.
Postretirement benefit costs in the accompanying
Consolidated Statement of Income were as follows:
(In thousands) 1996 1995 1994
Interest Cost $ 1,289 $ 1,266 $ 1,380
Service Cost 928 795 1,117
Amortization of Gains (471) (477) (117)
Total Postretirement Benefit Cost $ 1,746 $ 1,584 $ 2,380
The following table sets forth the postretirement benefit
obligation recognized in the accompanying Consolidated Balance
Sheet at December 27, 1996 and December 29, 1995:
(In thousands) 1996 1995
Accumulated Postretirement Benefit Obligation
Retirees $ 7,385 $ 7,489
Active Employees - Fully Eligible 371 604
Active Employees - Not Fully Eligible 4,424 8,483
Unrecognized Net Gain 8,499 7,505
Unamortized Prior Service Cost 4,560 1,834
Total $25,239 $25,915
The expected cost of the company's postretirement benefits
is assumed to increase at an annual rate of 8.2% in 1996. This
rate is assumed to decline approximately 1% per year to 5% in
the year 1999 and remain level thereafter. The health care
cost trend rate assumption has a significant impact on the
amounts reported. An increase in the rate of 1% in each year
would increase the accumulated postretirement benefit
obligation at December 27, 1996 by $1.0 million and the
aggregate of the service and interest cost for 1996 by $0.1
million. The weighted average discount rate used to determine
the accumulated postretirement benefit obligation was 8.0%.
The company has not funded the liability for these benefits.
<PAGE>
Profit-Sharing Plans
The company has defined contribution profit-sharing plans
covering certain non-union employees. Under the terms of these
plans, the company has agreed to make matching contributions
equal to those made by the participating employees up to a
maximum of 6% of each employee's base salary. Effective
January 1, 1997, the base company matching contribution for
active employees will be $0.75 for each dollar contributed up
to 6% of each employee's base salary. Additional matching
contributions, up to $0.50 for each dollar contributed, may
also be made if the company achieves certain financial results.
The company's total contributions to the plans amounted to $5.1
million for 1996 and $6.3 million for 1995 and 1994.
NOTE 9. REDEEMABLE PREFERRED STOCK
In July 1995, at the election of the holders, all
1,500,000 shares of Series C Preferred Stock were converted
into 3,961,498 shares of common stock, or 2.641 shares of
common stock for each share of Series C Preferred Stock (a
conversion price of $18.93 per share of common stock).
NOTE 10. STOCKHOLDERS' EQUITY
Common Stock Repurchase
In April 1996, the Board of Directors approved a program
to repurchase up to an aggregate of $50 million of the
company's common stock through open market or privately
negotiated transactions. During 1996, the company repurchased
1,266,100 shares of its common stock under this program for
$29.0 million at an average price of $22.82 per share, plus
expenses.
In 1995, the Board of Directors authorized the repurchase
of up to 6 million shares of the company's common stock. This
repurchase was completed at prices ranging from $25.81 to $30
per share, plus expenses.
All repurchased shares were retired. The excess of the
purchase price of the common stock over its stated value has
been reflected as a decrease in Additional Paid-In Capital and
Retained Earnings on the accompanying Consolidated Balance
Sheet.
Earnings Per Common Share
For 1996, primary and fully diluted earnings per common
share were computed by dividing net income by the weighted
average number of common shares and common equivalent shares
outstanding during the year. For 1995 and 1994, primary
earnings per common share were computed by dividing net income,
reduced by the amount of preferred stock dividends, by the
weighted average number of common shares and common equivalent
shares outstanding during the year. Fully diluted earnings per
common share for 1995 and 1994 were computed based on the
assumption that the Series C Preferred Stock was converted at
the beginning of the year. Common equivalent shares consist of
stock options granted and premium stock bonus plan shares. The
number of shares used in these computations was as follows:
<PAGE>
Weighted Average Number of Common and Common Equivalent Shares
(In millions) 1996 1995 1994
Primary 26.0 28.2 28.3
Fully Diluted 26.1 30.6 32.3
Stockholder Rights Plan
The company's stockholder rights agreement provides that
rights become exercisable when a person acquires 20% or more of
the company's common stock or announces a tender offer which
would result in the ownership of 20% or more of the company's
common stock, or if a person who has been declared "adverse" by
the independent directors of the company exceeds a threshold
stock ownership established by the Board, which may not be less
than 10%. The rights will be attached to all common stock.
Once exercisable, each right entitles its holder to purchase
two one-hundredths of a share ("unit") of Series A Junior
Participating Preferred Stock at a purchase price of $130 per
unit, subject to adjustment.
Upon the occurrence of certain other events related to
changes in the ownership of the company's outstanding common
stock, each holder of a right would be entitled to purchase
shares of the company's common stock or an acquiring
corporation's common stock having a market value of two times
the exercise value of the right. Rights that are, or were,
beneficially owned by an acquiring or adverse person will be
null and void. In addition, the Board of Directors may, in
certain circumstances, require the exchange of each outstanding
right for common stock or other consideration with a value
equal to the exercise price of the rights. The company has
reserved 500,000 shares of preferred stock for issuance
pursuant to the exercise of the rights in the future. The
rights expire November 29, 1998 and, subject to certain
conditions, may be redeemed by the Board of Directors at any
time at a price of $0.025 per right.
Stock Incentive Plans
The Compensation Committee of the Board of Directors
approved stock option grants under the company's 1989 Stock
Incentive Plan (the "Plan") for shares of the company's common
stock beginning in July 1993 to key employees of the company.
The options have an exercise price of the greater of the fair
market value on the date of grant or $22.38 per share, a term
expiring July 26, 2003 and vest between 1996 and 2002 based
upon the achievement of stock price appreciation targets. The
percentage of the options that vest during specified time
periods will depend on the amount of stock price appreciation
in those time periods. In 1998, the options will vest as to
60% of the covered shares if not otherwise vested, and in 2002,
the options will vest as to the remaining 40% if not otherwise
vested. Previous stock option grants under the Plan become
exercisable in three to four equal annual installments
commencing one year after grant.
The 1992 Directors Stock Option Plan provides for the
granting of options to purchase shares of common stock to non-
employee members of the company's Board of Directors. The
aggregate number of options which may be granted under this
plan is 200,000. Options become exercisable in three equal
installments on the first three anniversaries of the date of
grant.
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). This
new standard defines a fair value
<PAGE>
based method of accounting for employee stock options, and
gives companies a choice of recognizing related compensation
expense by adopting the new fair value method or continuing to
measure compensation under Accounting Principles Board Opinion
No. 25 ("APB 25"). The company intends to continue using the
measurement prescribed by APB 25. Had compensation cost for
these plans been determined consistent with SFAS 123, the
company's net income and earnings per share would have been
reduced to the following pro forma amounts:
1996 1995
Net Income (In thousands)
As Stated $69,454 $30,297
Pro Forma $69,001 $30,087
Primary Earnings per Common Share
As Stated $ 2.67 $ 0.95
Pro Forma $ 2.65 $ 0.95
Fully Diluted Earnings per Common Share
As Stated $ 2.67 $ 0.99
Pro Forma $ 2.65 $ 0.98
Because the SFAS 123 method of accounting has not been
applied to options granted prior to December 31, 1994, the
resulting pro forma compensation cost may not be representative
of the cost to be expected in future years.
The fair value of each grant is estimated on the date of
the grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
1996 1995
Risk Free Interest Rate 6.08% 6.23%
Expected Dividend Yield 2.00% 2.00%
Expected Volatility 33.00% 33.00%
Expected Life in Years 4.43 5.46
The following is a summary of the transactions and status
of the company's stock option plans:
1996 1995 1994
Average Average Average
Exercise Exercise Exercise
(Shares in thousands) Shares Price Shares Price Shares Price
Outstanding at Beginning
of Year 4,449 $20.17 4,92 $19.63 4,176 $17.80
Granted
Exercise Price equals
Fair Value 42 23.88 155 24.15 1,359 22.51
Exercise Price greater than
Fair Value 105 22.38 137 22.38
Exercised (153) 15.88 (391) 13.68 (517) 12.07
Canceled (467) 22.38 (373) 22.29 (97) 21.59
Outstanding at End
of Year 3,976 $20.18 4,449 $20.17 4,921 $19.63
Exercisable at End
of Year 1,243 $14.92 1,220 $14.29 1,241 $12.86
Weighted Average Fair Value
of Options Granted $6.34 $7.68
<PAGE>
The following summarizes information about the stock
options outstanding at December 27, 1996:
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise Options Contractual Exercise Options Exercise
Prices (In thousands) Life (Years) Price (In thousands) Price
$7.81 to 10.31 525 3.77 $9.98 525 $9.98
$10.50 to 19.50 590 5.42 17.89 590 17.89
$20.00 to 22.00 94 6.04 20.63 83 20.63
$22.38 2,513 6.52 22.38 20 22.38
$22.75 to $29.94 254 7.12 24.66 25 23.61
$7.81 to 29.94 3,976 6.02 $20.18 1,243 $14.92
At December 27, 1996, 1,303,605 shares were available for
future grants of stock options under the plans.
In 1995, the Board of Directors adopted the company's 1995
Stock Bonus Plan ("Stock Bonus Plan"). The Stock Bonus Plan
permits executives and key employees, as selected by the
Compensation Committee of the Board of Directors, to receive
all or part of their bonuses in the form of shares of common
stock or phantom shares. In addition, non-employee directors
may elect to receive all or part of their annual retainers
and/or meeting fees in the form of shares of common stock or
phantom shares. Participants receive a premium in the form of
additional shares equal to 17.6% which vest over a two year
period. During 1996, the company issued 7,402 shares of common
stock and 14,011 phantom shares, including the related premium
shares. At December 27, 1996, 378,431 shares were available
for stock bonuses and premiums under the plan.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Commitments
Ship Purchases and Ship Management
The company took delivery of and made final payments on
five C11-class vessels in 1995 and one C11-class vessel in
1996. The total cost of the six C11-class vessels was $529
million, including total payments to the shipyards of $503
million, of which $62 million was paid in January 1996.
In January 1995, the company and Columbia entered into an
agreement under which Columbia would provide crewing,
maintenance, operations and insurance for the company's six C11-
class vessels for a per diem fee per vessel. The agreement may
be terminated at any time by either party with notice.
Alliances
The alliance agreements between the company, OOCL, MOL,
NLL and MISC, collectively referred to as the Global Alliance,
were fully implemented in the first quarter of 1996. Under the
current alliance agreements, alliance partners contribute and
are allocated vessel space, which may be adjusted
<PAGE>
from time to time. The agreements provide for, among other
things, settlement of the difference between the value of
vessel space provided by each partner and the value of vessel
space available to that partner, at specified vessel costs per
TEU per day. Agreements covering terminal and equipment
sharing among the Global Alliance partners have not been
reached, and the company is unable to predict at this time
whether or when such agreements will be reached.
NLL merged with the container line operations of P&O on
December 31, 1996 to form P&O Nedlloyd Container Line Limited.
NLL and P&O were each members of different alliances, and the
future alliance participation of P&O-NL has not yet been
determined. If P&O-NL does not continue in the Global Alliance,
there could be a significant impact on the Global Alliance's
operations. The company cannot predict when the alliance
participation of P&O-NL will be determined or the resulting
impact on the operations of the Global Alliance. However,
while no assurances can be given, the company believes that
acceptable alternatives may be available.
In September 1996, the company and TMM amended their
existing agreement for the reciprocal charter of vessel space.
The amended agreement is effective until late April 1999 and
automatically renews for one year unless terminated with one
year's notice.
The company and Matson commenced service under a 10-year
alliance in February 1996. In connection with the alliance,
the company sold Matson six of its U.S.-flag ships (three C9-
class vessels and three C8-class vessels) and certain of its
assets in Guam for approximately $163.4 million in cash. One
of the ships was sold in December 1995, and the remaining five
vessels were sold in January 1996. Four of these vessels,
together with a fifth Matson vessel, are currently being used
in the alliance. The net gain on the sale of the four vessels
in the alliance and the Guam assets is estimated to be $1.9
million, depending upon final vessel modification and drydock
costs, and will be deferred and amortized over the 10-year term
of the alliance. The net gain on the sale of the fifth vessel
was $1.6 million and was recognized in the first quarter of
1996. Matson is operating the vessels in the alliance, which
serves the U.S. West Coast, Hawaii, Guam, Korea and Japan, and
has the use of substantially all the westbound capacity. The
company has the use of substantially all the alliance vessels'
eastbound capacity.
The value of vessel space provided by the company to the
alliances is less than the value of the total capacity
allocated to it through the alliances, resulting in an annual
net cash payment from the company to its alliance partners.
The amount paid to alliance partners was $50.6 million in 1996,
and is currently estimated to be $55.8 million in 1997.
In connection with the sale of the company's K10-class
vessel construction contract to a third party in September
1995, the company, MOL, OOCL and NLL formed a joint venture
company, in which their respective shares are each 25%, that
agreed to charter back the K10 vessels for seven years. OOCL
has agreed to subcharter the K10s from the joint venture for
seven years for use in the Asia-Europe trade, replacing three
of its 2,800 twenty-foot equivalent unit F-class vessels. The
three replaced F-class vessels are being chartered to the joint
venture for ten years and
<PAGE>
subchartered by the company from the joint venture through May
2000. The subcharters for two of such vessels have been
assumed by TMM through May 1999. TMM's remaining obligations
of $40.8 million under the assumed subcharters have been
guaranteed by the company. The company has been deploying the
third F-class vessel since May 1996 in its West Asia/Middle
East service.
Facilities, Equipment and Services
The company had outstanding purchase commitments to
acquire cranes, facilities, equipment and services totaling
$84.7 million at December 27, 1996. In addition, the company
has commitments to purchase terminal services for its major
Asian operations. These commitments range from one to ten
years, and the amounts of the commitments under these contracts
are based upon the actual services performed. At December 27,
1996, the company had outstanding letters of credit totaling
$29.0 million, which guarantee the company's performance under
certain of its commitments.
The company and a Philippine terminal developer and
operator formed a joint venture for the development of terminal
facilities in Karachi, Pakistan, in which each share equally in
the venture's operations, profits and commitments. In June
1996, the joint venture entered into an implementation
agreement with an agency of the Republic of Pakistan regarding
construction and operation of these terminal facilities. The
joint venture is currently arranging financing for the project.
Subject to completion of the financing and other related
arrangements, the company currently anticipates construction to
begin in early 1997.
Employment Agreements
The company has entered into employment agreements with
certain of its executive officers. The agreements provide for
certain payments to each officer upon termination of
employment, other than as a result of death, disability in most
cases, or justified cause, as defined. The aggregate estimated
commitment under these agreements was $12.8 million at December
27, 1996.
Contingencies
In October 1995, Lykes filed a petition seeking protection
from its creditors under Chapter 11 of the U.S. Bankruptcy
laws. The company chartered four L9-class vessels from Lykes,
and Lykes operates three Pacesetter vessels chartered from the
company. All four L9s were redelivered to Lykes by September
25, 1996, and the three Pacesetters continue to be operated by
Lykes. On July 26, 1996, the Bankruptcy Court gave its final
approval to a settlement agreement, which became effective on
August 9, 1996, between the company and Lykes, establishing
terms for the payment of the company's claims against Lykes for
unpaid charter hire. The settlement also allows Lykes the use
of the three Pacesetters until December 31, 1997 and requires
Lykes to obtain the release of liens it permitted to be
established against those vessels. Certain Bankruptcy Court
orders underlying the settlement agreement have been appealed.
Lykes' bankruptcy filing is not expected to have a material
adverse impact on the company's consolidated financial position
or results of operations.
On December 27, 1996, Lykes and Canadian Pacific, Ltd.
("CP") entered into a Letter of Intent under which CP or one of
its affiliates would purchase Lykes' U.S. container shipping
services. Under the proposed transaction, CP would time
charter Lykes' vessels, including the company's
<PAGE>
Pacesetters. The company has been advised that CP also intends
to assume certain of Lykes' obligations under the settlement
agreement. Finalization of the Lykes purchase by CP is subject
to satisfactory resolution of objections to the purchase filed
with the Bankruptcy Court by certain Lykes creditors and final
Bankruptcy Court approval.
The company is a party to various legal proceedings,
claims and assessments arising in the course of its business
activities. Based upon information presently available, and in
light of legal and other defenses and insurance coverage and
other potential sources of payment available to the company,
management does not expect these legal proceedings, claims and
assessments, individually or in the aggregate, to have a
material adverse impact on the company's consolidated financial
position or operations.
NOTE 12. SALE OF DOMESTIC DISTRIBUTION SERVICES
In May 1996, the company sold its rights to service
certain domestic intermodal customers of APLLTS, a wholly owned
subsidiary of the company, for $2.0 million in cash and $6.0
million in notes, and realized a pre-tax gain of $6.9 million.
In addition, APLLTS and the purchaser entered into a 10-year
agreement whereby APLLTS will provide stacktrain services to
the purchaser. Revenues related to the servicing rights sold
represented approximately 4% of the company's consolidated 1996
revenues and approximately 6% of consolidated 1995 revenues.
NOTE 13. BUSINESS SEGMENT INFORMATION
The company provides container transportation services in
North America, Asia and the Middle East through an intermodal
system combining ocean, rail and truck transportation. In
addition, the company was engaged in real estate operations
until 1994, when its remaining real estate holdings were sold.
Revenues and Operating Income for 1994 for the company's real
estate operations were $16.2 million and $9.0 million,
respectively. Identifiable assets related to the company's
real estate operations, primarily notes receivable, totaled
$0.6 million, $1.2 million and $6.0 million in 1996, 1995 and
1994, respectively.
The following table shows the percentage of ocean
transportation revenues by country:
1996 1995 1994
OriginDestination OriginDestination OriginDestination
United States 24% 39% 27% 41% 26% 44%
Hong Kong 13 4 13 5 14 4
People's Republic
of China 12 3 10 3 10 3
Japan 8 10 8 10 9 11
Taiwan 7 3 8 3 9 3
India 6 3 5 3 5 2
Indonesia 4 2 4 2 4 1
Korea 4 3 4 3 4 3
Thailand 4 2 3 2 3 1
Other 18 31 18 28 16 28
<PAGE>
Operating income, net income and identifiable assets
cannot be allocated on a geographic basis due to the nature of
the company's business.
NOTE 14. QUARTERLY RESULTS (Unaudited)
(In millions, except per share amounts)
1996 1995
Quarter December September June April December September June April
Ended 27 20 28 5 29 22 30 7
Revenues $725.5 $646.2 $641.1 $726.3 $769.9 $711.1 $674.3 $740.7
Operating Income
(Loss)(1)(2) 31.7 48.9 42.5 17.6 (13.4) 53.5 24.7 3.6
Income (Loss)Before
Taxes 22.8 40.9 33.9 6.6 (21.3) 49.8 23.0 1.7
Net Income (Loss $16.6 $28.2 $20.8 $3.9 $(15.9) $ 30.9 $14.2 $ 1.1
Earnings (Loss)
Per Common Share
Primary $0.66 $1.07 $0.78 $0.15 $(0.61) $ 1.02 $0.45 $(0.02)
Fully Diluted $0.65 $1.07 $0.78 $0.15 $(0.61) $ 0.97 $0.44 $(0.02)
Cash Dividends
Per Common Share $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10
Market Price Per Common Share
High $24 1/8 $25 7/8 $28 7/8 $23 7/8 $29 3/4 $31 1/2 $24 3/8 $24 1/4
Low 21 1/8 22 23 20 1/2 22 1/4 23 1/2 22 1/4 21 1/8
(1)During 1996, the company recorded a first quarter gain of
$1.6 million on the sale of a vessel, a second quarter gain
of $6.9 million on the sale of its domestic distribution
services segment. In addition, during 1996, the company
recorded gains of $12.9 million in the third quarter and a
net loss of $0.3 million in the fourth quarter resulting
from the curtailment of pension and postretirement
obligations due to workforce reductions. During the fourth
quarter of 1996, the company recorded gains of $11.5 million
and $9.2 million from the sale of certain cranes from its
terminals in Los Angeles and Oakland, and residential
property in Singapore, respectively.
(2) During the fourth quarter of 1995, the company recorded a
restructuring charge of $48.4 million related to the acceleration
of its program to reengineer its order cycle processes and other
organizational changes. The company incurred costs, related to
its corporate initiatives, not included in the restructuring
charge, of $6.6 million and $24.9 million in the fourth quarter
and year of 1995, respectively. During the 1995 fourth quarter
and full year, the company recognized gains of $2.5 million and
$6.2 million on vessel sales, respectively, and received
liquidated damages resulting from the delayed delivery of two of
the new C11-class vessels of $2.0 million and $5.5 million,
respectively.
<PAGE>
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Description Balance at Charged To Deductions- Balance at
Beginning Cost and Describe (1) End of Year
of Year Expense
Allowance for Doubtful Accounts
December 27, 1996 $22,531 6,144 (8,845) $19,830
December 29, 1995 $21,908 14,937 (14,314) $22,531
December 30, 1994 $10,359 13,217 (1,668) $21,908
(1)Uncollectible receivables written off, net of recoveries and
other items.
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to Directors and certain
executive officers of the company appearing under the caption
"Election of Directors - Information With Respect to Nominees
and Directors" in the company's definitive proxy statement for
the annual meeting of stockholders to be held on May 14, 1997
is hereby incorporated herein by reference.
The following sets forth certain information with respect to
the remaining executive officers of the company:
John G. Burgess, age 52, was elected Executive Vice President
of the company in May 1995. He has also served as Executive
Vice President of American President Lines, Ltd. ("APL") since
December 1992. Prior to that, he served as Executive Vice
President and Chief Operating Officer APL from May 1990 to
November 1992.
Maryellen B. Cattani, age 53, was elected Executive Vice
President of the company in March 1995. She has also served as
General Counsel and Secretary of the company since July 1991
and as a Senior Vice President from July 1991 to March 1995.
Prior to joining the company, she was a partner in the law firm
of Morrison & Foerster from 1989 to 1991.
L. Dale Crandall, age 55, was elected Executive Vice President
and Chief Financial Officer of the company in March 1995 and
Treasurer of the company in September 1995. Prior to that, Mr.
Crandall was managing partner of Price Waterhouse's Los Angeles
office since 1990.
Michael Goh, age 47, was elected Executive Vice President of
the company in April 1996. Prior to that, he served as Senior
Vice President of the company from March 1996 to April 1996,
Senior Vice President of APL from January 1996 to March 1996
and in various capacities with APL Land Transport Services,
Inc., including Senior Vice President from May 1992 to July
1994 and Vice President from May 1989 to April 1992.
James S. Marston, age 63, was elected Executive Vice President
and Chief Information Officer of the company in May 1995. He
served as Senior Vice President and Chief Information Officer
of the company from September 1987 to May 1995.
William J. Stuebgen, age 49, has served as Vice President,
Controller of the company since October 1990.
The executive officers of the company are elected by the Board
of Directors. Each officer holds office until his or her
successor has been duly elected and qualified, or until the
earliest of his or her death, resignation, retirement or
removal by the Board.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the caption "Compensation
of Executive Officers and Directors" and in the company's
definitive proxy statement for the annual meeting of
stockholders to be held on May 14, 1997, is hereby incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information appearing under the captions "Election of
Directors-Stock Ownership of Directors and Executive Officers"
and "Certain Beneficial Ownership of Securities" in the
company's definitive proxy statement for the annual meeting of
stockholders to be held on May 14, 1997, is hereby incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the captions "Compensation
of Executive Officers and Directors -- Employment Contracts,
Termination of Employment and Change-in-Control Arrangements
and Certain Transactions" in the company's definitive proxy
statement for the annual meeting of stockholders to be held on
May 14, 1997, is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements and Schedules
The following report of independent public accountants,
consolidated financial statements and notes to the
consolidated financial statements of APL Limited and
subsidiaries are contained in Part II, Item 8:
a. Report of Independent Public Accountants
b. Consolidated Statement of Income
c. Consolidated Balance Sheet
d. Consolidated Statement of Cash Flows
e. Consolidated Statement of Changes in Stockholders' Equity
f. Notes to Consolidated Financial Statements
2. The following schedules are contained in Part II, Item 8:
a. Schedule II - Valuation and Qualifying Accounts
<PAGE>
3.Exhibits required by Item 601 of Regulation S-K
The following documents are exhibits to this Form 10-K
Exhibit No. Description of Document
2.1* Purchase Agreement as of May 2, 1996, by and among Hub
Group, Inc., APL Limited and APL Land Transport Services,
Inc., incorporated by reference to the identically
numbered exhibit to the Form 8-K (File No. 1-8544), dated
May 2, 1996 and filed on May 17, 1996.
3.1* Integrated copy of the amended Certificate of
Incorporation, filed as Exhibit 3.1 to the company's Form
10-Q (File No. 1-8544), dated November 1, 1995.
3.2* Integrated copy of the amended By-Laws, filed as Exhibit
3.1 to the company's Form 10-Q (File No. 1-8544), dated
August 2, 1996.
3.3* Certificate of Ownership and Merger merging APL Limited
into American President Companies, Ltd., and changing the
name of American President Companies, Ltd. to APL
Limited, effective June 1, 1996, filed as Exhibit 3.2 to
the company's Form 10-Q (File No. 1-8544), dated August
2, 1996.
4.1* Amended and Restated Rights Agreement dated October 22,
1991, between the company and The First National Bank of
Boston, as Rights Agent, filed as Exhibit 4.1 to the
company's Form SE (File No. 1-8544), dated October 22,
1991.
4.2* Trust Indenture between American President Lines, Ltd.,
Issuer, and Security Pacific National Bank, Trustee,
dated as of April 22, 1988, President Truman Issue, filed
as Exhibit 4.1 to the company's Form SE (File No. 1-
8544), dated July 26, 1988.
4.3* Forms of Series I and Series II Bonds, filed as part of
Exhibit 4.1 to the company's Form SE (File No. 1-8544),
dated July 26, 1988.
4.4* Registration Rights Agreement, among the company, Hellman
& Friedman Capital Partners, Hellman & Friedman Capital
Partners International (BVI), and APC Partners; dated as
of August 3, 1988, as amended (without exhibits), filed
as Exhibit 4.2 to the company's Form SE (File No. 1-
8544), dated February 17, 1989.
4.5* Indenture, dated as of November 1, 1993, between American
President Companies, Ltd. and The First National Bank of
Boston as Trustee, filed as Exhibit 4.1 to the company's
Form 8-K (File No. 1-8544), dated November 29, 1993.
4.6* Form of 7-1/8% Senior Note Due 2003 of American President
Companies, Ltd., filed as Exhibit 4.2 to the company's
Form 8-K (File No. 1-8544) dated November 29, 1993.
4.7* Form of 8% Senior Debentures Due 2024 of American
President Companies, Ltd., filed as Exhibit 4.20 to the
company's Form 10-K (File No. 1-8544), dated March 9,
1994.
<PAGE>
10.1* Operating-Differential Subsidy Agreement (No. MA/MSB-
417), effective as of January 1, 1978, between the United
States and American President Lines, Ltd., filed as
Exhibit 10.1 to the company's Form SE (File No. 1-8544),
dated March 17, 1992.
10.2* Lease Agreement, dated June 1, 1988, between Monsanto
Company and American President Intermodal Company, Ltd.,
filed as Exhibit 10.14 to the company's Form SE (File No.
1-8544), dated July 26, 1988.
10.3* Lease Agreement, dated June 1, 1988, between Consolidated
Rail Corporation and American President Intermodal
Company, Ltd., filed as Exhibit 10.2 to the company's
Form SE (File No. 1-8544), dated March 14, 1990.
10.4* Lease and Preferential Assignment Agreement dated January
6, 1971, and First Supplemental Agreement dated February
24, 1971, between the City of Oakland and Seatrain
Terminals of California, Inc., filed as Exhibit 10.32 to
the company's Registration Statement on Form S-l,
Registration No. 2-93718, which became effective on
November 1, 1984.
10.5* Second Supplemental Agreement to Lease and Preferential
Assignment Agreement, dated May 3, 1988, filed as Exhibit
10.3 to the company's Form SE (File No. 1-8544), dated
March 14, 1990.
10.6* Preferential Assignment dated February 23, 1972, between
the City of Oakland and Seatrain Terminals of California,
Inc., filed as Exhibit 10.33 to the company's
Registration Statement on Form S-l, Registration No. 2-
93718, which became effective on November 1, 1984.
10.7* Assignment, Designation of Secondary Use and Consent,
dated December 11, 1974, among Seatrain Terminals of
California, Inc., American President Lines, Ltd., the
City of Oakland and Seatrain Lines, Inc., filed as
Exhibit 10.34 to the company's Registration Statement on
Form S-l, Registration No. 2-93718, which became
effective on November 1, 1984.
10.8* Acknowledgment of Termination of Consent to Secondary Use
and Sublease and Assumption of Entire Combined Premises
and Cranes dated December 18, 1981, between the City of
Oakland and American President Lines, Ltd., filed as
Exhibit 10.35 to the company's Registration Statement on
Form S-l, Registration No. 2-93718, which became
effective on November 1, 1984.
10.9* Supplemental Agreement dated July 6, 1982, between the
City of Oakland and American President Lines, Ltd., filed
as Exhibit 10.36 to the company's Registration Statement
on Form S-l, Registration No. 2-93718, which became
effective on November 1, 1984.
<PAGE>
10.10*Permit No. 441, dated November 26, 1980, Second Amendment
to Permit No. 441, dated February 7, 1983, and Third
Amendment to Permit No. 441, dated May 10, 1984, between
the City of Los Angeles and American President Lines,
Ltd., filed as Exhibit 10.37 to the company's
Registration Statement on Form S-l, Registration No. 2-
93718, which became effective on November 1, 1984.
10.11*Fourth Amendment to Permit No. 441, dated as of October
29, 1986 between the City of Los Angeles and American
President Lines, Ltd., filed as Exhibit 10.4 to the
company's Form SE (File No. 1-8544), dated March 23,
1987.
10.12*Sixth Amendment to Permit No. 441, dated as of August 30,
1993, between the City of Los Angles and American
President Lines, Ltd., filed as Exhibit 10.12 to the
company's Form 10-K (File No. 1-8544), dated March 14,
1996.
10.13*Financing and Security Agreement, dated March 27, 1984,
between American President Lines, Ltd. and the City of
Los Angeles, California, filed as Exhibit 10.38 to the
company's Registration Statement on Form S-1,
Registration No. 2-93718, which became effective on
November 1, 1984.
10.14*Lease, dated July 31, 1972, Lease Agreement, dated
September 1, 1980, Memorandum, dated September 1, 1980,
and two letters dated July 3, 1981 and July 14, 1981,
respectively, between Hanshin Port Development Authority
and American President Lines, Ltd., filed as Exhibit
10.39 to the company's Registration Statement on Form S-
1, Registration No. 2-93718, which became effective on
November 1, 1984.
10.15*Pre-engagement Agreement for Lease dated March 17, 1983,
Supplemental Agreement dated March 17, 1983 and form of
Wharf Lease Agreement between Yokohama Port Terminal
Corporation and American President Lines, Ltd., filed as
Exhibit 10.41 to the company's Registration Statement on
Form S-l, Registration No. 2-93718, which became
effective on November 1, 1984.
10.16*Lease Contract of Wharves Nos. 68 & 69 of Container
Terminal No. 3 Kaohsiung Harbor, Taiwan, Republic of
China, dated December 31, 1987 and Equipment Agreement
between the Kaohsiung Harbor Bureau and APL, dated
December 31, 1987, filed as Exhibit 10.4 to the company's
Form SE (File No. 1-8544), dated March 11, 1988.
10.17*Lease dated April 28, 1978, Memorandum of Understanding,
Addendum to Lease dated May 9, 1978, Addendum No. 2 to
Lease dated July 28, 1978, and Addendum No. 3 to Lease
dated March 27, 1984, between Sunset Cahuenga Building, a
Joint Venture, and American President Lines, Ltd., filed
as Exhibit 10.44 to the company's Registration Statement
on Form S-l, Registration No. 2-93718, which became
effective on November 1, 1984.
10.18*Addendum No. 4 dated April 19, 1985 to Lease dated April
28, 1978, between Sunset Cahuenga Building, a Joint
Venture, and American President Lines, Ltd., filed as
Exhibit 10.1 to the company's Form SE (File No. 1-8544),
dated December 12, 1985.
<PAGE>
10.19*Addendum No. 5 dated July 25, 1986 to Lease dated April
28, 1978, between Sunset Cahuenga Building, a Joint
Venture, and American President Lines, Ltd., filed as
Exhibit 10.5 to the company's Form SE (File No. 1-8544),
dated March 11, 1988.
10.20*Addendum No. 6, dated May 1, 1988, to Lease dated April
28, 1978, between Sunset Cahuenga Building, a Joint
Venture, and American President Lines, Ltd., filed as
Exhibit 10.13 to the company's Form SE (File No. 1-8544),
dated July 26, 1988.
10.21*Lease Agreement between Port of Seattle and American
President Lines, Ltd. at Terminal 5 dated September 26,
1985, filed as Exhibit 10.5 to the company's Form SE
(File No. 1-8544), dated December 12, 1985.
10.22*Amendment No. 6 to the Lease Agreement between Port of
Seattle and American President Lines, Ltd. at Terminal 5,
and assignment of the lease from American President
Lines, Ltd. to Eagle Marine Services, Ltd. dated June 1,
1994, excluding exhibits and other related agreements,
filed as Exhibit 10.1 to the company's Form 10-Q (File
No. 1-8544), dated August 12, 1994.
10.23 Lease Agreement between the company and Shorenstein
Realty Investors Three, L.P. effective December 31, 1996,
without exhibits.
10.24*Grantor Trust Agreement with U.S. Trust Company of
California, N.A., effective April 10, 1989, filed as
Exhibit 10.1 to the company's Form SE (File No. 1-8544),
dated August 1, 1989.
10.25*Assignment Agreement from United States Lines, Inc. to
American President Lines, Ltd. with attached supplements,
dated September 16, 1987, filed as Exhibit 10.8 to the
company's Form SE (File No. 1- 8544), dated March 14,
1990.
10.26*Permit No. 733, dated September 10, 1993, between the
City of Los Angeles and Eagle Marine Services, Ltd., and
the Guaranty of Agreement made by American President
Lines, Ltd., excluding exhibits, filed as Exhibit 10.1 to
the company's Form 10-Q (File No. 1-8544), dated November
18, 1993.
10.27*Loan Agreement dated March 14, 1994 by and among
Kreditanstalt fur Wiederaufbau (as Agent and Lender);
Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank
AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-
und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche
Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG,
Banque Internationale a Luxembourg S.A. (as the
Syndicate); and American President Lines, Ltd. (as
Borrower); including Appendices and Schedules thereto,
filed as Exhibit 10.4 to the company's Form 10-Q (File
No. 1-8544), dated May 20, 1994 and as Exhibit 10.4a to
the company's Form 10-K/A (file No. 1-8544), dated
December 6, 1994.
<PAGE>
10.28*Amendment No. 1 dated May 19, 1995 to the Loan Agreement
dated March 14, 1994 by and among Kreditanstalt fur
Wiederaufbau (as Agent and Lender); Commerzbank AG,
Hamburg (as Syndicate Agent); Commerzbank AG (Kiel
Branch), Dresdner Bank AG in Hamburg, Vereins-und
Westbank AG, Deutsche Schiffsbank AG, Norddeutsche
Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG,
Banque Internationale a Luxembourg S.A. (as the
Syndicate); and American President Lines, Ltd. (as
Borrower), filed as Exhibit 10.28 to the company's Form
10-K (File No. 1-8544), dated March 14, 1996.
10.29*Amendment No. 2 dated September 1, 1995 to the Loan
Agreement dated March 14, 1994, as amended by Amendment
No. 1 to the Loan Agreement dated May 19, 1995, by and
among Kreditanstalt fur Wiederaufbau (as Agent and
Lender); Commerzbank AG, Hamburg (as Syndicate Agent);
Commerzbank AG (Kiel Branch), Dresdner Bank AG in
Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank
AG, Norddeutsche Landesbank-Girozentrale, Deutsche
Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A.
(as the Syndicate); and American President Lines, Ltd.
(as Borrower); including exhibits thereto or a
description thereof, filed as Exhibit 10.29 to the
company's Form 10-K (File No. 1-8544), dated March 14,
1996.
10.30*Amended and Restated Guarantee dated as of May 19, 1995
by American President Companies, Ltd. (as Guarantor); in
favor of Kreditanstalt fur Wiederaufbau (as Agent and
Lender); and Commerzbank AG Hamburg (as Syndicate Agent);
Commerzbank AG (Kiel Branch), Dresdner Bank AG in
Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank
AG, Norddeutsche Landesbank-Girozentrale, Deutsche
Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A.
(as the Syndicate), filed as Exhibit 10.30 to the
company's Form 10-K (File No. 1-8544), dated March 14,
1996.
10.31*Acknowledgment and Consent of Guarantor dated September
1, 1995 by the company (as Guarantor) in favor of
Kreditanstalt fur Wiederaufbau (as Agent and Lender);
Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank
AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-
und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche
Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG,
Banque Internationale a Luxembourg S.A. (as the
Syndicate), filed as Exhibit 10.31 to the company's Form
10-K (File No. 1-8544), dated March 14, 1996.
10.32*Amendment No. 1 to the First Preferred Ship Mortgage
dated September 1, 1995 given by M.V. President Kennedy,
Ltd. (as Shipowner) to Kreditanstalt fur Wiederaufbau (as
Mortgagee), filed as Exhibit 10.32 to the company's Form
10-K (File No. 1-8544), dated March 14, 1996.
10.33*Amendment No. 1 to the Bareboat Charter Party dated
September 1, 1995 by M.V. President Kennedy, Ltd. (as
Shipowner) and American President Lines, Ltd. (as
Charterer), filed as Exhibit 10.33 to the company's Form
10-K (File No. 1-8544), dated March 14, 1996.
10.34*Second Amended and Restated Agreement to Acquire and
Charter dated September 1, 1995 by and among American
President Companies, Ltd. (as Transferor), of M.V.
President Kennedy, Ltd., of M.V. President Adams, Ltd.,
of M.V. President Kennedy, Ltd., of M.V. President
Kennedy, Ltd. and of M.V. President Kennedy, Ltd.
(Transferees), Kreditanstalt fur Wiederaufbau (as Agent
and Lender); Commerzbank AG, Hamburg (as Syndicate
Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in
Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank
AG, Norddeutsche Landesbank-Girozentrale, Deutsche
Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A.
(as the Syndicate); including exhibits thereto or a
description thereof, filed as Exhibit 10.34 to the
company's Form 10-K (File No. 1-8544), dated March 14,
1996.
<PAGE>
10.35*Charter Hire Guarantee dated as of May 19, 1995 by
American President Companies, Ltd. (as Guarantor); in
favor of M.V. President Kennedy, Ltd. (as the Obligee),
filed as Exhibit 10.35 to the company's Form 10-K (File
No. 1-8544), dated March 14, 1996.
10.36*Amendment No. 1 to Second Amended and Restated Agreement
to Acquire and Charter dated January 4, 1996 by and among
American President Companies, Ltd. (as Transferor), M.V.
President Kennedy, Ltd., M.V. President Adams, Ltd., M.V.
President Jackson, Ltd., M.V. President Polk, Ltd., M.V.
President Truman, Ltd. and APL Shipholdings, Ltd.
(Transferees), Kreditanstalt fur Wiederaufbau (as Agent
and Lender); Commerzbank AG, Hamburg (as Syndicate
Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG
(Hamburg), Vereins-und Westbank AG, Deutsche Schiffsbank
AG, Norddeutsche Landesbank-Girozentrale, Deutsche
Verkehrs-Bank AG (Hamburg Branch), Banque Internationale
a Luxembourg S.A. (as the Syndicate), filed as Exhibit
10.1 to the company's Form 10-Q (File No. 1-8544), dated
May 10, 1996.
10.37*Credit Agreement, dated March 25, 1994 among American
President Companies, Ltd., borrower, and Morgan Guaranty
Trust Company of New York, J.P. Morgan Delaware, Bank of
America National Trust and Savings Association, The First
National Bank of Boston, Barclays Bank PLC, ABN AMRO Bank
N.V., The First National Bank of Chicago and Morgan
Guaranty Trust Company of New York, as agent, filed as
Exhibit 10.1 to the company's Form 10-Q (File No. 1-
8544), dated May 20, 1994.
10.38*Amendments Nos. 1 and 2 dated May 10, 1995 and July 12,
1995, respectively, to the Credit Agreement among
American President Companies, Ltd., borrower, and Morgan
Guaranty Trust Company of New York (as agent and
participant), Bank of America National Trust and Savings
Association, The First National Bank of Boston, The
Industrial Bank of Japan, Limited, ABN AMRO Bank N.V. and
The First National Bank of Chicago, filed as Exhibit 10.1
to the company's Form 10-Q (File No. 1-8544), dated
August 4, 1995.
10.39 Amendment No. 3 dated April 5, 1996 to the Credit
Agreement among American President Companies, Ltd.,
borrower, and Morgan Guaranty Trust Company of New York
(as agent and participant), Bank of America National
Trust and Savings Association, The First National Bank of
Boston, The Industrial Bank of Japan, Limited, ABN AMRO
Bank N.V. and The First National Bank of Chicago.
10.40*Deferred Compensation Plan For Directors of the company,
filed as Exhibit 10.49 to the company's Registration
Statement on Form S-l, Registration No. 2-93718, which
became effective on November 1, 1984.**
10.41*Executive Survivors' Benefits Plan, dated November 29,
1988, filed as Exhibit 10.4 to the company's Form SE
(File No. 1-8544), dated March 17, 1992.**
10.42*Amendment No. 1 to the Executive Survivors' Benefits
Plan, effective December 4, 1992, filed as Exhibit 10.10
to the company's Form SE (File No. 1-8544), dated March
24, 1993.**
<PAGE>
10.43 1988 Deferred Compensation Plan of APL Limited: Regular
Deferral Plan, an amendment and restatement of the 1988
Deferred Compensation Plan; effective November 9, 1996.**
10.44 1988 Deferred Compensation Plan of APL Limited: Pure
Excess Deferral Plan, dated November 9, 1996.**
10.45*1992 Directors' Stock Option Plan, dated March 17, 1992,
filed as Exhibit 10.06 to the company's Form SE (File No.
1-8544), dated May 5, 1992.**
10.46*Amended and Restated Retirement Plan for the Directors of
American President Companies, Ltd., dated September 15,
1992, filed as Exhibit 10.01 to the company's Form SE
(File No. 1-8544), dated October 20, 1992.**
10.47*Second Amendment to the American President Companies,
Ltd. Retirement Plan (As Amended and Restated Effective
January 1, 1993), effective January 1, 1993, filed as
Exhibit 10.2 to the company's Form 10-Q (File No. 1-
8544), dated May 10, 1996.**
10.48*Third Amendment to the American President Companies, Ltd.
Retirement Plan (As Amended and Restated Effective
January 1, 1993), effective January 1, 1997, filed as
Exhibit 10.3 to the company's Form 10-Q (File No. 1-
8544), dated May 10, 1996.**
10.49*American President Companies, Ltd. SMART Plan, second
amendment and restatement effective January 1, 1993,
filed as Exhibit 10.45 to the company's Form 10-K (File
No. 1-8544), dated March 10, 1995.**
10.50*Second Amendment to the American President Companies,
Ltd. SMART Plan (Second Amendment and Restatement
Effective as of January 1, 1993), effective January 1,
1993, filed as Exhibit 10.4 to the company's Form 10-Q
(File No. 1-8544), dated May 10, 1996.**
10.51*Third Amendment to the American President Companies, Ltd.
SMART Plan (Second Amendment and Restatement Effective as
of January 1, 1993), effective April 1, 1996, filed as
Exhibit 10.5 to the company's Form 10-Q (File No. 1-
8544), dated May 10, 1996.**
10.52*Excess-Benefit Plan of the company, amended and restated
effective December 31, 1994, filed as Exhibit 10.46 to
the company's Form 10-K (File No. 1-8544), dated March
10, 1995.**
10.53 1995 Deferred Compensation Plan of APL Limited: Regular
Deferral Plan, an amendment and restatement of the 1995
Deferred Compensation Plan, effective November 9, 1996.**
10.54 1995 Deferred Compensation Plan of APL Limited: Pure
Excess Plan, dated November 9, 1996.**
10.55*1995 Supplemental Executive Retirement Plan of the
company, amended and restated effective January 1, 1996,
filed as Exhibit 10.51 to the company's Form 10-K (File
No. 1-8544), dated March 14, 1996..**
<PAGE>
10.56*1995 Stock Bonus Plan of the company, effective January
1, 1996, filed with the company's Proxy Statement (File
No. 1-8544) for the Annual Meeting of Shareholders held
on May 2, 1995.**
10.57*Employment Agreement between the company and Maryellen B.
Cattani dated April 28, 1994, filed as Exhibit 10.10 to
the company's Form 10-Q (File No. 1-8544), dated May 20,
1994.**
10.58*Employment Agreement between the company and Timothy J.
Rhein dated July 28, 1992, filed as Exhibit 10.1 to the
company's Form 10-Q (File No. 1-8544), dated November 4,
1994.**
10.59*Employment Agreement between the company and Joji Hayashi
dated July 28, 1992, filed as Exhibit 10.2 to the
company's Form 10-Q (File No. 1-8544), dated November 4,
1994.**
10.60*Amendment No. 1 dated September 7, 1995 to the Employment
Agreement as amended, between the company and Joji
Hayashi, filed as Exhibit 10.2 to the company's Form 10-Q
(File No. 1-8544), November 1, 1995.**
10.61*Employment Agreement between the company and James S.
Marston dated July 28, 1992, filed as Exhibit 10.3 to the
company's Form 10-Q (File No. 1-8544), dated November 4,
1994.**
10.62*Employment Agreement between the company and John G.
Burgess dated July 28, 1992, filed as Exhibit 10.4 to the
company's Form 10-Q (File No. 1-8544), dated November 4,
1994.**
10.63*Employment Agreement between the company and Michael Diaz
dated July 28, 1992, filed as Exhibit 10.5 to the
company's Form 10-Q (File No. 1-8544), dated November 4,
1994.**
10.64*Employment Agreement between the company and L. Dale
Crandall dated February 1, 1995, filed as Exhibit 10.3 to
the company's Form 10-Q (File No. 1-8544), May 17,
1995.**
10.65*Agreement between the company and John M. Lillie dated
October 13, 1995, filed as Exhibit 10.61 to the company's
Form 10-K (File No. 1-8544), dated March 14, 1996.**
10.66*Form of Indemnity Agreements dated March 11, 1988 between
the company and Charles S. Arledge, John H. Barr, J.
Hayashi, Forrest N. Shumway and Barry L. Williams, filed
as Exhibit 10.3 to the company's Form SE (File No. 1-
8544), dated February 17, 1989.**
10.67*Form of Indemnity Agreements dated April 25, 1991 between
the company and F. Warren Hellman and Timothy J. Rhein,
filed as Exhibits 10.3 and 10.5 to the company's Form SE
(File No. 1-8544), dated May 8, 1991.**
10.68*Indemnity Agreement dated October 5, 1993 between the
company and Toni Rembe, filed as Exhibit 10.74 to the
company's Form 10-K (File No. 1-8544), dated March 9,
1994.**
<PAGE>
10.69*Form of Indemnity Agreement dated April 28, 1994 between
the company and G. Craig Sullivan, filed as Exhibit 10.62
to the company's Form 10-K (File No. 1-8544), dated March
10, 1995.**
10.70*Form of Indemnity Agreement dated June 20, 1994 between
the company and Tully M. Friedman, filed as Exhibit 10.63
to the company's Form 10-K (File No. 1-8544), dated March
10, 1995.**
11.1 Computation of Earnings Per Share.
21.1 Subsidiaries of the company.
23.1 Consent of Independent Public Accountants.
24.1 Powers of Attorney.
27 Financial Data Schedules filed under Article 5 of
Regulation S-X for the year ended December 27, 1996.
* Incorporated by Reference
** Denotes management contract or compensatory plan.
Pursuant to Item 601 (b)(4)(iii)(A) of Regulation S-K,
certain instruments defining the rights of holders of the long-
term debt of the company and its consolidated subsidiaries have
not been filed because the amount of securities authorized
under each such instrument does not exceed ten percent of the
total assets of the company and its subsidiaries on a
consolidated basis. A copy of any such instrument will be
furnished to the Commission upon request.
(b) Reports on Form 8-K during the fourth quarter:
No current report on Form 8-K was filed during the fourth
quarter of the fiscal year for which this report on Form
10-K is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APL LIMITED (Registrant)
By /s/ William J. Stuebgen
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
March 5, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
/s/ Joji Hayashi March 5, 1997
Joji Hayashi
Chairman of the Board
/s/ Timothy J. Rhein March 5, 1997
Timothy J. Rhein
President, Chief Executive
Officer and Director
/s/ Charles S. Arledge* March 5, 1997
Charles S. Arledge
Director
/s/ John H. Barr* March 5, 1997
John H. Barr
Director
/s/ Tully M. Friedman* March 5, 1997
Tully M. Friedman
Director
/s/ F. Warren Hellman* March 5, 1997
F. Warren Hellman
Director
<PAGE>
/s/ Toni Rembe* March 5, 1997
Toni Rembe
Director
/s/ Forrest N. Shumway* March 5, 1997
Forrest N. Shumway
Director
/s/ G. Craig Sullivan* March 5, 1997
G. Craig Sullivan
Director
/s/ Barry L. Williams* March 5, 1997
Barry L. Williams
Director
*By: /s/ Maryellen B. Cattani March 5, 1997
Maryellen B. Cattani
Attorney-in-fact
1111 BROADWAY
OFFICE LEASE
By and Between
SHORENSTEIN REALTY INVESTORS THREE, L.P.,
a California limited partnership,
as Landlord
and
APL LIMITED, a Delaware corporation,
as Tenant
Dated: Effective as of December 31, 1996
TABLE OF CONTENTS
ARTICLE 1 Premises 2
Section 1.1. Premises 2
Section 1.2. Rentable Area 2
Section 1.3. Common Areas 3
Section 1.4.Basement and
Parking Level Space 4
Section 1.5.Communications
Facilities 5
Section 1.6.Health Club Memberships 7
Section 1.7. Elevators 7
ARTICLE 2 Initial Construction of the Building and
Premises 7
Section 2.1.Base Building Work and
Tenant Improvements 7
Section 2.2.Compliance with Laws 7
Section 2.3. Repair 8
ARTICLE 3 Deleted. 8
ARTICLE 4 Term; Option to Extend; Expansion
Options 8
Section 4.1. Term 8
Section 4.2. Option to Extend 8
Section 4.3. Expansion Options 8
Section 4.4.Fair Market Rental 10
Section 4.5.Right of First Offer 12
ARTICLE 5 Rent 15
Section 5.1. Annual Base Rent 15
Section 5.2. Payment 16
Section 5.3.Building Operating
Costs 16
Section 5.4. Taxes 23
Section 5.5. Interest 25
ARTICLE 6 Use of Premises 25
ARTICLE 7 Signs and Building Directory 26
Section 7.1. 26
Section 7.2. 26
Section 7.3. 26
Section 7.4. 26
ARTICLE 8 Insurance 27
Section 8.1. APL's Insurance 27
Section 8.2.Landlord's Insurance 27
Section 8.3. Miscellaneous 28
Section 8.4. Certificates 28
Section 8.5.Waiver of Subrogation 28
Section 8.6.Blanket Policies and
Self-Insurance 28
ARTICLE 9 Indemnification 29
Section 9.1. APL 29
Section 9.2. Landlord 29
Section 9.3. Mechanics' Liens 29
ARTICLE 10 Utilities and Services 29
Section 10.1.Basic Utilities and
Services 29
Section 10.2. Electricity 30
Section 10.3.Interruption 30
Section 10.4.Janitorial Services 30
Section 10.5. Security 31
ARTICLE 11 Alterations and Build Out of Expansion
Spaces 31
Section 11.1.Alterations and Expansion
Space 31
Section 11.2.Landlord Repair or
Alterations 31
Section 11.3.Removal of Alterations 32
ARTICLE 12 Repairs and Maintenance 32
Section 12.1. Landlord Repair 32
Section 12.2. Tenant Repair 33
ARTICLE 13 Operation 33
Section 13.1. Operation 33
ARTICLE 14 Damage and Destruction 33
Section 14.1.Reconstruction by
Landlord 33
Section 14.2.Substantial
Destruction 34
Section 14.3.Destruction During Last
Part of Term 34
Section 14.4.Abatement or Reduction of
Rent 34
Section 14.5.Inapplicability of Civil
Code Sections 34
Section 14.6.APL's Right to Terminate
Lease 34
Section 14.7.Insurance Proceeds 35
ARTICLE 15 Condemnation 35
Section 15.1. Definitions 35
Section 15.2. Effect on Lease 36
Section 15.3. Award 36
Section 15.4. Waiver 36
Section 15.5.Restoration of the
Premises 37
Section 15.6.Rescission of APL's
Election to Terminate Lease 37
Section 15.7.Reduction of Rent 37
Section 15.8.Temporary Occupancy 37
Section 15.9.Separate
Representation 38
Section 15.10.Temporary Taking 38
ARTICLE 16 Entry by Landlord 38
ARTICLE 17 Assignment and Subletting 38
Section 17.1. 38
Section 17.2. 38
Section 17.3. 39
ARTICLE 18 Partial Subordination 40
ARTICLE 19 Default 41
Section 19.1.Events of Default 41
Section 19.2.Landlord's Remedies 41
Section 19.3. Landlord Default 42
Section 19.4. Waiver 43
ARTICLE 20 Notices 43
ARTICLE 21 Landlord Representations and
Warranties 44
Section 21.1. 44
Section 21.2. 44
ARTICLE 22 Commissions 44
ARTICLE 23 Estoppel Certificates 45
ARTICLE 24 Surrender 45
ARTICLE 25 Rules and Regulations 46
ARTICLE 26 Parking 46
Section 26.1. Parking 46
ARTICLE 27 Leasehold Financing 47
Section 27.1.Leasehold Mortgage 47
Section 27.2. Default 47
ARTICLE 28 Tenth Floor Termination Option 49
ARTICLE 29 Generator Equipment 49
Section 29.1.APL's Generator
Equipment 49
Section 29.2.Use of Building
Generator 52
Section 29.3. Evacuation 52
ARTICLE 30 Termination of Original Lease
and Storage Space Lease 52
ARTICLE 31 Miscellaneous 53
Section 31.1.Words 53
Section 31.2.Successors 53
Section 31.3.Time 53
Section 31.4.Sale 53
Section 31.5.Unenforceability 53
Section 31.6.Attorneys' Fees 53
Section 31.7.Governing Law 53
Section 31.8.Final Expression 53
Section 31.9.Headings 54
Section 31.10 Memorandum of Lease 54
Section 31.11.Force Majeure 54
Section 31.12.Reasonableness 54
Section 31.13.Light and Air
Easement 54
Section 31.14.Holding Over 54
Section 31.15.Nondiscrimination 55
Section 31.16.Relationship of
Parties 55
Section 31.17.Legal Authority 55
Section 31.18.Merger 56
Section 31.19.Quiet Enjoyment 56
Section 31.20.Best Efforts Defined 56
Section 31.21.Waiver 56
Section 31.22.Condition Precedent 56
Exhibits
Reference
Exhibits
Exhibit A Real Property Recitals
Exhibit B Premises Section
1.1
Exhibit C Rentable Area Section
1.2
Exhibit D Communications Facilities Section
1.5
Exhibit E Elevator Performance Requirements Sec
tion 10.1
Exhibit F Janitorial Services Section 10.4
Exhibit G Security Services Section 10.5
Exhibit H Rules and Regulations Article 25
Exhibit I Equipment Site Section 29.1
Exhibit J Memorandum of Lease Section 31.10
Exhibit K Subordination, Non-disturbance
& Attornment Agreement Section 31.10
APL OFFICE LEASE
1111 BROADWAY
This OFFICE LEASE ("Lease"), effective as of
DecemberE31, 1996, is made by and between SHORENSTEIN
REALTY INVESTORS THREE, L.P., a limited partnership
("Landlord"), and APL LIMITED, a Delaware corporation
(formerly known as "American President Companies,
Ltd.") ("APL").
RECITALS
A. Bramalea Pacific, Inc., a California
corporation ("Bramalea"), and APL entered into a lease,
dated April 18, 1988 (the "Original Lease"), pursuant
to which Bramalea undertook the obligation to acquire
certain unimproved property in Oakland, California, and
to construct an office building on such property, and
further pursuant to which Bramalea leased to APL and
APL leased from Bramalea certain premises in such
building. Bramalea's obligations under the Original
Lease were guaranteed by Bramalea, Inc., a Delaware
corporation, pursuant to a Lease Guaranty dated April
18, 1988, and Bramalea, Inc.'s obligations under the
guaranty were guaranteed by Bramalea Limited, an
Ontario corporation, pursuant to an additional Lease
Guaranty, also dated April 18, 1988. 1111 Associates,
a California limited partnership, succeeded to
Bramalea's interest in the Original Lease.
B. 1111 Associates ultimately constructed a
24-story office building, located at 1111 Broadway,
Oakland, California (the "Building"), on certain
previously unimproved real property containing
approximately sixty-seven thousand (67,000) square feet
of space (as described on Exhibit "A" attached hereto
and incorporated herein by reference) (the "APL
Parcel"), which is part of that larger parcel of real
property bounded by Broadway, Clay Street, Eleventh
Street and Twelfth Street (also described on the
attached Exhibit "A") (the "APL Block").
C. The Original Lease was modified by a
First Amendment to Office Lease, dated April 26, 1990,
a Second Amendment to Office Lease, dated SeptemberE13,
1990, a Third Amendment to Office Lease, dated October
29, 1990, a Fourth Amendment to Office Lease, dated
January 1, 1991, a Fifth Amendment to Office Lease,
dated January 1, 1991, a Sixth Amendment to Office
Lease, dated June 21, 1991, and a Seventh Amendment to
Office Lease, dated May 12, 1993, which amendments,
among other matters, modified certain construction
timing matters, confirmed rent commencement dates and
move-in dates, modified expansion options, and
redefined the premises. Further references in this
Lease to the Original Lease shall refer to the Original
Lease, as so amended. Certain matters regarding the
termination of the Original Lease are set forth in
Article 30 of this Lease.
D. Toronto Dominion Bank foreclosed on all
of 1111 Associates's interest in the APL Parcel, the
APL Block, and the Building, and such interest was
acquired by 1111 Broadway, Inc., a Delaware
corporation. Landlord anticipates that, on or before
December 31, 1996, Landlord will acquire all of the
interest of 1111 Broadway, Inc., in the APL Parcel, the
APL Block, and the Building, together with a portion of
that certain first class office and retail complex in
Oakland, California, presently located within an area
bounded by Broadway, Fourteenth Street, Martin Luther
King, Jr. Way, Eleventh Street, Clay Street and Twelfth
Street (the "Balance of City Center"). Landlord and
APL acknowledge that Landlord does not presently expect
to acquire the entire Balance of City Center.
E. Landlord and APL presently desire to
enter into a lease of the premises presently occupied
by APL pursuant to the Original Lease, on the terms and
conditions set forth herein, effective as of December
31, 1996.
NOW, THEREFORE, Landlord and APL agree as follows:
ARTICLE 1
Premises
Section 1.1. Premises .1. Premises. Landlord
leases to APL, and APL leases from Landlord, for the
term and subject to the covenants, agreements and
conditions contained in this Lease, those certain
premises located in the Building, consisting of a
portion of several of the basement parking levels of
the Building, a portion of the first floor and all of
the rentable area and public common areas on floors 2 -
10, inclusive, as shown by outline more particularly on
Exhibit "B" attached hereto and incorporated herein by
reference, and a portion of the roof of the Building
(collectively, the "Premises"). Landlord and APL
acknowledge that APL is now, and will be at the
commencement of the Term hereof, in possession of the
entire Premises, other than that portion of the
Premises located on the roof of the Building, pursuant
to the Original Lease. The area to be leased by APL on
the roof shall be composed of an area of approximately
twenty (20) feet by twenty (20) feet on the roof
together with an area of approximately eight (8) feet
by ten (10) feet within the penthouse mechanical room
located on the roof. The exact location of the roof
portion of the Premises shall be determined at such
time as APL elects to use the roof. The space referred
to in this Section 1.1 shall sometimes be referred to
as the "Initial Premises". The Premises shall mean the
Initial Premises and any additional area added to the
area leased during the term ("Term" as defined in
Section 4.1).
Section 1.2. Rentable Area.
(a) The total number of square feet of rentable
space (the "Rentable Area") contained within the
Premises and the Building is deemed for the purposes of
this Lease to be as listed in Exhibit "C" attached
hereto and incorporated herein by reference. The
computation of Annual Base Rent (as defined in
SectionE5.1) for all extension terms ("Extension Terms"
as defined in SectionE4.2) shall be made based upon the
Rentable Area.
(b) Landlord shall not have the right to make any
material change to the Premises, the ground floor lobby
of the Building or the outdoor plazas of the APL Parcel
without APL's prior written consent, which consent
shall not be unreasonably withheld or delayed. Without
APL's consent, Landlord shall have the right to
undertake customary and usual maintenance and repair of
the Premises, Common Areas (as hereinafter defined) and
Building; to undertake customary and usual construction
of tenant improvements for other tenants of the
Building; and to install, maintain, use, repair and
replace pipes, ducts, conduits, wires and other
components of the Building systems leading through the
Premises and servicing other parts of the Building.
All changes to the ground floor lobby of the Building
and outdoor plazas of the APL Parcel shall be subject
to APL's prior written consent, which consent shall not
be unreasonably withheld or delayed.
(c) APL shall not have or acquire any property
right or interest in or to any name(s) or distinctive
designations which may become identified or associated
with City Center, any other building or area in City
Center, or any portion thereof. If APL refers to City
Center in its advertising such name shall not be used
after the termination of this Lease or at locations
other than the Premises. Landlord and/or the other
owner(s) of the Balance of City Center shall have the
right to change the name of City Center and/or any
portion of City Center or City Square from time to time
at Landlord's and/or such party's or parties' election.
Section 1.3. Common Areas. APL and its agents,
employees, customers, invitees and licensees shall have
the non-exclusive right to use the Common Areas. The
term "Common Areas" shall mean all areas and facilities
outside of the boundaries of the Premises and within
the exterior boundaries of the APL Parcel that are not
leased to other tenants and that are designated by
Landlord, from time to time, for the general use and
convenience of tenants in the Building. Common Areas
include, without limitation, pedestrian walkways,
patios, landscape areas, sidewalks, service corridors,
restrooms, stairways, escalators, decorative walls,
plazas, fountains, malls, throughways, loading areas
and ramps and parking areas (except as parking areas
are separately treated elsewhere herein). Landlord
shall have the right to:
(a) Establish and uniformly enforce reasonable
nondiscriminatory rules and regulations applicable to
all tenants concerning the maintenance, management, use
and operation of the Common Areas;
(b) Close, if necessary, parts of the Common
Areas, to whatever extent may be legally necessary to
prevent dedication of any of the Common Areas or the
accrual of any rights of any person or of the public to
the Common Areas;
(c) Close temporarily any parts of the Common
Areas for maintenance, repair and renovation purposes,
provided all such maintenance, repair and renovation
shall be done as promptly as reasonably practicable;
(d) Reduce, increase, enclose or otherwise change
at any time and from time to time the size, number,
location, lay-out and nature of the Common Areas and
facilities (subject to the provisions of the first
sentence of SubsectionE1.2(b) above) and other
tenancies and premises in the Building or APL Parcel
and to create additional rentable areas through use or
enclosure of Common Areas (subject to the provisions of
the first sentence of Subsection 1.2(b) above); and
(e) Select a person, firm or corporation to
maintain and operate the Common Areas if at any time
Landlord determines that the best interests of the
tenants of the Building shall be served by having the
Common Areas maintained and operated by such person,
firm or corporation.
Notwithstanding the foregoing, in no event shall
the exercise by Landlord of any of the rights described
above in any manner materially reduce any of APL's
rights hereunder or in any manner materially obstruct
or materially interfere with APL's access to and from
the Premises or APL's use and quiet enjoyment of the
Premises.
Landlord and its affiliates shall exercise such
voting and other control (if any) as they may have over
the entities which control the common areas located in
that portion of the Balance of the City Center bounded
on the west by Clay Street so as to continue to make
such common areas and the amenities and facilities
located therein available for the use and enjoyment of
APL, its officers, employees, agents, customers and
invitees on a non-exclusive basis with other tenants,
officers, employees, invitees and customers of the
other buildings located in the Balance of the City
Center. "Affiliates" shall mean (i) any parent of
Landlord, (ii) any entity under common control with
Landlord or (iii)Eany joint venture, partnership,
corporation (foreign or domestic) or other entity of
which Landlord, or a subsidiary of Landlord or any
corporation controlled by or under common control with
Landlord is the general partner or owns at least fifty
percent (50%) of the net assets or fifty percent (50%)
of the voting stock or other equity interest.
During the Term if APL determines, in its
reasonable judgment, that sharing of management,
operation, repair and maintenance expenses for all
common areas contained within the APL Block would be
fair and equitable then APL, if requested by Landlord
and upon approval of the terms of such amendment, shall
enter into an amendment of this Lease incorporating the
common areas of the APL Block into the definition of
Common Areas and otherwise incorporating any other
agreed upon terms regarding allocation of common area
costs.
Section 1.4. Basement and Parking Level Space.
(a)Mailroom and Storage Space.
That portion of the Premises located in the
basement Level B of the Building shown outlined and
labeled "Mailroom" on Exhibit "B" (the "Mailroom"),
that portion of the Premises located in the basement
Level B of the building shown outlined and labeled
"Basement Storage" on Exhibit "B" (the "Basement
Storage Area"), and that portion of the Premises
consisting of the 5 increments of space on basement
Levels A, B and C of the Building shown outlined and
labeled "Storage Area" on Exhibit "B" (the "Parking
Level Storage Area") shall be used by APL as a mailroom
and for receiving, distribution and storage. The
Basement Storage Area and the Parking Level Storage
Area are sometimes collectively referred to herein as
the "Storage Area", and the Mailroom and Storage Area
are sometimes collectively referred to herein as the
"Basement Space". Commencing on JanuaryE1, 1998, APL
shall pay Increased Building Operating Costs and
Increased Real Property Taxes allocable to the Mailroom
and only Increased Real Property Taxes applicable to
the Storage Area. Maintenance of the exterior of the
Basement Space, the portion of the Building in which
the Basement Space is located and of access thereto
shall be the responsibility of Landlord, which
responsibility Landlord shall perform in the same
manner as is provided with respect to other areas of
the Building for which Landlord has responsibility.
(b) Relocation of Parking Level Storage Area.
(i) Conditions. Landlord shall have the
right from time to time during the term of this Lease
to relocate one or more increments of the Parking Level
Storage Area within the Building on the following terms
and conditions:
(A) The square footage of the new
space shall be equal in size to the applicable
increment(s) of existing Parking Level Storage Area
being relocated, subject to a variation of ten percent
(10%). Provided, however, the amount of rent
attributable to the Parking Level Storage Area shall
not be increased if the square footage is increased,
but shall be proportionately decreased if the square
footage is decreased.
(B) The improvements provided by
Landlord in the new space shall be comparable to the
improvements, if any, provided by Landlord in the
applicable increment(s) of existing Parking Level
Storage Area being relocated; provided that Landlord
may relocate improvements from the applicable
increment(s) of existing Parking Level Storage Area
being relocated to the new space.
(C) Landlord shall pay the moving
expenses reasonably incurred by APL in connection with
such relocation of such increment(s) of Parking Level
Storage Area.
(D) APL's access to the new space
shall be equivalent to its access to the applicable
increment(s) of existing Parking Level Storage Area
being relocated.
(ii) Notice. Landlord shall deliver to
APL written notice of Landlord's election to relocate
any increment of Parking Level Storage Area at least
thirty (30) days prior to the date the relocation is to
be effective.
Section 1.5. Communications Facilities. APL
shall have the right, at its expense, to install,
maintain, replace and operate communications equipment
and facilities (collectively, the "Installation") on
the roof of the Building in such location as APL shall
reasonably designate, subject to Landlord's reasonable
approval. The location of the Installation shall be
selected so as to minimize the aesthetic impact on the
Building and, if reasonably requested by Landlord, APL
shall construct an enclosure around the Installation,
provided such an enclosure will not adversely affect
operation of the Installation or materially increase
the cost of the Installation. APL's requirements for
the construction of the Installation, including its
energy requirements and general specifications, are
more particularly described on Exhibit "D" attached
hereto and incorporated herein by reference. The
Installation shall not require the stationing on the
roof of the Building of any personnel except for
construction, maintenance, adjustment and replacement
of the Installation. The Installation shall not
adversely affect the Building structure or the
operation of the Building mechanical systems. No other
person shall have the right to install any
communications equipment and facilities on the roof of
the Building if such installation will materially
interfere with APL's use and quiet enjoyment of the
Installation. The Installation may include a dish-type
microwave transmitter and/or receiver of a diameter not
to exceed twenty (20) feet. In fastening the
Installation to the Building, by tripod tower, direct
attachment or other means, APL shall promptly repair
any damage to the Building, or any portion thereof, and
shall provide a secure and stable attachment capable of
withstanding reasonably anticipated wind loads. APL
shall have the right of access to the Installation at
all times including the use of communications cable
between a location or locations in the Premises
designated by APL and the Installation, the supplying
of alternating current power from the Premises to the
Installation and the provision of earthen grounding of
the Installation. The Installation shall remain the
property of APL and may be removed by APL at any time.
In exercising its rights hereunder, APL shall use
reasonable care so as to cause as little interference
with Landlord's operation of the Building as is
reasonably practicable. The Installation shall be
constructed, maintained, repaired and operated in
compliance with all applicable laws, statutes,
ordinances and regulations (collectively, "Applicable
Laws"). If Applicable Laws do not permit construction
or operation of the Installation APL shall have the
right to install, maintain, repair and operate other
equipment and facilities outside the Premises and in,
on or about the Building in order to establish and
enjoy the beneficial use of a comparable communications
facility. In selecting an alternative location for the
Installation APL and Landlord shall attempt to find an
area within the Building which does not constitute
usable area. If usable area of the Building is desired
by APL, APL shall pay Fair Market Rental for such
space. The inability of APL to construct, maintain,
repair or operate the Installation due to Applicable
Laws shall not constitute a default by Landlord or
result in an abatement of rent. APL shall indemnify,
defend and hold Landlord harmless from and against any
and all claims, expenses and liability arising from
damage to property or injury to persons caused by APL's
construction, repair, maintenance or operation of the
Installation. APL shall give Landlord not less than
sixty (60) days notice of APL's desire to construct the
Installation. Following receipt of such notice APL and
Landlord shall determine the exact location of the roof
space to be leased by APL. If the microwave dish
erected by APL is twelve (12) feet or less in diameter
APL shall pay monthly rent of Two Hundred Fifty Dollars
($250.00). If the microwave dish erected by APL is
greater than twelve (12) feet in diameter but less than
or equal to twenty (20) feet in diameter APL shall pay
monthly rent of Five Hundred Dollars ($500.00). In
addition, APL shall pay monthly rent of One Dollar
($1.00) per square foot of usable space actually used
by APL in the mechanical system penthouse located on
the roof of the Building. The above described monthly
rent shall only be applicable during those portions of
the Initial Term (prorated for partial months) when the
Installation is on the roof. APL shall not pay any
Building Operating Costs or Real Property Taxes in
connection with the leasing of the roof space.
Section 1.6. Health Club Membership. If and
when a health or sports club facility is opened by the
Landlord on the APL Block or Balance of the City
Center, APL, its officers and employees shall be
offered any and all corporate and individual membership
plans at the lowest fees then being charged to any
other corporation or individual for comparable
memberships in the health or sports club facility.
Landlord's obligations under this Section 1.6 shall
only be effective as to those portions of the APL Block
and/or Balance of the City Center owned or controlled
by Landlord or its affiliates and only so long as
Landlord and/or its affiliates own or control such real
property.
Section 1.7. Elevators. With regard to the
lowrise elevator bank (floorsE1-14) APL shall have the
right to establish or to require Landlord to provide
(at APL's cost) such security in addition to that
already maintained by Landlord for such elevator bank
as APL, in its sole discretion, desires including,
without limitation, a reception desk and/or security
guards on the ground floor level of the Building and in
the lobby of each floor occupied by APL. Any changes
to APL's existing reception and security desk on the
ground floor shall be subject to Landlord's reasonable
approval as to design and location. Signs reflecting
those elevators controlled by APL may be placed by APL
in the ground floor lobby area provided the cost of
construction, maintenance and repair of such signs is
borne by APL and such signs are constructed and
maintained in a first class condition.
ARTICLE 2
Initial Construction of the Building and Premises
Section 2.1. Base Building Work and Tenant
Improvements. Article 2 of the Original Lease set
forth certain obligations of the parties regarding the
initial construction of the Building and the initial
improvement of Tenant's premises. The terms "Building
Shell Work" and "Tenant Improvements", as used in this
Lease, shall have the meanings set forth in the
Original Lease, and the term "Base Building Elements"
shall mean the elements in the "Base Building" column
of Exhibit "J" to the Original Lease.
Section 2.2. Compliance with Laws. Landlord
shall, at Landlord's sole cost and expense and without
reimbursement from APL pursuant to any provision of
this Lease or otherwise (except as specifically
provided in this Section 2.2), maintain and keep the
Building, Common Areas, Premises and Tenant
Improvements (except for subsequent improvements to the
Premises made or to be made by APL) in compliance with
all governmental codes, laws, ordinances, rules,
regulations and requirements applicable to the
Building, Common Areas, Premises, Tenant Improvements
or to APL's use of the Premises for general office,
marketing, sales and service, data processing,
training, administrative, storage and related uses.
Notwithstanding the foregoing, if any improvements,
alterations, additions or modifications (collectively
"Modifications") to the Premises are or were initiated
by APL after Substantial Completion (as defined in
Section 2.6 of the Original Lease) of the Tenant
Improvements and if the initiation of such
Modifications causes certain codes, laws, ordinances,
rules, regulations or requirements to be applied to the
Premises, then the cost of compliance within the
Premises (including any changes to Building systems
serving the Premises to the extent the portions
affected are located in the Premises) shall be borne by
APL.
Section 2.3. Repair. Landlord shall repair, or
cause to be repaired or replaced, at its sole cost and
expense, any defects or damage to the Building Shell
Work, Base Building Elements, or Tenant Improvements
due to defective materials or workmanship in
construction thereof or nonconformance with the plans
and specifications approved as provided in Sections 2.1
and 2.2 of the Original Lease. The existence of any
guarantees or warranties shall not relieve Landlord of
its primary responsibility for the Building and all
Tenant Improvements constructed on the APL Parcel.
ARTICLE 3
Deleted.
ARTICLE 4
Term; Option to Extend; Expansion Options
Section 4.1. Term.The term of this Lease (the
"Term") shall commence on December 31, 1996 (the
"Commencement Date"). The Term of this Lease shall
expire on December 31, 2006.
Section 4.2. Option to Extend. Landlord grants
to APL the option to extend the Term on all the
provisions hereof, except for Rent, for three (3)
successive five (5) year extension terms (each, an
"Extension Term"). A failure to exercise any one of
the options to extend shall automatically extinguish
all succeeding options. APL shall exercise its option
as to each Extension Term by giving irrevocable written
notice of exercise of the option (each, an "Option
Notice") to Landlord by January 1 of the immediately
preceding calendar year, that is Landlord is to receive
twelve (12) months prior notice. If APL fails to give
the Option Notice by such date Landlord shall give APL
written notice of its failure to exercise the subject
option and APL shall have five (5) business days after
receipt of Landlord's written notice within which APL
may give the Option Notice notwithstanding APL's
failure to timely exercise its rights. As used herein,
the "Term" shall mean the initial Term, plus all
Extension Terms as to which APL gives a timely Option
Notice. Except as provided in Section 4.5, the Annual
Base Rent for each Extension Term shall be of the fair
market rental ("Fair Market Rental" as hereinafter
defined) of the Premises as of the commencement of each
Extension Term (each, an "Adjustment Date").
Section 4.3. Expansion Options.
(a) First Expansion. APL shall have the option
(the "First Expansion Option") to lease between 10,000
and 12,000 rentable square feet of space on one floor
of the Building (the location and exact size and
configuration of which shall be designated by Landlord
as provided below and which space, at Landlord's
election, may consist of either one (1) or two (2)
increments, in Landlord's sole discretion, provided
that no increment shall consist of less than four
thousand (4,000) rentable square feet of space) (the
"First Expansion Space") for a term (A) commencing on a
date (or dates, if the First Expansion Space consists
of two (2) increments) to be designated by Landlord,
but which shall be within the period commencing on
January 1, 2001, and ending on December 31, 2002, and
(B)Eending upon the termination of this Lease. APL
shall exercise the option for the First Expansion
Space, if at all, by written notice from APL to
Landlord given not earlier than May 1, 2000, and not
later than June 30, 2000 (subject to the provisions of
Subsection 4.3(c) below). Landlord shall notify APL in
writing (the "Expansion Designation Notice") of the
date of commencement of the term of the lease of each
increment of the First Expansion Space, and the exact
size and location of each increment of the First
Expansion Space, not less than six (6) months prior to
such commencement date.
(b) Second Expansion. APL shall have the option
(the "Second Expansion Option") to lease one additional
floor of the Building (which shall be designated by
Landlord, as provided below) (the "Second Expansion
Space") for a term (A)Ecommencing on a date to be
designated by Landlord, but which shall be within the
period commencing on January 1, 2003, and ending on
June 30, 2004, and (B)Eending upon the termination of
this Lease. APL shall exercise the option for the
Second Expansion Space, if at all, by written notice
from APL to Landlord given not earlier than May 1,
2002, and not later than June 30, 2002 (subject to the
provisions of Subsection 4.3(c) below). Landlord shall
notify APL in writing (the "Expansion Designation
Notice") of the date of commencement of the term of the
lease of the Second Expansion Space, and the exact size
and location of the Second Expansion Space, not less
than six (6) months prior to such commencement date.
(c) Late Notice. If APL fails to give any notice
under this Section 4.3 within the time specified above,
Landlord shall deliver to APL written notice of APL's
failure to give notice and APL shall have an additional
five (5) business days after receipt of Landlord's
notice to give the subject notice.
(d) Terms and Conditions. If APL exercises an
Expansion Option, then as soon as reasonably feasible
thereafter the parties hereto shall enter into an
amendment of this Lease, adding the First Expansion
Space or the Second Expansion Space, as applicable, to
the Premises leased hereunder on the following terms
and conditions:
i. For the purposes of the balance of this
Subsection 4.3(d) the term "Expansion Space" shall
mean either the Second Expansion Space or an
increment of the First Expansion Space. The term
of the lease as respects the Expansion Space shall
commence on the date stated in Landlord's notice
and shall continue thereafter coextensively with
the then-remaining term hereof, provided that in
the event of the inability of Landlord to deliver
possession of the Expansion Space to APL on the
availability date stated in Landlord's notice,
Landlord shall not be liable for any damage
thereby, nor shall Tenant's lease of the Expansion
Space be void or voidable, but Landlord shall use
diligent good faith efforts to obtain possession
of the Expansion Space and deliver the Expansion
Space to APL as soon as reasonably practicable and
APL shall have no liability with respect to the
Expansion Space until the date Landlord delivers
possession of the Expansion Space to APL (and the
Expansion Space Rent Commencement Date, as defined
in subparagraph ii. below, shall be computed based
on the date Landlord delivers possession of the
Expansion Space to APL, as provided in
subparagraph ii. below);
ii. Commencing on the date (the "Expansion
Space Rent Commencement Date") which is the
earlier of (a) three (3) months after the date
Landlord delivers possession of the Expansion
Space to APL or (b) the date on which APL
commences conduct of its business in the Expansion
Space, and continuing throughout the term of the
lease of the Expansion Space, the Annual Base Rent
payable by APL under Section 5.1 hereof for the
Expansion Space shall be the Fair Market Rental
(as defined in SectionE4.4) thereof, determined in
accordance with Section 4.4 below (and subject to
the further provisions of Subsection 4.3(e)below);
iii. Commencing on the Expansion Space Rent
Commencement Date and continuing throughout the
term of the lease of the Expansion Space, APL's
Share as set forth in Section 5.3 hereof with
respect to the Expansion Space shall be based on
the rentable square footage of the Expansion
Space, and the Base Year with respect to the
Expansion Space shall be the calendar year in
which the Expansion Space is delivered to APL;
iv. The Expansion Space shall be delivered
to and accepted by APL in its then "as is" state
and condition and Landlord shall have no
obligation to perform or pay for any remodeling,
renovation or improvements to prepare same for
APL's occupancy, provided that with respect to the
First Expansion Space, Landlord at its sole cost
and expense shall provide all necessary demising
walls taped and painted on the side APL occupies;
and
v. Except as otherwise provided above, the
Expansion Space shall be subject to all the terms
and conditions set forth herein as applicable to
the Initial Premises.
(e) Special Factors Regarding Rent. Rent as
agreed upon by the parties or as determined pursuant to
arbitration shall be effective until the next Rent
Adjustment Date occurring pursuant to Section 4.2.
Thereafter Rent for the subject Expansion Space shall
be the same per square foot as that determined for the
Premises pursuant to Section 4.4. The Fair Market
Rental of the subject Expansion Space shall be
determined assuming the term of the lease as to the
subject Expansion Space is the greater of (i) three (3)
years or (ii) the period until the next Rent Adjustment
Date. In computing the Annual Base Rent for the
subject space, Fair Market Rental shall be determined
by the parties (or arbitrators, if necessary).
Section 4.4. Fair Market Rental.
(a) "Fair Market Rental" shall mean the rate
being paid for comparable space in similar buildings in
Oakland, California, with similar amenities, taking
into consideration the following: size of space subject
to rent determination, location, floor level, floor
efficiency (load factor) and the manner used to
determine the usable square footage of the relevant
space, proposed term of the lease, extent of services
to be provided, leasing commissions, tenant improvement
allowances, "free rent" and other forms of rental
concessions, all items included in operating expenses
and taxes which are reimbursable by tenant, the level
and types of building security provided, the net worth
and creditworthiness of the tenant, the time that the
particular rate under consideration became or is to
become effective, the value, utility and condition of
tenant improvements paid for by Landlord, and view,
light and air taking into consideration Section 31.13.
Leasing commissions for purposes of determining Fair
Market Rental for any extension periods pursuant to
Section 4.2 shall only be considered.to the extent
commissions are then generally being paid upon
extensions. Reimbursement for lease termination
payments and relocation costs shall not be considered
in determining Fair Market Rental. Fair Market Rental
as of the Adjustment Date shall be determined by
Landlord with written notice (the "Notice") given to
APL together with Landlord's delivery of the Expansion
Designation Notice (but no sooner than six (6) months
prior to the date the Expansion Space is to be added to
the Lease), subject to APL's right to arbitration as
hereinafter provided. Failure on the part of APL to
demand arbitration within thirty (30) days after
receipt of the Notice from Landlord shall bind APL to
the Fair Market Rental as determined by Landlord.
Should APL elect to arbitrate and should the
arbitration not have been concluded prior to the
Adjustment Date, then until Fair Market Rental is
determined by arbitration APL shall pay rent for the
space which is the subject of the arbitration at the
same rent per square foot then being paid by APL for
the Initial Premises. If the amount of the Fair Market
Rental as determined by arbitration is greater than or
less than the amount actually paid by APL, then any
adjustment required to adjust the amount previously
paid shall be made by payment by the appropriate party
within ten (10) days after such determination of Fair
Market Rental.
(b) If APL disputes the amount claimed by
Landlord as Fair Market Rental, APL may require that
Landlord submit the dispute to arbitration. The
arbitration shall be conducted and determined in the
City of Oakland, California in accordance with the then
prevailing rules of the American Arbitration
Association or its successor for arbitration of
commercial disputes, except that the procedures
mandated by such rules shall be modified as follows:
(i) APL shall make any demand for
arbitration in writing within thirty (30) days after
service of the Notice, specifying therein the name and
address of the person to act as the arbitrator on APL's
behalf. The arbitrator shall be a real estate
appraiser or broker with at least ten (10) years full
time commercial appraisal experience who is familiar
with the Fair Market Rental of first-class commercial
office space in Oakland, California. Failure on the
part of APL to make the timely and proper demand for
such arbitration shall constitute a waiver of the right
thereto. Within ten (10) business days after the
service of the demand for arbitration, Landlord shall
give notice to APL specifying the name and address of
the person designated by Landlord to act as arbitrator
on its behalf, which arbitrator shall be similarly
qualified. If Landlord fails to notify APL of the
appointment of its arbitrator within or by the time
specified, then the arbitrator appointed by APL shall
be the arbitrator to determine the Fair Market Rental
for the subject space.
(ii) If two arbitrators are chosen pursuant
to Subsection 4.4(b)(i) above, the arbitrators so
chosen shall meet within ten (10) business days after
the second arbitrator is appointed and shall appoint a
third arbitrator, who shall be a competent and
impartial person with qualifications similar to those
required of the first two arbitrators pursuant to
Subsection 4.4(b)(i) above. If they are unable to
agree upon such appointment within five (5) business
days after expiration of such ten (10) day period, the
third arbitrator shall be selected by the parties
themselves. If the parties do not so agree, then
either party, on behalf of both, may request
appointment of such a qualified person by the then
president of the Alameda County Board of Realtors. The
three arbitrators shall decide the dispute, if it has
not been previously resolved, by following the
procedures set forth in Subsection 4.4(b)(iii) below.
(iii) The Fair Market Rental shall be
fixed by the three arbitrators in accordance with the
following procedures. Each of the arbitrators selected
by the parties shall state, in writing, his or her
determination of the Fair Market Rental, supported by
the reasons therefor, and shall make counterpart copies
for each of the other arbitrators. The arbitrators
shall arrange for a simultaneous exchange of such
proposed resolutions. The role of the third arbitrator
shall be to select which of the two proposed
resolutions more closely approximates his or her
determination of Fair Market Rental. The third
arbitrator shall have no right to propose a middle
ground or any modification of either of the two
proposed resolutions. The resolution he or she chooses
as that more closely approximating his or her
determination of the Fair Market Rental shall
constitute the decision of the arbitrators and shall be
final and binding upon the parties.
(iv) In the event of a failure, refusal or
inability of any arbitrator to act, his or her
successor shall be appointed by him or her, but in the
case of the third arbitrator, his or her successor
shall be appointed in the same manner as that set forth
herein with respect to the appointment of the original
third arbitrator. The arbitrators shall attempt to
decide the issue within ten (10) business days after
the appointment of the third arbitrator. Any decision
in which the arbitrator appointed by Landlord and the
arbitrator appointed by APL concur shall be binding and
conclusive upon the parties, except that such
arbitrators shall not attempt by themselves to mutually
ascertain the Fair Market Rental and any such
determination, in a manner other than that provided for
in Subsection 4.4(b)(iii) hereof, shall not be binding
on the parties. Each party shall pay the fees and
expenses of its respective arbitrator and both shall
share the fees and expenses of the third arbitrator.
Attorneys' fees and expenses of counsel and of
witnesses for the respective parties shall be paid by
the respective party engaging such counsel or calling
such witnesses.
(v) The arbitrators shall have the right to
consult experts and competent authorities for factual
information or evidence pertaining to a determination
of Fair Market Rental, but any such consultation shall
be made in the presence of both parties with full right
on their part to cross-examine. The arbitrators shall
render the decision and award in writing with
counterpart copies to each party. The arbitrators
shall have no power to modify the provisions of this
Lease, including, without limitation, any provision
relating to the floor on Fair Market Rental.
Section 4.5. Right of First Offer.
(a) First Offer Right; Available Space. APL
shall have a continuing right of first offer to lease
each increment of space in the Building containing more
than ten thousand (10,000) square feet of rentable area
(each of which is an "Available Space") which becomes
"available for lease" during the period commencing on
December 31, 1997, and ending on December 31, 2004,
subject to the provisions of this Section 4.5. An
increment of space shall not be deemed "available for
lease" if any tenant of the Building exercises an
option or right of first offer to lease such space,
which option or right of first offer has been granted
prior to the date of this Lease.
(b) Notice of Available Space. Within thirty
(30) days after any such Available Space becomes
available to lease, or, if sooner, within thirty (30)
days after Landlord shall be in a position to project
when an Available Space will be available to lease (but
in no event earlier than twelve (12) months prior to
such projected availability date), Landlord shall give
APL written notice thereof (an "Availability Notice").
Each Availability Notice shall identify the space and
specify the availability date (or estimated
availability date) and shall identify the rent and
rental concessions, such as "free rent" and tenant
improvement allowance, which Landlord proposes to offer
for such Available Space. APL acknowledges that, as of
the date this Lease is executed, APL does not require
additional space in the Building other than the Initial
Premises and that APL has no rights hereunder with
respect to space in the Building which is vacant as of
the commencement of the term hereof (the "Current
Vacant Space"), unless such space shall again become
"available for lease" at a future date; provided,
however, if Landlord has not leased any increment of
the Current Vacant Space to a third-party tenant by
December 31, 1997, then the provisions of this
SectionE4.5 shall apply to such increment of the
Current Vacant Space [except with respect to increments
of the Current Vacant Space for which Landlord is then
actively and in good-faith negotiating with a third-
party to lease (which negotiations have included, at a
minimum, exchange of a proposal and counter proposal),
in which event the provisions of this Section 4.5 shall
apply to such increment of the Current Vacant Space
only if such negotiations conclude without execution of
a lease with respect to such space].
(c) Exercise of First Offer Right. If APL elects
to lease all or a portion of Available Space, APL shall
so notify Landlord in writing (the "Acceptance Notice")
within ten (10) business days after the date of the
Availability Notice (provided if APL elects to accept
less than all of the Available Space, APL must accept
all space described in the Availability Notice on the
particular floor or floors accepted by APL). If APL
does not exercise its right to lease an Available Space
within such ten (10) day period, then Landlord shall be
released of its obligation to lease such Available
Space to APL and all rights of APL with respect thereto
under this Section 4.5 shall cease until the Available
Space becomes "available for lease" again at a future
date. The Acceptance Notice shall also contain APL's
determination of Fair Market Rental and market and
rental concessions for the portion of the Available
Space which APL desires.
(d) Terms and Conditions. Upon APL's election to
lease an Available Space, Landlord and APL shall
promptly enter into an amendment of this Lease, adding
such Available Space to the Premises on all the terms
and conditions set forth in this Lease as to the
Initial Premises originally demised hereunder, except
that (i) the term of the lease to APL of such Available
Space shall commence upon the later of the availability
date or the date Landlord delivers possession of the
Available Space to APL (but in no event sooner than
thirty (30) days after the date of Landlord's
Availability Notice to APL) and shall continue
coextensively with the remaining term hereof and any
extension thereof, (ii)Ecommencing on the Available
Space Rent Commencement Date (as defined below), the
Base Annual Rent payable by APL under Section 5.1 for
the Available Space shall be the fair market rent for
such space, as provided for below, (iii)Ecommencing on
the Available Space Rent Commencement Date, APL's
proportionate share payable under Sections 5.3 and 5.4
hereof with respect to such Available Space shall be
determined by dividing the rentable square footage of
such Available Space by the rentable square footage of
the Building, and (iv)EAPL shall take the Available
Space in its then "as-is" condition. The "Available
Space Rent Commencement Date" shall be the date which
is the later of (a) three (3) months after receipt of
the Acceptance Notice or (b) the date Landlord delivers
possession of the Available Space to APL, provided that
if APL commences the conduct of its business in the
Available Space prior to the Available Space Rent
Commencement Date, the Available Space Rent
Commencement Date shall be the date on which APL so
commences conduct of its business in such space.
(e)Determination of Rental. During the thirty
(30) day period following Landlord's receipt of the
Acceptance Notice, Landlord and APL shall attempt to
agree on Fair Market Rental and market rental
concessions for the subject portion of the Available
Space. If Landlord and APL are unable to agree during
such period then Fair Market Rental and market rental
concessions shall be determined pursuant to Section
4.4. For purposes of Section 4.4 the "Availability
Notice" shall be deemed the "Notice" provided APL shall
have sixty (60) days after receipt of the Availability
Notice within which to demand arbitration. The Fair
Market Rental of the portion of the Available Space
being taken shall be determined assuming the term of
the lease as to such space is the greater of (a)Ethree
(3) years or (b) the period until the next Rent
Adjustment Date. The arbitrators shall determine Fair
Market Rental, market "free rent", market tenant
improvement allowance and any other rental concessions
then being offered. The parties (or the arbitrators,
if necessary) shall first determine the Fair Market
Rental of the subject space. Then the component of the
Fair Market Rental allocable to amortization of the
fair market tenant improvement allowance (the "Fair
Market T.I. Allowance") shall be deducted from the Fair
Market Rental. Determination of this component shall
be made by the parties (or the arbitrators, if
necessary). The initial Annual Base Rent for the
subject space shall be the Fair Market Rental after
deduction of the amortization of the Fair Market T.I.
Allowance (the "Initial Annual Base Rent"). The
Initial Annual Base Rent, as agreed by the parties or
as determined by arbitration, shall be effective until
the later of (a) three (3) years after the commencement
of the Lease as to the Available Space accepted by APL
(unless this Lease is terminated or expires prior to
that date) or (b) the next rent Adjustment Date
occurring pursuant to Section 4.2. Thereafter the
Annual Base Rent for the Available Space accepted by
APL shall be the same per square foot as that
determined for the Initial Premises under Section 4.4.
The Fair Market T.I. Allowance for the portion of the
Available Space accepted by APL shall be amortized and
added to the Initial Annual Base Rent over the period
until the next rent Adjustment Date (or date of
expiration of the Lease if the applicable option to
extend is not exercised). The following are two
examples of application of this section.
Assume the date rent commences for the subject
Available Space is the eighth (8th) anniversary of the
Commencement Date and assume APL does not exercise its
next option to extend prior to commencement of APL's
obligation to pay rent as to the subject space (that
is, the Lease Term will expire on the tenth anniversary
of the Commencement Date). Assume the arbitrators
determine that Fair Market Rental (assuming a three (3)
year term) is $30.00 per square foot and that $10.00
per square foot is a Fair Market T.I. Allowance. The
Initial Annual Base Rent for the portion of the
Available Space taken by APL (until the tenth
anniversary of the Commencement Date) is $26.67 ($30.00
Fair Market Rental minus the $3.33 amortization of the
Fair Market T.I. Allowance). The $10.00 Fair Market
T.I. Allowance is then amortized over the two (2) year
term ($5.00 per year) resulting in a rental rate for
the subject space of $31.67 per square foot ($26.67
Initial Annual Base Rent plus $5.00 amortization of
Fair Market T.I. Allowance).
Assume the date rent commences for the subject
Available Space is the eighth anniversary of the
Commencement Date and assume APL exercises its next
option to extend prior to commencement of APL's
obligation to pay rent as to the subject space (that
is, the Lease Term will expire on the fifteenth
anniversary of the Commencement Date). Assume the
arbitrators determine that Fair Market Rental (assuming
a three year term) is $30.00 per square foot and that
$10.00 per square foot is a Fair Market T.I. Allowance.
The Initial Annual Base Rent for the portion of the
Available Space taken by APL (until the eleventh
anniversary of the Commencement Date) is $26.67 ($30.00
Fair Market Rental minus the $3.33 amortization of the
Fair Market T.I. Allowance). The $10.00 Fair Market
T.I. Allowance is then amortized over the two year term
($5.00 per year) resulting in a rental rate for the
subject space for the ninth and tenth years of the Term
of $31.67 per square foot ($26.67 Initial Annual Base
Rent plus $5.00 amortization of Fair Market T.I.
Allowance). The resulting rental rate for the subject
space for the eleventh year of the Term will be $26.67
per square foot (that is, the Initial Annual Base Rent
and no amortization of Fair Market T.I. Allowance).
During the twelfth through fifteenth years of the Term
the Annual Base Rent for the subject space shall be the
same as that of the Initial Premises as computed on the
tenth anniversary of the Commencement Date.
ARTICLE 5
Rent
Section 5.1. Annual Base Rent. Commencing on
December 31, 1996, Annual Base Rent for the Premises
(excluding the Mailroom and Storage Area) shall be as
follows:
Annual Base Rent
Per Square Foot
Monthly
Period of Rentable Area Annual Base Rent Installments
12/31/96 + 1997 $16.15 $3,321,441.30 $276,786.78
1998 $23.75 $4,884,472.50 $407,039.38
1999 $24.00 $4,935,888.00 $411,324.00
2000 $24.25 $4,987,303.50 $415,608.63
2001 $26.00 $5,347,212.00 $445,601.00
2002-2006 $29.00 $5,964,198.00 $497,016.50
Commencing on December 31, 1996, Annual Base Rent
for the Mailroom and Storage Area shall be:
Annual Base Rent
Per Square Foot
Monthly
Period of Rentable Area Annual Base Rent Installments
12/31/96 - 2001 $12.00 $38,988.00 $3,249.00
2002-2006 $15.00 $48,735.00 $4,061.25
Equal monthly installments of Annual Base Rent and
other sums payable as rent shall be due and payable in
advance, on the first day of each calendar month during
the Term. Monthly installments of Annual Base Rent for
any partial calendar months during the Lease Term shall
be proportionately adjusted. Annual Base Rent shall be
payable without notice or demand and except as
otherwise provided herein shall be made without any
setoff, deduction or counterclaim whatsoever.
Section 5.2. Payment. All payments of Annual
Base Rent, Increases in Building Operating Costs and
Real Property Taxes (collectively "Rent") and all other
monetary obligations which are required to be made by
APL hereunder shall be made payable to and sent to
Landlord at the office of Shorenstein Company, L.P.,
555 California Street, 14th floor, San Francisco,
California 94104, unless Landlord notifies APL of
another address for the payment of Rent.
Section 5.3. Building Operating Costs.
Commencing on January 1, 1998, APL shall pay to
Landlord, at the times hereinafter set forth, 38.298%
("APL's Share") of Increased Building Operating Costs.
"Increased Building Operating Costs" shall mean the
amount by which Building Operating Costs for a calendar
year exceed the Building Operating Costs for calendar
year 1997 (the "Base Year").
(a) "Building Operating Costs" shall mean
all reasonable costs, charges and expenses actually
incurred by Landlord in connection with operating,
maintaining, repairing, insuring and managing the
Building and Common Areas as a first class office
building, computed on an accrual basis. In the event
of any inconsistency, ambiguity or overlap between the
exclusion provisions of SectionE5.4(b) and the
inclusion provisions of Section 5.4(c) the provisions
of Section 5.4(b) shall control in determining whether
a particular cost or expense is to be excluded from or
included in Building operating Costs.
(b) Building Operating Costs shall not
include:
(i) Repairs or other work occasioned by
fire, windstorm or other cause to the extent Landlord
is reimbursed by insurance, condemnation or other
proceeds.
(ii) Leasing commissions and fees,
attorneys' fees, costs and disbursements and other
expenses incurred in connection with negotiations or
disputes with present or prospective tenants or other
occupants or associated with the enforcement of any
leases or the defense of Landlord's title to or
interest in the Building or any part thereof.
(iii) Costs (including permit,
license and inspection fees) incurred in renovating or
otherwise improving or decorating, painting or
redecorating space for tenants or other occupants of
vacant space.
(iv) Costs of any services (including
utilities) sold or provided tenants or other occupants
for which Landlord is entitled to be reimbursed by such
tenants or other occupants as an additional charge or
rental over and above the basic rental and escalations
payable under the lease with such tenant or other
occupant.
(v) Depreciation and amortization not
expressly permitted under the provisions of Section
5.4(c).
(vi) Costs of a capital nature,
including, without limitation, capital improvements,
capital repairs, capital equipment, and capital tools,
all as determined in accordance with generally accepted
accounting principles, consistently applied, provided,
however, Landlord may include costs of capital
improvements, equipment or devices installed in order
to effect a labor saving, energy saving or other
economy, amortized over the useful life of such
improvement, equipment or device, but in no event may
the amount included in Building operating costs in any
year exceed the actual economies or savings realized
during such year. Amortization of such permitted
capital items may include interest on the unamortized
balance at ten percent (10%) per annum.
(vii) Expenses in connection with
services or other benefits of a type which are not
provided to APL, but which are provided to another
tenant or occupant.
(viii) Costs incurred due to
violation by Landlord or any tenant of the terms and
conditions of any lease.
(ix) Overhead and profit increment paid
to Landlord, its partners or their subsidiaries or
affiliates for management or other services on or to
the Building or for supplies or other materials to the
extent that the costs of such services, supplies or
materials exceed the costs that would have been paid
had the services, supplies or materials been provided
by unaffiliated parties on a competitive basis.
Notwithstanding anything in this Section 5.3 to the
contrary, during the Initial Term for the purposes of
determining APL's Share of Increases in Building
Operating Costs, APL's Share of the aggregate of all
management and related fees (collectively "Management
Fees") for any calendar year shall not exceed two and
one-half percent (2.5%) of APL's Annual Base Rent for
the same calendar year. The two and one half percent
(2.5%) shall be increased by the CPI-U Index (as
defined in Section 17.2) on each January 1, using
January 1, 1991 as the beginning Index. In no event
shall APL's Share of Management Fees at any time during
the Term exceed the amounts then being paid by other
major anchor tenants with "gross" leases in comparable
first class buildings in the San Francisco-Oakland
area. The amount of the Management Fees shall be
adjusted on each Adjustment Date during the Term to the
amounts then being paid by other major anchor tenants
with "gross" leases in comparable first class buildings
in the San Francisco/Oakland area. If at least three
(3) comparable "gross" leases are not then available
then the available "net" leases and comparable "net"
leases shall be used for purposes of this limitation.
(x) Interest on debt or amortization
payments on any mortgages or deeds of trust or rental
payments under any ground or other similar underlying
lease or leases.
(xi) Landlord's general overhead and
general administrative expenses including, without
limitation, entertainment, relocation, hiring and
training.
(xii) Any compensation paid to
clerks, attendants or other persons in commercial
concessions, if any, operated by Landlord.
(xiii) Rentals and other related
expenses incurred in leasing air conditioning systems,
elevators or other equipment ordinarily considered to
be of a capital nature, except equipment which is used
in providing janitorial services and which is not
affixed to the Building.
(xiv) All items and services for
which APL reimburses Landlord or pays third persons or
which Landlord provides selectively to one or more
tenants or occupants of the Building (other than APL)
without reimbursement.
(xv) Advertising, marketing and
promotional expenditures.
(xvi) Any costs, fines or penalties
incurred due to violations by Landlord of any
governmental rule or authority and any penalties and
interest on late payment of taxes, mortgages, ground
leases, equipment leasing or other financing.
(xvii) Cost of acquisition of and
extraordinary security for any art work.
(xviii) Cost of the initial
development and construction of the Building and common
Areas and the cost of any "punch list" or similar
corrective work with respect thereto and the cost of
repairing defects therein in order to obtain full and
final completion of the Building and Common Areas, the
cost of any work required in order to rectify design
and/or construction defects and bring the Building and
Common Areas into compliance with governmental code or
law requirements applicable to the work in' order to
obtain certificates of occupancy for APL to occupy the
Premises.
(xix) Costs of installing, operating
and maintaining the garage facilities and any specialty
services, such as an observatory, broadcasting
facilities, luncheon club and athletic or recreational
club.
(xx) Unless required by applicable
California or local law, statute, rule, regulation or
ordinance insurance premiums or other costs for
earthquake insurance .
(xxi) Professional fees not directly
attributable to the Building.
(xxii) Salaries of leasing agents,
promotional directors, executives of Landlord or its
partners, building management employees, all off-site
personnel and executives and all management personnel
above the level of senior on-site property manager and
senior on-site engineer. These exclusions shall
include, without limitation, pension plans, fringe
benefits, medical insurance, life and disability
insurance, welfare benefits, union contributions,
payroll taxes and other related expenses in connection
with such excluded agents, directors, executives and
employees.
(xxiii) Traffic and other studies or
reports required in connection with initial
construction or any subsequent alteration or
modification of the Building, Common Areas or City
Center.
(xxiv) Contributions of any kind,
including, without limitation, contributions to local
civic organizations, museums, charities and political
candidates or organizations.
(xxv) Amounts owed by Landlord to
other tenants.
(xxvi) Expenses incurred in removing,
storing or disposing of the personal property,
fixtures, equipment of improvements of former tenants
or occupants of the Building.
(xxvii) Construction, remodelling,
alterations or additions of or to the Building and/or
the Common Areas; and any and all costs, taxes, fees
and other impositions by public authorities (including,
without limitation, impositions for infrastructure,
housing, schools and parks) associated with the
increase or expansion of the size of the Building or
City Center by adding additional land, buildings and/or
other structures.
(c) Building Operating Costs shall include
by way of example:
(i) Costs of providing rubbish and
waste pickup and disposal.
(ii) Costs of janitorial services and
window cleaning (including materials, supplies,
Building standard light bulbs and ballasts, equipment
and tools therefor), and rental and depreciation costs
related to any of the foregoing or contracts with third
parties to provide same.
(iii) costs in providing customary
and usual security for the Building consistent with the
requirements hereof, but excluding extraordinary
security costs such as crowd control.
(iv) Insurance premiums for insurance
required or permitted hereunder, including, without
limitation, rental interruption insurance and other
types of insurance coverage then being maintained by
prudent owners of comparable first class office
buildings in the San Francisco/Oakland metropolitan
area, provided such insurance coverage is available at
commercially reasonable rates, in amounts and with
deductible amounts consistent with those maintained by
owners of similar office buildings in Oakland,
California, the costs of which may include a reasonable
and appropriate allocation of a portion of the premium
of a blanket insurance policy maintained by Landlord if
such allocated amount is less than the premium for a
separate policy of insurance.
(v) Costs of electricity, water, sewer,
and other utilities used in connection with the
operation of the Building and Common Areas.
(vi) Costs of operation, maintenance,
and repair (excluding items which are considered
capital in nature under generally accepted accounting
principles) of the Building, including, without
limitation, heat, ventilation and air conditioning
systems, fire prevention sprinkler systems, elevators,
escalators and all other mechanical or electrical
systems serving the Building and service agreements for
all such systems and equipment;
(vii) License, permit and inspection
fees relating directly to operation of the Building;
(viii) Non-capital costs of
compliance with fire, safety or other governmental
rules, regulations, laws, statutes, ordinances or
requirements imposed by any governmental authority with
respect to the Building.
(ix) Wages, salaries, employee benefits
and taxes (or an allocation of the foregoing) for on-
site personnel working full or part time in connection
with the operation, maintenance or management of the
Building and the Common Areas.
(x) Administrative and management fees
for the Building, subject to the limitations contained
in Section 5.4(b)(ix).
(xi) Costs of indoor and outdoor
landscaping (including, without limitation, planting,
replacing and replanting of flowers and bushes, and the
maintenance thereof).
(xii) Subject to APL's prior written
approval, which approval may be withheld in its sole
discretion, expenses and fees (including attorneys'
fees) reasonably incurred contesting the validity or
applicability of any governmental enactments which may
affect Building Operating Costs.
(xiii) Personal property taxes levied
and assessed against personal property in Common Areas
used exclusively in the operation, maintenance and
repair of the Common Areas.
(d) There shall be deducted from Building
operating Costs the following:
(i) Net recoveries received by Landlord
from tenants as a result of any act, omission, default
or negligence of such tenants or by reason of a breach
by such tenants of the provisions of their respective
leases that reduce the expenses incurred by Landlord in
operating, repairing, and maintaining the Building and
the Common Areas to the extent such amounts were
previously included in Building Operating Costs.
(ii) Net proceeds received by Landlord
as contributions toward Building Operating Costs for
use of Common Areas by shows and promotions, displays,
kiosks, lockers, advertising, temporary tenants, and
licensees.
(iii) Net proceeds received by
Landlord under any insurance policy issued to Landlord
provided that the claim is related to the operation,
maintenance, repair and management of the Building and
Common Areas to the extent that such amount of proceeds
were previously included as Building Operating Costs.
(iv) Net amounts received from a
manufacturer or builder or a warranty claim to the
extent such amounts were previously included in
Building Operating Costs.
(e) Adjustment for Occupancy Factor.
Notwithstanding any other provision herein to the
contrary, in the event the Building is not fully
occupied during the Base Year or any year of the term
of this Lease, an adjustment shall be made by Landlord
in computing Building Operating Costs for such year so
that the Building Operating Costs shall be computed for
such year as though the Building had been fully
occupied during such year. To accomplish the
foregoing, all variable components of Building
Operating Costs for such calendar year (e.g.,
janitorial service, utilities, mechanical maintenance,
but excluding expenses which do not vary with occupancy
levels such as insurance and elevator maintenance)
shall be "grossed-up", employing sound accounting and
property management principles, to the amount such
variable components would have been if the Building had
been fully occupied during the entire calendar year and
the adjusted amount of the variable components shall be
used in determining Building Operating Costs for such
calendar year.
(f) Notice and Payment. During December of
each calendar year (commencing with calendar year 1997)
or as soon after December as practicable, Landlord
shall give APL written notice of Landlord's reasonable
estimate of APL'S Share of Increased Building Operating
Costs (commencing with calendar year 1998) for the
following year. On or before the first day of each
month during the ensuing calendar year, APL shall pay
to Landlord one-twelfth (1/12th) of such estimated sum;
provided, that if such notice is not given in December
of any calendar year, APL shall continue to pay on the
basis of the prior year's estimate until the month
after such notice is given, at which time APL shall pay
any difference due for the period from the beginning of
such calendar year until the date of the notice. If at
any time it appears in Landlord's reasonable judgment
that the sum so estimated for the current calendar year
will vary from actual Increased Building Operating
Costs, Landlord may, by written notice to APL, revise
its estimate for such year, and subsequent payments by
APL for such year shall be based upon such revised
estimate.
(g) Annual Statements. Within one hundred
twenty (120) days after the end of each calendar year,
Landlord shall deliver to APL a detailed statement of
each item of Building Operating Costs or Increased
Building Operating Costs payable for such calendar
year, in each instance prepared and certified by an
independent certified public accountant reasonably
acceptable to APL. The cost of preparation and
certification by the independent certified public
accountant shall be included in Building Operating
Costs. If such statement for any calendar year shows
an amount owing by APL that is less than the estimated
payments for such calendar year previously made by APL,
it shall be accompanied by a refund of the excess by
Landlord to APL. If such statement shows an amount
owing by APL that is more than the estimated payments
for such calendar year previously made by APL, APL
shall pay the deficiency to Landlord within thirty (30)
days after delivery of such statement. If the Term has
expired prior to the final determination of APL's share
of any item of Increased Building Operating Costs, APL
shall, within thirty (30) days of receipt of Landlord's
invoice, pay any increase due over the estimated sums
paid by APL and, conversely, any overpayment by APL
shall be immediately refunded by Landlord to APL. At
any time during the Term, and within two (2) years
after expiration of the Term, APL shall be entitled,
upon five (5) days prior written notice and during
normal business hours at Landlord's office in the
Building to inspect and examine those books and records
of Landlord relating to the determination of any item
of Building Operating Cost or Real Property Taxes. All
books and records of Landlord relating to Building
Operating Costs shall be maintained in accordance with
generally accepted accounting principles, consistently
applied. If, after inspection and examination of such
books and records, APL disputes the amounts of Building
Operating Costs, Increased Building Operating Costs
and/or Real Property Taxes charged by Landlord, APL
may, by written notice to Landlord, request an
independent audit of such books and records. APL may
withhold payment of the disputed amount of any cost
disputed by APL in good faith. Any sum determined to
be payable to the other party shall bear interest from
the date paid or due, as applicable, at the Default
Rate. The independent audit of the books and records
shall be conducted by a certified public accountant
designated by APL and reasonably acceptable to
Landlord. If, within thirty (30) days after Landlord's
receipt of APL's notice requesting an audit, Landlord
and APL are unable to agree on the certified public
accountant to conduct such audit, then APL may
designate a "Big Six" accounting firm not then employed
by Landlord or APL to conduct such audit. The audit
shall be limited to the determination of the amount of
any or all items of Building Operating Costs, Increased
Building Operating Costs and Real Property Taxes for
the subject calendar year. If the audit discloses that
any item of Building Operating Costs or Real Property
Taxes included in the computation of Increases in
Building Operating Costs or Real Property Taxes billed
to APL was incorrect, the appropriate party shall pay
to the other party the deficiency or overpayment, as
applicable. All costs and expenses of the audit shall
be paid by APL unless the audit shows that Landlord
overstated in the aggregate Building Operating Costs,
Increased Building Operating Costs and/or Real Property
Taxes for the subject calendar year by more than three
percent (3%), in which case Landlord shall pay all
costs and expenses of the audit.
(h) Confirmation of Occupancy Factor. If
APL believes that the adjustments to Building Operating
Expenses made pursuant to Subsection 5.3(e) above may
have been based on incorrect occupancy data, APL shall
so notify Landlord in writing and within thirty (30)
days of such notice Landlord shall deliver to APL a
copy of Landlord's rent roll report covering the
preceding calendar year, which rent roll report shall
show the following: the name and suite number of each
tenant in the Building; the usable and rentable square
footage of each tenant's premises in the Building; and,
the commencement and expiration dates (if within the
Term, including all unexercised extension options), and
the actual occupancy date of each such tenant's lease.
The contents of the rent roll report shall be kept
confidential by APL. If Landlord does not provide APL
with a copy of such rent roll report, then during the
period beginning with the date that Landlord is
obligated to deliver the rent roll report to APL and
ending on the date that Landlord actually delivers same
to APL, APL shall have the right to withhold payment of
the disputed portion of the monthly payments otherwise
payable pursuant hereto, provided, that upon delivering
the rent roll report to APL, APL shall pay to Landlord
all of the previously withheld monthly payments,
subject to APL's rights hereunder.
Section 5.4. Taxes
(a) APL shall pay-before delinquency all
taxes, assessments, license fees, and other charges
that are levied and assessed on APL's personal property
located in the Premises. Within ten (10) business days
after Landlord's request, APL shall furnish Landlord
with satisfactory evidence of these payments. APL
shall comply with the provisions of any law, ordinance
or rule of the taxing authorities which requires APL to
file a report of APL's personal property located in the
Premises. If any such taxes are levied against the
Building, or if the assessed value of the Building is
increased by the inclusion of a value placed on APL's
personal property and if Landlord pays such taxes then
APL and Landlord shall equitably allocate the amounts
paid by Landlord and APL, within ten (10) business days
after receipt of request therefor, shall reimburse
Landlord for the sum of the taxes levied against
Landlord, or the portion of the taxes resulting from
the increase in Landlord's assessment. In the event of
any dispute regarding equitable allocation of such
taxes the dispute shall be resolved in the manner
provided in Section 2.6 of the Original Lease.
(b) Commencing on January 1, 1998, APL shall
pay to Landlord, in the manner and at the times set
forth in this section, 38.484% ("APL's Tax Share") of
Increased Real Property Taxes. "Increased Real
Property Taxes" shall mean the amount by which Real
Property Taxes for a calendar year exceed Real Property
Taxes for the Base Year.
(i) "Real Property Taxes" shall mean
all taxes, assessments, and other governmental charges,
general and special, ordinary and extraordinary, of
every kind and nature whatsoever, including, without
limitation, assessments for public improvements or
benefits, which shall during the Term be levied,
assessed and imposed upon the Building, Tenant
Improvements and the APL Parcel. Real Property Taxes
shall also include, without limitation, any tax, fee or
excise levied, assessed and/or based on the square
footage of premises in the Building, on the act of
entering into leases for premises in the Building, on
the occupancy by tenants of space in the Building, and
any other tax, fee or excise however described, in
substitution for any charge, tax, levy, fee or
assessment (or any increase thereof) included in this
definition of Real Property Taxes, including, without
limitation, taxes levied on property used in the
operation of the Building; and the cost to Landlord of
reasonably contesting the amount, validity or
applicability of the taxes and charges defined herein
as Real Property Taxes. Landlord shall credit against
Real Property Taxes any refunds received as a result of
tax contests, after deduction of Landlord's costs in
connection with the same. Real Property Taxes shall
not include the following: any municipal, county, state
or federal income, corporate, estate, transfer or
franchise taxes; capital gains taxes; impositions or
penalties arising from Landlord's failure to comply
with any governmental laws, ordinances, or directives;
personal property taxes on the furniture, equipment,
fixtures and other personal property or tenant
improvements of Landlord, APL or any other tenant in
the Building; real property taxes assessed against any
tenant improvements constructed for or by other tenants
or occupants of the Building, any tax on oil, gas, and
mineral rights; inheritance taxes, business, license,
and/or income taxes based on rents or gross receipts;
and taxes personally owed by Landlord. With respect to
assessments which may be levied against or upon the
Building, Tenant Improvements and APL Parcel and which
under the laws then in force may be evidenced by
improvement or other bonds, or may be paid in annual
installments, there shall be included within Real
Property Taxes for any fiscal tax year only the current
annual installment for such year. With regard to
"changes in ownership" occurring during the Term, if
all or a portion of the Premises is not reassessed,
then no increase in Real Property Taxes associated with
such "change in ownership" of the Building shall be
included in Real Property Taxes payable by APL
hereunder. In addition if a "change of ownership"
occurs during the Initial Term and if all or a portion
of the Premises is reassessed then for the balance of
the Initial Term, only one-half of any increases in
Real Property Taxes resulting from the first such
"change in ownership" occurring after Landlord's
acquisition of the Building and the APL Parcel shall be
included in Real Property Taxes. If a "change in
ownership" of APL's leasehold estate created by this
Lease occurs during the Initial Term, then APL shall
pay one-half (1/2) of any increases in Real Property
Taxes resulting from such "change in ownership" of the
leasehold estate and one-half (1/2) of any increases in
Real Property Taxes resulting from such "change in
ownership" of APL's leasehold estate shall be included
in Real Property Taxes. After the Initial Term all
increases in Real Property Taxes resulting from a
"change in ownership" (including, without limitation, a
"change in ownership" of APL's leasehold estate or
Landlord's fee interest) whenever occurring shall be
included in Real Property Taxes. For purposes of this
Lease, "changes in ownership" has the same definition
as in California Revenue and Taxation Code Sections 60-
62, inclusive, or any amendments or successor statutes
to those sections.
(ii) APL's Tax Share of Increased Real
Property Taxes (commencing with calendar year 1998)
shall be as set forth in Section 5.3 above.
(iii) APL shall pay to Landlord ten
(10) days prior to delinquency of the applicable tax
bill an amount equal to APL's Tax Share of Increased
Real Property Taxes (commencing in calendar year 1998).
(iv) APL's liability to pay its share of
Increased Real Property Taxes shall be prorated on the
basis of a 365-day year to account for any fractional
portion of a tax fiscal year included in the Term at
its expiration.
(v) If, for any reason other than the
default of APL, this Lease shall terminate on a day
other than the last day of the calendar year, the
additional sums due in connection with the Increased
Real Property Taxes from APL applicable to the calendar
year in which such termination shall occur shall be
prorated according to the ratio that the number of days
from the commencement of such calendar year to and
including such termination date bears to 365.
Section 5.5. Interest Any Rent and other
monetary obligations due hereunder not paid when due
shall bear interest from the date of receipt of the
notice until paid at the then discount rate of interest
charged by the Federal Reserve Bank of San Francisco
plus five percent (5%) (the "Default Rate").
Notwithstanding the foregoing, APL shall be forgiven
from such interest obligation upon the first occurrence
during any twelve (12) consecutive month period
provided that such interest obligation shall in any
case commence three (3) days after receipt by APL of
notice of failure to pay.
ARTICLE 6
Use of Premises
APL shall be permitted to use the Premises for
marketing, sales and service, general office, data
processing, training, administrative, storage and
related uses and for any other use which is consistent
with the uses then prevalent in other office buildings
located in the APL Block and the Balance of the City
Center (in each case, a "Permitted Use"), in compliance
with applicable law. Permitted Use shall also include
uses in the lower elevator bank which are an incidental
benefit to and primarily made available to APL
personnel, including, without limitation, restaurant,
health care and recreational uses. Use of the Premises
for any use other than a Permitted Use shall be subject
to the prior written approval of Landlord, which
approval shall not be unreasonably withheld or delayed.
Landlord warrants to APL that use of the Premises for
the specific purposes in the first sentence of this
Article is permitted by all applicable zoning codes.
APL, at its sole cost and expense, shall comply with
all laws, statutes, ordinances, regulations and
requirements now enforced or hereafter enacted relating
to or affecting condition, use or occupancy of the
Premises; provided, however, APL shall have no
obligation to bear the cost and expense of compliance
with such laws, statutes, ordinances, regulations and
requirements unless required as a result of a
particular or unique use of the Premises by APL other
than as general office, and related uses such as
marketing, sales and service, data processing,
training, administrative and storage. APL shall not
permit anything to be done on the Premises or keep or
permit anything to be kept in the Premises which will
void the coverage of any insurance upon the Building or
any of its contents; provided, however, APL shall have
no liability or obligations hereunder with respect to
the voiding of such insurance if such voiding of the
insurance results from any Permitted Use of the
Premises by APL.
ARTICLE 7
Signs and Building Directory
Section 7.1. At all times following the
execution of this Lease and during the Term, but only
so long as APL or an affiliated company (as defined by
SectionE17.2) or successor to APL by merger,
consolidation or reorganization leases One Hundred
Twenty-Five Thousand (125,000) or more square feet of
Rentable Area in the Building, the Building shall be
known as the "APL Limited Building" or such other name
as APL reasonably desires which designates one or more
of its businesses. APL shall be entitled to construct,
maintain, repair and replace the following signs on and
about the Building and the Common Areas: a sign on the
ground level exterior of the Premises on the facade of
the Building and over the Broadway main entrance, and a
monument sign in the Common Areas. The following shall
apply with respect to this Section:
(a) All signs shall contain the name of APL,
APL's logo, and/or any other insignia generally used by
APL and shall be of such sizes, colors and materials
and in locations reasonably determined by APL subject
to Landlord's reasonable approval;
(b) All signs shall be professionally
prepared and of good quality and condition; and
(c) The signs shall comply with all
applicable governmental statues, laws, regulations and
ordinances.
Section 7.2. At the expiration or earlier
termination of the Term, Landlord, at APL's expense,
may remove any displays of APL's name, logo or other
insignia and restore the areas on which they were
located. At the request of APL at any time during or
after the Term, Landlord shall rename the Building to
eliminate any identification with APL. APL's rights
under Section 7.1 are personal to APL and to any
affiliated company or successor to APL by merger,
consolidation, or reorganization and to any parent,
affiliate or subsidiary of APL.
Section 7.3. Landlord shall, at Landlord's expense
(which shall be an element of Building Operating
Costs), maintain a Building directory at a location
reasonably acceptable to APL, and shall furnish APL
with its proportionate share of such directory (based
on Rentable Area contained in the Premises and the
Building) but in no event less than twenty (20) lines.
Section 7.4. Landlord shall have no right
whatsoever to use the name, logo or other insignia of
APL without the prior written consent of APL, which
consent may be withheld by APL in its sole and absolute
discretion. The preceding prohibition shall not apply
to photographs or depictions of the Building which
contain APL's signs or factual statements to the effect
that APL leases the Premises.
ARTICLE 8
Insurance
Section 8.1. APL's Insurance .1. APL's
Insurance;. APL shall maintain, throughout the Term, a
policy or policies of worker's compensation insurance
in an amount not less than the statutorily prescribed
limits and comprehensive general liability insurance,
naming Landlord as an additional insured, insuring
against all claims in connection with APL's use or
occupancy of the Premises or its activities in, on or
about the Premises. Such policy shall have a minimum
combined single limit of coverage of Five Million
Dollars ($5,000,000) for bodily injury and property
damage. The comprehensive general liability insurance
shall specifically include the liability assumed
hereunder by APL; provided, however, that the amount of
such insurance shall not be construed to limit the
liability of APL hereunder. APL shall also maintain,
throughout the Term, a policy or policies of fire and
extended coverage insurance covering damage to the
Tenant Improvements and any alterations, additions or
other improvements made to the Premises by or at the
direction of APL in the amount of at least eighty
percent (80%) of the full replacement value. APL shall
furnish Landlord, upon written demand therefor at
reasonable intervals a certificate evidencing such
insurance.
Section 8.2. Landlord's Insurance. Landlord
shall maintain, throughout the Term, a policy or
policies of insurance covering damage to the Premises
and the Building, excluding APL's personal property,
the Tenant Improvements and any other tenant
improvements in the Building, in the amount of at least
eighty percent (80%) of the full replacement value
thereof, excluding excavations, foundations and
footings, providing protection against all perils
included within the classification of "all risk"
coverage. Landlord may, at its election, maintain
rental interruption insurance in an amount customary
for similar first class office buildings, the premium
cost of which shall be included in Building Operating
Costs. All policies maintained by Landlord shall
provide for deductibles in amounts customary for
similar first-class office buildings in the vicinity of
the Building. In addition, Landlord shall maintain
during the Term comprehensive general liability
insurance, with a minimum combined single limit of
coverage of not less than Five Million Dollars
($5,000,000). Landlord may maintain such other
insurance in such amounts (excluding earthquake
insurance) as other owners of similar first class
office buildings in the San Francisco/Oakland area are
then maintaining provided such insurance coverage is
available at commercially reasonable rates. All
liability insurance maintained by Landlord shall
specifically include the liability assumed hereunder by
Landlord (provided, however, that the amount of such
insurance shall not be construed to limit the liability
of Landlord hereunder) and shall provide that it is
primary insurance and not "excess over" or contributory
with any other valid, existing and applicable insurance
in force for or on behalf of APL. The policies
required of APL and Landlord shall not eliminate cross-
liability and shall contain a severability of interest
clause. Notwithstanding the foregoing, APL shall have
the right at any time during the Term when APL leases
ninety percent (90%) or more of the Rentable Area of
the Building upon not less than sixty (60) days advance
written notice to Landlord to undertake and maintain
any or all of the insurance policies required of
Landlord hereunder. If APL elects to maintain any
policy required of Landlord hereunder, APL shall be
entitled to reimbursement of the cost of that portion
insurance not allocable to the Premises. Landlord's
payment of its proportionate share of such insurance
premiums shall be made in the same manner as payment of
Building Operating Costs by APL. Any installments of
reimbursement of such insurance premiums shall be made
in the same manner as payment of Building Operating
Costs by APL. Any installments of reimbursement of
such insurance premiums not received when due shall
bear interest from the date due until paid at the
Default Rate
Section 8.3. Miscellaneous. All insurance
policies to be maintained by either party hereunder
shall:
(a) be issued by insurance companies, with a
general policyholder's rating of not less than A XIII
in the most currently available Best's Insurance
Reports and are licensed to do business in the State of
California or shall be one of the recognized London,
England insurance companies; and
(b) provide that such insurance shall not be
cancelled nor shall there be any material change in the
scope or amount of coverage of such policy, unless
thirty (30) days' prior written notice shall have been
given to the other party hereunder.
Section 8.4. Certificates. All policy or
policies of insurance to be obtained by either party or
certificates thereof shall be delivered to the other
party prior to or promptly upon the commencement of the
Term and upon each renewal of such insurance.
Section 8.5. Waiver of Subrogation. Landlord
and APL hereby mutually waive their respective rights
of recovery against each other for any loss of, or
damage to, either party or its property, to the extent
that such loss or damage is insured by an insurance
policy required to be in effect at the time of such
loss or damage or in the case of self-insurance to the
extent it would have been covered by such a policy in
the absence of self insurance. Each party shall obtain
any special endorsements, if required by its insurer,
whereby the insurer waives its rights of subrogation
against the other party hereto. The provisions of this
Section 8.5 shall not, however, apply in those
instances in which waiver of subrogation would cause
either party's insurance coverage to be voided or
otherwise made uncollectible.
Section 8.6. Blanket Policies and Self-
Insurance. Notwithstanding anything to the contrary
contained in this Article 8, a party's obligations to
carry the insurance provided herein may be brought
within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by the
party; provided, however, that the other party shall be
named as an additional insured thereunder as its
interest may appear and that the coverage afforded the
other party will not be reduced or diminished by reason
of such blanket policy of insurance (with an
endorsement to that effect provided to such other
party), and provided further that the requirements set
forth herein are otherwise satisfied. APL may elect to
self-insure with respect to any of its insurance
obligations hereunder and Landlord may elect to self-
insure any of its liability insurance obligations
hereunder; provided, however, that such right to self-
insure shall have no limits so long as the self-
insuring party maintains a net worth of Five Hundred
Million Dollars ($500,000,000.00) as determined in
accordance with generally accepted accounting
principles. If either party's net worth falls below
Five Hundred Million Dollars ($500,000,000.00) then
such party's self insurance limit, when aggregated with
all other self-insurance obligations then undertaken by
such party, shall be five percent (5%) of its then net
worth. The self insuring party shall give the other
party not less than thirty (30) days notice of its
election to self insure.
ARTICLE 9
Indemnification
Section 9.1. APL APL shall hold Landlord
harmless from, and indemnify and defend Landlord
against, any and all claims or liability for any injury
or damage to any person or property whatsoever
occurring in, on or about the Premises, the Building,
or the Common Areas, to the extent that such injury or
damage is caused by the negligence or willful
misconduct of APL, its agents, employees or licensees.
Section 9.2. Landlord Landlord shall hold APL
harmless from, and indemnify and defend APL against,
any and all claims or liability for any injury or
damage to any person or property whatsoever occurring
in, on or about the Premises, the Building or the
Common Areas, to the extent that such injury or damage
is caused by the negligence or willful misconduct of
Landlord, its agents, employees or invitees.
Section 9.3. Mechanics' Liens Each party
shall indemnify, defend and hold the other party
harmless from and against any liens or encumbrances
affecting the APL Parcel, Building or Premises arising
out of any work performed or materials furnished by or
for the indemnifying party
ARTICLE 10
Utilities and Services
Section 10.1. Basic Utilities and Services.
Landlord shall furnish to the Premises during APL's
hours of operation all utilities, maintenance and
similar services then customarily supplied to major
anchor tenants of other first class office buildings in
amounts sufficient for the comfortable use and
occupancy of the Premises, as reasonably determined by
APL, including, without limitation: (a)Ewater,
electricity, and heating, ventilating and air
conditioning; (b) high quality lighting levels,
including fluorescent tube replacement and ballast
repair; (c)Etrash collection service; (d) elevator
service satisfying the elevator performance
specifications attached hereto as Exhibit "E" and
incorporated herein by reference; and (e) window
washing. Heating, ventilating and air conditioning
shall be provided to the Premises on Mondays through
Fridays between 7:00 a.m. and 6:00 p.m. in amounts
sufficient for the comfortable use and occupancy of the
Premises, as reasonably determined by APL. Hot and
cold water shall be provided twenty-four (24) hours per
day in all lavatories and through all fixtures and
pipes within the Premises. With APL's prior written
consent, which consent may be withheld by APL in its
sole discretion, Landlord may provide only tepid water
in the lavatories. Landlord shall provide repair and
maintenance of all Common Areas to a standard and in a
manner consistent with the maintenance and repair of
Common Areas of other comparable first class office
buildings. Landlord shall promptly replace, as
necessary, all Building Standard light bulbs,
florescent tubes and ballasts in the Premises.
Elevator service shall be supplied on a twenty-four
(24) hour per day basis. If utilities or services in
excess of those specified above are requested by APL,
in writing, APL shall reimburse Landlord for the actual
direct costs of providing such additional services
within thirty (30) days of receipt for any invoice
therefor. Reimbursement not timely made shall bear
interest at the Default Rate from the date due until
paid.
Section 10.2. Electricity. Landlord shall
operate and maintain in good and operable condition the
electrical systems servicing the Premises as of
commencement of the term of this Lease, which shall
have a capacity of 3 watts per square foot of Rentable
Area for lighting and 2.5 watts per square foot of
Rentable Area for standard electrical. APL may use any
and all equipment, machinery or devices in the Premises
which it desires provided such use does not exceed the
capacity of the feeders, conductors, risers and wiring
and other components of the electrical system in or to
the Premises existing in the Premises as of the
commencement date of this Lease (provided that Landlord
has maintained such system in a good and operable
condition). If APL's electrical requirements exceed
the capacity of the existing feeders, conductors,
risers, wiring and other components of the electrical
system and provided that Landlord has properly
maintained the electrical systems existing in the
Premises as of the commencement date of this Lease,
then APL shall have the right, at APL's expense, to
require Landlord to increase the capacity of the
subject feeders, conductors, risers, wiring and other
components of the electrical system so as to
accommodate the increased electrical requirements of
APL.
Section 10.3. Interruption. Rent shall be
equitably abated, if Landlord, for any reason
whatsoever (including Force Majeure), is unable to
supply any of the Building's sanitary, electrical,
heating, air-conditioning, water or other systems
serving the Premises for a period in excess of twenty-
four (24) hours, unless the damage or defective
condition relating to such systems is solely caused by
the negligence or willful misconduct of APL, its
employees, licensees or invitees. Such abatement shall
reflect the extent to which such unavailability
materially disrupts APL's normal business operations on
the Premises. Abatement of Rent shall be determined on
a floor by floor basis if the disruption affects less
than the entire Premises. In the event of any stoppage
or interruption of services, Landlord shall use all
deliberate speed in restoring such services as soon as
possible; APL, however, shall have the right, at its
option, to terminate this Lease if any such stoppage or
interruption of such services affects more than twenty-
five percent (25%) of the Rentable Area of the Premises
and continues for any reason (including Force Majeure)
for more than seventy-five (75) consecutive days and
materially disrupts, as reasonably determined by APL,
APL's normal business operations in the Premises.
Section 10.4. Janitorial Services. Landlord
shall provide the Premises and the Common Areas with
janitorial services in accordance with the janitorial
services attached hereto as Exhibit "F" and
incorporated herein by reference. Landlord shall cause
all exterior windows of the Building to be cleaned not
less often than once during every calendar quarter
during the Term.
Section 10.5.. Landlord shall provide the
security services more particularly described on
Exhibit "G" attached hereto and incorporated herein by
reference, which security services shall be increased
and modified from time to time so that the security
services in effect in the Building at any time shall
not be less than those then maintained by other first-
class office buildings in Oakland, California. APL
shall have the right, at its cost, to establish its own
procedures in the lobby area of the Building and on any
floor occupied by APL in order to maintain and protect
the internal security of the Premises in accordance
with APL's needs. At its election, APL may require
that Landlord provide such additional security at APL's
sole cost and expense. Further, APL shall have the
right, in its sole discretion, to install additional
security devices for the Premises, including, without
limitation, 24-hour monitored heat and smoke sensors
throughout the Premises, a "group alert" system capable
of notifying APL's personnel of any emergencies, and a
security monitoring system on all stairwell doors. APL
shall be responsible, at its own cost and expense, for
all security personnel needed to operate its additional
security devices.
ARTICLE 11
Alterations and Build Out of Expansion Spaces
Section 11.1. Alterations and Expansion Space.
APL shall not make any alterations to the structural
portions of the Building or to mechanical or utility
systems without Landlord's consent, which consent shall
not be unreasonably withheld or delayed. APL may make
alterations to the Premises (including Expansion Space)
not affecting structural portions or mechanical or
utility systems of the Building without Landlord's
consent, if the cost of such alterations does not
exceed Fifty Thousand Dollars ($50,000.00). Such
Alterations, the cost of which exceeds Fifty Thousand
Dollars ($50,000.00), shall be subject to Landlord's
consent, which consent shall not be unreasonably
withheld or delayed. APL shall not permit any
mechanics' or materialmen's liens or other liens to
stand against the Premises, the Building or the APL
Parcel for any labor or material furnished APL in
connection with work of any character performed on the
Premises by or at the direction of APL; and Landlord
shall not permit any such liens for work or material
furnished by Landlord to be placed against the
Premises, the Building or the APL Parcel. Either party
shall have the right to remove any lien by posting of
the applicable statutorily prescribed lien release
bond. Liens must be bonded after request by the other
party, within ninety (90) days of recordation of the
lien, unless bonding is required within a shorter
period in order to facilitate the closing of any
pending financing transaction. Landlord and APL shall
each have the right to contest the validity or amount
of any such lien, but upon the final determination of
such contest shall immediately pay any judgment
rendered with all proper costs and charges and shall
have the lien released at the contestant's own expense.
Before the commencement of any substantial repairs,
alterations, additions, replacements or restorations in
and about the Premises (including the Expansion Space)
by or at the direction of APL, APL shall give to
Landlord notice thereof, specifying the nature and
location of the intended work and the expected date of
commencement thereof.
Section 11.2. Landlord Repair or Alterations.
With respect to any permitted repairs or alterations
made by Landlord within the Premises, Landlord shall
not install pipes, ducts or conduits except in
concealed areas, including concealed areas above the
finished ceiling line, and the installation of the same
shall not in any way alter or affect the size or
character of the Premises or APL's ability to utilize
the same for the conduct of its business. Landlord
shall have the right to make such changes to the
Building as may be necessary or desirable for the
efficient operation of the Building, provided, however
that (except as elsewhere provided) Landlord shall make
no changes of any kind to the Building without the
prior written consent of APL (which consent shall not
be unreasonably withheld or delayed), if such changes
are of such a nature that they would have required the
consent of APL pursuant to the construction by landlord
of the Tenant Improvements had they been made during
the initial buildout of the Premises pursuant to the
Original Lease or if the changes would alter the
character of the Building, affect the usability of the
Premises, diminish the quantity or quality of the
services provided by Landlord under this Lease, or
affect the functional utilization of the Building or
the ingress or egress thereto. Notwithstanding the
foregoing, Landlord shall be permitted to make changes
to the Building that are required by law or by
direction of governmental authority and that are not
attributable to actions or activities which Landlord
could avoid; provided, however, that the Rent shall be
abated to the extent such changes interfere with APL's
normal use of the Premises and provided that changes to
the Premises to comply with legal requirements may only
be made if the legal requirements cannot be satisfied
by undertaking repairs or alterations elsewhere in the
Building.
Section 11.3. Removal of Alterations. All
alterations, additions and improvements made by APL at
any time to the Premises shall be and remain the
property of APL during the Term. APL may at any time
during the Term or upon the termination of this Lease,
remove any alterations and any of APL's moveable
furniture, business machines, kitchen equipment and
appliances, equipment and trade fixtures purchased or
installed at APL's expense, provided that APL shall
repair all damage to the Building and the Premises
caused by such removal.
ARTICLE 12
Repairs and Maintenance
Section 12.1. Landlord Repair. Subject to the
provisions of Articles 14 and 15, except to the extent
such repair is required as a result of the negligence
or willful misconduct of APL, its employees, agents,
and officers, Landlord, at its sole cost and expense,
shall maintain in good condition and repair, and
consistent with the operation of the Building as a
first class office building, the Building and the
Common Areas, including, without limitation, the
plumbing, electrical, HVAC and other utility facilities
serving the Building and the Premises; as well as the
structural parts of the Building, including, without
limitation, footings and foundations, bearing and
exterior walls, subflooring and roof; and the elevator
and fire sprinkler systems which are a part of and/or
service the Building, the Common Areas and/or the
Premises. If Landlord fails to perform any of its
maintenance or repair obligations hereunder and such
failure continues for a period of twenty (20) days
after notice from APL, then APL shall have the right to
undertake such repair or maintenance and Landlord shall
reimburse APL for such sums incurred by APL within ten
(10) days after receipt of invoice therefor. Sums not
timely paid by Landlord shall accrue interest at the
Default Rate from the date due until paid.
Notwithstanding the foregoing, if the subject
maintenance or repair item cannot be completed within
twenty (20) days, then Landlord shall have such
additional time as may be reasonably necessary provided
Landlord commences such maintenance or repair within
such twenty (20) day period and thereafter diligently
prosecutes such maintenance and repair to completion.
Except as provided above, APL expressly waives the
benefits of any statute now or hereafter in effect
which would afford APL the right to make repairs at
Landlord's expense because of Landlord's failure to
keep the Premises in good order, condition and repair.
Section 12.2. Tenant Repair. APL, at its
expense, shall make all interior, non-structural and
non-mechanical system repairs to the Premises
(including Expansion Space and any Available Space
added to the Premises pursuant to SectionE4.3 or 4.5
above) which are not the obligation of Landlord
hereunder and which become necessary during the Term to
keep the Premises in substantially as good condition as
on the Commencement Date, reasonable wear and tear,
acts or omissions of Landlord or of Landlord's agents
or employees and damage by fire or other casualty
excepted.
ARTICLE 13
Operation
Section 13.1. Operation. Landlord shall use due
diligence to operate the Building and the Common Areas
in as economically reasonable a manner as commercially
practicable, consistent with the manner in which other
comparable first-class office buildings are operated.
Subject to the foregoing, Landlord shall use due
diligence to operate the Building at a cost not
disproportionately high when compared to the cost of
operating comparable first-class office buildings.
ARTICLE 14
Damage and Destruction
Section 14.1. Reconstruction by Landlord
Subject to the provisions of this Article 14, if during
the Term the Premises or the portions of the Common
Areas providing direct vehicular or pedestrian access
to the Premises are totally or partially destroyed from
any casualty, Landlord shall promptly restore the
Premises and/or such portions of the Common Areas to
substantially the same condition as they were in
immediately before destruction; provided, Landlord's
obligations shall not exceed the landlord's
construction obligations required to be completed by
the commencement of the term of the Original Lease
(excluding the Tenant Improvements), and APL shall
restore the balance of the Premises including the
Tenant Improvements and fixtures to substantially the
same condition as they were in immediately before
destruction. APL shall have the right, at its cost, to
install tenant improvements of a style, utility, type
and construction different from the original Tenant
Improvements provided APL constructs improvements,
fixtures and equipment consistent with a Permitted Use.
Such destruction shall not terminate this Lease. If
the existing laws do not permit the Premises to be
restored to substantially the same condition as they
were in immediately before destruction and if
restoration as permitted by law will result in APL
having materially less Rentable Area than existed in
the Premises prior to the destruction or will result in
a material reduction in the amount of expansion space
available to APL or will result in a material adverse
effect on the conduct of APL's business in the
Premises, as reasonably determined by APL, then either
party may terminate this Lease by giving notice to the
other party.
Section 14.2. Substantial Destruction . If
there is destruction to the Building in excess of fifty
percent (50%) of its then replacement value (regardless
of whether the Premises are destroyed) and if the
Building cannot be substantially restored within twelve
(12) months of the date of damage or destruction
Landlord or APL shall have the right to terminate this
Lease by giving notice to the other party. Such
election must be made within a reasonable time after
the destruction occurs.
Section 14.3. Destruction During Last Part of
Term. If any destruction of the Premises occurs during
the last twelve (12) months of the Term regardless of
the nature and extent of the destruction, either
Landlord or APL may elect to terminate this Lease
within a reasonable time thereafter. If any
destruction occurs to the Premises during the last
twelve (12) months of the then current Term and APL
waives its right to exercise any further unexercised
extension terms, then either Landlord or APL may elect
to terminate this Lease within a reasonable time
thereafter.
Section 14.4. Abatement or Reduction of Rent In
case of a partial or total destruction of the Premises,
there shall be an abatement or reduction (as
applicable) of all monetary obligations hereunder
including, without limitation, Rent between the date of
destruction and the date upon which APL Substantially
Completes reconstruction of the tenant improvements,
fixtures, equipment and furnishings in the Premises and
recommences the conduct of its business therein.
Promptly following Landlord's completion of its
restoration obligations, Landlord shall tender the
premises to APL in a condition ready for commencement
of APL's work. Thereafter, APL shall diligently
prosecute its restoration work to completion. Such
abatement shall be based on the extent to which the
destruction interferes with APL's enjoyment and use of
the Premises.
Section 14.5. Inapplicability of Civil Code
Sections. The provisions of California Civil Code
Sections 1932(2) and 1933(4), and any successor
statutes, are inapplicable with respect to any
destruction of the Premises, such sections providing
that a lease terminates upon the destruction of the
Premises unless otherwise agreed between the parties to
the contrary.
Section 14.6. APL's Right to Terminate Lease
APL's Right to Terminate Lease;. As soon as reasonably
practicable after any such damage or destruction to the
Premises or the Building, Landlord shall inform APL of
Landlord's reasonable and bona fide estimate of the
period of time it will take Landlord to perform its
restoration obligations as herein provided, which
estimate shall be based upon estimates obtained from
Landlord's contractors and architect. If Landlord
reasonably estimates that the period of restoration
will exceed two hundred seventy (270) days from the
date of the damage or destruction, APL shall have the
right, exercisable within sixty (60) days after receipt
of Landlord's estimate, within which to terminate this
Lease and if Tenant does not so exercise such
termination right, Tenant shall be deemed for the
purposes of this Section 14.6 to have accepted the
estimated redelivery dated specified in Landlord's
notice. If APL elects to terminate this Lease as
herein provided, the effective date of such termination
shall be no earlier than sixty (60) days following the
date APL elects to terminate, in which event the
parties shall be relieved of all obligations accruing-
under this Lease from and after the effective date of
termination. If APL does not elect to terminate this
Lease within such sixty (60) day period, then this
Lease shall remain in full force and effect and
Landlord shall restore the Premises and Building as
provided in this Article except that APL shall pay Rent
and APL's Share of Building Operating Costs and Real
Property Taxes based on the proportionate share of
space in the Building which remains occupied by APL.
If Landlord fails to Substantially Complete (as such
term was defined in Section 2.5 of the Original Lease)
the restoration of the Premises and tender the restored
Premises to APL within three hundred (300) days after
the date of the damage or destruction, then APL may
terminate this Lease by written notice to Landlord
(unless APL has agreed to an estimated redelivery date
which is more than three hundred (300) days from the
date of the damage or destruction, in which event APL
may terminate this Lease by written notice to Landlord
only if Landlord fails to Substantially Complete the
restoration of the Premises and tender the restored
Premises to APL by the agreed estimated redelivery
date). The effective date of such termination shall be
no earlier than sixty (60) days after APL elects to
terminate
Section 14.7. Insurance Proceeds;. If this Lease
is terminated pursuant to Article 14, Landlord shall be
entitled to that portion of the proceeds, if any,
actually received by APL from casualty insurance equal
to the unamortized cost of the Tenant Improvements paid
by Landlord. In such event APL shall use reasonable
efforts to collect the insurance proceeds to which it
is entitled under the subject casualty insurance
policy. Such sum shall be paid out of the payment made
by APL's insurer for the Tenant Improvements and shall
be paid to Landlord within thirty (30) days of receipt
by APL. Sums not timely paid shall bear interest at
the Default Rate from the date due until paid.
ARTICLE 15
Condemnation
Section 15.1. Definitions. "Condemnation" or
"Taking" means (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a
condemnor, or (b) a voluntary sale or transfer by
Landlord to any condemnor, either under threat of
condemnation or while legal proceedings for
condemnation are pending.
"Date of taking" means the date the condemnor has
the right to possession of the property being
condemned.
"Award" means all compensation, sums, and anything
of value awarded, paid or received on a total or
partial condemnation excluding the award to APL for
goodwill and relocation costs.
"Condemnor" means any public or quasi-public
authority, or private corporation or individual, having
the power of eminent domain.
Section 15.2. Effect on Lease. If there is a
taking of all the Premises, or part of the balance of
the Building (other than the Premises) such that a
material portion of the expansion space is eliminated,
or part of the Common Area that materially prevents
direct pedestrian access to the Premises, or part of
the Premises so that the remaining part of the Premises
is rendered unsuitable for APL's continued use of the
Premises for the purpose of conducting APL's business
thereon, as reasonably determined by APL, APL shall
have the right to terminate this Lease effective as of
the date of the taking. The election to terminate this
Lease as provided herein shall be exercised, if at all,
within one hundred twenty (120) days after the nature
and extent of the taking is determined.
Section 15.3. Award APL and Landlord
shall cooperate in the condemnation proceeding so as to
maximize the Award. APL shall be entitled to recover a
separate amount for its goodwill and relocation
expenses. After determination of the amount of the
Award, APL and Landlord shall meet and attempt to
determine:
(a) The value of the Award assuming that (i)
the Building occupancy rate is its then actual
percentage, including the Premises, (ii) all other
rents paid in the Building are then actual effective
rates and (iii) the Premises are leased at then current
fair rental value, not the actual rents paid by APL
under this Lease. Such value shall be referred to as
the "Adjusted Award".
(b) The value of APL's leasehold interest in
the Building or that portion thereof if less than all
is taken, taking into consideration the actual terms of
this Lease (such value is referred to as the "APL
Leasehold Value").
If APL and Landlord are unable to agree within thirty
(30) days after determination of the amount of the
Award, then the matter shall be resolved by arbitration
using the mechanism more particularly described in
Section 4.4 except that the arbitrators who shall
decide the issue shall be qualified MAI real estate
appraisers with at least ten (10) years full-time
commercial appraisal experience. Once the Leasehold
Value and the Adjusted Award are determined, the amount
of the award payable to APL shall be computed as
follows:
APL Leasehold Value x Award = Amount payable to
APL.
Adjusted Award
For example, assuming a full taking of the APL Parcel,
the computations might be:
$30 M x $130 M = $26 M
$150 M
The balance of the Award shall be retained by
Landlord, subject to the possible interests of third
parties.
The Award shall be retained by the condemning
authority until APL's and Landlord's respective rights
to the Award have been determined at which point the
Award shall be distributed by the condemning authority
to the parties as herein provided.
Section 15.4. Waiver. Each party waives the
provisions of California Code of Civil Procedure
Section 1265.130, and any successor statute, allowing
either party to petition the Superior Court to
terminate this Lease in the event of condemnation.
Section 15.5. Restoration of the Premises. If
APL does not terminate this Lease as provided in this
Article 15, Landlord shall, at its cost and expense,
promptly make all necessary repairs or alterations to
the Premises so that the portion of the Premises not
taken shall be placed in a condition as close to the
original condition of the Premises immediately before
the taking as is possible; provided, Landlord's
obligations shall not exceed Landlord's construction
obligations at the commencement of the Term, and APL
shall restore the balance of the Premises, including
the Tenant Improvements and fixtures to substantially
the same condition as they were in immediately before
the taking.
Section 15.6. Rescission of APL's Election to
Terminate Lease. If between the period commencing on
the date APL elects to terminate this Lease and the
effective date of termination any condemnation
proceeding which gave rise to the termination shall be
abandoned, then APL shall have the election to rescind
its previous election to terminate this Lease by giving
notice thereof to Landlord within thirty (30) days
following the date Landlord notifies APL that the
condemnation proceedings have been abandoned. If APL
does not elect to rescind its previous election to
terminate this Lease within such thirty (30) day
period, this Lease shall terminate in accordance with
the terms of APL's election to terminate this Lease
Section 15.7. Reduction of Rent. Anything
contained in this Article 15.7 to the contrary
notwithstanding, nothing shall be construed to impose
upon APL the obligation to pay any Rent or other
monetary obligations beyond the date of taking in the
event of a total taking of the Premises, or in the
event of a partial taking, the difference between the
Rent set forth in this Lease and the new Rent as
computed pursuant hereto. Rent shall be prorated as of
the earlier of the date of taking, or the date APL
specifies in its notice of election to terminate
provided that APL surrenders possession of the Premises
on or before such date set forth in APL's notice to
terminate, otherwise, on such later date on which APL
surrenders possession of the Premises, and Landlord
agrees to refund to APL any rent paid in advance. If
there is a partial taking of the Premises and this
Lease remains in effect as to the remaining portion of
the Premises, Rent shall be reduced as of the date of
taking in the proportion which the total number of
square feet of Rentable Area remaining in the Premises
bears to the total number of square feet of Rentable
Area in the Premises immediately before the date of
taking.
. If APL elects to terminate this Lease when a portion
of the Premises is taken by condemnation, APL shall
have the right, until such time as it can relocate to
new premises, to holdover for up to one (1) year, in
that portion of the Premises not taken, after the date
specified in APL's notice of election to terminate, on
a month-to-month basis at the same Rent on a pro rata
basis, and under the same terms, covenants, conditions,
and agreements contained in this Lease. If APL elects
to exercise its right to holdover pursuant to the terms
of this Section 15.8, APL shall, if not prevented by
the condemnor, give Landlord three (3) months notice of
the date it intends to terminate such holdover tenancy,
and Landlord shall not terminate such holdover tenancy
prior to the expiration of the one (1) year period
unless APL is in default of this Lease.
Section 15.9. Separate Representation. Landlord
and APL shall be entitled to separate representation in
any condemnation proceedings involving the Premises.
Section 15.10. Temporary Taking. If all of the
Premises shall be condemned or taken for governmental
occupancy for a period more than seventy-five (75) days
and less than the balance of the Term (including
unexercised extension rights) APL may either (a)
terminate this Lease as of the date of the taking or
(b) elect not to terminate this Lease in which event
any award for such temporary taking shall be paid to
Landlord and APL's Annual Base Rent and all other
obligations with regard to the subject space shall
abate until ninety (90) days after expiration of the
temporary taking.
ARTICLE 16
Entry by Landlord
Landlord and its agents shall have the right,
during normal business hours, upon reasonable notice to
APL, to enter upon the Premises, so long as it does not
unreasonably interfere with the business activities of
APL on the Premises, for the purpose of inspection,
serving or posting notices, showing the Premises to
prospective lenders, purchasers or tenants (provided
the Premises may only be shown to prospective tenants
during the last twelve (12) months of the Term),
maintaining the Premises or making necessary repairs,
to any portion of the Premises to the extent required
or permitted under this Lease. Notwithstanding the
foregoing, the right to enter upon the Premises or any
portion thereof pursuant to any provision of this Lease
(other than in an emergency as to which it is
impossible to give prior notice to APL) shall be
limited, in the case of such portions of the Premises
as APL shall designate as security areas, to entry with
a duly authorized representative of APL, after having
first given APL reasonable advance notice of the reason
for and time of such entry. Landlord shall indemnify,
defend and hold APL harmless from and against any loss,
liability or claim in any way resulting from Landlord's
entry into the Premises to the extent caused by the
acts or omissions of Landlord, its agents, employees,
officers or contractors. Landlord shall use due
diligence and all commercially practical efforts to
cause all work performed on the Premises to be done as
promptly as reasonably possible and so as to cause as
little interference to APL's use of the Premises as
possible.
ARTICLE 17
Assignment and Subletting
Section 17.1. Subject to compliance with Permitted
Uses hereunder, APL shall have the right to sublet all
or any portion of the Premises without Landlord's
consent.
Section 17.2. If APL desires to assign all or any
part of its interest under the Lease to a third party
the provisions of this section shall apply. Landlord
shall have the option, to be exercised irrevocably by
giving notice to APL within thirty (30) days after
receipt of APL's notice of intent to assign, to
recapture the portion of the Premises which is being
assigned and to terminate this Lease as to such portion
of the Premises on the effective date stated in APL's
notice of intent to assign. In the event of such a
termination all Rent and other monetary obligations
hereunder shall be prorated to the date of termination
based upon the number of square feet of Rentable Area
recaptured and all liabilities of either party accruing
after the date of termination with respect to the
recaptured space shall be extinguished. Upon any
partial assignment, the assignee shall only have the
right to exercise the next two (2) accruing options to
extend and such assignee shall have no expansion rights
or right of first refusal rights hereunder. APL shall
be permitted to assign or sublet the Premises, or any
part thereof, to any of APL's subsidiaries or
affiliated companies, or to any corporate successor
(upon merger, consolidation or reorganization) (the
"Permitted Assignees"), without the need to obtain
Landlord's consent. Upon any assignment with the
consent of Landlord (or, if the consent of Landlord is
not necessary for an assignment, upon such assignment),
if the net worth of the assignee is greater than One
Hundred Seventy Five Million Dollars (U.S.
$175,000,000.00) (the "Minimum Net Worth") then APL
shall be relieved of its obligations under this Lease
to the extent of the interest assigned. The Minimum
Net Worth shall be increased on January 1 of each year
commencing on January 1, 1992 by the same percentage as
any increase in the Consumer Price Index for All Urban
Consumers (CPI-U) for the San Francisco/Oakland/San
Jose, California Area ALL ITEMS (1982-84 equals 100),
as published by the United States Department of Labor,
Bureau of Labor Statistics (the "Index"). For purposes
of application of the formula, the Index for January,
1991 shall be compared to the Index for the month of
January of the year of adjustment. For purposes of
this Article, "affiliated company" shall mean any
parent of APL or any entity under common control with
APL, or any joint venture, partnership, corporation
(foreign or domestic), or other entity of which APL or
a subsidiary of APL or any corporation controlled by or
under common control with APL owns at least fifty
percent (50%) of the net assets or fifty percent (50%)
of the voting stock or other equity interest.
Section 17.3. The provisions of this Section 17.3
shall never apply to Permitted Assignees. One-half
(1/2) of any sums or the monetary equivalent of other
economic consideration received by APL directly or
indirectly in connection with any sublease under this
Section 17.3 which exceed, in the aggregate: (a) the
total sums which APL is obligated to pay Landlord
hereunder (prorated in the case of a sublease of less
than all of the Premises to reflect obligations
allocable to the portion of the Premises sublet) plus,
(b) the cost, amortized over the period of the sublease
of any additional tenant improvements paid for by APL
and not reimbursed by the sublessee shall be payable to
Landlord as additional Rent under this Lease. APL
shall also be entitled to deduct from the sums due
Landlord under Section 17.3 one-half (1/2) of all other
costs and expenses incurred by APL in connection with
such subletting, including, without limitation, "free
rent", rental concessions, attorneys' fees and brokers'
fees. APL shall also be entitled to recapture all Rent
and other charges paid hereunder with respect to the
subleased space which was actually incurred by APL
during periods when the subject subletting space was
vacant and being offered for sublease.
ARTICLE 18
Partial Subordination
This Lease may, at the option of Landlord, be made
subordinate to any deed of trust now or hereafter
placed upon or affecting the Premises, Building, Common
Area or APL Parcel or to any ground lease or underlying
lease which now or hereafter may exist and to all
advances made or to be made upon the security thereof,
renewals, modifications, replacements and extensions
thereof, provided that as a condition of such
subordination:
(a) such deed of trust or ground or
underlying lease shall contain a covenant which
provides, so long as the security of the mortgagee or
beneficiary is not impaired, that the proceeds of all
insurance policies maintained by or on behalf of
Landlord and covering the Building, the Common Areas,
the Premises and/or the improvements, equipment and/or
appurtenances constituting the Premises, and all
proceeds of any condemnation, whether any such proceeds
are to be held by Landlord or the beneficiary, shall be
paid and/or made available for repair, replacement or
rebuilding as provided in this Lease;
(b) a separate written agreement is entered
into by the trustee and beneficiary named in any such
deed of trust or the lessor under the ground or
underlying lease, and is recorded simultaneously with
such deed of trust or ground or underlying lease
providing that notwithstanding any default under the
deed of trust or ground or underlying lease or any
foreclosure or termination thereof, or the enforcement
by the holder thereof or lessor of any rights or
remedies, including sale thereunder, or otherwise, APL
shall not be joined in or made a party to such
foreclosure or termination proceedings and this Lease
shall be recognized and remain in full force and
effect, and APL shall be permitted to remain in quiet
and peaceful possession of the Premises throughout the
Term in accordance with the provisions of this Lease,
as long as APL is not in default under this Lease or,
if APL is in default, as long as APL's time to cure
such default has not expired.
APL shall, within thirty (30) days of Landlord's
written request, execute and deliver such instruments
as may be reasonably necessary or convenient to
evidence such subordination. Such instrument or
agreement may provide, (i) that APL pay rent to such
beneficiary or lessor from the date of such attornment,
(ii). that such beneficiary or lessor shall not be
responsible to APL under this Lease except for
obligations accruing subsequent to the date of such
attornment, and (iii) that APL, in the event of
foreclosure or a deed in lieu thereof or a termination
of the ground or underlying lease, will enter into a
new lease with the beneficiary, lessor or other person
having or acquiring title on the same terms and
conditions as this Lease and for the balance of the
Term. If any beneficiary, trustee or ground lessor
elects to have this Lease prior to the lien of such
beneficiary's, trustee's or ground lessor's deed of
trust or ground lease, and gives notice of such
election to APL, this Lease shall be deemed prior to
the lien of such deed of trust or ground lease, whether
this Lease is dated prior or subsequent to the date of
such deed of trust or ground lease, or the date of the
recording thereof. Any such instrument or instruments
shall provide that APL shall have the right to enforce
the terms thereof.
ARTICLE 19
Default
Section 19.1. Events of Default. If any of the
following shall occur, it shall be deemed to be in
default under this Lease: (a) if APL fails to pay any
installment of Annual Base Rent or other sum when and
as the same becomes due and payable and such failure
continues for more than ten (10) days after receipt of
written notice thereof from Landlord; (b) if APL fails
to pay any other monetary obligations when and as the
same become due and payable and such failure continues
for more than thirty (30) days after receipt of written
notice thereof from Landlord; (c) if APL materially
fails to perform any of the other obligations required
to be performed by APL under this Lease and such
failure continues for more than thirty (30) days after
receipt of written notice thereof from Landlord;
provided, however, that if any such obligation cannot
reasonably be performed within such thirty (30) day
period, APL shall have such additional time as is
reasonably necessary to perform such obligation,
provided APL timely commences the cure of such default
and thereafter diligently prosecutes such cure to
completion; or (d) if APL makes a general assignment
for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a
petition in bankruptcy, is adjudicated bankrupt, or
files a petition seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or
future statute, law or regulation, if, with respect to
any involuntary filing, the same is not discharged
within ninety (90) days.
Section 19.2. Landlord's Remedies. Landlord
shall have the following remedies if APL commits a
default. These remedies are not exclusive; they are
cumulative in addition to all other remedies now or
later available at law or in equity
(a) Landlord shall have the right upon ten
(10) days notice (during which time APL may cure the
default) to terminate this Lease and all rights of APL
hereunder by giving written notice to APL of such
election by Landlord. On termination, Landlord may
recover the following from APL:
(i) the worth at the time of the award
of any unpaid Rent which had been earned at the time of
termination;
(ii) the worth at the time of the award
of the amount by which the unpaid Rent which would have
been earned after termination until the time of the
award exceeds the amount of such rental loss that APL
proves could have been reasonably avoided;
(iii) the worth at the time of the
award of the amount by which the unpaid Rent for the
balance of the Term after the time of the award exceeds
the amount of such Rent loss that APL proves could have
been reasonably avoided;
(iv) any other amount necessary to
compensate Landlord for the detriment proximately
caused by APL's default or which in the ordinary course
of things would be likely to result therefrom; and
(v) at Landlord's election, such other
amounts in addition to or in lieu of the foregoing as
may be permitted from time to time by applicable
California law.
As used in subparagraphs (i) and (ii) above, the
"worth at the time of the award" is computed by
allowing interest at the Default Rate. As used in
subparagraph (iii) above, the "worth at the time of the
award" is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San
Francisco at the time of the award plus one percent
(1%).
(b) Landlord may continue this Lease in full
force and effect, and this Lease will continue in
effect as long as Landlord does not terminate APL's
right to possession, and Landlord shall have the right
to collect Rent when due.
Section 19.3. Landlord Default
(a) If Landlord is in default under this
Lease, APL may take whatever acts may be reasonably
necessary to cure the same at the expense of Landlord,
if such default continues for thirty (30) days (except
in the event of emergency) following notice thereof
from APL to Landlord of APL's intentions to perform the
same; provided, however, that in the case of such
default which, for causes beyond Landlord's reasonable
control (financial inability excepted), cannot with due
diligence be cured within such thirty (30) day period,
such thirty (30) day period shall be deemed extended if
Landlord: (i) immediately upon the receipt of such
notice, advises APL of Landlord's intention to
institute all steps necessary to cure such default, and
(ii) institutes and thereafter with diligence and
dispatch prosecutes to completion all steps necessary
to cure the same. With regard to emergency, APL shall
only be obligated to give Landlord twenty-four (24)
hours within which to commence to cure its default.
(b) Whether or not APL chooses to cure
Landlord's default pursuant to subparagraph (a) above,
all Rent shall be equitably and proportionately abated
to the extent Landlord's default interferes with APL's
normal business operations on the Premises, as
reasonably determined by APL.
(c) Notwithstanding the foregoing, if any
default of Landlord continues for more than a period of
seventy-five (75) days following notice thereof from
APL to Landlord and such default materially interferes
with APL's occupancy and use of twenty-five percent
(25%) or more of the Premises, APL shall, without
limiting any other remedies of APL hereunder,
including, without limitation, any right of offset or
damages, have the right to terminate this Lease by
written notice to Landlord.
(d) Any sums payable by Landlord to APL
pursuant to this SectionE19.3 shall be paid on demand
and, if not paid within ten (10) days, shall be
credited to and deducted from the next installments of
Rent payable hereunder.
(e) No remedy or election given to APL by
any provisions in this Lease shall be deemed exclusive
unless so indicated, but it shall, whenever possible,
be cumulative with all other remedies at law or in
equity except as otherwise herein specifically
provided.
(f) Nothing contained in this Section 19.3
shall confer upon APL any right to pay, or adjust or
compromise any lien, charge, encumbrance or claim which
Landlord in good faith disputes or contests, so long as
any such dispute or contest (i) continues and is being
litigated in a court of competent jurisdiction and has
not been reduced to a final judgment therein, and (ii)
does not affect APL's possession of the Premises and/or
APL's use of the Building and the Common Areas as
provided in this Lease and (iii) does not subject APL
to any civil or criminal liability; nor shall anything
herein contained be construed as imposing any
obligation upon APL to perform any obligation of
Landlord to pay any liens, charges, encumbrances or
claims above mentioned, nor shall any such performance
or the making of any such payment by APL be construed
as obligating APL to further perform or make any
further payments.
(g) APL shall give any beneficiary of any
deed of trust recorded against the Building and/or APL
Parcel by certified mail, a copy of any notice of
default served upon Landlord, provided that prior to
such notice, APL has been notified in writing of the
address of such beneficiary. If Landlord fails to cure
such default within the time period provided for in
this Lease, then the beneficiary shall have an
additional thirty (30) days within which to cure such
default, or if such default cannot be cured within that
time, then such additional time as may be necessary if
within such additional thirty (30) days the beneficiary
has commenced and is diligently pursuing the remedies
necessary to cure such default (including, without
limitation, the commencement of foreclosure proceedings
if necessary to effect such cure), in which event this
Lease shall not be terminated while remedies are being
so diligently pursued.
Section 19.4. Waiver No waiver by either party
of any default hereunder by the other party shall be
deemed to be a waiver of any subsequent default under
the same or any other term, covenant or condition of
this Lease.
ARTICLE 20
Notices
All notices which are required to be given by
either party hereunder shall be in writing, personally
delivered or sent by certified or registered mail,
postage prepaid, return receipt requested, or by a
reputable air courier service which provides written
evidence of delivery and addressed to the parties at
the following addresses:
Landlord: Shorenstein Company, L.P.
555 California Street, 49th floor
San Francisco, CA 94104
APL: APL Limited
1111 Broadway
Oakland, CA 94612
Attention: Manager of Office Services
Copy to: APL Limited
1111 Broadway
Oakland, CA 94612
Attention: General Counsel
or to such other addresses and to such other persons as
the parties may from time to time designate in writing,
by notice as aforesaid. The time of giving of any such
notice shall be deemed to be (a) the date of delivery
by personal service; or (b) on the earlier of the
expiration of the fifth day after the day on which such
notice is so mailed in the United States or Canadian
Mail or the delivery date shown on the return receipt
prepaid in connection therewith or (c) if notice is
given by a reputable air courier service, then it shall
be deemed to be given or served on the business day
next following the date of delivery to the subject air
courier service prepaid and addressed as provided
above; provided, however, that change of address shall
be effective only upon actual receipt.
ARTICLE 21
Landlord Representations and Warranties
Section 21.1. In addition to all other
representations and warranties made by Landlord to APL
in this Lease, Landlord further represents and warrants
to APL As follows:
(a) Landlord has full right and power to
execute this Lease and upon acquisition of the APL
Parcel will have full right and power to perform its
obligations under this Lease and to grant the estate
demised herein and APL, on paying the Rent and
performing the other covenants hereof, shall peaceably
and quietly have, hold and enjoy the Premises and all
appurtenances during the Term (including extensions);
(b) Upon notice of nonconformance, Landlord
will promptly cause the Building, Common Areas,
Premises, and Tenant Improvements to conform, to every
applicable requirement of law or duly authorized
authority or of any Board of Underwriters, or rating
bureau, or similar organizations, or the requirements
of the insurance carriers on the Premises and the
Building, and Landlord shall, at all times during the
Term (including extensions), promptly comply with all
such requirements, all at Landlord's sole cost and
expense without reimbursement from APL except as
permitted by Section 14.1. Landlord shall not permit
any property in the vicinity of the Premises which is
owned or controlled by it to be used in a manner to
create a nuisance, undue noise, obnoxious odors or
other interference with APL's enjoyment of the
Premises; and
Section 21. Landlord shall indemnify and save
harmless APL from and against any and all liabilities,
claims, suits, demands, damages, judgments, costs,
interests and expenses (including without limitation
reasonable attorneys' fees) arising out of the
inaccuracy of any representation or warranty made by
Landlord to APL in this Lease.
ARTICLE 22
Commissions
APL is represented by Colliers Damner Pike.
Landlord is represented by Shorenstein Management, Inc.
APL shall be responsible for any compensation due
Colliers Damner Pike. Landlord shall be responsible
for any compensation due Shorenstein Management, Inc.
Except for Colliers Damner Pike and Shorenstein
Management, Inc., each party represents to the other
that it has dealt with no broker in connection with the
execution and delivery of this Lease and that the other
party shall not be required to pay any commission
whatsoever with regard to this Lease or the exercise of
any option granted to APL herein resulting from the
actions of the party making such representation. Each
party shall indemnify and defend the other party
against and hold the other party harmless from any and
all losses, costs, damages, liabilities or expenses
(including court costs and reasonable attorneys' fees)
resulting from a breach by the indemnifying party of
the foregoing representations.
ARTICLE 23
Estoppel Certificates
Landlord or APL shall, at any time and from time
to time, upon not less than ten (10) days' prior notice
by the other party, execute, acknowledge and deliver to
the other party a statement in writing certifying that
this Lease is unmodified and in full force and effect
(or, if there have been modifications or other
qualifications, that the same is in full force and
effect as modified and stating the modifications or
other qualifications), the commencement and expiration
dates of the Term, as extended if such is the case,
whether there are then existing any defaults by the
other party in the performance of its obligations under
this Lease (and, if so, specifying the same), that no
notice has been received by the party of any default
which has not been cured (except as to defaults
specified in the certificate), the dates to which Rent
has been paid in advance, and such other matters as may
be reasonably requested by either party, it being
intended that any such statement delivered pursuant to
this Article may be addressed to and/or relied upon by
any prospective assignee, purchaser or encumbrancer of
the APL Parcel, Building, Common Areas, Premises or
ownership interest therein, or any prospective assignee
of APL's leasehold interest.
ARTICLE 24
Surrender
Upon the expiration or earlier termination of this
Lease APL shall peaceably and quietly leave and
surrender the Premises in as good a condition as when
it was delivered, except for ordinary wear and tear,
repairs and replacements required to be made by
Landlord, loss by fire, casualty and causes beyond
APL's control, and alterations, additions and
improvements herein permitted. APL may remove
furniture, business machines, kitchen equipment and
appliances, trade fixtures, signs, alterations,
additions, and improvements of any kind purchased or
installed at APL's expense, prior to the termination of
this Lease provided that if damage is caused by such
removal, APL shall repair such damage.
ARTICLE 25
Rules and Regulations
APL shall faithfully observe and comply with the
rules and regulations that are attached hereto as
Exhibit "H" (the "Rules and Regulations"). Landlord
reserves the right from time to time upon thirty (30)
days advance written notice to make reasonable
additions and modifications to the Rules and
Regulations, and all such additions and modifications
shall be binding upon APL commencing ten (10) business
days after delivery of a copy thereof to APL.
Notwithstanding the foregoing, Landlord shall not
change or modify the Rules and Regulations in any way
which (a) diminishes or otherwise reduces the specific
obligations of the Landlord to perform under the terms
and conditions of this Lease, (b) interferes with APL's
use and enjoyment of or access to the Premises, Common
Areas or Building, or (c) interferes with the conduct
of APL's normal business operations. Landlord shall
apply and administer all Rules and Regulations in a
fair and nondiscriminatory manner. Should any tenant
in the Building receive any waiver or special
dispensation from Landlord with regard to the Rules and
Regulations, Landlord shall advise APL promptly and APL
shall be entitled upon request to a similar waiver or
similar dispensation.
ARTICLE 26
Parking
Section 26.1. Parking
(a) During the Term, Landlord shall make
available for APL's exclusive use one (1) automobile
parking space for every one thousand (1,000) square
feet of Rentable Area of the Premises. As of December
31, 1996, Tenant is entitled to a total of 206
automobile parking spaces hereunder. Not less than
fifty percent (50%) of such parking spaces shall be
reserved and shall be located in the parking garage in
the Building and the balance shall be located in the
City Center Garage located at 525 14th Street, 1000
Broadway Garage, Convention Center Garage or a parking
structure at 11th and Clay Streets. The foregoing list
of non-Building garages is in order of APL's
preference; therefore, Landlord shall use its best
efforts to satisfy APL's requirements in order of APL's
preference. Landlord shall use reasonable efforts to
provide that all of the reserved parking spaces in the
Building garage shall be on the highest levels of the
garage. The subject parking spaces shall be available
on a 24-hours-a-day, 7-days-a-week basis. Not less
than fifty percent (50%) of the reserved spaces shall
be for full-size cars with parking space dimensions of
not less than eight and one-half (8-1/2) feet by
eighteen (18) feet.
(b) Each time that the Premises are expanded
under this Lease (whether pursuant to an option, right
of first refusal or otherwise), Landlord shall provide
such additional parking as may be necessary to ensure
that APL at all times has a total of one (1) parking
space for every one thousand (1,000) square feet of
Rentable Area of the Premises, one-half of which spaces
shall be reserved.
(c) During the Term, APL shall pay to
Landlord or to the operator of the subject garage, as
directed by Landlord, monthly, in advance, on the day
installments of Annual Base Rent are due, the then
current prevailing parking charge for each parking
space in the Building garage provided, however, that
such prevailing rate shall not exceed the prevailing
market rate for comparable privately owned and operated
parking facilities located in the downtown Oakland
area. The rate charged APL shall also not be higher
than the rate charged any other tenant or occupant of
the Building. The parking rate through December 31,
1997 for a reserved stall shall not exceed One Hundred
Sixty-Eight Dollars ($168.00) per month, and for a non-
reserved stall shall not exceed One Hundred Thirty
Dollars ($130.00) per month. Parking rates may not be
increased more than once during any twelve (12)
consecutive month period.
(d) APL may elect from time to time to use
fewer parking spaces and, upon thirty (30) days prior
written notice of such election, APL shall be relieved
of the obligation for payment for the spaces not used.
In its notice APL shall designate the exact location of
any reserved spaces which it elects to relinquish. Any
such spaces so relinquished, however, shall be subject
to recovery and shall be made available to APL again on
the terms and conditions hereof upon not less than
sixty (60) days prior written notice and demand by APL.
(e) If a portion of the Premises is
recaptured by landlord pursuant to Article 17, APL's
right to parking spaces shall revert to Landlord at the
rate of one parking space per 1,000 square feet of
Rentable Area so recaptured.
ARTICLE 27
Leasehold Financing
Section 27.1. Leasehold Mortgage. The term
"Leasehold Mortgage" shall mean a mortgage or deed of
trust upon APL's interest in this Lease and the term
"Leasehold Mortgagee" shall include the mortgagee under
such a mortgage and the beneficiary under such a deed
of trust. APL shall have the right to hypothecate,
convey or transfer its interest in this Lease in whole
or in part by a Leasehold Mortgage to a bank, insurance
company, savings and loan association or other
established institutional lender without the necessity
of obtaining the approval of Landlord, or, upon the
written approval of Landlord, which shall not be
unreasonably withheld or delayed, to any other lender.
Landlord shall, on APL's request, execute in connection
with such Leasehold Mortgage such written consents or
acknowledgments and such other instruments
incorporating the substance of this Article 27.
Section 27.2. Default. Upon the occurrence of
any default by APL in its obligations under this Lease,
Landlord shall take no action to terminate this Lease
with respect to the Leasehold Mortgagee without first
giving written notice of such default to the Leasehold
Mortgagee and a period of thirty (30) days after such
notice, and such additional time as may be reasonably
necessary to cure such default so long as the Leasehold
Mortgagee is diligently and continually attempting (i)
to obtain possession of the Premises, or (ii) to
institute, prosecute and complete proceedings to
acquire APL's interest under this Lease. The Leasehold
Mortgagee, upon obtaining possession or acquiring APL's
interest under this Lease, shall be required promptly
to cure all defaults of APL which are reasonably
susceptible of being cured by the Leasehold Mortgagee.
The following shall further apply with respect to any
such Leasehold Mortgage:
(a) the Leasehold Mortgagee and the owner of
the indebtedness secured by the Leasehold Mortgage
shall not become liable upon the covenants of this
Lease unless and until they become owners of the legal
and equitable title to the leasehold estate under this
Lease;
(b) Landlord shall be notified in writing of
any such Leasehold Mortgage, of the name and address of
the Leasehold Mortgagee, and of the amount of the
indebtedness to be secured by the Leasehold Mortgage;
(c) during the existence of the Leasehold
Mortgage, any notice of default in the Performance of
the covenants of this Lease or any notice of
termination of this Lease given to APL and copies of
all other notices required to be given by Landlord to
APL shall simultaneously be given to the Leasehold
Mortgagee at the address specified in subparagraph (b)
above, or at such other address as the Leasehold
Mortgagee shall designate to Landlord in writing;
(d) the Leasehold Mortgagee shall have the
right, to the same extent, and with the same effect as
APL, under the default provisions of this Lease, to
take such action or to make such payment as may be
necessary or appropriate to cure any such default;
(e) the Leasehold Mortgagee shall not be
obligated to continue any possession of the Premises or
to continue any foreclosure proceedings if all defaults
have been cured by APL in accordance with the
provisions of this Lease;
(f) the Leasehold Mortgagee shall comply
during the period of Landlord's forbearance from
terminating this Lease, with such terms, conditions,
and covenants of the Lease as are reasonably
susceptible of being complied with by the Leasehold
Mortgagee. As long the Leasehold Mortgagee is in
compliance with the provisions of this Article,
Landlord will not accept any surrender of the Premises
or otherwise accomplish cancellation of this Lease by
agreement with APL without the prior written consent of
the Leasehold Mortgagee;
(g) if the Lease is terminated for any
reason, Landlord and the Leasehold Mortgagee shall, at
the Leasehold Mortgagee's option, enter into a new
lease for the Premises upon the same terms as this
Lease, and with the same priority as this Lease except
that the term of the new lease shall be the same as the
unexpired Term (and the new lease shall contain all
option and extension rights and rights of first refusal
pending and unexercised under this Lease) and
Landlord's obligation to construct the Improvements
shall not be applicable to the extent that this
obligation has been fulfilled;
(h) there shall be no merger of the estates
of Landlord and APL hereunder notwithstanding any
acquisition of the leasehold estate through purchase,
foreclosure or otherwise, so long as the Leasehold
Mortgage is in effect;
(i) if any Leasehold Mortgagee acquires
APL's interest under this Lease, Landlord shall
recognize the Leasehold Mortgagee as the tenant
hereunder and this Lease shall continue as a direct
lease between the Leasehold Mortgagee as tenant and
Landlord for the unexpired portion of the Term
including any extension options. Any option rights,
extension rights or rights of first refusal contained
herein may be exercised by the Leasehold Mortgagee on
behalf of APL, or in its own behalf;
(j) if any Leasehold Mortgagee acquires
title to APL's interest in this Lease by foreclosure,
assignment in lieu of foreclosure or otherwise, APL
shall not be released from any of its obligations or
liabilities hereunder and the Leasehold Mortgagee may
assign this Lease provided the prior written consent of
the Landlord is first obtained, which consent shall not
be unreasonably withheld or delayed. Upon such
assignment, the Leasehold Mortgagee shall be released
from any further liability for the performance or
observance of any of the covenants of the Lease,
provided the assignee of the Leasehold Mortgagee has
assumed in writing the tenant's obligations hereunder.
ARTICLE 28
Tenth Floor Termination Option
At any time after December 31, 1998, and prior to
January 1, 2002, upon not less than twelve (12) months'
advance written notice (the "Termination Notice"), APL
shall have the right to delete the tenth (10th) floor
space (the "Deletion Increment") (consisting of Twenty-
two Thousand One Hundred Eighty-seven (22,187) square
feet of Rentable Area) from the Premises. The
Termination Notice shall specify the date upon which
APL intends to relinquish the Deletion Increment (the
"Deletion Date"). On or before the Deletion Date, APL
shall pay to Landlord a termination payment equal to
twelve (12) times the average of (i) the monthly
installment of Annual Base Rent attributable to the
Deletion Increment payable twelve (12) months prior to
the Deletion Date and (ii) the monthly installment of
Annual Base Rent attributable to the Deletion Increment
payable as of the Deletion Date. Notwithstanding
anything to the contrary in this Lease, APL shall
surrender the Deletion Increment on the Deletion Date
in the condition required by this Lease and on the day
following the Deletion Date the Rent and APL's Share
shall be adjusted accordingly to reflect the decreased
area of the Premises.
ARTICLE 29
Generator Equipment
Section 29.1. APL's Generator Equipment
(a) Equipment Site and Equipment. Landlord
hereby grants to APL a license to use that area (the
"Equipment Site") in the basement of the Building in
the approximate location shown on Exhibit "J" (attached
hereto and incorporated herein by this reference) for
the installation, operation, maintenance and
replacement by APL, at APL's sole expense (except as
specifically provided in this Section 29.1), of one
self-contained electrical generator package unit, the
exact design of which shall be subject to Landlord's
prior reasonable approval. The Equipment Site shall be
provided to APL without charge of any kind. APL shall
have the further right to install and maintain
electrical conduits as reasonably required to connect
such generator to the Premises. The generator and all
related wiring, pipes, equipment and cabling are
referred to herein as the "Equipment." If either APL
or Landlord ascertain that the Equipment Site will not
be suitable for the installation of a generator, APL
and Landlord shall promptly and in good faith attempt
to locate and designate a mutually agreeable alternate
site which is suitable for the installation of the
Equipment, and upon such designation such alternate
site shall be the "Equipment Site".
(b) Impositions. APL shall be responsible for
promptly paying all additional real and personal
property taxes, assessments, charges, fees or other
governmental impositions levied or assessed on the
Building or the APL Parcel due to the Equipment or the
construction or operation thereof.
(c)Installation; Proper Identification of
Equipment; Cost. APL shall submit to Landlord detailed
plans and specifications detailing the location and
size of the Equipment and specifically describing all
proposed construction and/or installation work,
including engineered drawings for the cables, pipes and
wires that APL wishes to install, but shall not
commence any construction, installation or operation of
the Equipment until the drawings, plans and
specifications have been approved in writing by
Landlord, which approval shall not be unreasonably
withheld, and until APL has secured all necessary
governmental approvals and permits in connection
therewith and has supplied the same to Landlord. The
visible elements of the exhaust vent for the Equipment
(the "Exterior Element") must be aesthetically pleasing
and appropriate to its location, provided that Landlord
shall not require APL to install an unreasonably
expensive Exterior Element if APL proposes a less
expensive, reasonably acceptable, aesthetically
pleasing alternative. Landlord shall have no
responsibility for, and APL holds Landlord harmless
from, any failure of the Equipment to comply with law
or to function properly notwithstanding the fact that
Landlord may have approved plans and specifications
therefor. Landlord and APL shall cooperate in
determining the locations of the risers and other areas
of the Building through which APL's conduits will be
installed, in order to satisfy APL's reasonable
requirements without unduly interfering with the
operation of Building systems or other tenants' systems
and without interfering with Landlord's ability to
provide services and utilities to other tenants. APL
shall keep the Equipment and the Building free from any
liens arising out of any work performed, materials
furnished or obligations incurred with respect to the
Equipment. APL shall give Landlord not less than
fifteen (15) days prior written notice of the
commencement of any construction or installation under
this Section. The contractor(s) performing the
construction and/or installation work under this
Section shall be subject to Landlord's prior written
approval, which approval shall not be unreasonably
withheld or delayed. APL shall cause APL's
contractor(s) to clearly identify the Equipment
(including all wires, cables and pipes) on the exterior
of each piece of Equipment.
(d) Cost. The cost of the Equipment and of the
installation of the Equipment shall be borne by
Landlord up to a total of Two Hundred Fifty Thousand
Dollars ($250,000.00) (the "Allowance"), and the
balance of the cost shall be borne by APL. Landlord
shall disburse the Allowance directly to APL's
contractor, and/or to the applicable subcontractors or
suppliers, and/or to APL, as APL shall determine, upon
receipt of a disbursement request accompanied by
invoices of APL's architect, engineer, or contractor to
be furnished to Landlord by APL covering work actually
performed, construction in place and materials
delivered to the site (as may be applicable) describing
in reasonable detail such work, construction and/or
materials. No payment will be made for work not
performed or materials or supplies not located on the
site. APL shall cause the installation to be completed
no later than twelve (12) months following the date of
Landlord's initial disbursement hereunder, which date
shall be extended by delays caused by Landlord and
delays resulting from force majeure. Landlord shall
not charge a fee in connection with the installation of
the Equipment.
(e)Compliance with Law; Permits. APL, at APL's
sole expense, shall comply with all laws regarding the
installation, construction, operation and maintenance
of the Equipment, and shall be solely responsible for
obtaining and shall obtain and keep in force all
permits, licenses and approvals necessary for operation
of the Equipment.
(f)Removal of Equipment. Upon the expiration or
any sooner termination of this Lease, APL may, at its
option, either leave the Equipment or, at its expense,
remove all of the Equipment from the Equipment Site and
other Building areas and restore such areas to their
condition prior to installation. If APL is required to
remove any of the Equipment by any governmental agency
having jurisdiction, then APL shall at its expense
remove the applicable Equipment and restore the
affected areas to their condition prior to
installation.
(g)Access to Equipment Site. APL shall have the
right to enter upon the Equipment during normal
business hours and weekends and to construct, install,
operate and maintain the Equipment, until the Lease
terminates. APL may have access to the Equipment Site
for repairs, maintenance, or operation at all times
provided that Tenant shall use reasonable efforts to
provide Landlord with adequate advance notice thereof
(except in the event of an emergency). APL shall
designate in writing to Landlord the person or persons
authorized to have access to the Equipment. Upon such
designation and prior identification to Landlord's
Building security personnel, such authorized person(s)
may enter upon the portions of the Building where the
Equipment is located.
(h)Liability; Indemnity; Insurance. Landlord
shall have no obligation to design, install, construct,
use, operate, maintain, repair, replace or remove the
Equipment, nor shall Landlord have any other
responsibility or liability in connection therewith or
the operations thereof, except as expressly set forth
in this Section.
(i)Repair. APL acknowledges and agrees that it
accepts the Equipment Site in its "as-is" condition.
APL, at APL's sole cost and expense, shall keep the
Equipment in good condition and repair (except for
damage caused by the wilful acts or negligence of
Landlord or its agents or representatives), including
monthly maintenance and testing of the Equipment by
service companies reasonably approved by Landlord. If
the Generator Site is damaged as a result of APL's
failure to properly maintain the Equipment, APL, at
APL's sole cost and expense, shall promptly repair such
damage.
(j)Use of Generator Equipment. The Equipment
shall be used solely to provide back-up power to APL's
equipment used in the Building and shall not be used
for any other purposes whatsoever and shall not be used
by anyone other than APL.
Section 29.2. Use of Building Generator
Landlord shall permit APL to tie into the Building's
emergency generator (the "Building Generator") to
provide back-up power to APL's equipment used in the
Building solely as an emergency back-up to the
Equipment. If the electricity to the Building is
interrupted and APL's Equipment described in Section
29.1 is not functioning, APL may draw power from the
Building Generator. In any such event, APL shall
reimburse Landlord, on demand, for Landlord's
reasonable estimate of APL's pro-rata share of the cost
of the fuel used by the Building Generator while the
Building Generator was in operation. If Landlord
reasonably and in good faith determines that the
Building Generator should not be used by APL, for
safety reasons, or to ensure the proper operation of
the Building's life safety equipment, or because such
use violates any applicable law, then APL shall not be
permitted to use the Building Generator. In no event
will Landlord be liable to APL for any loss or damage
incurred by APL as a result of the unavailability of
the Building Generator.
Section 29.3. Evacuation. If Landlord closes the
Building and calls for its evacuation, or suggests that
the Building be evacuated for any reason, including
because of an electrical failure, and if one or more of
APL's employees, agents, or other persons acting on
behalf of or at the request of APL ("APL's Personnel")
remain in or later enters the Building or the Premises
during the evacuation period, then APL hereby waives
all claims against Landlord and Landlord's building
manager for any injury incurred by any of APL's
Personnel, or injury to property, due in whole or in
part to APL's failure to evacuate all of APL's
Personnel for the Premises and the Building. Further,
APL will hold Landlord and Landlord's building manager
harmless from and defend and indemnify them against any
and all claims, liabilities, damages or costs,
including reasonable attorney's fees, incurred by them
due to injury to APL's personnel or property as a
direct or indirect result of APL's Personnel remaining
in the Premises or the Building during such evacuation
period.
ARTICLE 30
Termination of Original Lease and Storage Space Lease
Notwithstanding the provisions of the Original
Lease to the contrary, and notwithstanding the
provisions of that certain Storage Space Lease, dated
November 26, 1990, between 1111 Associates, as
landlord, and APC, as tenant (the "Storage Lease"), to
the contrary, the Original Lease and the Storage Lease
shall terminate effective as of 12:00 midnight on the
date immediately preceding the date the term of this
Lease commences; provided, however, that neither
Landlord nor APL shall be relieved of any of its
obligations under the Original Lease or the Storage
Lease accruing prior to such termination of the
Original Lease and the Storage Lease and the parties's
indemnification obligations under the Original Lease
shall survive the termination of the Original Lease
with regard to events occurring prior to such
termination (and provided further that for the purposes
of this Article 30, Landlord shall be deemed to be the
landlord under the Original Lease and the Storage
Lease).
ARTICLE 31
Miscellaneous
Section 31.1. Words. The words "Landlord" and
"APL", as used in this Lease, shall include the plural
as well as the singular. Words used in one gender
herein shall include other genders, as the context may-
require.
Section 31.2. The covenants and conditions
contained in this Lease shall be binding upon and inure
to the benefit of the heirs, executors, administrators,
successors and assigns of the parties hereto. The
provisions of this Section 31.2 shall not be construed
to grant to APL any rights to assign or in any way
otherwise to transfer any rights under this Lease.
Section 31.3. Time is of the essence in each and
every provision of this Lease.
Section 31.4. Each conveyance by Landlord or the
successors in interest to the Landlord's interest in
the Building, Common Areas, APL Parcel or the Premises
prior to the expiration or earlier termination of this
Lease shall be subject to this Lease and shall relieve
the grantor of all further liability as Landlord,
except for such liability or obligations accruing prior
to the date of such conveyance. APL shall attorn to
Landlord's successors in interest, whether such
interest is acquired by sale, transfer, foreclosure,
deed in lieu of foreclosure or otherwise.
Section 31.5. Unenforceability If any
provision of this Lease or the application thereof to
any persons or circumstances is to any extent held to
be invalid or unenforceable, neither the remainder of
this Lease nor the application of such provision to
persons or circumstances other than those as to whom or
which it is held to be invalid or unenforceable shall
be affected thereby, and every provision of this Lease
shall be valid and enforceable to the fullest extent
permitted by law.
Section 31.6. Attorneys' Fees In the event of
any litigation or other proceedings (including
arbitration) involving the parties hereto for the
enforcement or interpretation of any of the provisions
of this Lease, or any right of either party hereto, the
unsuccessful party in such litigation or other
proceedings hereby agrees to pay to the successful
party all costs and expenses, including reasonable
attorneys' fees and court costs (whether incurred at
the trial, appellate or administrative levels),
incurred by the successful party in such litigation or
other proceedings, all of which may be included in, and
is a part of, any judgment or decision rendered in such
litigation or other proceedings
Section 31.7. This Lease shall be construed and
enforced in accordance with the laws of the State of
California.
Section 31.8. The terms of this Lease together
with all attached exhibits, schedules, addenda and
riders (which are hereby incorporated by this
reference) are intended by the parties hereto as a
final expression of their agreement with respect
to the subject matter hereof, and may not be
contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend
that this Lease constitutes the complete and exclusive
statement of its terms, and that no extrinsic evidence
whatsoever may be introduced in any proceedings, if any
(judicial or otherwise), other than by written
agreement, executed by all of the parties hereto or
their successors in interest.
Section 31.9. The headings of the various
articles of this Lease are intended solely for means of
reference, and are not intended for any purposes
whatsoever to modify, explain or place any construction
on any of the provisions of this Lease.
Section 31.10. The parties have executed,
acknowledged and delivered into escrow, concurrently
herewith, a short form memorandum of this Lease (the
"Memorandum of Lease") in the form attached hereto as
ExhibitE"K" and incorporated herein by reference and a
Subordination, Non-Disturbance and Attornment Agreement
(the "SNDA") in the form attached hereto as Exhibit "L"
and incorporated herein by reference. On the date
Landlord acquires title to the APL Parcel, the
Memorandum of Lease shall be recorded immediately
following recordation of the grant deed conveying the
APL Parcel to Landlord. The Memorandum of Lease shall
be recorded before any other documents, including,
without limitation, any loan documents.
Section 31.11. Except as otherwise expressly
provided therein, if either party is delayed or
hindered in or prevented from the performance of any
act required hereunder by reason of strikes, lockouts,
labor troubles, inability to procure materials, failure
of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like
nature not the fault of either party (financial
inability excepted), then performance of such act shall
be excused for the period of delay and the period of
the performance of any such act shall be extended for a
period equivalent to the period of such delay except
for delivery of possession of the Premises to APL.
Section 31.12. Reasonableness. Except as
otherwise provided herein, wherever the consent,
permission or approval of either party is required as a
prerequisite to the exercise of any right under this
Lease, such consent, permission or approval shall not
be unreasonably delayed or withheld. Whenever any
right of estimate, judgment, determination, decision,
or promulgation is vested in either party, such
estimate, judgment, determination, decision, or
promulgation shall be reasonable.
Section 31.13. Light and Air Easement. Any
diminution or shutting off of light, air or view by any
structure which is now or hereafter erected on lands
adjacent to the Building shall impose no liability on
Landlord. If any building is constructed on the APL
Block or in the Balance of City Center which is larger
or of a different shape than that shown on Exhibit "U"
to the Original Lease incorporated by reference, then
the effect, if any, on light, air or view resulting
from construction of such building shall be considered
in establishing the Annual Base Rent on each
subsequently occurring Adjustment Date.
Section 31.14. If APL remains in possession after
the expiration or sooner termination of this Lease,
Landlord shall be entitled to consequential damages
arising from such breach of the Lease by APL. Holding
over shall not be deemed an extension or renewal of the
Term.
Section 31.15. Nondiscrimination. APL
acknowledges and agrees that this Lease is subject to
the following nondiscrimination provisions contained in
documents recorded against the APL Parcel:
"The lessee herein covenants by and for himself,
his heirs, executors, administrators and assigns,
and all persons claiming under or through him and
this lease is made and accepted upon and subject
to the following conditions:
"That there shall be no discrimination against or
segregation of any person or group of persons on
account of race, color, creed, national origin,
ancestry, sex, sexual preference or age in the
leasing, subleasing, transferring, use, occupancy,
tenure or enjoyment of the premises herein leased
nor shall the lessee himself, or any person
claiming under or through him, establish or permit
any such practice or practices of discrimination
or segregation with reference to the selection,
location, number, use or occupancy of tenants,
sublessees, subtenants or vendees in the premises
herein leased."
APL shall conduct its activities on the Premises in
compliance with such provisions. Landlord shall
indemnify APL for any violation of the above quoted
provisions by Landlord, its agents, contractors,
officers or employees.
Section 31.16. Relationship of Parties. Landlord
is not and shall not, in any way or for any purpose,
become an agent or partner of APL in its business or
otherwise, or a joint venture, or a member of any joint
enterprise with APL solely as a result of this Lease.
Section 31.17. Legal Authority. Each individual
executing or attesting this Lease on behalf of either
party hereby covenants, warrants and represents:
(a) that he or she is duly authorized to
execute or attest and deliver this Lease on behalf of
such partnership or corporation in accordance with a
duly adopted resolution of the governing body of the
partnership or of the corporation's board of directors
and in accordance with such partnership's governing
documents and such partnership's governing documents
and such corporation's articles of incorporation or
charter and by-laws;
(b) that this Lease is binding upon such
partnership or corporation;
(c) that the entity upon whose behalf such
individual is executing or attesting this Lease is a
duly organized and legally existing corporation in good
standing in the State of California; and
(d) the execution and delivery of this Lease
by such entity shall not result in any breach of, or
constitute a default under, any mortgage, deed of
trust, lease, loan, credit agreement, partnership
agreement or other contract or instrument to which such
party is a party or by which such party may be bound.
Section 31.18. Merger. Notwithstanding the
acquisition by the same party (of-the-title-and
interest of both Landlord and APL under this Lease,
there shall never be a merger of the estates of
Landlord and APL under this Lease, but instead, the
separate estates, rights, duties and obligations of
Landlord and APL as existing hereunder, shall remain
unextinguished and continue separately, in full force
and effect until this Lease expires or otherwise
terminates in accordance with express provisions herein
contained.
Section 31.19. Quiet Enjoyment. As a material
part of the consideration for the execution of this
Lease by APL, Landlord covenants and agrees with APL
that APL shall and may peaceably and quietly have,
hold, and enjoy the Premises for the Term subject,
however, to the terms of this Lease.
Section 31.20. Best Efforts Defined. "Best
efforts" as used herein shall mean proceeding with due
diligence and in as economically and reasonable a
manner as commercially practicable.
Section 31.21. Waiver. If either party waives the
performance of any term, covenant or condition
contained in this Lease, such waiver shall not be
deemed to be a waiver of the term, covenant or
condition itself or a waiver of any subsequent breach
of the same or any other term, covenant, or condition
contained herein. Furthermore, the acceptance of Rent
by Landlord shall not constitute a waiver of any
preceding breach by APL of any term, covenant or
condition of this Lease, regardless of Landlord's
knowledge of such preceding breach at the time Landlord
accepts such Rent. Failure by Landlord to enforce any
of the terms, covenants or conditions of this Lease for
any length of time shall not be deemed to waive or to
decrease the right of Landlord to insist thereafter
upon strict performance by APL.
Section 31.22. Condition Precedent. This Lease
shall be ineffective for any purpose, and neither
Landlord nor APL shall have any obligation or liability
hereunder, if Landlord does not acquire the APL Parcel
and the Building on or before January 31, 1997.
Landlord shall have no liability to APL if Landlord for
any reason fails to acquire the APL Parcel and the
Building on or before such date and APL is not a third
party beneficiary of any purchase agreement that may
exist, now or hereafter, between Landlord and the
current owner of the Property.
IN WITNESS WHEREOF, the parties hereto have
executed this Lease on the dates set forth below and it
shall be effective and enforceable as of the later of
such dates.
Dated: 12/24/96 LANDLORD:
SHORENSTEIN REALTY INVESTORS THREE, L.P.,
a California limited partnership
By Shorenstein Company, L.P.,
a California limited partnership, Manager
By Shorenstein Management, Inc.,
a California corporation, its Agent
By /s/ John S. Grassi
John S. Grassi
Executive Vice President
APL:
Dated: December 11, 1996 APL LIMITED, a Delaware
corporation
By:
/s/ John S.Marston
Title:
ExecutiveVicePresident
By:
/s/Timothy J. Windle
Title:
Assistant Secretary
EXECUTION COPY
AMENDMENT NO. 3 TO CREDIT AGREEMENT
AMENDMENT dated as of April 5, 1996 to the Credit
Agreement dated as of March 25, 1994 as heretofore amended
(the "Agreement") among AMERICAN PRESIDENT COMPANIES, LTD.
(the "borrower"), the BANKS party thereto and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
WHEREAS, the Borrower wishes to modify the Fixed Charge
Coverage Covenant in Section 5.16 of the Agreement so that
the Rent included in calculations thereunder as of the end
of each of the first three fiscal quarters of 1996 will be
determined on a prospective basis for the next four
succeeding fiscal quarters rather than on a historical basis
for the previous four fiscal quarters; and
WHEREAS, the undersigned Banks are willing so to amend
the Agreement;
NOW, THEREFORE, the undersigned parties agree as
follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is
defined in the Agreement has the meaning assigned to such
term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each
other similar reference contained in the Agreement shall,
from and after date on which this Amendment becomes
effective as provided in Section 4 below, refer to the
Agreement as amended hereby.
SECTION 2. Consolidated Fixed Charge Coverage Ratio.
Section 5.16 of the Agreement is amended by adding the
following proviso at the end of the definition of
Consolidated Fixed Charge Coverage Ratio set forth therein:
provided that the Rent to be included in
calculating the Consolidated Fixed Charge Coverage
Ratio for the periods of four consecutive fiscal
quarters ending at the end of each of the first three
fiscal quarters of 1996 (each such quarter end being a
"date of determination") shall be the total rental
expense which the Borrower and its Consolidated
Subsidiaries are obligated to pay for the four
consecutive fiscal quarters immediately following the
date of determination, under all operating leases that
are in effect at the date of determination and have
initial noncancelable terms in excess of one year, all
calculated on a consolidated basis in the same manner
as total rental expense was calculated for purposes of
the last sentence of Note 6 to the Borrower's
consolidated financial statements for its fiscal year
ended December 30, 1994.
SECTION 3. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 4. Counterparts; Effectiveness. This
Amendment may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same
instrument. This amendment shall become effective on the
date when the Agent shall have received duly executed
counterparts hereof signed by the Borrower and the Required
Banks (or, in the case of any such party as to which an
executed counterpart shall not have been received, the Agent
shall have received telegraphic, telex, facsimile or other
written confirmation from such party of execution of a
counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above
written.
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ Thomas R.
Meier
Title: Assistant Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Diana H.
Imhof
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ James
Johnson
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Alicia
Szendiuch
Title: Director
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By /s/ Eiji
Tanaka
Title: Deputy General Manager
ABN AMRO NORTH AMERICA INC.,
AS AGENT FOR ABN AMRO BANK
By /s/ Daniel P.
Taylor
Title: Officer
By /s/ Diane D.
Waggoner
Title: Group V.P. & Director
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Karen J.
Andrews
Title: Vice President
1988 DEFERRED COMPENSATION PLAN OF
APL LIMITED: REGULAR DEFERRAL PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The 1988 Deferred Compensation Plan was adopted by
the Board on November 29, 1988. The 1988 Deferred
Compensation Plan was amended, effective November 9,
1996, to form two plans: the 1988 Deferred
Compensation Plan of APL Limited: Pure Excess Deferral
Plan (the "Pure Excess Deferral Plan") and the 1988
Deferred Compensation Plan of APL Limited: Regular
Deferral Plan (the "Plan"). This document constitutes
an amendment and restatement of the prior version of
the Plan. The Plan is intended to provide certain
Executives with an opportunity to defer payment of
their salaries or their bonus awards under the
Company's year-end bonus plan for executives and key
employees. In addition, the Plan provides for matching
contributions by the Company. It is expected that the
Plan will assist the Company in attracting and
retaining Executives of outstanding achievement and
ability.
SECTION 2. DEFINITIONS.
(a) "Base Salary" means the Executive's annual
base salary, as adjusted from time to time, before
reduction for deferrals pursuant to this Plan, the
Thrift Plan, the Profit-Sharing Plan or any other
arrangement for deferral established by the Company.
(b) "Beneficiary" means the person or persons
designated by the Executive in writing to receive
payment of any Deferral Account of the Executive in the
event of his or her death. If no designated
Beneficiary survives the Executive, the Executive's
estate shall be the Beneficiary. If a designated
Beneficiary survives the Executive but dies before
receiving payment of all amounts due him or her, the
remaining amounts shall be paid to such Beneficiary's
estate. An Executive may at any time elect to change
his or her Beneficiary designation. Any such change
shall be in writing and shall be effective upon receipt
by the Company prior to the death of the Executive.
(c) "Benefit Unit" means a period of one or more
Years designated by the Committee under Section 4(a) as
a period for which Executives may file separate
Election Forms.
(d) "Board" means the Board of Directors of the
Company, as constituted from time to time.
(e) "Bonus Award" means the amount of
compensation paid by the Company to an Executive as a
bonus award under the Company's year-end bonus plan for
executives and key employees.
(f) "Code" means the Internal Revenue Code of
1986, as amended.
(g) "Committee" means the Compensation Committee
of the Board.
(h) "Company" means American President Companies,
Ltd., a Delaware corporation.
(i) "Compensation Limit" means the compensation
limit described in section 401(a)(17) of the Code, as
it may be revised or adjusted from time to time.
(j) "Deferral Account" means the account
maintained on the books of account of the Company for
each Benefit Unit for which an Election Form was filed
by the Executive.
(k) "Early Retirement Date" means the later of
the date when the Executive (i) attains age 55 or (ii)
completes five years of service with the Company, as
determined by the Committee.
(l) "Election Form" means an Executive's written
election to defer compensation under the Plan during a
Benefit Unit.
(m) "Executive" means an executive or key
employee of the Company, or a subsidiary of the
Company, who is eligible to participate in the Plan
under Section 3.
(n) "Financial Hardship" means an unusual expense
or indebtedness that imposes an extraordinary or
unexpected financial burden upon the Executive, the
amount of which is not reasonably available from other
resources of the Executive.
(o) "In-Service Distribution" means a
distribution that occurs while the Executive remains in
employment with the Company or a subsidiary of the
Company.
(p) "Plan" means this 1988 Deferred Compensation
Plan of APL Limited: Regular Deferral Plan, as amended
from time to time.
(q) "Profit-Sharing Plan" means the American
President Profit-Sharing Plan, as amended from time to
time.
(r) "Pure Excess Deferral Plan" means the 1988
Deferred Compensation Plan of APL Limited: Pure Excess
Deferral Plan, as amended from time to time.
(s) "Retirement" means any termination of
employment on or after the Executive reaches his or her
(i) Early Retirement Date or (ii) Retirement Date.
(t) "Retirement Benefit" means the benefit
payable to an Executive after Retirement.
(u) "Retirement Date" means the date when the
Executive attains age 65.
(v) "Retirement Rate" means the 120-month rolling
average yield for 10-year United States Treasury Notes,
determined for each Year as of the December 1 that
precedes such Year. Notwithstanding the terms of the
previous sentence, the Retirement Rate for 1989 shall
be 10.66%.
(w) "Termination Benefit" means the lump sum
amount payable to an Executive who separates from
service with the Company and its subsidiaries before
Retirement.
(x) "Termination Rate" means 90% of the
Retirement Rate for the Year in question. The
termination rate for 1989 shall be 9.59%.
(y) "Thrift Plan" means the American President
Companies, Ltd. Profit-Sharing Thrift Plan for Salaried
Shoreside Employees, as amended from time to time.
(z) "Total and Permanent Disability" means that
the Executive is unable to engage in any substantial
gainful activity by reason of any medically
determinable physical or mental impairment that can be
expected to result in death or that has lasted, or can
be expected to last, for a continuous period of not
less than 12 months.
(aa) "Year" means a calendar year.
SECTION 3. ELIGIBILITY.
The Committee, acting upon the advice of the Chief
Executive Officer of the Company or upon its own
motion, shall determine which executives and key
employees will be eligible to participate in the Plan
as Executives. The Committee shall notify an
individual in writing when he or she is first
designated as an Executive for purposes of the Plan.
SECTION 4. ELECTION TO PARTICIPATE IN PLAN.
(a) Not less than 30 days before the beginning of
each Year, the Committee shall designate the Benefit
Unit or Benefit Units that begin with such Year.
(b) An Executive may elect to participate in the
Plan for a Benefit Unit by filing an Election Form for
Bonus Awards with the Company on or before the December
15 preceding the start of such Benefit Unit (on or
before December 30, 1988, in the case of Benefit Units
commencing on January 1, 1989). Such Election Form
shall apply to the Bonus Awards, if any, to be paid
during the Benefit Unit. The Election Form shall
specify the percentage or amount of the Executive's
Bonus Awards, if any, to be deferred during the Benefit
Unit as well as the time or times for payment of
Retirement Benefits and In-Service Distributions.
(c) An Executive may also elect to participate in
the Plan for a Benefit Unit by filing an Election Form
for Base Salary with the Company on or before the
December 15 preceding the start of such Benefit Unit.
Such Election Form shall apply to all Base Salaries to
be paid during the Benefit Unit. The Election Form
shall specify the percentage or amount of the
Executive's Base Salary to be deferred during the
Benefit Unit as well as the time or times for payment
of Retirement Benefits and In-Service Distributions.
In no event, however, shall an Executive defer more
than 88 percent of his or her Base Salary up to the
Compensation Limit, and 100 percent of his or her Base
Salary above the Compensation Limit.
(d) In the case of an individual who is newly
designated as an Executive under Section 3, the
Election Forms described in Subsections (b) and (c)
above may be filed for any Benefit Unit then in
progress not later than 30 days after the Committee's
written notice of eligibility was given.
(e) Except as otherwise expressly provided in the
Plan, all elections shall be irrevocable upon filing
with the Company on Election Forms. The foregoing
notwithstanding, elections of the time or times for
payment filed under this Section 4, and not requiring
payment before 1997, may be modified by filing a new
Election Form on or before December 20, 1996 that
requires payment no earlier than January 1, 1997, which
modified election shall be irrevocable upon filing of
the Election Form with the Company.
(f) A portion of the Base Salaries deferred
pursuant to the provisions of the preceding Subsections
of this Section 4 shall be deemed made under the Pure
Excess Deferral Plan and shall not be part of the
Eligible Employee's benefit under this Plan. Deferrals
shall be deemed made under the Pure Excess Deferral
Plan, and not this Plan, to the extent that such
deferrals come from Base Salary in excess of the
Compensation Limit but not in excess of the maximum
deferral percentage permitted under the terms of the
Profit-Sharing Plan or Thrift Plan (as applicable).
(g) Any other provision of the Plan
notwithstanding, the Committee, at its sole discretion,
may (i) reduce the level of deferral elections or (ii)
decline altogether to accept an Executive's deferral
election.
SECTION 5. MATCHING CONTRIBUTIONS.
(a) As of the close of each calendar month, the
Company shall credit the Deferral Account of each
Executive who is eligible to receive matching
contributions under the Thrift Plan or the
Profit-Sharing Plan with a matching contribution under
this Plan. The amount of the matching contribution
under this Plan shall be equal to:
(i) The sum of (A) the "salary deferrals"
and "basic contributions" made by the Executive
under the Thrift Plan for the calendar month plus
(B) the "salary deferrals" and "basic employee
contributions" made by the Executive under the
Profit-Sharing Plan for the calendar month plus
(C) the amount of Base Salary deferred by the
Executive under Section 4(c) of this Plan for the
calendar month, but only to the extent that such
sum does not exceed six percent of the Executive's
Base Salary for the calendar month; minus
(ii) The aggregate amount of the "matching
contributions" allocated to the Executive under
the Thrift Plan or the Profit-Sharing Plan for the
calendar month.
(b) As of the close of each calendar year, the
Company shall deduct from each Executive's Deferral
Account an amount equal to the "basic contributions"
and "discretionary contributions" allocated to him or
her under the Profit-Sharing Plan for such year.
(c) The foregoing Subsections (a) and (b)
notwithstanding, a portion of the matching contribution
determined in Subsection (a) above shall be credited
under the Pure Excess Plan and shall not be part of the
Eligible Employee's benefit under this Plan. The
matching contribution shall be credited under the Pure
Excess Plan, and not this Plan, to the extent that such
matching contribution relates to deferrals from Base
Salary in excess of the Compensation Limit.
(d) Subsection (a) above notwithstanding,
matching contributions credited in lieu of
contributions under the Thrift Plan (and the interest
credited thereon) shall be distributed to the Executive
only to the extent that such matching contributions
(and interest) would be vested under the Thrift Plan.
The balance, if any, of such matching contributions
(and interest) shall be forfeited upon the termination
of the Executive's employment.
(e) Interest credits on any matching contribution
shall commence as of the day next following the close
of the calendar month to which such contribution
relates.
SECTION 6. ESTABLISHMENT OF DEFERRAL ACCOUNTS.
(a) In the event a Bonus Award is made to an
Executive who has duly filed an Election Form with
respect to Bonus Awards to be paid during a Benefit
Unit and for whom no Deferral Account has been
established for such Benefit Unit, the Company shall
establish a Deferral Account for the Executive for such
Benefit Unit. The Deferral Account for a Benefit Unit
shall be credited with an amount equal to that portion
of each Bonus Award that would have been payable to the
Executive during such Benefit Unit but for the terms of
the deferral election. A Bonus Award shall be credited
to the Executive's Deferral Account as of the first day
of the month next following the date of such Bonus
Award, and interest credits on such Bonus Award shall
commence as of such day.
(b) In the case of an Executive who has duly
filed an Election Form with respect to Base Salaries to
be paid during a Benefit Unit and for whom no Deferral
Account has been established for such Benefit Unit, the
Company shall establish a Deferral Account for the
Executive for such Benefit Unit. The Deferral Account
for a Benefit Unit shall be credited with an amount
equal to that portion of each Base Salary payment that
would have been payable to the Executive during such
Benefit Unit but for the terms of the deferral election
and that is deferred under this Plan pursuant to
Section 4 above. Deferred Base Salary shall be
credited to the Executive's Deferral Account as of the
pay date for the deferred Base Salary. Interest
credits on deferred Base Salary shall commence as of
the day next following the close of the month in which
such deferred Base Salary is credited to the Deferral
Account.
SECTION 7. INTEREST CREDITS AND DISTRIBUTION
EVENTS.
(a) Interest shall be credited to all Deferral
Accounts, commencing at the times specified above, at
the rate of 1/12th of the applicable rate each month
and shall be compounded at the end of each Year.
(b) If an Executive separates from employment
with the Company and its subsidiaries for reasons other
than death, Total and Permanent Disability or
Retirement, interest on his or her Deferral Accounts
shall be credited at the Termination Rate and, any
elections the Executive may have made with respect to
the timing of the payout of his or her Deferral
Accounts notwithstanding, such Deferral Accounts shall
be paid in a lump sum on the first day of the calendar
quarter next following the date of termination.
(c) If an Executive separates from employment
with the Company and its subsidiaries by reason of
Retirement, interest on his or her Deferral Accounts
shall be credited at the Retirement Rate and such
Deferral Accounts shall be paid in the manner specified
by the Executive in his or her Election Forms.
(d) If an Executive suffers a Total and Permanent
Disability prior to Retirement, deferrals and matching
contributions shall continue to be credited to the
Executive's Deferral Accounts as long as Base Salary or
Bonus Award payments are continued during the period of
Total and Permanent Disability in accordance with any
Election Form executed prior to the onset of the Total
and Permanent Disability. When long-term disability
benefits commence, the disabled Executive's Deferral
Accounts shall be paid over a five-year period on a
quarterly basis, commencing on the first day of the
calendar quarter coinciding with or next following
commencement of long-term disability benefits.
Interest on the Deferral Accounts of a disabled
Executive shall be credited at the Retirement Rate.
(e) If an Executive dies prior to his or her
Early Retirement Date and Retirement Date, interest on
the deceased Executive's Deferral Accounts shall be
credited at the Retirement Rate. Such Deferral
Accounts shall be paid to the Executive's Beneficiary
in a lump sum on the first day of the calendar quarter
next following the date of death.
(f) If an Executive dies after his or her Early
Retirement Date or Retirement Date but prior to
Retirement, the deceased Executive's Deferral Accounts
shall be credited with interest at the Retirement Rate
and shall be paid to the Executive's Beneficiary in the
manner elected by the Executive, as if the Executive
had retired on the date of his or her death.
(g) If an Executive dies after Retirement
Benefits have commenced, the previously unpaid benefits
shall continue to be paid as scheduled.
(h) If an Executive elects to receive an In-
Service Distribution on his or her Election Form, such
distribution shall be made in accordance with the
Executive's Election Form; provided, however, that (i)
no distribution shall be made less than one year after
commencement of the Benefit Unit to which the
In-Service Distribution election applies and (ii) the
total amount distributed shall not exceed the value of
the Deferral Account for the Benefit Unit to which the
In-Service Distribution election relates, including
interest credited thereto. For purposes of the
previous sentence, interest shall be credited at the
Termination Rate for In-Service Distributions made
prior to an Executive's Early Retirement Date and
Retirement Date and at the Retirement Rate for
In-Service Distributions made after an Executive's
Early Retirement Date or Retirement Date. If an
Executive received an In-Service Distribution to which
interest was credited at the Termination Rate and
subsequently becomes entitled to have interest credited
to his or her Deferral Accounts at the Retirement Rate,
then the Executive's Deferral Accounts shall be
recalculated by crediting interest on all amounts
received as an In-Service Distribution at the
Retirement Rate up to the time of the In-Service
Distribution. Any resulting increase in the value of
the Executive's Deferral Accounts as of the date of the
In-Service Distribution shall be credited with interest
at the Retirement Rate for the period from the date of
the In-Service Distribution to the date when the
Deferral Accounts are distributed.
SECTION 8. FORM AND TIME OF PAYMENT OF ACCOUNTS.
(a) Subject to Section 7, payments from each
Deferral Account shall be made only in cash and shall
consist of lump sums or quarterly installments, or a
combination of lump sums and quarterly installments, as
elected by the Executive in the applicable Election
Form. Installments of Retirement Benefits shall be
paid on the first day of each calendar quarter.
Installments of Retirement Benefits shall not be paid
over a period exceeding 15 years. The amount of the
installments shall be redetermined each Year by
assuming that interest will be credited on the unpaid
balance at the Retirement Rate for the Year in question
for the remainder of all installment payments.
(b) In the event of an Executive's Total and
Permanent Disability or Financial Hardship, the
Committee may determine in its sole discretion that
payments from one or more of the Executive's Deferral
Accounts shall be made at an earlier date than the time
or times specified on the Executive's Election Forms.
(c) Upon application of an Executive, the
Committee may determine in its sole discretion that
payments from one or more of the Executive's Deferral
Accounts shall be made at an earlier date than the time
or times specified on the Executive's Election Forms
(even in the absence of a Total and Permanent
Disability or Financial Hardship). All distributions
under this Subsection (c) shall be reduced by a penalty
equal to six percent of the amount otherwise
distributable, which penalty shall be forfeited to the
Company. An Executive who has received a distribution
under this Subsection (c) thereafter shall not make
additional deferrals under the Plan or under the Pure
Excess Deferral Plan.
SECTION 9. NONASSIGNABILITY OF INTERESTS.
The interest and property rights of any Executive
under the Plan shall not be subject to option nor be
assignable either by voluntary or involuntary
assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment or
other creditor's process, and any act in violation of
this Section 9 shall be void.
SECTION 10. LIMITATION OF RIGHTS.
(a) Nothing in the Plan shall be construed to
give any Executive any right to be granted a Bonus
Award.
(b) Neither the Plan nor the deferral of any Base
Salary or Bonus Award, nor any other action taken
pursuant to the Plan, shall constitute or be evidence
of any agreement or understanding, express or implied,
that the Company or a subsidiary will employ an
Executive for any period of time, in any position or at
any particular rate of compensation.
SECTION 11. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee.
The Committee shall have full power and authority to
administer and interpret the Plan, to establish
procedures for administering the Plan and to take any
and all necessary actions in connection therewith. The
Committee's interpretation and construction of the Plan
shall be conclusive and binding on all persons.
SECTION 12. CLAIMS AND INQUIRIES.
(a) Application for Benefits. Applications for
benefits and inquiries concerning the Plan (or
concerning present or future rights to benefits under
the Plan) shall be submitted to the Company in writing
and addressed to the Chairman of the Committee. An
application for benefits shall be submitted on the
prescribed form and shall be signed by the Executive
or, in the case of a benefit payable after his or her
death, by the Beneficiary.
(b) Denial of Application. In the event that an
application for benefits is denied in whole or in part,
the Chairman of the Committee shall notify the
applicant in writing of the denial and of the right to
a review of the denial. The written notice shall set
forth, in a manner calculated to be understood by the
applicant, specific reasons for the denial, specific
references to the provisions of the Plan on which the
denial is based, a description of any information or
material necessary for the applicant to perfect the
application, an explanation of why the material is
necessary, and an explanation of the review procedure
under the Plan. The written notice shall be given to
the applicant within a reasonable period of time (not
more than 90 days) after the Chairman of the Committee
received the application, unless special circumstances
require further time for processing and the applicant
is advised of the extension. In no event shall the
notice be given more than 180 days after the Chairman
of the Committee received the application.
(c) Review Panel. The Committee shall serve as
the "Review Panel" under the Plan. The Review Panel
shall have the authority to act with respect to any
appeal from a denial of benefits or a determination of
benefit rights.
(d) Request for Review. An applicant whose
application for benefits was denied in whole or in
part, or the applicant's duly authorized
representative, may appeal from the denial by
submitting to the Review Panel a request for a review
of the application within 90 days after receiving
written notice of the denial from the Chairman of the
Committee. The Chairman of the Committee shall give
the applicant or his or her representative an
opportunity to review pertinent materials, other than
legally privileged documents, in preparing the request
for a review. The request for a review shall be in
writing and addressed to the Committee. The request
for a review shall set forth all of the grounds on
which it is based, all facts in support of the request,
and any other matters that the applicant deems
pertinent. The Review Panel may require the applicant
to submit such additional facts, documents or other
material as it may deem necessary or appropriate in
making its review.
(e) Decision on Review. The Review Panel shall
act on each request for a review within 60 days after
receipt, unless special circumstances require further
time for processing and the applicant is advised of the
extension. In no event shall the decision on review be
rendered more than 120 days after the Review Panel
received the request for a review. The Review Panel
shall give prompt written notice of its decision to the
applicant. In the event that the Review Panel confirms
the denial of the application for benefits in whole or
in part, the notice shall set forth, in a manner
calculated to be understood by the applicant, the
specific reasons for the decision and specific
references to the provisions of the Plan on which the
decision is based.
(f) Rules and Interpretations. The Review Panel
shall adopt such rules, procedures and interpretations
of the Plan as it deems necessary or appropriate in
carrying out its responsibilities under this Section
12.
(g) Exhaustion of Remedies. No legal action for
benefits under the Plan shall be brought unless and
until the claimant (i) has submitted a written
application for benefits in accordance with Subsection
(a) above, (ii) has been notified by the Chairman of
the Committee that the application is denied, (iii) has
filed a written request for a review of the application
in accordance with Subsection (d) above and (iv) has
been notified in writing that the Review Panel has
affirmed the denial of the application; provided,
however, that legal action may be brought after the
Chairman of the Committee or the Review Panel has
failed to take any action on the claim within the time
prescribed by Subsections (b) and (e) above,
respectively.
SECTION 13. MISCELLANEOUS PROVISIONS.
(a) An Executive who has agreed to defer a stated
portion of Base Salaries or Bonus Awards over more than
one Year in a Benefit Unit on a valid Election Form may
accelerate the elected deferrals by a separate
election. The duration of such Benefit Unit shall be
reduced accordingly. Any acceleration of deferrals
shall be made prior to the commencement of the Year in
which the deferred compensation to be accelerated
otherwise would be paid.
(b) The minimum annual deferral of Base Salary
and Bonus Awards shall be $2,000.
(c) Any other provision of the Plan
notwithstanding, if an Executive's Deferral Account
after commencement of Retirement Benefits is reduced in
value to $50,000 or less, or if a Deferral Account
established for a Beneficiary becomes worth $50,000 or
less, the Committee may elect to make a lump sum
distribution of any such Deferral Account.
SECTION 14. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may amend, suspend or terminate the Plan
at any time, except that no amendment shall
retroactively change either the Termination Rate or the
Retirement Rate for the period prior to the date of the
amendment.
SECTION 15. CHOICE OF LAW.
The validity, interpretation, construction and
performance of the Plan shall be governed by the
Employee Retirement Income Security Act of 1974 and, to
the extent they are not preempted, by the laws of the
State of California.
SECTION 16. EXECUTION.
To record the amendment and restatement of the
Plan, the Company has caused its duly authorized
officer to affix the corporate name hereto.
APL LIMITED
By: /s/Timothy J. Windle
Its: Assistant Secretary
1988 DEFERRED COMPENSATION PLAN OF
APL LIMITED: PURE EXCESS DEFERRAL PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The 1988 Deferred Compensation Plan was adopted by
the Board on November 29, 1988. The 1988 Deferred
Compensation Plan was amended, effective November 9,
1996, to form two plans: the 1988 Deferred
Compensation Plan of APL Limited: Pure Excess Deferral
Plan (the "Plan") and the 1988 Deferred Compensation
Plan of APL Limited: Regular Deferral Plan (the
"Regular Deferral Plan"). This document constitutes
the Plan, as adopted. The Plan is intended to provide
certain Executives with an opportunity to defer payment
of their salaries. In addition, the Plan provides for
matching contributions by the Company. It is expected
that the Plan will assist the Company in attracting and
retaining Executives of outstanding achievement and
ability.
The Plan shall be administered and operated in
accordance with the provisions of the Regular Deferral
Plan, and capitalized terms in this Plan shall have the
same meaning as in the Regular Deferral Plan, except to
the extent provided in this document.
SECTION 2. DEFINITIONS.
Except as follows, the terms of Section 2 of this
Plan are the same as the terms of Section 2 of the
Regular Deferral Plan:
(a) "Plan" means this 1988 Deferred Compensation
Plan of APL Limited: Pure Excess Deferral Plan, as
amended from time to time.
(b) "Regular Deferral Plan" means the 1988
Deferred Compensation Plan of APL Limited: Regular
Deferral Plan, as amended from time to time.
SECTION 3. ELIGIBILITY.
The terms of Section 3 of this Plan are the same
as the terms of Section 3 of the Regular Deferral Plan.
SECTION 4. ELECTION TO PARTICIPATE IN PLAN.
The terms of Section 4 of this Plan are the same
as the terms of Section 4 of the Regular Deferral Plan,
except that no deferrals of Bonus Awards may be made
under this Plan and a deferral from Base Salary may be
made under this Plan only in accordance with the
following sentence. Deferrals from Base Salary made
pursuant to the provisions of Section 4 of the Regular
Deferral Plan shall be deemed made under this Plan, and
not the Regular Deferral Plan, to the extent that such
deferrals come from Base Salary in excess of the
Compensation Limit but not in excess of the maximum
deferral percentage permitted under the terms of the
Profit-Sharing Plan or Thrift Plan (as applicable). No
other deferrals from Base Salary may be made under this
Plan.
SECTION 5. MATCHING CONTRIBUTIONS.
The terms of Section 5 of this Plan are the same
as the terms of Section 5 of the Regular Deferral Plan,
except that a matching contribution shall be credited
under this Plan only in accordance with the following
sentence. A matching contribution credited pursuant to
the provisions of Section 5 of the Regular Deferral
Plan shall be credited under this Plan, and not under
the Regular Deferral Plan, to the extent that such
matching contribution relates to deferrals from Base
Salary in excess of the Compensation Limit. No other
matching contributions shall be credited under this
Plan.
SECTION 6. ESTABLISHMENT OF DEFERRAL ACCOUNTS.
The terms of Section 6 of this Plan are the same
as the terms of Section 6 of the Regular Deferral Plan,
except that no amount shall be credited to a Deferral
Account under this Plan with respect to the deferral of
Bonus Awards.
SECTION 7. INTEREST CREDITS AND DISTRIBUTION
EVENTS.
The terms of Section 7 of this Plan are the same
as the terms of Section 7 of the Regular Deferral Plan,
except that references to Bonus Awards are inapplicable
to this Plan.
SECTION 8. FORM AND TIME OF PAYMENT OF
ACCOUNTS.
The terms of Section 8 of this Plan are the same
as the terms of Section 8 of the Regular Deferral Plan,
except that the reference in Subsection (c) to the
"Pure Excess Deferral Plan" shall read in this Plan as
a reference to the "Regular Deferral Plan."
SECTION 9. NONASSIGNABILITY OF INTERESTS.
The terms of Section 9 of this Plan are the same
as the terms of Section 9 of the Regular Deferral Plan.
SECTION 10. LIMITATION OF RIGHTS.
The terms of Section 10 of this Plan are the same
as the terms of Section 10 of the Regular Deferral
Plan, except that references to the deferral of Bonus
Awards are inapplicable to this Plan.
SECTION 11. ADMINISTRATION OF THE PLAN.
The terms of Section 11 of this Plan are the same
as the terms of Section 11 of the Regular Deferral
Plan.
SECTION 12. CLAIMS AND INQUIRIES.
The terms of Section 12 of this Plan are the same
as the terms of Section 12 of the Regular Deferral
Plan.
SECTION 13. MISCELLANEOUS
PROVISIONS.
The terms of Section 13 of this Plan are the same
as the terms of Section 13 of the Regular Deferral
Plan, except that references to Bonus Awards are
inapplicable to this Plan.
SECTION 14. AMENDMENT OR TERMINATION OF THE
PLAN.
The terms of Section 14 of this Plan are the same
as the terms of Section 14 of the Regular Deferral
Plan.
SECTION 15. CHOICE OF LAW.
The terms of Section 15 of this Plan are the same
as the terms of Section 15 of the Regular Deferral
Plan.
SECTION 16. EXECUTION.
To record the adoption of the Plan, the Company
has caused its duly authorized officer to affix the
corporate name hereto.
APL LIMITED
By: /s/Timothy J. Windle
Its: Assistant Secretary
1995 DEFERRED COMPENSATION PLAN OF
APL LIMITED: REGULAR DEFERRAL PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The 1995 Deferred Compensation Plan was adopted by
the Board on December 9, 1994, effective as of January
1, 1995. The 1995 Deferred Compensation Plan was
amended, effective November 9, 1996, to form two plans:
the 1995 Deferred Compensation Plan of APL Limited:
Pure Excess Deferral Plan (the "Pure Excess Deferral
Plan") and the 1995 Deferred Compensation Plan of APL
Limited: Regular Deferral Plan (the "Plan"). This
document constitutes an amendment and restatement of
the prior version of the Plan. The Plan is intended to
provide Executives with an opportunity to defer a
portion of their salaries or their bonus awards under
the Company's year-end bonus plan for executives and
key employees. The Plan is also intended to provide
High-Paid Employees with an opportunity to defer a
portion of their salaries in excess of the Compensation
Limit imposed by the Code on the SMART Plan. The Plan
provides for matching contributions by the Company. It
is expected that the Plan will assist the Company in
attracting and retaining employees of outstanding
achievement and ability.
SECTION 2. DEFINITIONS.
(a) "Base Salary" means the Eligible Employee's
annual base salary (as adjusted from time to time) plus
commissions, before reduction for deferrals pursuant to
this Plan, the SMART Plan, the American President
Companies, Ltd. FlexPlan or any other arrangement for
deferral established by the Company.
(b) "Beneficiary" means the person or persons
designated by the Eligible Employee in writing to
receive payment of any Deferral Account of the Eligible
Employee in the event of his or her death. If no
designated Beneficiary survives the Eligible Employee,
the Eligible Employee's estate shall be the
Beneficiary. If a designated Beneficiary survives the
Eligible Employee but dies before receiving payment of
all amounts due him or her, the remaining amounts shall
be paid to such Beneficiary's estate. An Eligible
Employee may at any time elect to change his or her
Beneficiary designation. Any such change shall be in
writing and shall be effective upon receipt by the
Company prior to the death of the Eligible Employee.
(c) "Board" means the Board of Directors of the
Company, as constituted from time to time.
(d) "Bonus Award" means the amount of
compensation paid by the Company to an Executive as a
bonus award under the Company's year-end bonus plan for
executives and key employees.
(e) "Change in Control" means the occurrence of
any of the following events:
(i) A change in control required to be
reported pursuant to Item 6(e) of Schedule
14A of Regulation 14A under the Securities
Exchange Act of 1934, as amended;
(ii) A change in the composition of the
Board, as a result of which fewer than two-
thirds of the incumbent directors are
directors who either (i) had been directors
of the Company 24 months prior to such change
or (ii) were elected, or nominated for
election, to the Board with the affirmative
votes of at least a majority of the directors
who had been directors of the Company 24
months prior to such change and who were
still in office at the time of the election
or nomination; or
(iii) Any "person" (as such term is
used in sections 13(d) and 14(d) of such Act)
is or becomes the beneficial owner, directly
or indirectly, of securities of the Company
representing 20 percent or more of the
combined voting power of the Company's then
outstanding securities ordinarily (and apart
from rights accruing under special
circumstances) having the right to vote at
elections of directors (the "Base Capital
Stock"); provided, however, that any change
in the relative beneficial ownership of
securities of any person resulting solely
from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's
ownership of securities, shall be disregarded
until such person increases in any manner,
directly or indirectly, such person's
beneficial ownership of any securities of the
Company.
(f) "Code" means the Internal Revenue Code of
1986, as amended.
(g) "Committee" means the Compensation Committee
of the Board.
(h) "Compensation Limit" means the compensation
limit described in section 401(a)(17) of the Code, as
it may be revised or adjusted from time to time. For
1995 and 1996, such compensation limit is $150,000; for
1997 it is $160,000.
(i) "Company" means APL Limited, a Delaware
corporation.
(j) "Deferral Account" means an account
maintained on the books of account of the Company for
an Eligible Employee under the Plan.
(k) "Election Form" means an Eligible Employee's
written election to defer compensation under the Plan.
In the case of a High-Paid Employee, such election may
include a written election filed under the SMART Plan.
(l) "Eligible Employee" means an Executive or a
High-Paid Employee.
(m) "Executive" means an executive or key
employee of the Company, or a subsidiary of the
Company, who is eligible to participate in the Plan
under Section 3(a), other than an executive or key
employee who has received a distribution under Section
8(c).
(n) "Financial Hardship" means an unanticipated
emergency caused by an event that is beyond the
Eligible Employee's control and that would result in
severe financial hardship to the Eligible Employee if
an early withdrawal were not permitted.
(o) "High-Paid Employee" means an employee of the
Company, or a subsidiary of the Company, whose Base
Salary since the beginning of the Year has exceeded the
Compensation Limit, other than an employee who has
received a distribution under Section 8(c).
(p) "In-Service Distribution" means a
distribution that occurs while the Eligible Employee
remains in employment with the Company or a subsidiary
of the Company, including (without limitation) a
distribution that occurs by reason of a Change in
Control.
(q) "Interest Rate" means the 120-month rolling
average yield for 10-year United States Treasury Notes,
determined for each Year as of the December 1 that
precedes such Year.
(r) "Plan" means this 1995 Deferred Compensation
Plan of APL Limited: Regular Deferral Plan, as amended
from time to time.
(s) "Pure Excess Deferral Plan" means the 1995
Deferred Compensation Plan of APL Limited: Pure Excess
Deferral Plan, as amended from time to time.
(t) "Post-Termination Distribution" means a
distribution that occurs after the Eligible Employee
has separated from employment with the Company or a
subsidiary of the Company for any reason.
(u) "Retirement" means a termination of
employment on or after the earlier of:
(i) The date when the Eligible Employee
attains age 65; or
(ii) The earliest date when the Eligible
Employee has both (A) attained age 55 and (B)
completed five years of service with the Company
and its subsidiaries, as determined by the
Committee.
(v) "SMART Plan" means the APL Limited SMART
Plan, as amended from time to time.
(w) "Total and Permanent Disability" means that
the Eligible Employee is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be
expected to result in death or that has lasted, or can
be expected to last, for a continuous period of not
less than 12 months.
(x) "Year" means a calendar year.
SECTION 3. ELIGIBILITY.
(a) Executives. The Committee, acting upon the
advice of the Chief Executive Officer of the Company or
upon its own motion, shall determine which executives
and key employees will be eligible to participate in
the Plan as Executives. The Committee shall notify an
individual in writing when he or she is first
designated as an Executive for purposes of the Plan.
(b) High-Paid Employees. High-Paid Employees
automatically become eligible to participate in the
Plan when their Base Salary for the Year exceeds the
Compensation Limit for the Year.
SECTION 4. ELECTION TO PARTICIPATE IN PLAN.
(a) Deferral of Bonus Awards by Executives. An
Executive may elect to participate in the Plan by
filing an Election Form for Bonus Awards with the
Company on or before December 20 of any Year. Such
Election Form shall apply solely to the Bonus Award, if
any, to be paid during the next following Year. The
Election Form shall specify the percentage or amount of
the Executive's Bonus Award, if any, to be deferred as
well as the time or times for payment of Post-
Termination Distributions and In-Service Distributions.
(b) Deferral of Base Salary by Executives. An
Executive may also elect to participate in the Plan by
filing an Election Form for Base Salary with the
Company on or before December 20 of any Year. Such
Election Form shall apply to Base Salaries paid during
subsequent Years. The Election Form shall specify the
percentage or amount of the Executive's Base Salary to
be deferred as well as the time or times for payment of
Post-Termination Distributions and In-Service
Distributions. In no event, however, shall an
Executive defer more than 88 percent of his or her Base
Salary up to the Compensation Limit and 100 percent of
his or her Base Salary above the Compensation Limit.
An Executive may change his or her deferral percentage
(or reduce it to zero) or specify a different time or
times for payment of Post-Termination Distributions and
In-Service Distributions by filing a new Election Form
for Base Salary with the Company on or before December
20 of any Year. The new Election Form shall apply to
Base Salaries paid during subsequent Years.
(c) New Executives. In the case of an individual
who is newly designated as an Executive under
Section 3(a), the Election Forms described in
Subsections (a) and (b) above may be filed not later
than 30 days after the Committee's written notice of
eligibility was given. The Election Forms shall apply
solely to the Bonus Award and Base Salaries paid after
such Election Forms are filed.
(d) High-Paid Employees. A High-Paid Employee
who is not an Executive shall only be eligible to make
deferrals from his or her Base Salary (and not from
Bonus Awards). A High-Paid Employee who is not already
participating as an Executive shall automatically
commence participating in the Plan when his or her Base
Salary for the Year equals the Compensation Limit for
the Year, but only if he or she has filed with the
Company an Election Form under the SMART Plan that
provides for participation in this Plan. The High-Paid
Employee's initial deferral percentage under this Plan
shall be equal to the deferral percentage elected under
the SMART Plan, but in no event more than six percent
of Base Salary. A High-Paid Employee may change his or
her deferral percentage (or reduce it to zero) by
filing a new Election Form with the Company. The new
Election Form shall take effect as soon as reasonably
practicable after it has been filed. In addition, a
High-Paid Employee who is not already participating as
an Executive shall file with the Company, not more than
30 days after participation commences, an Election Form
that specifies the time or times for payment of Post-
Termination Distributions and In-Service Distributions.
A High-Paid Employee may specify a different time or
times for payment of Post-Termination Distributions and
In-Service Distributions by filing a new Election Form
with the Company on or before December 20 of any Year.
The new Election Form shall apply to Base Salaries paid
during subsequent Years.
(e) Elections Irrevocable. Except as otherwise
expressly provided in the Plan, all elections shall be
irrevocable upon filing with the Company on Election
Forms. The foregoing notwithstanding, elections of the
time or times for payment filed under this Section 4
prior to 1996, and not requiring payment before 1997,
may be modified by filing a new Election Form on or
before December 20, 1996 that requires payment no
earlier than January 1, 1997, which modified election
shall be irrevocable upon filing of the Election Form
with the Company.
(f) Pure Excess Deferral Plan. A portion of the
Base Salary deferred pursuant to the provisions of the
preceding Subsections of this Section 4 shall be deemed
made under the Pure Excess Deferral Plan and shall not
be part of the Eligible Employee's benefit under this
Plan. Deferrals shall be deemed made under the Pure
Excess Deferral Plan, and not this Plan, to the extent
that such deferrals come from Base Salary in excess of
the Compensation Limit but not in excess of the maximum
deferral percentage permitted under the terms of the
SMART Plan. (For 1995 and 1996, such SMART Plan
maximum deferral percentage is 12%.)
SECTION 5. MATCHING CONTRIBUTIONS.
(a) Amount of Matching Contributions. As of the
close of each calendar month, the Company shall credit
the Deferral Account of each Eligible Employee who is
eligible to receive matching contributions under the
SMART Plan with a matching contribution under this
Plan. The amount of the matching contribution under
this Plan shall be equal to:
(i) The sum of (A) the "salary deferrals"
and "after-tax contributions" made by the Eligible
Employee under the SMART Plan for the calendar
month plus (B) the amount of Base Salary deferred
by the Eligible Employee under Section 4 of this
Plan for the calendar month, but only to the
extent that such sum does not exceed six percent
of the Eligible Employee's Base Salary for the
calendar month; minus
(ii) The aggregate amount of the "matching
contributions" allocated to the Eligible Employee
under the SMART Plan for the calendar month.
The foregoing notwithstanding, a portion of the
matching contribution determined above shall be
credited under the Pure Excess Deferral Plan and shall
not be part of the Eligible Employee's benefit under
this Plan. The matching contribution shall be credited
under the Pure Excess Deferral Plan, and not this Plan,
to the extent that such matching contribution relates
to deferrals from Base Salary in excess of the
Compensation Limit.
(b) Vesting. Subsection (a) above
notwithstanding, matching contributions credited in
lieu of contributions under the SMART Plan (and the
interest credited thereon) shall be distributed to the
Eligible Employee only to the extent that such matching
contributions (and interest) would be vested under the
SMART Plan. The balance, if any, of such matching
contributions (and interest) shall be forfeited upon
the termination of the Eligible Employee's employment.
(c) Interest. Interest credits on any matching
contribution shall commence as of the day next
following the close of the calendar month to which such
contribution relates.
SECTION 6. DEFERRAL ACCOUNTS.
(a) Establishment of Deferral Accounts. The
Company shall establish on its books one or more
Deferral Accounts for each Eligible Employee.
(b) Crediting of Bonus Awards. The appropriate
Deferral Account of an Executive shall be credited with
an amount equal to that portion of each Bonus Award
which would have been payable to such Executive but for
the terms of his or her deferral election. A Bonus
Award shall be credited to the Deferral Account as of
the first day of the month next following the date of
such Bonus Award, and interest credits on such Bonus
Award shall commence as of such day.
(c) Crediting of Base Salaries. The appropriate
Deferral Account of an Eligible Employee shall be
credited with an amount equal to that portion of each
Base Salary payment that would have been payable to
such Eligible Employee but for the terms of his or her
deferral election and that is deferred under this Plan
pursuant to Section 4 above. Deferred Base Salary
shall be credited to the Deferral Account as of the pay
date for the deferred Base Salary. Interest credits on
deferred Base Salary shall commence as of the day next
following the close of the month in which such deferred
Base Salary was credited to the Deferral Account.
SECTION 7. INTEREST CREDITS AND DISTRIBUTION
EVENTS.
(a) Interest Rate. Interest shall be credited
each month to all Deferral Accounts, commencing at the
times specified in Section 6, at the rate of 1/12th of
the Interest Rate. Interest shall be compounded at the
end of each Year.
(b) Distributions Before Retirement. If an
Eligible Employee separates from employment with the
Company and its subsidiaries for reasons other than
death or Retirement, then his or her Deferral Accounts
shall be paid in a lump sum on the first day of the
calendar quarter next following the date of termination
(without regard to the Eligible Employee's elections).
(c) Distributions After Retirement. If an
Eligible Employee separates from employment with the
Company and its subsidiaries by reason of Retirement,
then his or her Deferral Accounts shall be paid in the
manner specified in his or her Election Forms.
(d) Death Before Retirement Eligibility. If an
Eligible Employee dies before becoming eligible for
Retirement, then his or her Deferral Accounts shall be
paid to his or her Beneficiary in a lump sum on the
first day of the calendar quarter next following the
date of death.
(e) Death After Retirement Eligibility. If an
Eligible Employee dies after becoming eligible for
Retirement, then his or her Deferral Accounts shall be
paid to his or her Beneficiary in the manner elected by
the Eligible Employee in his or her Election Forms.
The Committee, however, may determine in its sole
discretion that payments from one or more of the
Eligible Employee's Deferral Accounts shall be made at
an earlier date than the time or times specified in the
Eligible Employee's Election Forms.
(f) In-Service Distributions. If an Eligible
Employee elected to receive an In-Service Distribution
on an Election Form, then the distribution shall be
made in accordance with such Election Form, except
that no distribution shall be made less than one year
after the election became effective.
SECTION 8. FORM AND TIME OF PAYMENT OF
ACCOUNTS.
(a) Form of Distributions. Subject to Section 7,
payments from each Deferral Account shall be made only
in cash and shall consist of lump sums or annual or
quarterly installments, or a combination of lump sums
and annual or quarterly installments, as elected by the
Eligible Employee on the applicable Election Form.
Installments of Post-Termination Distributions shall be
paid on the first day of each calendar year or quarter.
Installments of Post-Termination Distributions shall
not be paid over a period exceeding 15 years. The
amount of the installments shall be redetermined each
Year by assuming that interest will be credited on the
unpaid balance at the Interest Rate for the Year in
question for the remainder of all installment payments.
(b) Emergency Interim Distributions. In the
event of an Eligible Employee's Total and Permanent
Disability or Financial Hardship, the Committee may
determine in its sole discretion that payments from one
or more of the Eligible Employee's Deferral Accounts
shall be made at an earlier date than the time or times
specified on the Eligible Employee's Election Forms.
Any amount distributed by reason of Financial Hardship
shall be limited to the amount necessary to relieve
such Financial Hardship.
(c) Other Interim Distributions. Upon
application of an Eligible Employee, the Committee may
determine in its sole discretion that payments from one
or more of the Eligible Employee's Deferral Accounts
shall be made at an earlier date than the time or times
specified on the Eligible Employee's Election Forms
(even in the absence of a Total and Permanent
Disability or Financial Hardship). All distributions
under this Subsection (c) shall be reduced by a penalty
equal to six percent of the amount otherwise
distributable, which penalty shall be forfeited to the
Company. An Eligible Employee who has received a
distribution under this Subsection (c) thereafter shall
not make additional deferrals under the Plan or under
the Pure Excess Deferral Plan.
SECTION 9. NONASSIGNABILITY OF INTERESTS.
The interest and property rights of any Eligible
Employee under the Plan shall not be subject to option
nor be assignable either by voluntary or involuntary
assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment or
other creditor's process, and any act in violation of
this Section 9 shall be void.
SECTION 10. LIMITATION OF RIGHTS.
(a) General Creditor. Eligible Employees shall
have the status of general unsecured creditors of the
Company. The Plan constitutes a mere promise by the
Company to make payments in the future. It is the
Company's intention that the Plan be considered
unfunded for tax purposes and for purposes of Title I
of the Employee Retirement Income Security Act of 1974,
as amended.
(b) Bonus Awards. Nothing in the Plan shall be
construed to give any Eligible Employee any right to be
granted a Bonus Award.
(c) Employment Agreement. Neither the Plan nor
the deferral of any Base Salary or Bonus Award, nor any
other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or
understanding, express or implied, that the Company or
a subsidiary will employ an Eligible Employee for any
period of time, in any position or at any particular
rate of compensation.
SECTION 11. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee.
The Committee shall have full power and authority to
administer and interpret the Plan, to establish
procedures for administering the Plan and to take any
and all necessary actions in connection therewith. The
Committee's interpretation and construction of the Plan
shall be conclusive and binding on all persons.
SECTION 12. CLAIMS AND INQUIRIES.
(a) Application for Benefits. Applications for
benefits and inquiries concerning the Plan (or
concerning present or future rights to benefits under
the Plan) shall be submitted to the Company in writing
and addressed to the Chair of the Committee. An
application for benefits shall be submitted on the
prescribed form and shall be signed by the Eligible
Employee or, in the case of a benefit payable after his
or her death, by the Beneficiary.
(b) Denial of Application. In the event that an
application for benefits is denied in whole or in part,
the Chair of the Committee shall notify the applicant
in writing of the denial and of the right to a review
of the denial. The written notice shall set forth, in
a manner calculated to be understood by the applicant,
specific reasons for the denial, specific references to
the provisions of the Plan on which the denial is
based, a description of any information or material
necessary for the applicant to perfect the application,
an explanation of why the material is necessary, and an
explanation of the review procedure under the Plan.
The written notice shall be given to the applicant
within a reasonable period of time (not more than 90
days) after the Chair of the Committee received the
application, unless special circumstances require
further time for processing and the applicant is
advised of the extension. In no event shall the notice
be given more than 180 days after the Chair of the
Committee received the application.
(c) Review Panel. The Committee shall serve as
the "Review Panel" under the Plan. The Review Panel
shall have the authority to act with respect to any
appeal from a denial of benefits or a determination of
benefit rights.
(d) Request for Review. An applicant whose
application for benefits was denied in whole or in
part, or the applicant's duly authorized
representative, may appeal from the denial by
submitting to the Review Panel a request for a review
of the application within 90 days after receiving
written notice of the denial from the Chair of the
Committee. The Chair of the Committee shall give the
applicant or his or her representative an opportunity
to review pertinent materials, other than legally
privileged documents, in preparing the request for a
review. The request for a review shall be in writing
and addressed to the Committee. The request for a
review shall set forth all of the grounds on which it
is based, all facts in support of the request, and any
other matters that the applicant deems pertinent. The
Review Panel may require the applicant to submit such
additional facts, documents or other material as it may
deem necessary or appropriate in making its review.
(e) Decision on Review. The Review Panel shall
act on each request for a review within 60 days after
receipt, unless special circumstances require further
time for processing and the applicant is advised of the
extension. In no event shall the decision on review be
rendered more than 120 days after the Review Panel
received the request for a review. The Review Panel
shall give prompt written notice of its decision to the
applicant. In the event that the Review Panel confirms
the denial of the application for benefits in whole or
in part, the notice shall set forth, in a manner
calculated to be understood by the applicant, the
specific reasons for the decision and specific
references to the provisions of the Plan on which the
decision is based.
(f) Rules and Interpretations. The Review Panel
shall adopt such rules, procedures and interpretations
of the Plan as it deems necessary or appropriate in
carrying out its responsibilities under this
Section 12.
(g) Exhaustion of Remedies. No legal action for
benefits under the Plan shall be brought unless and
until the claimant (i) has submitted a written
application for benefits in accordance with Subsection
(a) above, (ii) has been notified by the Chair of the
Committee that the application is denied, (iii) has
filed a written request for a review of the application
in accordance with Subsection (d) above and (iv) has
been notified in writing that the Review Panel has
affirmed the denial of the application; provided,
however, that legal action may be brought after the
Chair of the Committee or the Review Panel has failed
to take any action on the claim within the time
prescribed by Subsections (b) and (e) above,
respectively.
SECTION 13. AMENDMENT OR TERMINATION OF THE
PLAN.
The Board may amend, suspend or terminate the Plan
at any time, except that no amendment shall
retroactively change the Interest Rate for the period
prior to the date of the amendment.
SECTION 14. CHOICE OF LAW.
The validity, interpretation, construction and
performance of the Plan shall be governed by the
Employee Retirement Income Security Act of 1974, as
amended, and, to the extent they are not preempted, by
the laws of the State of California (other than their
choice-of-law provisions).
SECTION 15. EXECUTION.
To record the amendment and restatement of the
Plan, the Company has caused its duly authorized
officer to affix the corporate name hereto.
APL LIMITED
By: /s/Timothy J. Windle
Its: Assistant Secretary
1995 DEFERRED COMPENSATION PLAN OF
APL LIMITED: PURE EXCESS DEFERRAL PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The 1995 Deferred Compensation Plan was adoed by
the Board on December 9, 1994, effective as of January
1, 1995. The 1995 Deferred Compensation Plan was
amended, effective November 9, 1996, to form two plans:
the 1995 Deferred Compensation Plan of APL Limited:
Pure Excess Deferral Plan (the "Plan") and the 1995
Deferred Compensation Plan of APL Limited: Regular
Deferral Plan (the "Regular Deferral Plan"). This
document constitutes the Plan, as adopted. The Plan is
intended to provide Executives with an opportunity to
defer a portion of their salaries. The Plan is also
intended to provide High-Paid Employees with an oppor
tunity to defer a portion of their salaries in excess
of the Compensation Limit imposed by the Code on the
SMART Plan. The Plan provides for matching contribu
tions by the Company. It is expected that the Plan
will assist the Company in attracting and retaining
employees of outstanding achievement and ability.
The Plan shall be administered and operated in
accordance with the provisions of the Regular Deferral
Plan, and capitalized terms in this Plan shall have the
same meaning as in the Regular Deferral Plan, except to
the extent provided in this document.
SECTION 2. DEFINITIONS.
Except as follows, the terms of Section 2 of this
Plan are the same as the terms of Section 2 of the
Regular Deferral Plan:
(a) "Plan" means this 1995 Deferred Compensation
Plan of APL Limited: Pure Excess Deferral Plan, as
amended from time to time.
(b) "Regular Deferral Plan" means the 1995
Deferred Compensation Plan of APL Limited: Regular
Deferral Plan, as amended from time to time.
SECTION 3. ELIGIBILITY.
The terms of Section 3 of this Plan are the same
as the terms of Section 3 of the Regular Deferral Plan.
SECTION 4. ELECTION TO PARTICIPATE IN PLAN.
The terms of Section 4 of this Plan are the same
as the terms of Section 4 of the Regular Deferral Plan,
except that no deferrals of Bonus Awards may be made
under this Plan and a deferral from Base Salary may be
made under this Plan only in accordance with the
following sentence. Deferrals from Base Salary made
pursuant to the provisions of Section 4 of the Regular
Deferral Plan shall be deemed made under this Plan, and
not the Regular Deferral Plan, to the extent that such
deferrals come from Base Salary in excess of the
Compensation Limit but not in excess of the maximum
deferral percentage permitted under the terms of the
SMART Plan. (For 1995 and 1996, such SMART Plan
maximum deferral percentage is 12%.) No other
deferrals from Base Salary may be made under this Plan.
SECTION 5. MATCHING CONTRIBUTIONS.
The terms of Section 5 of this Plan are the same
as the terms of Section 5 of the Regular Deferral Plan,
except that a matching contribution shall be credited
under this Plan only in accordance with the following
sentence. A matching contribution credited pursuant to
the provisions of Section 5 of the Regular Deferral
Plan shall be credited under this Plan, and not under
the Regular Deferral Plan, to the extent that such
matching contribution relates to deferrals from Base
Salary in excess of the Compensation Limit. No other
matching contributions shall be credited under this
Plan.
SECTION 6. DEFERRAL ACCOUNTS.
The terms of Section 6 of this Plan are the same
as the terms of Section 6 of the Regular Deferral Plan,
except that no amount shall be credited to a Deferral
Account under this Plan with respect to the deferral of
Bonus Awards.
SECTION 7. INTEREST CREDITS AND DISTRIBUTION
EVENTS.
The terms of Section 7 of this Plan are the same
as the terms of Section 7 of the Regular Deferral Plan.
SECTION 8. FORM AND TIME OF PAYMENT OF
ACCOUNTS.
The terms of Section 8 of this Plan are the same
as the terms of Section 8 of the Regular Deferral Plan,
except that the reference in Subsection (c) to the
"Pure Excess Deferral Plan" shall read in this Plan as
a reference to the "Regular Deferral Plan."
SECTION 9. NONASSIGNABILITY OF INTERESTS.
The terms of Section 9 of this Plan are the same
as the terms of Section 9 of the Regular Deferral Plan.
SECTION 10. LIMITATION OF RIGHTS.
The terms of Section 10 of this Plan are the same
as the terms of Section 10 of the Regular Deferral
Plan, except that references to the deferral of Bonus
Awards are inapplicable to this Plan.
SECTION 11. ADMINISTRATION OF THE PLAN.
The terms of Section 11 of this Plan are the same
as the terms of Section 11 of the Regular Deferral
Plan.
SECTION 12. CLAIMS AND INQUIRIES.
The terms of Section 12 of this Plan are the same
as the terms of Section 12 of the Regular Deferral
Plan.
SECTION 13. AMENDMENT OR TERMINATION OF THE
PLAN.
The terms of Section 13 of this Plan are the same
as the terms of Section 13 of the Regular Deferral
Plan.
SECTION 14. CHOICE OF LAW.
The terms of Section 14 of this Plan are the same
as the terms of Section 14 of the Regular Deferral
Plan.
SECTION 15. EXECUTION.
To record the adoption of the Plan, the Company
has caused its duly authorized officer to affix the
corporate name hereto.
APL LIMITED
By: /s/Timothy J. Windle
Its: Assistant Secretary
EXHIBIT 11.1
APL LIMITED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
_________________________________________________________________
Year Ended December 27 December 29 December 30
1996 1995 1994
_________________________________________________________________
(In thousands, except
per share amounts)
_________________________________________________________________
PRIMARY EARNINGS PER COMMON SHARE
_________________________________________________________________
Net Income $69,454 $30,297 $74,198
Preferred Dividends Series C (3,375) (6,750)
_________________________________________________________________
Earnings Available $69,454 $26,922 $67,448
_________________________________________________________________
Weighted Average:
Common Stock (1) 25,493 27,423 27,231
Common Stock Equivalents (2) 544 822 1,071
_________________________________________________________________
Total Shares 26,037 28,245 28,302
_________________________________________________________________
_________________________________________________________________
Primary Earnings Per Common
Share $ 2.67 $ 0.95 $ 2.38
_________________________________________________________________
FULLY DILUTED EARNINGS PER COMMON SHARE
_________________________________________________________________
Net Income $69,454 $30,297 $74,198
_________________________________________________________________
Weighted Average:
Common Stock (1) 25,493 29,734 27,231
Common Stock Equivalents (2) 561 822 1,100
Preferred Stock Series C 3,962
_________________________________________________________________
Total Shares 26,054 30,556 32,293
_________________________________________________________________
_________________________________________________________________
Fully Diluted Earnings Per
Common Share $ 2.67 $ 0.99 $ 2.30
_________________________________________________________________
(1)In July through November 1996, the company repurchased 1,266
shares of its common stock. In July 1995, 1,500 outstanding
shares of the company's 9% Series C Cumulative Convertible
Preferred Stock ("Series C Stock") were converted into 3,962
shares of common stock. Primary Earnings Per Share for 1995
includes deductions for the 9% Series C Cumulative
Convertible Preferred Stock dividends of $3,375 for
preferred dividends through the conversion date. The fully
diluted earnings per share calculation for 1995 reflects the
conversion of the Series C stock as though it had occurred
as of the beginning of the year. Additionally, in August
through October 1995, the company repurchased 6,000 shares
of its common stock.
(2)Assumes conversion of outstanding stock options and stock
bonus plan shares as determined by application of the
treasury stock method.
EXHIBIT 21.1
APL LIMITED
SUBSIDIARIES OF THE COMPANY
SUBSIDIARY JURISDICTION OF INCORP.
____________________________________________________________________
ACS CANADA, LTD. CANADA
AMERICAN CONSOLIDATION SERVICES EUROPE LIMITED UNITED KINGDOM
AMERICAN CONSOLIDATION SERVICES, LTD. HONG KONG
AMERICAN CONSOLIDATION SERVICES, LTD. TAIWAN
AMERICAN CONSOLIDATION SERVICES (AUSTRALIA),
PTY. LTD. AUSTRALIA
AMERICAN CONSOLIDATION SERVICES (PHILIPPINES),
INC. PHILIPPINES
AMERICAN CONSOLIDATION SERVICES (KOREA), LTD. KOREA
AMERICAN CONSOLIDATION SERVICES OF NORTH AMERICA,
LTD. DELAWARE
AMERICAN PRESIDENT BUSINESS LOGISTICS SERVICES,
LTD. DELAWARE
AMERICAN PRESIDENT COMPANIES FOUNDATION CALIFORNIA
AMERICAN PRESIDENT LINES CANADA, LTD. CANADA
AMERICAN PRESIDENT LINES, LTD. DELAWARE
AMERICAN PRESIDENT LINES (CHINA) COMPANY LIMITED PEOPLEOS
REPUBLIC
OF CHINA
AMERICAN PRESIDENT LINES (LANKA) AGENCIES LIMITED SRI LANKA
AMERICAN PRESIDENT TRUCKING COMPANY, LTD. DELAWARE
APL AGENCIES INDIA PRIVATE LIMITED INDIA
APL AGENCIES SDN. BHD. MALAYSIA
APL (BANGLADESH) AGENCIES LIMITED BANGLADESH
APL DE MEXICO, S.A. DE C.V. MEXICO
APL EXPRESS LTD. DELAWARE
APL EXPRESS TRANSPORTATION, LTD. DELAWARE
APL INFORMATION SERVICES, LTD. DELAWARE
APL LAND TRANSPORT SERVICES, INC. TENNESSEE
APL M.V. JAPAN, LTD. DELAWARE
APL M.V. KOREA, LTD. DELAWARE
APL M.V. SINGAPORE, LTD. DELAWARE
APL M.V. THAILAND, LTD. DELAWARE
APL NEWBUILDINGS, LTD. DELAWARE
APL SHIPHOLDINGS, LTD. DELAWARE
ASIAN-AMERICAN CONSOLIDATION SERVICES, LTD. CALIFORNIA
BETTER ASSET MANAGEMENT COMPANY DELAWARE
CONTROLADORA APC MEXICANA, S.A. DE C.V. MEXICO
EAGLE INTERMODAL, LTD. DELAWARE
EAGLE MARINE SERVICES, LTD. DELAWARE
EAGLE MARINE SERVICES (INDIA), LTD. DELAWARE
EMS DE MEXICO, S.A. DE C.V. MEXICO
EMS LOGISTICS (S) PTE. LTD. SINGAPORE
EMSM, LIMITED LIABILITY COMPANY DELAWARE
GLOBAL ALLIANCE F, LTD. BERMUDA
MULTI MODAL TRANSPORT INTERNATIONAL (PVT) LTD. PAKISTAN
M.V. CHINA FINANCE LIMITED. DELAWARE
M.V. PRESIDENT ADAMS, LTD. DELAWARE
M.V. PRESIDENT JACKSON, LTD. DELAWARE
M.V. PRESIDENT KENNEDY, LTD. DELAWARE
M.V. PRESIDENT POLK, LTD. DELAWARE
M.V. PRESIDENT TRUMAN, LTD. DELAWARE
NATOMAS REAL ESTATE COMPANY CALIFORNIA
NAUTICAL EXPRESS, LTD. DELAWARE
PIONEER INTERMODAL CONTAINER SERVICES CO., LTD THAILAND
PISCES, LIMITED LIABILITY COMPANY CALIFORNIA
SIAM INTERMODAL SERVICES LTD. THAILAND
SONG-DOR HOLDINGS LIMITED HONG KONG
ULTRALITE CONTAINER CORPORATION DELAWARE
VASCOR, LTD. DELAWARE
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inc
orporation of our report dated February 7, 1997 included in this
Form 10-K, into the company's previously filed Registration
Statements on Form S-3 No. 33-60893, and Form S-8 Nos. 2-89096, 2-
89094, 33-17499, 33-28640, 33-24847, 33-36030, 33-47492, 33-56163
and 33-59441.
/s/ Arthur Andersen LLP
San Francisco, California
March 4, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
26th day of February, 1997.
/s/Charles S. Arledge
Charles S. Arledge
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
28th day of February, 1997.
/s/John H. Barr
John H. Barr
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of March, 1997.
/s/Tully M. Friedman
Tully M. Friedman
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of March, 1997.
/s/ F. Warren Hellman
F. Warren Hellman
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
26th day of February, 1997.
/s/Toni Rembe
Toni Rembe
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
28th day of February, 1997.
/s/Forrest N. Shumway
Forrest N. Shumway
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 1
day of March, 1997.
/s/G. Craig Sullivan
G. Craig Sullivan
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint
L. Dale Crandall, Maryellen B. Cattani and Timothy J. Windle,
jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution in each, for me and in my
name, place and stead to execute for me and on my behalf in
each or any one of my offices and capacities with APL Limited
(the "Company"), as shown below, the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996, with
exhibits thereto and other documents in connection therewith,
which the Company contemplates filing with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended, and any and all amendments to said Form 10-K,
hereby ratifying, approving and confirming all that any such
attorney-if-fact may do by virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
26th day of February, 1997.
/s/Barry L. Williams
Barry L. Williams
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary information extracted from the Form 10-K of APL
Limited for the year wnded December 27, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> DEC-27-1996
<CASH> 102,370
<SECURITIES> 180,628
<RECEIVABLES> 242,460<F1>
<ALLOWANCES> 0
<INVENTORY> 29,220
<CURRENT-ASSETS> 616,482
<PP&E> 1,949,065
<DEPRECIATION> 825,846
<TOTAL-ASSETS> 1,880,178
<CURRENT-LIABILITIES> 390,556
<BONDS> 696,347
0
0
<COMMON> 24,564
<OTHER-SE> 478,275
<TOTAL-LIABILITY-AND-EQUITY> 1,880,178
<SALES> 0
<TOTAL-REVENUES> 2,739,126
<CGS> 0
<TOTAL-COSTS> 2,598,432<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,516
<INCOME-PRETAX> 104,176
<INCOME-TAX> 34,722
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,454
<EPS-PRIMARY> 2.67
<EPS-DILUTED> 2.67
<FN>
<F1>The Allowance for Doubtful Accounts, included in Receivables, amounted to
$19,830 at December 27, 1996.
<F2>The Provision for Doubtful Accounts, included in Total-Costs, amounted to
$6,144 for the 52 weeks ended December 27, 1996.
</FN>
</TABLE>
