<PAGE> 1
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 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-8444
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Yager/Kuester Public Fund Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1560476
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12201 Steele Creek Road, P.O. Box 412080
Charlotte, North Carolina 28241
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(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code: (704) 588-4074
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ---------------------------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of 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]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing. Not
Applicable.
Documents Incorporated By Reference
Exhibits (4) and (10.1) of Part IV, required by Item 601 of Regulation
S-K, are incorporated by reference from the prospectus of the registrant, dated
December 1, 1987, Registration Number 33-07056-A (hereinafter "Prospectus").
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PART I
Item 1. Business. The registrant is a North Carolina limited partnership
formed in July 1986 (hereinafter referred to as the "Partnership"). The
Partnership engaged in a "blind pool offering," the proceeds of which were used
to purchase income-producing real property. During the year ended December 31,
1988, the Partnership received the minimum investment required to remove
subscribers' funds from escrow. The Partnership's offering terminated with a
total subscription of $3,195,000 from investor limited partners. The net
proceeds were used to purchase the properties described in Item 2 below, to pay
the expenses of the offering and to fund the working capital account. The funds
not required for those purposes, totaling $84,273, were returned to investors.
The sole business of the Partnership is the operation of commercial office
buildings purchased with the proceeds of the public offering. (See Item 2 below
for a description of the properties.) The lease terms with the major tenants at
such properties are summarized below.
(i) EastPark Executive Center, Charlotte, NC - the General Services
Administrator ("GSA") has a lease term for a ten (10) year period ending on
October 31, 2004, at a rental rate of $14.15 per square foot. GSA may, at
its election, terminate the lease after eight (8) years. The GSA leased
premises include approximately 32,000 square feet. The Partnership incurred
leasehold improvements expense of approximately $1,092,000 for the GSA
space. Such improvements were completed in October 1996. The GSA lease
accounts for approximately 75% of the rental income related to the EastPark
Executive Center. The remaining leasehold space is leased to three other
tenants.
(ii) BB&T Bank (formerly United Carolina Bank) Building, Greenville,
SC - Metropolitan Life Insurance Company ("Metlife") is in the fourth year
of a five year lease renewal. The rental rate is $14.00 per square foot
during the first three years of the renewal term and escalates to $14.25
per square foot during the last two years of the renewal term. In lieu of
granting an upfit allowance, Metlife was allowed a rent concession of
$6,250 per month for the first twelve (12) months of the renewal term; the
concession terminated July 31, 1995. Metlife and BB&T account for 66% and
26%, respectively, of the rental income related to the BB&T Bank Building.
During the first quarter of 1998, the General Partners were able to
negotiate an extension of the lease with BB&T. The BB&T lease is now
scheduled to expire on July 31, 2006 and calls for an increase in rate from
$14.06 per square foot to $15.50. The lease also provides for a 2%
escalation in rent per year.
The Partnership has no employees of its own; management of the
Partnership's property is performed by FSK Properties, LLC, an affiliate of FSK
Limited Partnership. Administration of the Partnership is performed by the
General Partners. (See Items 10 and 13 below.)
Item 2. Properties. On June 23, 1989, the Partnership purchased the
EastPark Executive Center, an office complex comprised of two buildings located
in Charlotte, North Carolina with net leasable area of 45,300 square feet, for a
purchase price of $3,155,138 of which $1,500,000 was provided by a first
mortgage loan bearing interest at 10.5% per annum and having a term of 10 years.
The lender, United of Omaha Life Insurance Company ("United Omaha"), is not
affiliated with the Partnership.
On November 30, 1989, the Partnership acquired the BB&T Bank Building, a
three-story office building in Greenville, South Carolina with net leasable area
of 39,138 square feet, for a purchase price of $4,202,544 of which $3,110,000
was provided by a first mortgage loan from United Omaha. The debt is currently
financed with First Union. (See Item 7, "Liquidity and Capital Resources" for
description of loan terms.)
In connection with the office building purchases, $26,312 of acquisition
costs were capitalized.
No further purchases of real property are projected and no funds are
available for that purpose. (See Item 7 below, "Status of Sales Efforts" for
recent developments regarding the properties.)
Item 3. Legal Proceedings. The Partnership is not involved in any legal
proceedings and was not so involved during the year ended December 31, 1997.
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Item 4. Submission of Matters to a Vote of Security Holders. Not
applicable.
PART II
Item 5. Market for the Partnership's Common Equity and Related Stockholder
Matters. There is no established public trading market for the Partnership's
securities. The Partnership has approximately 535 limited partners. Cash
distributions made to the limited partners during the past years are set out in
the Statements of Cash Flow included in the Financial Statements included in
Part II, Item 8 of this Report.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
At or For
Year Ended December 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations
Rental income $ 1,158,468 $ 1,150,758 $ 1,172,935 $ 1,114,741 $ 1,067,859
Net income (loss) (51,497) 40,561 29,787 17,865 (15,330)
Net income (loss)
per limited
partnership unit (8.00) 6.30 4.63 2.77 (2.38)
Summary of Financial
Position:
Total assets $ 7,633,602 $ 7,864,107 $ 7,214,881 $ 6,951,442 $ 7,037,438
Long-term debt, less
current maturities 1,145,441 4,059,909 1,288,754 4,220,469 4,330,390
Distribution per
limited partner-
ship unit -- -- -- -- --
Number of limited
partnership units 6,370 6,370 6,370 6,370 6,370
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
During the year ended December 31, 1997, the Partnership continued to fund
working capital requirements. The working capital deficiency increased from
($864,930) at December 31, 1996 to ($3,581,543) at December 31, 1997. The
decrease in the working capital is primarily a result of the reclassification of
the loan on the BB&T Bank building to current liabilities from long-term debt
due to the balloon payment of approximately $2,722,700 that is due in December
1998. This loan was refinanced in the form of a line of credit for $2,840,000
through First Union Bank of North Carolina. The line of credit carries an
interest rate at the 3-month LIBOR rate plus 1.75% and is repayable in monthly
payments of accrued interest only until December 1, 1998 when all remaining
principal and interest shall be due. The General Partners anticipate selling the
BB&T Building before maturity.
An additional increase in current liabilities can be attributed to a
$1,000,000 line-of-credit note payable by the Partnership for the EastPark
Executive Center GSA upfit, of which $1,000,000 and $942,483 were outstanding at
December 31, 1997 and 1996 respectively. The line of credit is unsecured and is
payable on demand.
3
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The cumulative unpaid priority return to the unit holders increased from
$1,924,049 at December 31, 1996 to $2,166,833 at December 31, 1997. This
increase resulted from no distributions being made to partners during the year
and the pro rata share due partners pursuant to the Limited Partnership
Agreement. Based on current and projected commercial real estate market
conditions, the General Partners believe that it is reasonably unlikely that a
sale of the Partnership properties would produce net sale proceeds sufficient to
pay any of such priority return. Furthermore, the General Partners believe that
it is reasonably unlikely that the Partnership's operating income or any
refinancing of Partnership debt would generate sufficient funds to pay the
priority return.
During the year ended December 31, 1997, the Partnership had net (loss) of
($51,497) compared to the net income of $40,561 and $29,787 in 1996 and 1995,
respectively. Rental income, operating expenses, and interest expense for the
years ended December 31, 1997 and 1996 resulted exclusively from the operations
of the Partnership's commercial real estate properties. The EastPark Executive
Center buildings, purchased June 23, 1989, were 96 % leased at December 31, 1996
and were 99% leased at December 31, 1997. The BB&T Bank Building (formerly the
United Carolina Bank Building,), purchased November 30, 1989, was 96% leased at
December 31, 1996 and 100% in 1997. In March 1997, Metlife signed a sublease
with United Health Care for approximately 1,400 square feet expiring July 31,
1999.
The Partnership entered into a Loan Extension and Modification Agreement
dated as of May 12, 1993 with Internet Services Corporation, a North Carolina
corporation (formerly International Network Services Corporation) owned equally
by three trusts, the beneficial interests of which inure respectively to the
benefit of three children of Dexter Yager, the sole General Partner of DRY
Limited Partnership, which limited partnership is one of the two general
partners of the Partnership. Pursuant to the Agreement, the Partnership agreed
to pay Internet $91,275 over a five-year period, with annual principal payments
of $18,255 each, together with interest at the rate equal to the prime rate of
NationsBank of North Carolina N.A., determined on an annual basis, plus two
percent (2.0%). This loan was paid off one year early in January 1997, saving
the Partnership approximately $1,400 in interest expense.
See Item 13 (Certain Relationships and Related Transactions) for a
discussion regarding leasing commissions paid to FSK Properties, LLC, a General
Partner of the Partnership.
In the event that funds derived from operations are insufficient to meet
the Partnership's working capital needs, the General Partners have agreed to
fund the shortfall.
Results of Operations
Comparison of 1997 results with 1996.
Operating results decreased from an operating income of $449,277 during the
year ended December 31, 1996 to an operating income of $355,399 for the
comparable year 1997. Operating income expressed as a percentage of rental
income decreased from 39.0% for the year ended December 31, 1996 to 31.0% for
the comparable year 1997. While common area maintenance ("CAM") charges were
down $22,000 at the BB&T facility, rental escalations and increased occupancy at
both facilities compensated for this decrease. This resulted in rental income
increasing by approximately $8,000 from the prior year. Operating expenses were
higher overall in 1997 by approximately $102,000. Increased depreciation
relating to the IRS upfit comprised the greatest increase in the expenses. The
remaining expense increase can be attributed to increased repairs and
maintenance. Nonoperating expenses for the year ended December 31, 1997
decreased 0.4% from the comparable year 1996.
Comparison of 1996 results with 1995.
Operating results increased slightly from an operating income of $444,916
during the year ended December 31, 1995 to an operating income of $449,277 for
the comparable year 1996. Operating income expressed as a percentage of rental
income increased from 37.9% for the year ended December 31, 1995 to 39.0% for
the comparable year 1996. While the overall occupancy rate for 1996 was
comparable to 1995, rental income nevertheless decreased by approximately
$22,000. This decrease of rental income in 1996 can be attributed to the
decrease in Common Area Maintenance ("CAM") reimbursements provided by the
Metropolitan Life Insurance Company lease at the BB&T facility. Operating
expenses were lower overall in 1996 by approximately $26,000. Decreased
professional fees incurred in 1995 relating to the potential sale of the
properties, comprised the greatest decrease in the expenses. The remaining
expense decrease can be attributed to decreased contract labor
4
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and miscellaneous expenses. Nonoperating income and expenses for the year ended
December 31, 1996 decreased 1.5% from the comparable year 1995.
Status of Sales Efforts; Future Matters
The General Partners entered into separate listing agreements for both
properties with a Charlotte-based commercial real estate broker at the beginning
of the third quarter, 1996. The BB&T Bank Building is now under contract to be
sold to Highwoods/Forysth Limited Partnership, a North Carolina limited
partnership ("Highwoods"), for a sale price of $3,600,000. As a result of
Highwoods' due diligence investigation of the BB&T building, parties have
settled on a $90,000 price reduction. The General Partners anticipate the
closing on the sale to occur in April 1998. The General Partners also anticipate
selling the EastPark Executive center in 1998.
Item 8. Financial Statements and Supplementary Data. The financial
statements are attached hereto.
5
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INDEPENDENT AUDITOR'S REPORT
To the Partners
Yager/Kuester Public Fund
Limited Partnership
Charlotte, North Carolina
We have audited the accompanying balance sheets of Yager/Kuester Public Fund
Limited Partnership as of December 31, 1997 and 1996, and the related statements
of operations, partners' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Yager/Kuester Public Fund
Limited Partnership as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Charlotte, North Carolina
February 13, 1998, except for the
last paragraph in Note 4 as to which
the date is March 30, 1998
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents (Note 2) $ 92,544 $ 103,036
Accounts receivable, tenants (Note 8) 38,196 91,224
Prepaid expenses 7,053 2,200
Securities available for sale (Note 3) 267,629 190,380
------------------------------
TOTAL CURRENT ASSETS 405,422 386,840
------------------------------
Investments and Noncurrent Receivables
Properties on operating leases and
leased properties held for sale,
net (Notes 4 and 5) 7,155,595 7,371,229
Accrued rent receivable 29,683 44,785
------------------------------
7,185,278 7,416,014
------------------------------
Other Assets
Deferred charges, net of
accumulated amortization
1997 $12,190; 1996 $11,282 2,810 10,818
Deferred leasing commissions, net of
accumulated amortization
1997 $45,826; 1996 $31,476 40,092 50,435
------------------------------
42,902 61,253
------------------------------
$7,633,602 $7,864,107
==============================
LIABILITIES AND PARTNERS' EQUITY
---------------------------------------------------------------------------------------------------------
Current Liabilities
Note payable, bank (Note 5) $1,000,000 $ 942,483
Current maturities of long-term debt (Note 5) 2,834,990 68,868
Accounts payable 14,423 109,107
Accrued expenses 137,552 131,312
------------------------------
TOTAL CURRENT LIABILITIES 3,986,965 1,251,770
------------------------------
Long-Term Debt, less current maturities (Note 5) 1,145,441 4,059,909
------------------------------
Commitment and Contingency (Notes 4 and 6)
Partners' Equity
General partners 1,684 2,199
Limited partners (Note 6) 2,494,411 2,545,393
Unrealized gain on investment securities (Note 3) 5,101 4,836
------------------------------
2,501,196 2,552,428
------------------------------
$7,633,602 $7,864,107
==============================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 8
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental income (Notes 4 and 8) $1,158,468 $1,150,758 $1,172,935
--------------------------------------------------
Operating expenses:
Contract labor 27,733 18,028 40,307
Depreciation and amortization 261,240 204,261 179,987
Repairs and maintenance 165,877 146,900 133,822
Management fees (Note 7) 60,796 53,845 50,981
Utilities 155,487 147,098 149,027
Professional fees 20,723 24,281 57,331
Property taxes 89,386 88,857 88,046
Miscellaneous 21,827 18,211 28,518
--------------------------------------------------
803,069 701,481 728,019
--------------------------------------------------
OPERATING INCOME 355,399 449,277 444,916
--------------------------------------------------
Nonoperating income (expense):
Interest income 7,512 651 724
Interest expense (426,557) (425,669) (422,066)
Other 12,149 16,302 6,213
--------------------------------------------------
(406,896) (408,716) (415,129)
--------------------------------------------------
NET INCOME (LOSS) (51,497) 40,561 29,787
Deduct net income (loss) applicable to limited
partners (per limited partner unit)
1997 $(8.00); 1996 $6.30; 1995 $4.63 (50,982) 40,157 29,489
--------------------------------------------------
NET INCOME (LOSS) APPLICABLE TO
GENERAL PARTNERS (PER GENERAL PARTNE
PARTNER UNIT) 1997 $(.08);
1996 $.06; 1995 $.05 $ (515) $ 404 $ 298
==================================================
</TABLE>
See Notes to Financial Statements.
8
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Net unrealized
Gain (Loss) on
Securities
General Limited Available
Partners Partners For Sale Total
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $1,497 $2,475,747 $ (5,305) $2,471,939
Net income 298 29,489 -- 29,787
Change in fair market value on
securities available for sale
(Note 3) -- -- 16,551 16,551
-------------------------------------------------------------
Balance, December 31, 1995 1,795 2,505,236 11,246 2,518,277
Net income 404 40,157 -- 40,561
Change in fair market value on
securities available for sale
(Note 3) -- -- (6,410) (6,410)
-------------------------------------------------------------
Balance, December 31, 1996 2,199 2,545,393 4,836 2,552,428
NET LOSS (515) (50,982) -- (51,497)
CHANGE IN FAIR MARKET VALUE ON
SECURITIES AVAILABLE FOR SALE
(NOTE 3) -- -- 265 265
-------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $1,684 $2,494,411 $ 5,101 $2,501,196
=============================================================
</TABLE>
See Notes to Financial Statements.
9
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (51,497) $ 40,561 $ 29,787
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 238,882 184,825 162,035
Amortization 22,358 19,436 17,952
Net realized (gains) losses on sale of securities
available for sale (2,304) (3,118) 3,940
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, tenant
and accrued rent receivable 68,130 (41,161) (23,206)
Increase (decrease) in:
Accounts payable and accrued
expenses (88,444) (15,933) 107,238
Other prepaids and accruals, net (4,853) (1,100) (877)
---------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 182,272 183,510 296,869
---------------------------------------------
Cash Flows From Investing Activities
Purchase of securities available for sale (293,255) (145,542) (193,803)
Proceeds from sale of securities available for sale 218,576 86,920 176,620
Purchase of investment property (23,248) (781,295) (355,955)
Disbursements for deferred leasing commissions (4,008) (4,395) (1,569)
Disbursements for deferred charges -- (7,100) --
---------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (101,935) (851,412) (374,707)
---------------------------------------------
Cash Flows from Financing Activities
Proceeds from long-term borrowings -- 2,840,000 --
Principal payments on long-term borrowings (148,346) (2,931,692) (109,921)
Proceeds from note payable, net 57,517 722,700 219,783
---------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (90,829) 631,008 109,862
---------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (10,492) (36,894) 32,024
Cash and cash equivalents:
Beginning 103,036 139,930 107,906
----------------------------------------------
Ending $ 92,544 $ 103,036 $ 139,930
==============================================
</TABLE>
10
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash payment for interest, net of interest
capitalized $432,193 $424,000 $423,197
Supplemental Disclosures of Noncash Transactions:
Net unrealized gain (loss) on securities available
for sale 265 (6,410) 16,551
</TABLE>
See Notes to Financial Statements.
11
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND
SIGNIFICANT ACCOUNTING POLICIES
Nature of business and organization: The Partnership is a North Carolina limited
partnership formed in July 1986. The purpose of the Partnership is to acquire,
operate, hold for investment and sell commercial rental property. Properties
currently held are located in Charlotte, North Carolina and Greenville, South
Carolina.
The general partners of the Partnership are DRY Limited Partnership, a North
Carolina limited partnership in which Dexter R. Yager, Sr. is the general
partner and FSK Limited Partnership, a North Carolina limited partnership in
which Faison S. Kuester, Jr. is the general partner.
Partnership agreement: Under the terms of the partnership agreement, all taxable
income, tax losses and cash distributions from operations are to be allocated
99% to the limited partners and 1% to the general partners until the limited
partners receive a return of their initial capital contributions and a "Priority
Return". The Priority Return is a sum equal to 8% per annum cumulative, but not
compounded, (prorated for any partial year) of the adjusted capital
contributions of the limited partners, calculated from the last day of the
calendar quarter in which each limited partner is admitted to the Partnership to
the date of payment. Thereafter, taxable income, tax losses and cash
distributions from operations will be allocated 75% to the limited partners and
25% to the general partners.
Upon the sale or refinancing of any future partnership properties, the
partnership agreement specifies certain allocations of net proceeds and taxable
gain or loss from the transaction.
A summary of the Partnership's significant accounting policies follows:
Use of management's estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents: For purposes of reporting the statements of cash
flows, the Partnership includes all cash accounts, which are not subject to
withdrawal restrictions or penalties, and all highly liquid debt instruments
purchased with an original maturity of three months or less as cash and cash
equivalents on the accompanying balance sheets. At various times throughout the
year, the Partnership may have cash balances at financial institutions which
exceed federally-insured amounts.
Investments: Properties on operating leases and leased properties held for sale
are stated at the lower of cost less accumulated depreciation or fair market
value. Depreciation is computed by the straight-line method over 40 years for
buildings and over 15 years for building improvements.
12
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment in securities available for sale and accounting change: Statement No.
115 requires that management determine the appropriate classification of
securities at the date individual investment securities are acquired, and that
the appropriateness of such classification be reassessed at each balance sheet
date. Since the Partnership neither buys securities in anticipation of
short-term fluctuations in market prices nor can commit to holding debt
securities to their maturities, the investment in debt and marketable equity
securities have been classified as available for sale in accordance with
Statement No. 115. Available for sale securities are stated at fair value, and
unrealized holding gains and losses are reported as a separate component of
partners' equity. Realized gains and losses, including losses from declines in
value of specific securities determined by management to be
other-than-temporary, are included in income. Realized gains and losses are
determined on the basis of the specific securities sold.
Deferred charges: Deferred charges are related to prepaid fees which are
amortized over the length of the related loans, 1 to 10 years, on a
straight-line basis.
Deferred leasing commissions: Deferred leasing commissions related to obtaining
specific leases are amortized using the straight-line method over the
noncancelable lease terms which range from three to seven years.
Revenue recognition: Rental revenue is recognized evenly over the term of the
lease. In connection with negotiating and obtaining leases, the Partnership's
management may at times grant concessions, such as free rent for a specific
number of months during the lease. These costs are amortized over the life of
the lease.
Disclosures about the fair value of financial instruments: Financial Accounting
Standards Board Statement No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. Statement 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
At December 31, 1997 and 1996 the carrying values of the Partnership's financial
instruments, including accounts receivable which are due on demand and the
mortgage payable which bears interest at market rates, approximate their fair
values.
Partnership equity: Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share. The Statement specifies the computation, presentation,
and disclosure requirements for earnings per share. Management believes that
statement No. 128 is not analogous to limited partnership units. Accordingly, no
additional disclosures for partnership units are presented in the accompanying
financial statements.
Income taxes: Under current income tax laws, income or loss of the Partnership
is included in the income tax returns of the partners. Accordingly, the
Partnership will make no provision for federal or state income taxes.
13
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. WORKING CAPITAL RESERVE
Per the Partnership Agreement, a minimum cash and cash equivalents reserve of
$94,500 must be maintained to fund any expenditures that the cash flow generated
from properties on operating leases is insufficient to meet. The Partnership did
not meet the minimum requirement by $1,956 at December 31, 1997, and exceeded
the minimum requirement by $8,536 at December 31, 1996.
Securities available for sale may be sold in order to fund future operating cash
flow expenditures.
Note 3. SECURITIES AVAILABLE FOR SALE
The following is a summary of the Partnership's securities available for sale as
of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Cost Gains Losses Fair Value
--------------------------------------------------------
1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
Preferred and common stock $121,536 $4,339 $(187) $125,688
Corporate bonds and notes 120,563 788 -- 121,351
Government securities 20,429 161 -- 20,590
--------------------------------------------------------
$262,528 $5,288 $(187) $267,629
========================================================
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------
1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
Preferred and common stock $107,500 $4,775 $ -- $112,275
Corporate bonds and notes 57,615 261 (432) 57,444
Government securities 20,429 232 -- 20,661
--------------------------------------------------------
$185,544 $5,268 $(432) $190,380
========================================================
</TABLE>
At December 31, 1997, the Partnership did not have trading or held to maturity
securities.
A summary of investment earnings included in nonoperating income (expense) in
the accompanying Statements of Operations for the years ended December 31, 1997,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Realized gains on sale of securities available for sale $2,396 $3,162 $ 1,805
Realized losses on sale of securities available for sale (92) (44) (5,745)
----------------------------------------
$2,304 $3,118 $(3,940)
========================================
</TABLE>
14
<PAGE> 15
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. SECURITIES AVAILABLE FOR SALE (CONTINUED)
The amortized cost and fair values of securities available for sale as of
December 31, 1997 by contractual maturity are shown below. The "other
securities" consists of equity securities. Equity securities have no maturity
date.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------------------------
<S> <C> <C>
Due after one year through five years $ -- $ --
Due after five years through ten years 35,432 35,739
Due thereafter 105,560 106,202
--------------------------
140,992 141,941
Other securities 121,536 125,688
--------------------------
$262,528 $267,629
==========================
</TABLE>
Proceeds from sales of securities available for sale during the years ended
December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------
<S> <C> <C> <C>
Proceeds from sales of securities available for sale $218,576 $86,920 $176,620
===============================
</TABLE>
Dividend income included in nonoperating income (expense) in the accompanying
Statements of Operations totaled $5,132, $6,980 and $7,778 for the years ended
December 31, 1997, 1996 and 1995, respectively.
The changes in the net unrealized gain (loss) on securities available for sale
during the years ended December 31, 1997 and 1996 were $265 and $(6,410),
respectively, which have been included in the separate component of partners'
equity.
Note 4. PROPERTIES ON OPERATING LEASES AND LEASED PROPERTIES HELD FOR SALE
The Partnership leases office facilities under various lease agreements. The
following schedule provides an analysis of the Partnership's investment in
properties held for lease by major classes as of December 31, 1997 and 1996,
respectively.
<TABLE>
<CAPTION>
1997 1996
---------------------------
<S> <C> <C>
Land $1,168,953 $1,168,953
Building 6,188,729 6,188,729
Building improvements 1,280,815 1,257,567
----------------------------
8,638,497 8,615,249
Less accumulated depreciation 1,482,902 1,244,020
----------------------------
$7,155,595 $7,371,229
============================
</TABLE>
15
<PAGE> 16
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. PROPERTIES ON OPERATING LEASES AND PROPERTIES HELD FOR LEASE
(CONTINUED)
The following is a schedule by years of all minimum future rentals on
noncancelable operating leases as of December 31, 1997:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------------------------------------------------------------------------
<S> <C>
1998 $1,035,141
1999 792,161
2000 494,728
2001 461,766
2002 375,649
Thereafter --
----------
$3,159,445
==========
</TABLE>
The Partnership properties are currently contracted with a real estate broker.
It is the intention of the General Partners to market and sell the properties.
The sales proceeds will be used to return partners' equity.
The Partnership reached an agreement on March 26, 1998, for the sale of one of
its rental properties. The agreement calls for a purchase price of $3,510,000 in
cash. The Partnership anticipates a loss of approximately $120,500 when the sale
is completed in fiscal 1998. The net cash proceeds from the sale, after related
costs and debt payoff, are expected to approximate $530,500. The carrying value
of the building was approximately $3,425,000 at December 31, 1997.
Note 5. NOTE PAYABLE, BANK, LONG-TERM DEBT AND PLEDGED ASSETS
The Partnership has a $1,000,000 line-of-credit with an outstanding balance of
$1,000,000 and $942,483 at December 31, 1997 and 1996, respectively. The
line-of-credit allows borrowings and repayments to be made on a daily basis.
Outstanding balances on the line-of-credit bear interest at a variable rate tied
to the bank's prime rate (prime rate was 8.50% at December 31, 1997). The
line-of-credit is unsecured and is payable on demand.
16
<PAGE> 17
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5. NOTE PAYABLE, BANK, LONG-TERM DEBT AND PLEDGED ASSETS (CONTINUED)
Long-term debt and pledged assets consists of the following at December 31, 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
------------------------------
<S> <C> <C>
Note payable due in monthly installments of $14,976, including interest at
10.5%, through June 1999, with $1,115,064 due in July
1999, collateralized by mortgage on land and building $1,201,631 $1,252,267
Note payable, interest only at the 3-month LIBOR plus 1.75%
(7.52% at December 31, 1997), due monthly, through November 1998,
balance due December 1998, collateralized by mortgage on
land and building 2,778,800 2,840,000
Note payable to Internet Services Corporation, related through
common ownership, due in five annual principal installments of
$18,255, plus interest at the prime rate of NationsBank of
North Carolina, N.A., plus 2%, unsecured, due January 1998 -- 36,510
-----------------------------
3,980,431 4,128,777
Less current maturities 2,834,990 68,868
-----------------------------
$1,145,441 $4,059,909
=============================
</TABLE>
Future maturities of long-term debt at December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
Year Ending
December 31, 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C>
1997 $ -- $ 68,868
1998 2,834,990 2,914,445
1999 1,145,441 1,145,464
---------------------------------
$3,980,431 $4,128,777
=================================
</TABLE>
Interest expense to Internet Services Corporation, for the years ended December
31, 1997, 1996 and 1995 was $669, $3,834 and $5,476, respectively.
Note 6. PRIORITY RETURN
The cumulative unpaid priority return to the limited partners is $2,166,833 and
$1,924,049 at December 31, 1997 and 1996, respectively. There were no cash
distributions to the limited partners for the priority return for the years
ended December 31, 1997, 1996 and 1995. Based on the pending sale and current
and projected real estate market conditions, the General Partners believe that
it is reasonably unlikely that a sale of the Partnership properties would
produce sufficient net sales proceeds to pay the priority return.
Note 7. MANAGEMENT AND ADMINISTRATIVE EXPENSES
Management expenses paid to a General Partner and to Internet Services
Corporation in connection with day-to-day operations of the Partnership amounted
to $60,796, $53,845, and $50,981 for the years ended December 31, 1997, 1996 and
1995, respectively.
17
<PAGE> 18
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 8. MAJOR TENANTS
Rental income for the years ended December 31, 1997, 1996 and 1995,
respectively, included approximate rentals from the following major tenants each
of which accounted for 10% or more of the total rental income of the Partnership
for those years:
<TABLE>
<CAPTION>
Approximate Amount of Rental Income
Year Ended December 31,
----------------------------------------------
1997 1996 1995
----------------------------------------------
<S> <C> <C> <C>
Tenant A $451,000 $455,000 $451,000
Tenant B 350,000 353,000 306,000
Tenant C 138,000 117,000 138,000
</TABLE>
Accounts receivable from each of the major tenants identified above were as
follows at December 31, 1997 and 1996, respectively:
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
----------------------
<S> <C> <C>
Tenant A $38,196 $37,884
Tenant B -- --
Tenant C -- --
</TABLE>
Note 9. FUTURE REPORTING REQUIREMENTS
The FASB has issued SFAS No. 130, Reporting Comprehensive Income, which the
Partnership has not been required to adopt as of December 31, 1997. The
Statement, which is effective for fiscal years beginning after December 15,
1997, establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. This statement requires that all items
that are recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.
Note 10. YEAR 2000
At the turn of the century, computer-based information systems will be faced
with the problems potentially affecting hardware, software, networks, processing
platforms, as well as customer and vendor interdependencies. The Partnership is
in the process of assessing the effect of Year 2000 on its operating plans and
systems. The Partnership is developing a plan for identifying, renovating,
testing and implementing its systems for Year 2000 processing and internal
control requirements. The cost for becoming Year 2000 compliant has not been
determined, however, management feels it will not be material to the
Partnership's financial statements.
18
<PAGE> 19
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. Not applicable.
PART III
Item 10. Directors and Executive Officers of the Partnership. The
Partnership has no executive officers and directors. The General Partners of the
partnership are DRY Limited Partnership, the sole General Partner of which is
Dexter R. Yager, Sr., and FSK Limited Partnership, the sole General Partner of
which is Faison S. Kuester, Jr.
Following is a brief discussion of the background and experience of Messrs.
Kuester and Yager.
Faison S. Kuester, Jr., 52, graduated from the University of North Carolina
at Chapel Hill with a Bachelor of Arts Degree in History in 1967. He is a
resident of Charlotte, North Carolina. After three years service in the United
States Army as a Lieutenant, Mr. Kuester joined Independence Development
Corporation in 1972 serving as a director of leasing and management for a period
of three years. In 1974, Mr. Kuester formed his own company, Kuester Realty and
Management, in order to lease and manage commercial properties in Charlotte,
North Carolina and surrounding communities. In addition to leasing and managing
various commercial properties, Kuester Realty had developed two medical clinics
in the Charlotte area. In 1980, Kuester Properties, Inc. ("KPI") was formed to
specialize in on-site management of apartment communities in the southeastern
United States. The following year Cauble and Kuester Company, Inc. was organized
to lease and manage commercial properties in the metropolitan Atlanta area. This
partnership brought together Cauble and Company, experienced mortgage lenders
and leasing agents in the Atlanta market, and Kuester Realty and Management.
Finally, in 1983, Kuester Development Corporation was formed to allow the
Kuester companies to engage in selective real estate development projects in the
southeastern United States.
Through Kuester Development Corporation, a wholly-owned subsidiary of KPI,
Mr. Kuester has been directly involved with the development of several
commercial real estate properties in North and South Carolina and Georgia. These
include the First United National Bank Building in Wilmington, North Carolina,
two retail office showroom projects, two medical office buildings and
residential condominiums in Charlotte, North Carolina, an office building in
Savannah, Georgia, and an office building in Greenville, South Carolina. Kuester
Development Corporation also has developed over 700 apartment units throughout
Charlotte, North Carolina since 1983.
In October 1996, Mr. Kuester formed FSK Properties, LLC to provide
management, leasing and brokerage services to his clients. FSK Properties, LLC
serves as property manager of the Partnership property.
Dexter R. Yager, Sr., 58, is the President and founder of D&B Yager
Enterprises, Inc., Mr. Yager's Amway distributorship business. Through D&B Yager
Enterprises, Inc., Mr. Yager has been an independent distributor for Amway
Corporation for over 30 years during which time he has achieved the status of
Crown Ambassador, which is the highest level attainable as an Amway distributor.
The Amway Corporation is one of the largest manufacturers of home care products
in the world. He is also a former member and past president of the Amway
Distributor Association Board of Directors. Mr. Yager has many other
family-owned businesses and is responsible for the development of several
businesses, including the following: Yager Personal Development, Inc., which
handles Mr. Yager's services as a speaker at Amway events, Yager Construction
Company, Inc., which is a general building contractor; and Dexter and Birdie
Yager Family Limited Partnership, which owns various real estate investments and
manages real estate for the Yager family.
Mr. Yager has significant experience in real estate investment for his own
account. Mr. Yager personally, and through partnerships in which he and his wife
own a majority interest, has made investments in raw land, office buildings, a
shopping center, and other commercial and residential real estate having a
market value in excess of $10,000,000. He has made substantial additional real
estate investments through partnerships in which he does not own a majority
interest.
Item 11. Executive Compensation. The Partnership does not employ any
executive officers or directors and no compensation is paid to any person for
performing services typically provided by such an officer or director. Dexter R.
Yager, Sr. and Faison S. Kuester have policy making functions with regard to
Partnership operations. See Item 10 for the relationship of such persons to the
Partnership. See Item 13 for a description of payments made to FSK Properties,
LLC for property management services and to Internet Services Corporation, Inc.
for accounting and management services.
19
<PAGE> 20
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The General Partners initially contributed a total of $2,500 to the capital of
the Partnership, consisting of a $1,600 contribution from DRY Limited
Partnership and $900 from FSK Limited Partnership. The General Partners own a 1%
interest in all items of Partnership income, gain, loss, deductions or credits
including 1% of net cash from operations. The General Partners also own a
residual 25% interest in net cash from a sale or refinancing of the Partnership
Property, subordinated to the receipt by the Limited Partners of the return of
their capital contributions and their priority return and to the payment of any
subordinated real estate commissions due to affiliates of the General Partners.
The General Partners do not own any Limited Partnership interest in the
Partnership.
Item 13. Certain Relationships and Related Transactions. During the
fiscal year ended December 31, 1997, FSK Properties, LLC received management
fees of $40,196 for management of the Partnership property. Internet Services
Corporation, Inc. received $20,600 for providing accounting/management services.
See Item 7 for a description of a loan to the Partnership by Internet Services
Corporation, a corporation owned equally by three trusts, the beneficial
interests of which inure to the benefit of three children of Dexter R. Yager,
Sr., the sole General Partner of DRY Limited Partnership, which limited
partnership is one of the two general partners of the Partnership. Janitorial
services for the EastPark Executive Center are provided by Marquis Cleaning
Services, which is operated and owned by Dexter R. Yager's nephew.
The General Partners believe that the terms for the above mentioned
services are as favorable as those the Partnership might have obtained from
unaffiliated parties.
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form
8-K.
(a)(1) The following financial statements of the Partnership are included
in Part II, Item 8 hereof.
(i) Independent Auditor's Report
(ii) Balance Sheets as of December 31, 1997 and 1996
(iii) Statements of Operations for years ended December 31, 1997,
1996 and 1995
(iv) Statements of Partners' Equity for years ended December 31,
1997, 1996 and 1995
(v) Statements of Cash Flows for years ended December 31, 1997,
1996 and 1995
(vi) Notes to Financial Statements
(a)(2) All schedules have been omitted because they are inapplicable, not
required, or the information is included elsewhere in the
financial statements or notes thereto.
(a)(3) Exhibits:
(4) Instrument defining rights of securities holders set forth
in the Limited Partnership Agreement which is contained in
the Prospectus incorporated herein by reference.
(10.1)* Limited Partnership Agreement
(10.2)**Exclusive Leasing and Management Agreement dated October
1, 1994 (EastPark Executive Center).
(10.3)**Exclusive Leasing and Management Agreement dated October
1, 1994 (BB&T Building).
(10.4) Contract of Sale and Purchase by and between the
Partnership and Highwoods/Forsyth Limited Partnership
dated January 23, 1998, as amended by Amendment to
Contract of Sale and Purchase dated March 9, 1998.
(10.5) First Amendment to Lease and Sublease by and between the
Partnership, BB&T, and BB&T Insurance Services dated March
18, 1998.
20
<PAGE> 21
(23) Consent of Independent Auditor
(27) Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K: None.
(c) Exhibits: The exhibits listed in Item 14(a)(3) above
and not incorporated herein by reference are filed
with this Form 10-K.
(d) Financial Statement Schedules: There are no
financial statement schedules included in this Form
10-K report.
- --------------------------------------------------------------------------------
* Incorporated by reference to Exhibit A of the Partnership's Prospectus dated
December 1, 1987, Registration Number 33-07056-A.
** Incorporated by reference to Exhibit 3 and 4 of the Partnership's Form 10-K
for the year ended December 31, 1995.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
By: FSK Limited Partnership
March 30, 1998 By: /s/ Faison S. Kuester, Jr.
--------------------------------
Faison S. Kuester, Jr.
General Partner
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 30, 1998 by the following persons on
behalf of the Partnership and in the capacities and on the dates indicated.
/s/ Jerry R. Haynes /s/ Faison S. Kuester
- ------------------------------ -----------------------------------
Faison S. Kuester, Jr., General
(Principal Accounting Officer) Partner of FSK Limited Partnership,
General Partner of the Partnership
Date March 30, 1998 Date March 30, 1998
------------------------- --------------------
/s/ Dexter R. Yager, Sr.
-----------------------------------
Dexter R. Yager, Sr., General
Partner of DRY Limited Partnership,
General Partner of the Partnership
Date March 30, 1998
--------------
22
<PAGE> 1
EXHIBIT 10.4
CONTRACT OF SALE AND PURCHASE
By and Between
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
a North Carolina Limited Partnership
and
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP,
a North Carolina Limited Partnership
January 23, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Agreement of Purchase and Sale....................................................................................1
Description of the Property.......................................................................................1
Earnest Money.....................................................................................................2
Purchase Price....................................................................................................4
Actions Pending Closing...........................................................................................4
Survey and Plans.........................................................................................4
Initial Delivery of Documentation........................................................................5
Access to, and Examination of, Records...................................................................6
Access to the Property...................................................................................6
Matters of Title.........................................................................................7
Environmental Assessments................................................................................7
Additional Agreements of the Parties..............................................................................8
Title to the Property....................................................................................8
Representations and Warranties of Owner..................................................................9
Representations and Warranties of Highwoods......................................................................16
Due Diligence Period.............................................................................................17
Conditions Precedent to Closing..................................................................................17
Maintenance and Operation of the Property........................................................................19
Closing Date.....................................................................................................20
Documents Required to be Delivered at Closing....................................................................20
Documents Required to be Delivered by Owner at Closing.................................................20
Deliveries by Highwoods at Closing......................................................................22
Closing Adjustments..............................................................................................23
Taxes...................................................................................................23
Utilities...............................................................................................24
Rents...................................................................................................24
Tenants' Overpayment or Underpayment of Estimated Operating Expenses....................................24
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Real Estate Commissions.................................................................................25
Tenant Improvements.....................................................................................25
Tenant Security Deposits................................................................................26
Service Agreement Payments..............................................................................26
Miscellaneous Items.....................................................................................26
Settlement After Closing................................................................................26
Equitable Adjustments...................................................................................26
Property Income.........................................................................................26
Leases, Estoppels, Contracts, Permits and Zoning Letters, etc....................................................27
Default..........................................................................................................28
Notice of Developments...........................................................................................28
Indemnification..................................................................................................28
Other Provisions.................................................................................................30
Counterparts............................................................................................30
Entire Agreement........................................................................................30
Construction............................................................................................30
Applicable Law..........................................................................................30
Severability............................................................................................31
Waiver of Covenants, Conditions and Remedies............................................................31
Exhibit.................................................................................................31
Amendment and Assignment................................................................................31
Relationship of Parties.................................................................................31
Further Acts............................................................................................31
Confidentiality.........................................................................................31
Broker Commissions......................................................................................32
Notice..................................................................................................32
Press Releases..........................................................................................33
</TABLE>
<PAGE> 4
STATE OF SOUTH CAROLINA
CONTRACT OF SALE AND PURCHASE
COUNTY OF GREENVILLE
THIS CONTRACT OF SALE AND PURCHASE (the "Agreement") is made and
entered into as of this the 23rd day of January, 1998, by and between
Yager/Kuester Public Fund Limited Partnership, a North Carolina limited
partnership ("Owner"), and Highwoods/Forsyth Limited Partnership, a North
Carolina limited partnership, or its designated assignee ("Highwoods").
W I T N E S S E T H:
WHEREAS, the parties desire to enter into a Contract of Sale and
Purchase to incorporate all prior negotiations and dealings of the parties with
respect to the purchase and sale of certain property hereinafter described.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the payment of earnest money and other good and valuable
consideration, receipt of which is hereby acknowledged by the Owner, the parties
agree as follows:
SALE AND PURCHASE
1. AGREEMENT OF PURCHASE AND SALE. The Owner agrees to sell and convey,
and Highwoods agrees to purchase, all that Property defined and described in
Section 2 hereof.
2. DESCRIPTION OF THE PROPERTY. The Property owned by Owner which is
the subject of this Agreement is as follows:
2.01. All those certain lots or parcels of land in Greenville,
Greenville County, South Carolina, more particularly described on EXHIBIT A
attached hereto and specifically incorporated herein by reference (hereinafter
called the "Land").
2.02. All of Owner's right, title and interest in and to all rights,
privileges, and easements appurtenant to the Land, including all water rights,
rights-of-way, roadways, parking areas, roadbeds, alleyways and reversions or
other appurtenances used in connection with the beneficial use of the Land.
2.03. All improvements and fixtures located on the Land owned by Owner
including, without limitation, the building located thereon containing an
aggregate of approximately 39,000 square feet (hereinafter referred to as the
"Building"); any and all other buildings, structures and amenities currently
located on the Land; and all fixtures, apparatus, equipment, vaults, machinery
and built-in appliances used in connection with the operation and occupancy of
the Land such as heating and air conditioning systems, electrical systems,
plumbing systems, sprinkler and other fire protection and life safety systems,
refrigeration, ventilation, or other facilities or services on the Land (all of
which are together hereinafter called the "Improvements"). It is specifically
understood that such Improvements shall include all tenant alterations in the
Building as of the Closing to the extent
<PAGE> 5
such alterations become the property of the landlord under the leases in effect
with respect to the Building.
2.04. All personal property located on or in or used exclusively in
connection with the Land, Building and Improvements and owned by Owner and used
or usable in the operation of the Property (as defined below) including, without
limitation, fittings, appliances, shades, wall-to-wall carpet, draperies,
screens and screening, awnings, plants, shrubbery, landscaping, furniture,
furnishings, office equipment, lawn care and building maintenance equipment and
other furnishings or items of personal property used or usable in connection
with the ownership and operation of the Improvements, including the computers
which operate the Building's HVAC systems, but excluding all personal property
located on the Land or in the Building owned by tenants of such Building or
contractors who provide service to such Building or which is not otherwise owned
by Owner (hereinafter called the "Personal Property"). A schedule of the
Personal Property shall be specifically identified pursuant to an inventory
supplied by Owner at the time of the execution hereof and attached hereto as
EXHIBIT B. After the date of this Agreement and, except as otherwise set forth
herein, Owner shall not remove any Personal Property from the Building or Land
without the prior written consent of Highwoods.
2.05. All of Owner's interest, if any, in the intangible property now
or hereafter owned by Owner and used or usable in connection with the Property
including, without limitation, the rights to use the trade style name now used
in connection with such property, all leases, subleases, prepaid rent and all
security deposits, any other contract or lease rights, escrow deposits, utility
agreements, guaranties, warranties or other rights related to the ownership of
or use and operation of the Property. A list of all leases of space within the
Building and subleases and other occupancy agreements to be specifically
assigned to Highwoods (the "Leases") shall be set forth on EXHIBIT C and
attached hereto within three (3) business days of the execution hereof. A list
of all leasing, service, maintenance and/or management contracts affecting or
relating to the Property and to be specifically assigned to and assumed by
Highwoods (the "Service Contracts") and all guaranties and warranties relating
to the Property together with a description of all pertinent terms and
provisions of such Service Contracts, guaranties and warranties shall be set
forth in EXHIBIT D and attached hereto within three (3) business days of the
execution hereof.
All of the items of property described in Subsections 2.01, 2.02, 2.03,
2.04 and 2.05 above are hereinafter collectively called the "Property."
3. EARNEST MONEY. Upon the execution of this Agreement, Highwoods will
deliver to Chicago Title Insurance Company (hereinafter referred to as the
"Escrow Agent") the sum of Fifty Thousand and no/100 Dollars ($50,000.00)
(hereinafter the "Initial Earnest Money"). The Initial Earnest Money shall be
deposited by the Escrow Agent into an interest bearing account at the direction
of Highwoods, and shall be paid to Owner or Highwoods according to the
provisions set forth below. If Highwoods has not terminated this Agreement prior
to the end of the Inspection Period as defined in Section 7 below, Highwoods
shall deposit an additional Fifty Thousand and no/100 Dollars ($50,000.00)
(hereinafter, the "Additional Earnest Money") with the Escrow Agent
2
<PAGE> 6
by 5:00 p.m. on the first business day immediately following the Inspection
Period. The Additional Earnest Money shall be deposited by the Escrow Agent into
an interest bearing account at the direction of Highwoods, and shall be paid to
Owner or Highwoods according to the provisions set forth below. The Initial
Earnest Money and the Additional Earnest Money are collectively referred to
herein as the "Earnest Money."
In the event the transaction contemplated by this Agreement closes or
should this transaction not close solely because of any default on the part of
Owner, or if any of the conditions precedent set forth in Section 8 fail to be
satisfied at Closing, or if Highwoods terminates its obligations set forth
herein pursuant to any other provision of this Agreement, then the Escrow Agent
shall pay to Highwoods all Earnest Money, including interest which has accrued
thereon, but such return shall not affect any other remedies available to
Highwoods, as specified and limited in this Agreement, in the event of a breach
of this Agreement by Owner; provided, in the event Highwoods terminates this
Agreement pursuant to Section 7 hereof, $100 of the Earnest Money should be paid
to Owner as consideration for Highwoods' right to terminate this Agreement
pursuant to Section 7.
In the event the transaction contemplated by this Agreement is not
closed solely because of any default on the part of Highwoods, then the Escrow
Agent shall pay to Owner all Earnest Money, including interest which has accrued
thereon, and such payment shall be and represent liquidated damages arising out
of Highwoods' default, which liquidated damages shall be the full extent of
Highwoods' liability with respect to such default and Owner shall have no
further right or claim against Highwoods.
Upon the filing of a written demand for the Earnest Money by Highwoods
or Owner, pursuant to this Section 3, the Escrow Agent shall promptly mail a
copy thereof to the other party. The other party shall have the right to object
to the delivery of the Earnest Money by filing written notice of such objection
with the Escrow Agent such that it is actually received by the Escrow Agent at
any time within ten (10) days after the mailing of such copy to it, but not
thereafter. Such notice shall set forth the basis for objecting to the delivery
of the Earnest Money. Upon receipt of such notice, the Escrow Agent shall
promptly mail a copy thereof to the party who filed the written demand. If the
Escrow Agent does not receive a notice of objection as set forth above, it shall
pay the Earnest Money, plus interest which has accrued thereon, to the party
requesting payment of same.
In the event the Escrow Agent shall have received the notice of
objection provided for above and within the time therein prescribed, the Escrow
Agent shall continue to hold the Earnest Money until (i) the Escrow Agent
receives written notice from Owner and Highwoods directing the disbursement of
said Earnest Money, in which case the Escrow Agent shall then disburse said
Earnest Money in accordance with said direction; or (ii) in the event of
litigation between Owner and Highwoods, the Escrow Agent shall deliver the
Earnest Money to the Clerk of the Court in which said litigation is pending; or
(iii) the Escrow Agent takes such affirmative steps as the Escrow Agent may, in
the Escrow Agent's reasonable opinion, elect in order to terminate the Escrow
Agent's duties, including but not limited to, deposit in the Court of
appropriate jurisdiction in connection
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with an action for interpleader, the costs thereof to be borne by whichever of
Owner or Highwoods is the losing party.
The Escrow Agent may act upon any instrument or other writing believed
by it in good faith to be genuine and to be signed and presented by the proper
person, and shall not be liable in connection with the performance of any duties
imposed upon the Escrow Agent by the provisions of this Agreement, except for
the Escrow Agent's willful default. The Escrow Agent shall have no duties or
responsibilities except those set forth herein. The Escrow Agent shall not be
bound by any modification of this Agreement, unless the same is in writing and
signed by Highwoods and Owner, and, if the Escrow Agent's duties hereunder are
affected, unless Escrow Agent shall have given prior written consent thereto. In
the event that the Escrow Agent shall be uncertain as to the Escrow Agent's
duties or rights hereunder, or shall receive instructions from Highwoods or
Owner which, in the Escrow Agent's opinion, are in conflict with any of the
provisions hereof, the Escrow Agent shall be entitled to hold and apply the
Earnest Money pursuant to the preceding paragraph and may decline to take any
other action. The Escrow Agent shall not charge a fee for its services as escrow
agent.
4. PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, the purchase price to be paid by Highwoods to Owner at Closing shall
be Three Million, Six Hundred Thousand and no/100 Dollars ($3,600,000.00) (the
"Purchase Price") (before taking into account adjustments to the Purchase Price
for prorated items as set forth in Section 12 below) and shall be paid to Owner
by Highwoods' as set forth in the next sentence hereof. At the Closing, the
Purchase Price shall be wire transferred from Highwoods to the Escrow Agent and
Escrow Agent shall make all disbursements of the Purchase Price to Owner as
required herein.
5. ACTIONS PENDING CLOSING.
5.01. SURVEY AND PLANS. Highwoods may, at Highwoods' election, cause to
be secured current physical and boundary surveys (the "Surveys") of the Land,
Building and other Improvements prepared by a South Carolina registered land
surveyor or licensed engineer which shall be certified to Highwoods and the
Title Company (as defined in Subsection 6.01 below) and shall contain such other
documentation and certifications as Highwoods or the Title Company may require.
The cost of such Surveys shall be borne by Highwoods. If the Surveys are
procured by Highwoods, the Surveys shall be used for a description of the Land
contained in the deed of conveyance referenced in 11.01(a) and in all other
documents related to this transaction which require a legal description of the
Land (including, without limitation, such description as is required for the
title insurance commitment described under Subsection 6.01; provided, any real
property shown within the boundary lines of the Land not described in the deeds
of conveyance to Owner shall be conveyed by Owner to Highwoods by quitclaim deed
rather than the special warranty deed described above). In addition, at the time
of the execution of this Agreement, Owner shall supply to Highwoods without
representation or warranty (i) copies of any existing survey(s) of the Land
reasonably available to Owner (the "Existing Surveys"), and (ii) to the extent
reasonably available to Owner, a complete set of the plans from which the
Improvements were constructed (the "Plans").
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In the event the Surveys (or the Existing Surveys delivered to Highwoods by
Owner) reveal anything which materially and adversely affect the Property,
Highwoods shall give notice to Owner of those matters objected to by Highwoods
in the Surveys or Existing Surveys by the fifteenth (15) day after the delivery
thereof to Highwoods. Owner shall then have the right, but not the obligation,
for a period of ten (10) business days to cure any defects or objectionable
matters specified by Highwoods. The parties agree that they shall each use their
best efforts to cause all matters of review and inspection to take place during
the Inspection Period. In the event that Owner fails or is unwilling to cure
such defects to the reasonable satisfaction of Highwoods' counsel, Highwoods may
proceed to a Closing subject to the defect (in which event Highwoods will be
deemed to have waived such defect); or by written notice to Owner, terminate
this Agreement or based on its other due diligence and Inspection Period rights
contained herein, otherwise allow this Agreement to expire. If Highwoods does
not procure the Surveys, the Existing Surveys shall be used for a description of
the Land contained in the deed of conveyance referenced in 11.01(a) and in all
other documents related to this transaction which require a legal description of
the Land.
5.02. INITIAL DELIVERY OF DOCUMENTATION. At the time of the execution
of this Agreement and to the extent that the information is in Owner's
possession, Owner shall provide to Highwoods the following: (i) a list of all
the personal property described in Section 2 above which shall be attached
hereto as EXHIBIT B; (ii) copies of each Lease listed on EXHIBIT C along with
all amendments thereto and a current rent roll of the Property setting forth
with respect to each Lease listed on EXHIBIT C, the date of the Lease, the name
of the tenant, the approximate area of the demised premises subject to each
Lease, the monthly rental and other charges payable by the tenant, the Lease
expiration date, and any renewal options or purchase options set forth in any
Lease, together with a schedule of rental delinquencies and other breaches of
tenant under the Leases and a schedule of security deposits held; (iii) true,
correct and complete copies of all service, maintenance, utility and other
contracts related to the Property, including any warranties or guaranties, which
shall be attached hereto as EXHIBIT D; (iv) copies of financial and operating
statements of the Property for calendar years 1996and 1997, and the proposed
budget for fiscal operations of the Property for 1998, if already prepared by
Owner; (v) all title information in Owner's possession or reasonably available
to Owner related to the Land, including, but not limited to, title insurance
policies, attorney's opinions on title, surveys, deeds, etc.; (vi) true, correct
and complete copies of all the Promissory Notes, deeds of trust or mortgages,
loan agreements, and related documents concerning the Property; (vii) copies of
all plans (original or otherwise), specifications, drawings, studies, space
audits, and programs for upgrading and improving, concerning or relating to the
Buildings or any of the Improvements; (viii) true, correct and complete copies
of the Leases and subleases and any amendments thereto covering any space within
the Buildings or Improvements; (ix) all environmental, engineering or similar
reports relating to the Property; (x) copies of all notices of any
environmental, building code or other violation relating to the Property, which
is uncorrected, if any, and a description of any building code or other
violation of which Owner is aware; (xi) the names and addresses of all
contractors who have performed material maintenance or repair work or have
otherwise been materially involved in connection with the maintenance, repair or
restoration of the Property or the correction of any building code or other
violation during the twelve (12) months prior to the date of this Agreement,
along with a summary
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description of any such repairs or work, together with copies of all studies,
estimates, plans and specifications in Owner's possession for such maintenance,
repair, restoration or code violations; provided Owner will deliver names and
addresses of all contractors who have performed any repair or restoration work
to the Building's roof, structure and heating, ventilating or air conditioning
systems (exclusive of routine maintenance related thereto) during the twelve
(12) months prior to the date of this Agreement; and (xii) a full description of
the Personal Property identified in EXHIBIT B, together with a listing of all
liens or security interests of others with respect thereto. If Highwoods, in its
reasonable discretion, is dissatisfied in any respect with the information
supplied pursuant to this Subsection 5.02, and if Highwoods elects to notify
Owner in writing of such determination within forty-five (45) days of the final
execution hereof, then Highwoods shall have an absolute right to terminate this
Agreement, and neither Highwoods nor Owner shall have any further liability to
the other.
5.03. ACCESS TO, AND EXAMINATION OF, RECORDS. Owner will permit
Highwoods and Highwoods' accountants to examine the financial records and other
books and records of Owner concerning or relating to the operation of the
Property in order that Highwoods' accountants can prepare at Highwoods' expense
audited financial statements for the Property for Owner's most recent fiscal
year ending December 31, 1997 (if requested by Highwoods), and an unaudited
financial statement for the Property for the year prior thereto and for the
current fiscal year to date.
5.04. ACCESS TO THE PROPERTY. Subject to the rights of existing
tenants, Owner shall give Highwoods and its agents, engineers and other
representatives, full access to the Property during regular business hours upon
reasonable notice, during the period prior to the Closing Date. In addition to
any other requirement hereunder and in connection with such access, Owner shall
endeavor to furnish Highwoods all information concerning the Property and its
operations which Highwoods may reasonably request. Highwoods may, at its
expense, make such engineering and other studies of the Property prior to the
Closing as it may deem necessary. Highwoods agrees to indemnify and hold Owner
harmless of and from any and all liability, costs and expenses (including
reasonable counsel fees of Owner) arising out of or with respect to any act or
omission of Highwoods or its agents, engineers, and other representatives in
connection with such access as aforesaid unless and except to the extent caused
by the negligence or wilful misconduct of Owner or its agents or tenants of any
of the Property; provided Highwoods shall have no liability to Owner as a result
of the mere discovery by Highwoods or its experts of environmental contamination
on the Land not caused by Highwoods or its agents.
With respect to the investigation of the Property by Highwoods: (a) the
costs and expenses of Highwoods' investigation shall be borne solely by
Highwoods; (b) prior to the expiration of the Inspection Period, Highwoods shall
restore any damage to the Property caused by Highwoods or its agents to the
condition which existed prior to Highwoods' entry thereon and investigation
thereof; (c) Highwoods shall not unreasonably interfere, interrupt or disrupt
the operation of Owner's business on the Property and, further, such access by
Highwoods and/or its agents shall be subject to the rights of Tenants under
Tenant Leases; (d) Highwoods shall not permit any mechanic's or materialman's
liens or any other liens to attach to the Property by reason of the performance
of any
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work or the other liens to attach to the Property by reason of the performance
of any work or the purchase of any materials by Highwoods or any other party in
connection with any studies or tests conducted pursuant to this Agreement; (e)
Highwoods shall give notice to Owner forty-eight (48) hours prior to entry by it
or its designees onto the Property and shall permit Owner to have a
representative present during all investigations and inspections conducted with
respect to the Property; provided, if Owner's representative is not present at
the Property on the time designated by Highwoods, Highwoods may still enter the
Property and conduct its investigations and inspections without Owner's
representative being present; (f) Highwoods shall take all reasonable actions
and implement all reasonable protections necessary to ensure that all actions
taken in connection with the investigations and inspections of the Property, and
all equipment, materials and substances generated, used or brought onto the
Property in the course of such investigations and inspections pose no material
threat to the safety of persons or the environment and cause no damage to the
Property or other property of Owner or other persons. The indemnity obligation
of Highwoods set forth in this Section 5.04 shall survive the Closing.
5.05. MATTERS OF TITLE. If any objection to the title, the Surveys or
the Existing Surveys is identified by Highwoods, Owner shall have the right, but
not the obligation, for a period of ten (10) business days to cure Highwoods'
objections to title, the Surveys or the Existing Surveys to Highwoods'
reasonable satisfaction. In the event that Owner cannot or refuses to cure any
such objection which remains unacceptable to Highwoods, then and in that event,
Highwoods, in accordance with its other due diligence and Inspection Period
rights contained herein, may terminate this Agreement without any further claim
or obligation of any kind to Owner, or in the alternative, consummate the
Closing in accordance with the terms of this Agreement. Notwithstanding anything
else contained herein, if Highwoods has not made an objection to the title, the
Surveys or the Existing Surveys by the conclusion of the Inspection Period, it
shall be conclusively presumed that Highwoods is satisfied with the status of
title and survey matters regarding the Land, Building, Improvements, and
Personal Property as of the date of termination of the Inspection Period.
5.06. ENVIRONMENTAL ASSESSMENTS. Prior to Closing, Highwoods at its
expense may cause to be undertaken and completed a current Phase I environmental
site assessment, and as necessary, Phase II assessment, of the Land and Building
(the "Environmental Assessments"). The Environmental Assessments shall be
performed by environmental inspection and engineering firms selected by
Highwoods. Highwoods shall determine from such Environmental Assessments and
from such other information available to Highwoods, in its sole discretion, that
the Land and Buildings are not contaminated by hazardous or toxic wastes,
substances or materials (including, but not limited to, asbestos, PCB's or
petroleum products) as defined under any applicable federal, state or local
laws, statutes, orders, rules, regulations, permits or approvals. In the event
that contamination or any other adverse environmental condition is found on or
under the Land or any Building, Highwoods reserves the right to terminate this
Agreement in its sole discretion.
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6. ADDITIONAL AGREEMENTS OF THE PARTIES.
6.01. TITLE TO THE PROPERTY. At the Closing, Owner shall deliver to
Highwoods a special warranty deed in form and content satisfactory to Highwoods'
counsel and customarily used in South Carolina for transactions of the type
described herein with recording fees paid at Highwoods' expense (and documentary
stamps paid by Owner), conveying to Highwoods a good, indefeasible, fee simple
and insurable title to the Land, its appurtenances and Improvements, said title
to be insurable both as to fee at regular rates by a title insurance company of
Highwoods' choice (the "Title Company"), subject only to those matters
specifically enumerated in (a) through (f) of this Section 6.01 ("Permitted
Exceptions"); provided, any real property shown on the Surveys within the
boundary lines of the Land not described in the deeds of conveyance to Owner
shall be conveyed by Owner to Highwoods by quitclaim deed rather than the
special warranty deed descried above. Within fifteen (15) days of the date
hereof, Highwoods shall obtain a current title insurance commitment for the Land
issued by the Title Company (which shall be selected by Highwoods) showing the
condition of title of the Land (the "Title Report"). If Highwoods disapproves of
any matter of title contained in the Title Report, Highwoods may then elect to
provide, no later than the fifth (5th) business day after its receipt of the
Title Report, written notice of Highwoods' disapproval of the same to Owner
(those disapproved title matters as so identified by Highwoods are hereafter
called the "Disapproved Exceptions"). Owner shall have the right, but not the
obligation, for a period of ten (10) business days to remove any Disapproved
Exception, and if such Disapproved Exception is not removed, Highwoods, in
accordance with its other due diligence and Inspection Period rights contained
herein, shall have the right to terminate this Agreement; but in the event that
Highwoods has not terminated this Agreement by the expiration of the Inspection
Period such Disapproved Exception shall then be deemed to be a Permitted
Exception. All expenses incurred in obtaining such title insurance commitment
(including, without limitation, those incurred by an attorney in conducting the
necessary title search) shall be borne by Highwoods. The title insurance premium
shall also be borne by Highwoods. The title insurance commitment of the Title
Company shall provide full coverage against mechanics' or materialmen's liens,
shall commit full survey coverage and shall commit a standard ALTA zoning
endorsement, and such other coverages and endorsements as shall be reasonably
required by Highwoods.
The Land, its appurtenances and the Improvements shall be conveyed by
Owner to Highwoods free and clear of all liens, encumbrances, claims,
rights-of-way, easements, leases, restrictions and restrictive covenants, except
the following Permitted Exceptions:
(a) Public rights-of-way of streets;
(b) Public utility easements and rights-of-way in customary
form;
(c) Rights and claims of tenants under recorded and unrecorded
leases, so long as (i) all of same have been fully disclosed by Owner
to Highwoods on EXHIBIT C attached hereto; (ii) all of the same contain
no tenant cancellation rights except as has otherwise been disclosed to
Highwoods in writing, right of rent abatement, or right of option or
first refusal
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for the purchase of the Property; (iii) Highwoods shall have approved
such leases; and (iv) there shall have been no modifications or
amendments to the same from the date hereof;
(d) Zoning and building laws or ordinances, provided they do
not prohibit the use of the Property for office and related commercial
purposes, and so long as the Property is in compliance with same;
(e) Ad valorem taxes for any year in which they are not yet
due and payable;
(f) Any other matters of record not designated by Highwoods as
a Disapproved Exception in the manner set forth above.
If, in the opinion of Highwoods' counsel, Highwoods is not able to
obtain an owner's title insurance commitment from the Title Company complying
with the requirements of this Subsection 6.01, Highwoods shall have the option
of taking title "as is" and consummating the Closing, or terminating this
Agreement, it being understood that such termination shall be the sole remedy of
Highwoods in such event; provided, however, in the event Highwoods is not able
to obtain an owners title insurance commitment as described above as the result
of a wilful act of Owner occurring subsequent to the execution hereof, then in
such event upon Highwoods' termination of this Agreement, Owner shall pay to
Highwoods all costs incurred by Highwoods related to its due diligence of the
Property during the Inspection Period, not to exceed $15,000. Notwithstanding
any other provision contained herein to the contrary, if the title defect(s) is
a mortgage, lien, judgment, assessment, unpaid taxes or tax which can be cured
by a monetary payment of $50,000 or less and which does not exist as the result
of a wilful act of Owner occurring subsequent to the execution hereof (and with
respect to which affirmative title insurance coverage is not available at the
Title Company's standard rates) Highwoods has, and shall have, the absolute
right of making such payment and reducing by a like amount the Purchase Price
due to Owner at Closing.
6.02. REPRESENTATIONS AND WARRANTIES OF OWNER. Owner hereby makes the
following representations and warranties to Highwoods:
(a) EXHIBIT C contains a current rent roll of the Property
(the "Rent Roll") relating to the Leases, which Rent Roll sets forth
with respect to each Lease (i) the date thereof, (ii) the name of the
tenant, (ii) the approximate area of the demised premises, (iv) the
monthly rental and other charges payable by the tenant, (v) the Lease
expiration date; and (vi) any Lease renewal options or purchase options
set forth in such Lease; and with respect to the Leases;
(1) The Leases are in full force and effect, have
been validly executed by the landlord and have not been amended or
modified in any manner whatsoever, except as noted on the Rent Roll;
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(2) The summary of the Leases set forth in EXHIBIT C
is accurate in all material respects and, to Owner's knowledge there
are no subleases of the Property except as noted in EXHIBIT C;
(3) The Owner's interest in the Leases will be free
and clear of all liens, encumbrances and agreements on the date of the
Closing contemplated hereby;
(4) Except for the prospective leases identified in
EXHIBIT C-1, attached hereto, which Owner shall have the right to enter
into on substantially the same terms set forth on EXHIBIT C-2, prior to
Closing, without the consent of Highwoods, Owner shall not enter into
any new lease with respect to the Building or any part thereof, or the
Property or any part thereof, nor shall Owner hereafter enter into any
amendment, modification or cancellation of any of the Leases, nor give
any rent concessions, or give any considerations other than possession
to any tenant without the prior written consent of Highwoods, provided,
after Owner notifies Highwoods of any such proposed lease, notification
cancellation or amendment if Highwoods does not respond to Owner within
ten (10) business days after receipt of written notice from Owner,
Highwoods will be deemed to have accepted any such lease. Such leases
will be in the form set forth on EXHIBIT C-2 attached hereto and
incorporated herein by reference;
(5) Owner has taken no action, by act or omission,
which may support a default, by waiver or otherwise, by a tenant under
a Lease, except as herein specifically pro vided;
(6) Owner has fulfilled all of the landlord's duties
and obligations including the completion of all upfittings,
construction, decoration and alteration work which Owner is obligated
to perform under any Lease, except as noted on EXHIBIT F;
(7) Except as set forth on EXHIBIT F-1, Owner shall
not be obligated at Closing under any leasing, agency, brokerage or
management agreement relating to the Leases and Highwoods shall not be
obligated to pay at Closing any leasing commissions or other
compensation due with respect to the Leases or any leasable space
located in or on the Property;
(8) Owner, and to Owner's knowledge, each tenant
under the Leases is not in default under any of the terms and
provisions of said Leases, and Owner has received no notice, nor has
Owner any knowledge of any alleged default in connection with said
Leases;
(9) Except as set forth on the Rent Roll, there are
no prepaid rentals under the Leases and there are no other rent
concessions or set-offs against rent, nor has any tenant asserted any
defense, set-off, or counterclaim in connection with said Leases;
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(10) Owner has not collected any of the rent or other
sums arising or accruing under any of the Leases in advance of the time
when the same shall become due;
(11) Owner, prior to taking any enforcement action
under any of the Leases because of a default of a tenant thereunder,
shall obtain the consent of Highwoods, which consent will not be
unreasonably withheld or delayed, provided, if Highwoods does not
respond to Owner within five (5) business days after receipt of written
notice from Owner of its intent to take such enforcement action, Owner
may take such action without Highwoods' actual consent;
(12) The tenants under the Leases currently occupy
all of the space described in the Leases, and the tenants under such
Leases have no unwritten rights with respect to the Property not
otherwise set forth on the Rent Roll or in the Leases.
(b) No service, maintenance, property management or other
contracts affecting the Property will be in existence as of the Closing
except as set forth on EXHIBIT D attached hereto, all of which can be
terminated without cost or payment on not more than thirty (30) days'
notice except as otherwise noted on said EXHIBIT D, and in no event
shall there be in existence as of the Closing any contracts relating to
management or leasing of the Building or Improvements. The copies of
the Service Contracts to be delivered pursuant to Section 5.02 hereof
are true, correct and complete in all respects and contain all
amendments;
(c) Owner shall keep all insurance relating to the Property in
full force and effect through the Closing. No notices or requests have
been received by Owner from any insurance company issuing any of said
policies which have not been complied with by Owner, and such insurance
is now in full force and effect. Any notices or requests from any such
insurance company received prior to the Closing shall be complied with
by Owner prior to Closing;
(d) To the best of Owner's knowledge, but without having made
any independent investigations, the roof of the Building drains
adequately;
(e) Except as otherwise set forth herein, all equipment,
fixtures and personal property as listed on EXHIBIT B attached hereto
shall remain present on the Land or in the Improvements at the Closing,
and shall be in the same condition and working order at Closing as of
the date hereof, reasonable wear and tear excepted;
(f) Owner owns the Personal Property free and clear from all
liens and encumbrances, except for such exceptions to the title thereto
as may be approved in writing by Highwoods or are released at the
Closing;
(g) Owner has entered into no agreement, oral or written,
other than as set forth on EXHIBIT G attached hereto, which affects
title to the Property or the operation thereof, and
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has entered into no agreement, oral or written, related to the Property
not otherwise referenced herein; neither Owner nor the Property is
subject to any claim, demand, suit, unfiled lien, proceeding or
litigation of any kind, pending or outstanding, or to the knowledge of
Owner, threatened or likely to be made or instituted which would in any
way be binding upon Highwoods or its successors or assigns or affect or
limit Highwoods' or its successors' or assigns' full use and enjoyment
of the Property or which would limit or restrict in any way Owner's
right or ability to enter into this Agreement and consummate the
transaction contemplated hereby;
(h) Copies of the Leases and Service Contracts, supplied by
Owner to Highwoods at any time prior to Closing are true, correct and
complete;
(i) Owner owns and will own at the date of Closing a fee
simple title to the Land subject only to Permitted Exceptions;
(j) To the best of Owner's knowledge, there are no taxes,
charges or assessments of any nature or description arising out of the
conduct of Owner's business or the operation of the Property which
would constitute a lien against the Property that will be unpaid at the
date of Closing except the lien of the City/County ad valorem property
taxes for the year in which Closing occurs;
(k) To the best of Owner's knowledge, but without having made
any independent investigations, all functional systems and structural
components of the Building including, without limitation, the roofs,
roof curbs, floors, heating, air conditioning and ventilating
mechanical systems, compressors, electrical systems, plumbing systems,
sprinklers and other fire protection and life safety systems,
refrigeration systems, vaults, equipment and appliances (collectively,
the "Systems") are currently in good condition and working order.
Subsequent to the execution hereof and at any time prior to Closing,
Owner agrees to provide Highwoods with any information or knowledge it
may have related to any defects in the Systems or the structural
soundness of the Building;
(l) Subject to a majority in interest of Owner's limited
partners consenting to the transaction contemplated hereby and assuming
this transaction does not violate federal and state securities laws,
Owner has full power and authority to enter into this Agreement and to
assume and perform all of its obligations hereunder; the execution and
delivery of this Agreement and the performance by Owner of its
obligations hereunder have been duly authorized by such partnership
action as may be required (including, without limitation, proper
approval by the partners thereof) and no further action or approval is
required in order to constitute this Agreement as a binding and
enforceable obligation of Owner, subject to bankruptcy and similar laws
reflecting the remedies or recourses of creditors generally; the
execution and delivery of this Agreement and the consummation of the
transactions contem plated hereunder on the part of Owner do not and
will not violate the partnership agreement of Owner, do not and will
not conflict with or result in the breach of any condition or
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<PAGE> 16
provision of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the
property or assets of Owner (including the Property) by reason of the
terms of any contract, mortgage, lien, lease, agreement, indenture,
instrument or judgment to which Owner is a party or which is or
purports to be binding upon Owner or which affects Owner and which will
remain in effect after the Closing; and no action by any federal, state
or municipal or other governmental department, commission, board,
bureau or instrumentality is necessary to make this Agreement a valid
instrument binding upon Owner in accordance with its terms, subject to
bankruptcy and similar laws affecting the remedies or recourses of
creditors generally;
(m) Owner is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of North
Carolina. Owner has full power and authority to carry on its business
as now conducted and to own or lease and to operate its properties and
assets now owned or leased and operated by them;
(n) The Property is not the subject of any outstanding
agreements with any party other than Highwoods pursuant to which any
such party may acquire any interest in the Property, except for (i)
certain mortgage loans against the Property (which will be discharged
and paid in full at Closing or assumed by Highwoods as set forth
herein), and (ii) the Leases, provided the Leases do not create any
option or other rights to purchase or acquire any interest in the
Property other than a leasehold estate described in the Leases;
(o) To the best of Owner's knowledge, but without having made
any independent investigations, the Improvements are free from damage
or infestation from termites or other wood destroying organisms;
(p) Owner is not a "foreign person" within the meaning of
Section 1445 of the Internal Revenue Code of 1986, as amended;
(q) To the best knowledge of Owner, but without having made
any independent investigations and without any knowledge related to the
actions of the tenants in the Building related to the subject matter of
this Subsection 6.02(q), as of the date of this Agreement and as of the
Closing Date and subject to the findings of any Environmental
Assessments obtained (or in the event Highwoods does not obtain an
Environmental Assessment, which could have been obtained) pursuant to
Highwoods' inspection right pursuant to Sections 5.04 and 5.06 above,
the Property (for purposes of this Subsection, the use of the term
"Property" shall include all leased and vacant space, land surface
water, groundwater, and any Improvements) is now and will then be free
of all contamination, including, without limitation (i) any "hazardous
waste," "underground storage tanks," "petroleum," "regulated
substance," or "used oil" as defined by the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. ss. 6901, et seq.) as amended, or by
any regulations promulgated thereunder; (ii) any "hazardous substance"
as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. ss. 9601, et seq.) as amended, or
by any
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regulations promulgated thereunder (including, but not to limited to,
asbestos and radon); (iii) any "oil" or other "hazardous substances" as
defined by the Oil and Hazardous Substances Control Act of 1976; (iv)
any substance the presence of which on, in, or under the Property, is
prohibited or regulated by any law similar to those set forth above;
and (v) any other substance which by law, regulation or ordinance
(whether published or unpublished) requires special handling in its
collection, storage, treatment, or disposal;
(r) To the best knowledge of Owner, but without having made
any independent investigations and without any knowledge related to the
actions of the tenants in the Building as of the date of this Agreement
and as of the Closing Date and subject to the findings of any
Environmental Assessments (or in the event Highwoods does not obtain an
Environmental Assessment, which could have been obtained) obtained
pursuant to Highwoods' inspection right under Sections 5.04 and 5.06),
the Property (for purposes of this Subsection, the use of the term
"Property" shall include all leased and vacant space, land surface
water, groundwater, and any Improvements), (i) will be free of asbestos
or any asbestos related products (including, without limitation, the
presence of any asbestos in the insulation or other material used
comprising any part of the Improvements); (ii) has no underground
storage tanks located on, under or at the Property; (iii) does not
appear on any state of federal CERCLA (Comprehensive Environmental
Responsibility, Compensation and Liability Act), Superfund or other
similar lists; (iv) has ever been used as a sanitary landfill, waste
dump site or for the treatment, storage or disposal of hazardous waste
as defined in the Resource Conservation Recovery Act; (v) has not been
the subject of a notice of violation or other written communication
from a governmental agency or any other entity or person alleging or
suggesting an environmental law violation on the Property; (vi) neither
Owner nor any of Owner's employees, agents, tenants, licensees or
invitees have placed or permitted the placement of any hazardous or
toxic substances, wastes or material in, on or over the Property in
violation of any environmental law; (vii) no other party has placed any
hazardous or toxic substances, wastes or material in, or over the
Property in violation of any environmental law; (viii) the Property is
not subject to any federal, state or local lien (including any
"Superfund" lien), proceedings, claim, liability or action, or the
threat or likelihood thereof, relating to the clean-up, removal or
remediation of any such hazardous substance from the Property and Owner
has received no request or information from the United States
Environmental Protection Agency, or the appropriate state environmental
agency within which the Property is located, or any public,
governmental or quasi-governmental agency or authority relating
thereto;
(s) There are no employees of Owner engaged in the operation
and maintenance of the Property to which Highwoods shall, at or after
Closing, have any obligation whatsoever because of any action taken or
promises made by Owner;
(t) To Owner's best knowledge, there are no outstanding
written requirements or recommendations by the fire insurance
underwriters or rating boards, or any insurance
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companies, requiring or recommending any repairs or work to be done
with reference to the improvements located on the Property;
(u) The books and records relating to the Property which have
been made or will be made available to Highwoods accurately, fully and
correctly reflect the operation of the Property in all material
respects and all income received and expenses incurred by Owner in
connection therewith. At Closing, there will have been no material
adverse change in the financial condition of the Property as previously
represented by Owner;
(v) No federal, state or local taxing authority has asserted
any tax deficiency, lien, interest or penalty or other assessment
against Owner's interest in the Property or Owner which has not been
paid and there is no pending audit or inquiry from any federal, state
or local tax authority relating to the Owner's interest in the Property
or Owner which reasonably may be expected to result in a tax
deficiency, lien, interest, penalty or other assessment against Owner's
interest in the Property or Highwoods;
(w) To the best knowledge of Owner, but without having made
any independent investigation, the Owner has operated the Property in
accordance with all applicable laws, ordinances, rules and regulations.
(x) In the event that Owner has knowledge, after the execution
of this Agreement but prior to Closing that any tenant under a Lease
shall become a debtor in a proceeding under Title 11 of the United
States Code, or the subject of any other insolvency proceeding,
including state receivership proceedings or a proceeding for the
assignment for the benefit of creditors under State law, then in such
event, Owner shall disclose such fact to Highwoods.
All representations and warranties of Owner contained in this Agreement
shall be true, accurate and correct in all material respects as of the date
hereof and Owner shall deliver to Highwoods at Closing a certificate certifying
that they are still true, accurate and correct as of the Closing Date. In the
event that Highwoods, prior to Closing, reasonably determines that any
representation or warranty set forth herein is not materially accurate,
Highwoods' sole remedy shall be its right to terminate its obligations under
this Agreement and receive the Earnest Money; provided, however, if any such
representation or warranty is not materially accurate solely as the result of
Owner's intentional or wilful act occurring after the execution hereof, and
Highwoods elects not to close the transaction contemplated hereby, Owner shall
pay to Highwoods all due diligence costs expended by Highwoods it during the
Inspection Period, not to exceed $15,000.
The representations and warranties set forth above shall survive the
Closing for a period of six (6) months (the "Notice Period"), but only if
Highwoods is unaware at the time of Closing that any such representation or
warranty is not correct in all material respects. Highwoods agrees to execute an
Affidavit to Owner at Closing certifying that it has no reason to believe that
the Owner's representations and warranties set forth herein are not true in all
material respects. Provided
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Highwoods executes the Affidavit referenced in the preceding sentence and so
long as Highwoods has notified Owner of the inaccuracy of any such
representation or warranty within the Notice Period, the fact that the extent of
the inaccuracy has not been quantified within the Notice Period, or the fact
that any dispute relating to the inaccuracy of any such representation or
warranty has not been resolved within the Notice Period, shall not limit
Highwoods' right to pursue to completion after the Notice Period any remedy it
may have related to a notice of an inaccuracy of any representation or warranty
given before the expiration of the Notice Period. Notwithstanding the above,
Highwoods may exercise any legal remedy available to it as a result of Owner's
intentional misrepresentation or other procurement of this Agreement through
fraudulent means until the time for seeking such remedy is barred by the running
of any applicable statute of limitations. Owner hereby indemnifies and holds
harmless Highwoods from and against any and all loss, costs (including without
limitation attorney fees and costs), claims or liability now or at any time
hereafter arising as a result of any misrepresentations or untruth or inaccuracy
of any of the foregoing representations, whether made now or at the time of
Closing, whether or not such claim is made before or after the Closing
contemplated hereby; provided, however, Owner shall not be required to indemnify
Highwoods pursuant to this paragraph until the amount of loss incurred by
Highwoods resulting from Seller's misrepresentations, or the untruth or
inaccuracy of any of the foregoing representations, exceeds Twenty-Five Thousand
and no/100 Dollars ($25,000.00), and then, Owner shall only be liable to
Highwoods for the amount of such loss exceeding $25,000.00.
6.03. REPRESENTATIONS AND WARRANTIES OF HIGHWOODS. Highwoods hereby
represents and warrants to Owner as follows:
(a) Highwoods has been duly formed and is validly existing as
a North Carolina limited partnership and is duly qualified to do
business in all jurisdictions where such qualification is necessary to
carry on its business as now conducted and is duly qualified in all
jurisdictions where the ownership of its property would necessitate
such qualification. Highwoods has all partnership power and authority
under its partnership agreement and its certificate of limited
partnership to enter into this Agreement and to enter into and deliver
all of the documents and instruments required to be executed and
delivered by Highwoods and to perform its obligations hereunder and
thereunder.
(b) The execution and delivery of this Agreement and the
documents required to be executed by Highwoods hereunder, and the
performance of its obligations under this Agreement, have been duly
authorized by all requisite partnership action, and this Agreement has
been, and such documents will on the Closing date have been, duly
executed and delivered by Highwoods. None of the foregoing requires any
action by or in respect of, or filing with, any governmental body,
agency or official or contravenes or constitutes a default under any
provision of applicable law or regulation, any organizational document
of Highwoods or any agreement, judgment, injunction, order, decree or
other instrument binding upon Highwoods. This Agreement does and will,
and the documents executed by Highwoods will, constitute the valid and
binding obligation of Highwoods enforceable in
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accordance with their terms, subject to bankruptcy and similar laws
affecting the remedies or recourses of creditors generally.
(c) To the actual knowledge of Highwoods, there is no existing
or threatened legal action or governmental proceedings of any kind
involving Highwoods, any of its assets or the operation of any of the
foregoing, which if determined adversely to Highwoods or its assets,
would have a material adverse effect on the financial condition,
business or prospects of Highwoods or its assets or which would
interfere with Highwoods' ability to execute or deliver, or perform its
obligations under this Agreement or any of the documents required to be
executed by it.
7. DUE DILIGENCE PERIOD. Highwoods shall have the right for a period of
forty-five (45) days from the date of execution hereof by all parties hereto
(the "Inspection Period") to inspect the Property including, without limitation,
the physical condition of such Property including the Building, Improvements,
mechanical and electrical systems, landscaping and parking areas, a BOMA-AOA
analysis, financial records and Leases to determine if it desires to purchase
the Property from Owner as herein set forth. The cost of such inspections shall
be borne by Highwoods. If Highwoods determines for any reason that it does not
desire to purchase the Property, it must give notice of this fact to Owner on or
before the end of the Inspection Period, and upon the giving of such notice,
this Agreement shall be null and void and of no further force or effect and all
but $100 of the Earnest Money shall be returned to Highwoods, with such $100
being paid to Owner as consideration for Highwoods' right to terminate this
Agreement pursuant to this Section 7. If Highwoods does not give such notice,
then the Closing shall take place at the time and place set forth in this
Agreement. During the Inspection Period, Highwoods shall have the right of
access to the Property and Owner's financial records and other records and
documents related thereto as set forth in Sections 5.03 and 5.04, and agrees to
indemnify, defend and hold harmless Owner from any claim, suit, demand, action,
loss, damage, cost or expense, including, without limitation, reasonable
attorneys' fees incurred by Owner arising out of such access as set forth in
Section 5.04, provided Highwoods shall have no liability to Owner as a result of
the mere discovery by Highwoods or its experts of environmental contamination on
the Land not caused by Highwoods or its agents. All physical inspections and
entry onto the Property shall be subject to the rights of tenants in possession
or occupying portions of the Property under the Leases. During the Inspection
Period, Highwoods shall not have the right to contact tenants under the Leases
and/or their agents concerning their tenancies.
8. CONDITIONS PRECEDENT TO CLOSING.
8.01. The obligations of Highwoods to purchase the Property from Owner
and meet its other obligations hereunder shall be subject to the following
conditions precedent, any of which may be waived by Highwoods in writing at the
Closing:
(a) All of the representations and warranties of Owner made
herein shall be true and correct in all material respects as of the
Closing ("actual knowledge" or the "best
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knowledge" of Owner as set forth in said representations and
warranties, for the purposes of this subparagraph 8.01 only, shall be
deemed to include knowledge acquired by Owner subsequent to the date
hereof and prior to Closing).
(b) Owner's obligations with respect to the Property as set
forth herein shall have been performed.
(c) Title to the Property must be insurable in accordance with
the Title Commitment, with no exceptions to title other than the
Permitted Exceptions, and Highwoods must be able to obtain a title
insurance policy from the Title Company in accordance with such Title
Insurance Commitment with payment of only standard title insurance
premiums.
(d) The Property must be in the same condition as of the date
of this Agreement, ordinary wear and tear excepted, and subject to the
specific provisions set forth herein related to condemnation and
casualty.
(e) Owner shall have delivered to Highwoods tenant estoppel
certificates in the form attached hereto as EXHIBIT H (or in the form
attached to any Lease and made a part thereof, provided such form has
been approved by Highwoods) dated not more than thirty (30) days prior
to Closing from tenants occupying 80% of the net rentable space in the
Building. Owner agrees to send estoppel certificates to all tenants of
the Property and request that the same be completed and returned to
Owner for delivery to Highwoods. If Highwoods has not received
satisfactory estoppel certificates from tenants occupying at least 80%
of the net rentable space in the Buildings on or before Closing, then
Highwoods may terminate this Agreement, but except for such
termination, Highwoods shall have no further remedy against Owner for
the failure of the condition precedent set forth in this Subsection
8.01(e). If Highwoods does not so terminate this Agreement, then the
condition precedent set forth in this Subsection 8.01(e) shall be
deemed waived and of no further force or effect.
(f) All management fees due any property manager of the
Property, and leasing commissions due arising out of any leases of the
Property (even if such commissions are due over time after the Closing)
shall be paid in full by Owner at Closing.
(g) No Tenant of 5% or more of the leasable space in any
Building shall have become a debtor in a proceeding under Title 11 of
the United States Bankruptcy Code or, the subject of any other
insolvency proceeding, including state receivership proceedings or a
proceeding for the assignment for the benefit of creditors under any
state law.
(h) Highwoods shall have received a fully-executed, full
service lease between Seller and Branch Banking and Trust Co. on terms
acceptable to Highwoods, including without limitation, a new minimum
lease term of five (5) years (the "BB&T Lease"). Highwoods shall have
seven (7) business days to review and approve or disapprove the
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provisions of the BB&T Lease. If Highwoods has not objected to any
provision of the BB&T Lease within seven (7) days after delivery
thereof to Highwoods, then in such event Highwoods shall be deemed to
have approved the BB&T Lease.
(i) Highwoods Investment Committee shall have approved this
transaction, with said approval to have been given prior to the end of
the Inspection Period.
In the event any of the aforesaid conditions precedent are not
fulfilled, Highwoods may only (i) terminate its obligations hereunder, (ii)
waive any such failure and close in accordance with the terms hereof, or (iii)
require Owner to use its best efforts to perform its obligations as elsewhere
set forth herein and as limited by other provisions of this Agreement.
8.02. The obligations of Owner under this Agreement are subject to the
satisfaction of each of the following conditions on or before the Closing Date,
any of which may be waived by Owner, and Highwoods agrees to cause the
conditions described in clauses (a) and (b) below to be so satisfied: (a) all
the terms, covenants, and conditions of this Agreement to be complied with and
performed by Highwoods on or before the Closing Date shall have been duly
complied with and performed in all respect; (b) the representations and
warranties of Highwoods contained in this Agreement shall be true and correct in
all respects at and as of the Closing Date with the same force and effect as
though such representations and warranties had been made as of the Closing Date,
except for any changes which have been disclosed to Owner in writing and
expressly approved or waived by Owner in writing; and (c) Owner shall have
obtained the consent of a majority in interest of Seller's limited partners to
the consummation of the transactions contemplated by this Agreement and have
assured itself that such consent and transactions related thereto comply with
Owner's Partnership Agreement and federal and state securities laws. If Owner's
limited partners' consent is not obtained as set forth above and this
transaction does not close, then in such event Owner shall pay to Highwoods all
due diligence expenses expended by Highwoods during the Inspection Period and
related to the Property, provided the costs thereof shall not exceed $15,000.
9. MAINTENANCE AND OPERATION OF THE PROPERTY.
9.01. From and after the date of this Agreement through the Closing,
Owner shall operate the Property in substantially the same condition and manner
in which it is now maintained and operated, normal wear and tear and damage or
destruction by casualty and condemnation excepted.
9.02. From and after the date of this Agreement through the day
following the Closing, Owner shall maintain on the Property such insurance as is
now in effect.
9.03. Highwoods acknowledges that Owner shall have the right, from and
after the date of this Agreement through the Closing, to remove or replace items
of Personal Property from time to time in the normal course of business.
Highwoods agrees that Owner may remove items of Personal Property from the
Property if such items are obsolete or replaced by Personal Property of equal or
greater utility or value. Any such Personal Property removed shall cease to
constitute Personal
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Property for all purposes under this Agreement. Any Personal Property replaced
pursuant to this subparagraph 9.03 shall, to the extent not thereafter removed,
constitute Personal Property for all purposes under this Agreement.
9.04. Highwoods acknowledges that Owner shall have the right, from and
after the date of this Agreement through the Closing with respect to the
Property, in the ordinary course of business, to enter into agreements
pertaining to the operation of the Property. All such agreements entered into
after the date hereof shall either be (i) approved in writing by Highwoods or
(ii) terminable without penalty on no more than thirty (30) days' notice.
Notwithstanding the above, Highwoods agrees to approve the BB&T Lease so long as
it is in substantially the form set forth on EXHIBIT H-1.
9.05. Owner shall promptly deliver to Highwoods written notice of any
casualty or taking involving the Property. If, prior to the Closing, all or any
part of a Building is damaged or destroyed by casualty or is taken by
condemnation, eminent domain or agreement in lieu thereof, such that (i) twenty
percent (20%) or more of the floor area of any Building or the parking area on
the Property is damaged or destroyed by such casualty (a "Major Casualty"); or
(ii) in the event of a taking, such taking is of twenty percent (20%) or more of
the floor area of any Building or of the parking area on the Property, or such
taking renders the Property unfit for use as an office (a "Major Taking"), then
either Highwoods or Owner may elect to terminate this Agreement. If any part of
the Property is damaged, destroyed or taken by a casualty, condemnation
proceeding, eminent domain proceeding or agreement in lieu thereof that does not
constitute a Major Casualty or a Major Taking, then the Closing shall take place
as set forth herein with Highwoods to receive all insurance or condemnation
proceeds related thereto.
9.06. On or before the Closing, Owner shall cause all debts secured by
the Property, or other liens or judgments filed against the Property to be paid
and satisfied in full, or in the alternative, Highwoods shall pay the same at
Closing pursuant to Section 4.02(a).
10. CLOSING DATE. The Closing shall take place on or before the
thirtieth (30th) day following the end of the Inspection Period at 10:00 o'clock
a.m. in the offices of Shumaker, Loop & Kendrick, LLP, in Charlotte, North
Carolina, unless another time, place and date is designated by Highwoods, but
only upon ten (10) business days prior notice thereof. In the event the
thirtieth (30th) day after the Inspection Period is a Saturday, Sunday or
Holiday, then in such event the Closing shall occur on the first business day
following the thirtieth (30th) day after the Inspection Period ends.
11. DOCUMENTS REQUIRED TO BE DELIVERED AT CLOSING:
11.01. DOCUMENTS REQUIRED TO BE DELIVERED BY OWNER AT CLOSING. As a
condition to each party's obligation to close, at Closing, Owner shall deliver
to Highwoods the following:
(a) A special warranty deed in the form reasonably acceptable
to Highwoods, and in the form customarily used in South Carolina in
transactions of the type contemplated
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hereby, conveying good and marketable fee simple title to the Property,
free and clear of all liens, encumbrances, easements and restrictions,
except the Permitted Exceptions and the Leases, which may encumber the
Property at the time of the conveyance thereof;
(b) A bill of sale transferring all the Personal Property
subject to this Agreement which bill of sale will be in a form
reasonably acceptable to Highwoods in the form attached hereto as
EXHIBIT I;
(c) A standard owner's affidavit and lien waiver form used by
the Title Company to cause an extended coverage ALTA owner's title
insurance policy to be issued to Highwoods without standard exceptions
and with customary endorsements as Highwoods may reasonably request;
(d) An assignment of all tenant security deposits held by
Owner under the terms of the Leases (this sum may be credited against
the Purchase Price otherwise due Owner from Highwoods at Closing);
(e) An assignment of the Leases in the form set forth on
EXHIBIT J, providing that Owner shall indemnify Highwoods in the manner
set forth in Section 16.02 and Highwoods shall indemnify Owner in the
manner set forth in Section 16.01 below;
(f) The original Leases set forth on EXHIBIT C, and all keys,
licenses and permits related to the Property and copies of all tenant
files and such other books and records as shall be necessary for
Highwoods to own and operate the Property commencing on the date of
Closing;
(g) An assignment of those Service Contracts assumed by
Highwoods in the form set forth on EXHIBIT K;
(h) A letter from Owner and Highwoods to tenants of the
Property which shall be sent on or immediately after the Date of
Closing advising them of the sale of the Property to Highwoods and that
all future payments under the Leases are to be paid to Highwoods;
(i) A certificate of Owner as to the warranties and
representations referred to in Section 6.02 hereof being true and
correct as of the Closing Date;
(j) A Rent Roll of the Property certified by Owner;
(k) An affidavit as to "foreign persons" referred to in
Section 6.02(q) hereof;
(l) All architectural and engineering plans in possession of
Owner relating to the Buildings or the Property;
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(m) A blanket assignment and transfer (without warranty) of
any and all miscellaneous interests and all warranties and guarantees
from contractors, subcontractors, suppliers, manufacturers or
distributors relating to the Property, if any, and all of Owner's
right, title, interest and benefits in, to and under all contracts,
licenses, permits, and similar documents or authorizations pertaining
to the ownership and operation of the Property, if any, including the
trade name of the Property in the form attached hereto as EXHIBIT K-1;
(n) Original of the certificate or certificates of occupancy
for the Property, if available;
(o) Originals of the tenant estoppel certificates referenced
in Section 8.01(e), duly executed by each of the tenants occupying
space in any Building located on the Property;
(p) The opinion of counsel for Owner in the form to be
mutually acceptable to the attorneys for Owner and Highwoods;
(q) Originals or certified copies of all contracts related to
the Property (including management contracts, service contracts and the
Leases) together with updated rent rolls pertaining to the Property and
all security deposits under the Leases.
(r) A certified copy of all appropriate partnership
resolutions authorizing the execution, delivery and performance by such
Owner of this Agreement and any other applicable documents required to
be delivered hereunder by Owner.
(s) Upon delivery to the Title Company of the Existing Surveys
delivered to Highwoods pursuant to Section 5.02 hereof, if the Title
Company will issue the Title Commitment and the final title policy to
be issued in connection therewith without exception to matters which
would be shown by a current survey, then, Owner shall deliver to
Highwoods at Closing an affidavit certifying, if true, that the
Existing Surveys delivered by Owner to Highwoods pursuant to 5.02
remain accurate in every respect and that no buildings, structures or
other improvement have been constructed on the Property since the date
of the survey so delivered.
(t) A settlement statement setting forth the total amount of
cash to be delivered to Owner hereunder and the prorated items and
other adjustments required to be made to the Purchase Price hereunder.
(u) Such other documents and instruments as may be reasonably
necessary to consummate the transactions contemplated by this
Agreement.
11.02. DELIVERIES BY HIGHWOODS AT CLOSING. At Closing, Highwoods shall
pay the Purchase Price to Owner pursuant to Section 4 hereof and shall execute
and deliver to Owner the following:
(a) An assignment of the Leases in the form set forth on
EXHIBIT J;
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(b) An assignment of those Service Contracts assumed by
Highwoods in the form set forth on EXHIBIT K;
(c) A Settlement Statement as described in Section 11.01(t)
above.
(d) Such other documents and instruments as may be reasonably
necessary to consummate the transactions with Owner under this
Agreement.
12. CLOSING ADJUSTMENTS. Unless otherwise specified in this Agreement,
all income, expenses and costs related to the Property shall be prorated as of
the effective date of the Closing as follows, with any credits or debits to
Owner as the result of such adjustments being added to or subtracted from the
amount of the Purchase Price due Owner under Section 4.02(b) of this Agreement.
12.01. TAXES. Ad valorem property taxes due or to be levied against the
Property for the year of Closing shall be prorated with Owner being responsible
for all such taxes from January 1st of the year of Closing through the last day
prior to the day of Closing. Highwoods shall be responsible for paying the
balance of the remaining ad valorem taxes due or to be levied against the
Property for the year of Closing. Owner shall be responsible for paying any
unpaid taxes for any year prior to closing. In the event the Taxes are not
determinable at the time of Closing, the Taxes shall be prorated on the basis of
the best available information (the "Estimated Taxes") . In the event any of the
Taxes are delinquent at the time of Closing, the same shall be paid at Closing.
If the Taxes are not paid at Closing, Owner shall deliver to Highwoods the bills
for the Taxes promptly upon receipt thereof and Highwoods shall thereupon be
responsible for the payment in full of the Taxes within the time fixed for
payment thereof and before the same shall become delinquent. Notwithstanding the
foregoing, in the event actual Taxes for the year of Closing exceed the
Estimated Taxes for the year of Closing (the "Tax Excess") or Estimated Taxes
for the year of Closing exceed the actual Taxes for year of Closing (the "Tax
Refund"), Owner and Highwoods shall prorate and pay such Tax Refund as follows:
(a) Owner shall be responsible for a portion of the Tax Excess
or shall receive credit for the Tax Refund prorated from January 1st of
the year of Closing through the Closing Date based upon a 365 day
calendar year. Highwoods shall notify Owner of any Tax Excess or Tax
Refund. The notification shall include a calculation of the amount due
to Highwoods from Owner in the case of a Tax Excess or the amount due
to Owner from Highwoods in the case of a Tax Refund. Owner shall have
thirty (30) days from Owner's receipt of such notification to pay its
portion of the Tax Excess to Highwoods and Highwoods shall have thirty
(30) days from Highwoods's delivery of such notification to Owner to
pay Owner its portion of the Tax Refund.
(b) Highwoods shall be responsible for a portion of the Tax
Excess prorated from the Closing Date through December 31st of the year
of Closing based upon a 365 day calendar year. Highwoods shall assume
responsibility for payment of all Estimated Taxes
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for the year of Closing as of the Closing Date, and shall notify Owner
of any Tax Excess or Tax Refund pursuant to the terms of this Section
12.02.
Notwithstanding the above, in the event the ad valorem property taxes
levied against the Property are paid directly by the tenant of any Building,
then in such event, there shall be no proration of such taxes between Highwoods
and Owner.
12.02. UTILITIES. All utility charges and reimbursement for utility
charges related to the Property (including, without limitation, telephone,
water, storm and sanitary sewer, electricity, gas, garbage and waste removal)
(to the extent not paid or payable by tenants under Leases) shall be prorated as
of the Closing Date, transfer fees required with respect to any such utility
shall be paid by or charged to Highwoods, and Owner shall be credited with any
deposits transferred to the account of Highwoods.
Notwithstanding the above, in the event the utility charges
attributable to the Property are paid directly by the tenant of the Building,
then in such event, there shall be no proration of such utility charges between
Highwoods and Owner.
12.03. RENTS. All paid rents, together with any other sums paid by
tenants under the Leases, shall be prorated as of the Closing Date. In the event
that, at the time of Closing, there are any past due or delinquent rents owing
by any tenants of the Property, Highwoods shall have the right to collect such
past due or delinquent rents and shall remit to Owner its pro-rata share
thereof, to the extent, and only to the extent, that the aggregate rents
received by Highwoods from each such tenant owing past due or delinquent rents
exceed the sum of (A) the aggregate rents and other sums payable by such tenant
for periods from and after the Closing Date, and (B) any reasonable and
necessary amounts expended by Highwoods to collect such past due or delinquent
rents. Highwoods shall use reasonable efforts to collect or enforce collection
of any such past due or delinquent rents from or against any tenant; provided,
Highwoods shall not be required to institute suit for collection or eviction of
such tenant, and Owner shall be responsible for any legal fees incurred by
Highwoods which attributable to the collection of rent due Owner (provided
Highwoods has no obligation to engage an attorney for such purpose). In the
event that, after Closing, Owner receives any payments of rent or other sums due
from tenants under Leases that relate to periods from and after Closing, Owner
shall promptly forward to Highwoods' its portion of such payments.
12.04. TENANTS' OVERPAYMENT OR UNDERPAYMENT OF ESTIMATED OPERATING
EXPENSES.
(a) Notwithstanding anything to the contrary contained herein,
in the event payments received from the Building's tenants pursuant to
the Leases for their estimated share of ad valorem taxes, insurance
premiums, common area maintenance expenses or other operating expenses
of the Property for the year of the Closing (the "Estimated Payments")
exceed the actual amounts of such expenses for the year of Closing
("Excess Estimated Payments") and if such Excess Estimated Payments do
not have to be reimbursed to the tenants or if the tenants do not have
to be given credit for such Excess Estimated Payments
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when determining estimated payments for such expenses in future years;
then in such event, Highwoods and Owner shall each be entitled to a
prorated portion of the Excess Estimated Payments based upon the number
of days in the year of Closing that each owned the Property.
(b) Notwithstanding anything to the contrary contained herein,
in the event Estimated Payments are less than the actual amounts of ad
valorem taxes, insurance premiums, common area maintenance expenses or
other operating expenses of the Property for the year of the Closing
("Estimated Payments Shortfall") and if the tenants under the Leases
are not required to reimburse the landlord under the Leases for such
Estimated Payments Shortfall; then in such event, Highwoods and Owner
shall each be responsible for the payment of a prorated portion of the
Estimated Payments Shortfall based upon the number of days in the year
of Closing that each owned the Property.
(c) Highwoods shall notify Owner of any Excess Estimated
Payments which should be prorated under Subsection (a) above or of any
Estimated Payments Shortfall which should be paid under Subsection (b)
above, the notification shall include a calculation of the amount due
from Highwoods to Owner in the event of any Excess Estimated Payments
or the amount from Owner to Highwoods in the event of any Estimated
Payments Shortfalls which should be reimbursed to Highwoods. Owner
shall have thirty (30) days from its receipt of Highwoods' notification
to pay Highwoods its portion of any Estimated Payments Shortfall.
Highwoods shall remit with the notice referenced above any sums due
from Highwoods to Owner as the result of Excess Estimated Payments.
12.05. REAL ESTATE COMMISSIONS. All commissions owed or to be owed in
connection with the Leases, exclusive of any commissions due as the result of
the extension of the term of a Lease or the exercise of an option to renew a
Lease (collectively "Commissions Payable") shall be paid by Owner on or before
the Closing Date. All obligations to pay commissions owed or to be owed in
connection with new leases executed after the execution hereof (with the
approval of Highwoods), the extension of the term of a Lease or the exercise of
an option to renew a Lease and agreements to lease all or any part of the Land
or the Improvements, which agreements were reached prior to the Closing Date and
approved by Highwoods, but not evidenced by a written Lease prior to the Closing
Date (collectively the "Commissions Assumed"), shall be assumed by Highwoods on
the Closing Date.
12.06. TENANT IMPROVEMENTS. All tenant improvement work owed or to be
owed in connection with the Leases, exclusive of any tenant improvement work
owed by Owner as the result of the extension of the term of a Lease or the
exercise of an option to renew a Lease (collectively "TI Work Payable") shall be
paid by Owner on or before the Closing Date; provided, however, that if the
amount of such TI Work Payable is not determinable as of the Closing Date, Owner
shall escrow with Highwoods' a reasonable estimate of such TI Work Payable
pursuant to the terms of an Escrow Agreement in a form reasonably acceptable to
Owner and Highwoods. All obligations to pay tenant improvement work owed or to
be owed in connection with new leases executed after the execution
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<PAGE> 29
hereof (with the approval of Highwoods), the extension of the term of a Lease or
the exercise of an option to renew a Lease and agreements to lease all or any
part of the Land or the Improvements, which agreements were reached prior to the
Closing Date and approved by Highwoods, but not evidenced by a written Lease
prior to the Closing Date (collectively the "TI Work Assumed"), shall be assumed
by Highwoods on the Closing Date.
12.07. TENANT SECURITY DEPOSITS. All security deposits paid by tenants
under Leases, and interest accrued thereon contingently payable to such tenants
for whose account they are maintained, shall be paid to Highwoods at Closing, or
at the option of either party, credited to Highwoods against the Purchase Price
payable to Owner under Section 4 hereof. After Closing, Highwoods shall be
responsible for maintaining such security deposits in accordance with the
provisions of the Leases relevant thereto.
12.08. SERVICE AGREEMENT PAYMENTS. All amounts payable under any of the
Service Agreements (other than service agreements not assumed by Highwoods,
which shall be payable by Owner) shall be prorated as of the Closing Date.
Highwoods does not assume any obligation under any Service Agreement for acts or
omissions that occur prior to Closing. Highwoods does not assume any obligation
under any service agreement not expressly assumed by Highwoods.
12.09. MISCELLANEOUS ITEMS. All other items of expense and income
regarding the operation and Ownership of the Property shall be prorated as of
the Closing Date.
12.10. SETTLEMENT AFTER CLOSING. The parties acknowledge that not all
invoices for expenses incurred with respect to the Property prior to the Closing
will be received by the Closing and that a mechanism needs to be in place so
that such invoices can be paid as received. All of the Closing Adjustments will
be done on an interim basis at the Closing and will be subject to final
adjustment in accordance with this Section 12.10. After Closing, upon receipt by
Highwoods of an invoice for the Property's operating expenses that are
attributable in whole or in part to a period prior to the Closing and that were
not apportioned at Closing, Highwoods shall submit to Owner a copy of such
invoice with such additional supporting information as Owner shall reasonably
request. Within ten (10) days of receipt of such copy, Owner shall pay to
Highwoods an amount equal to the portion of such invoice attributable to the
period ending on the Closing Date.
12.11. EQUITABLE ADJUSTMENTS. In the event that any of the prorations
or adjustments described in this Section 12 are based upon estimated or
erroneous information, then the parties shall make between themselves any
equitable adjustment required by reason of any difference between such estimated
or erroneous amounts and the actual amounts of such sums. In making the
prorations required by this Section 12, the economic burdens and benefits of
Ownership of the Property for the Closing Date shall be allocated to Highwoods.
12.12. PROPERTY INCOME. All other income of the Property (including
payments due under escalator clauses, tax stops, expense clauses and similar
rental adjustment clauses) accruing or relating to the period through the day
before the effective date of Closing shall be paid to Owner.
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<PAGE> 30
All other income of the Property (including payments due under escalator
clauses, tax stops, expense clauses and similar rental adjustment clauses)
accruing or relating to the period commencing on the effective date of Closing
and thereafter shall be the property of and paid to Highwoods.
13. LEASES, ESTOPPELS, CONTRACTS, PERMITS AND ZONING LETTERS, ETC.
13.01. As of the Closing, the originals of all Leases shall be
delivered to Highwoods by Owner. As Highwoods shall require, and as set forth in
Section 8.01(e), Owner shall use its best efforts to obtain estoppel
certificates from tenants under the Leases in that specimen form attached hereto
as EXHIBIT H or in the form attached to any Lease which is made a part thereof;
provided, Highwoods must approve such form before it is obligated to accept
same. Such estoppel agreements shall not be materially modified and shall be
delivered by Owner to Highwoods at Closing. All security deposits held or
required to be held by Owner in connection with any Lease, together with any
prepaid rents, shall also be delivered by certified funds to Highwoods at the
time of Closing or at Highwoods' option, credited to Highwoods against the
Purchase Price due Owner under Section 4 at Closing. Prior to the Closing, Owner
shall not execute any new leases related to the Property except with the prior
written approval of Highwoods.
13.02. Unless otherwise specified by Highwoods in writing, all
management or leasing contracts must be terminated as of the effective date of
Closing so that Highwoods or its designee shall have the exclusive right to
manage and lease the Property. With respect to any and all Service Contracts,
however, Highwoods shall have the absolute right to approve in writing prior to
or as of Closing any and all such Service Contracts which Highwoods desires to
be continued. If Highwoods approves any Service Contract, it shall be kept in
full force and effect by Owner through the Closing at which time it will be
assigned to Highwoods. In the event Highwoods does not approve in writing any
Service Contract, Owner shall be exclusively liable for all obligations under
the same.
13.03. Owner shall use its best efforts to deliver to Highwoods prior
to Closing a letter or other certificate from the appropriate governmental
authority certifying that the use and operation of the Property now is and at
Closing will be in full compliance with applicable building codes, zoning,
subdivision and land use laws without the necessity of a special permit or
variance. Additionally, Owner shall use its best efforts to deliver to Highwoods
during the Inspection Period (i) all licenses and other permits required by any
governmental authority for the operation of the Property; and (ii) evidence that
all water, sewer, gas, electric, telephone and drainage facilities and other
utilities required by law for the normal use and operation of the Property are
installed and operating with respect thereto. Owner shall have no liability to
Highwoods for Owner's failure to deliver the items described in this Section
13.03.
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14. DEFAULT.
14.01. In the event Owner defaults or fails to perform any of the
conditions or obligations of Owner under this Agreement or in the event any of
the representations and warranties contained herein are not true and correct in
all material respects as of the date hereof and as of the Closing, then
Highwoods shall be entitled to either (i) proceed in an action for damages
(which shall be limited to attorneys' fees and other costs incurred in
connection with its preparation of this Agreement and investigation of the
Property); (ii) proceed by an action in law or equity for specific performance;
or (iii) elect to terminate this Agreement by giving written notice to Owner,
and thereafter received a refund of the Earnest Money.
14.02. In the event Highwoods defaults or fails to perform any of the
covenants or conditions or obligations of Highwoods under this Agreement the
Earnest Money shall be retained by Owner as liquidated damages, and not as a
penalty, (as it would be difficult to otherwise ascertain Owner's damages in the
event of such a default by Highwoods) and, thereafter, Highwoods shall have no
further obligations to Owner hereunder.
15. NOTICE OF DEVELOPMENTS. After the execution hereof and prior to
Closing, Owner will give prompt written notice to Highwoods of any material
adverse change of which it acquires actual knowledge affecting the Property. If
such material adverse change was not otherwise reasonably discoverable by
Highwoods during its Inspection Period, then in that event Highwoods shall have
the right to terminate this Agreement and thereafter receive a refund of the
Earnest Money. Each party hereto will given prompt written notice to the other
party of any material development affecting the ability of such party to
consummate the transactions contemplated by this Agreement.
16. INDEMNIFICATION.
16.01. Highwoods agrees that as between Owner and Highwoods, from and
after the Closing, Highwoods shall be liable for all liabilities, loss, cost
and/or damage (including attorney fees) which are asserted as claims by third
parties which relate to the Property, but only if such claims arise out of acts
or omissions of Highwoods, its agents, employees, licensees or invitees
occurring after Closing which are related to the Property (including acts or
omissions relating to any Lease or other contracts and breaches thereof or
defaults thereunder, concerning such Property or the operation thereof which
occur after Closing), and then only if such claims do not relate to: (i)
obligations Owner had a duty to perform in the period prior to Closing, (ii)
liabilities for expenses incurred in the ordinary course of business or any
other money owed by Owner on the date of Closing, subject to proration and
adjustment as herein set forth, (iii) tort liabilities resulting from acts or
omissions related to the Property occurring prior to Closing, and (iv) breaches
of any contracts related to the Property if such breaches occurred prior to
Closing. The claims by third parties for loss or damage for which Highwoods
shall be responsible as set forth above are hereinafter referred to as "Claims
Against Highwoods."
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In this regard, Highwoods agrees to indemnify and hold harmless Owner
from and against all loss and damage (including costs and attorney fees)
incurred by Owner as the result of Claims Against Highwoods.
Highwoods is not assuming any obligation of the Owner related to the
Property which exists on the date of Closing except for executory obligations of
Owner which are specifically identified and set forth herein as being assumed by
Highwoods.
Nothing in this Section 16.01 shall be construed to limit Highwoods'
indemnity obligation set forth in Section 5.04 hereof, which indemnity
obligation shall be in addition to those indemnity obligations of Highwoods set
forth in this Section 16.01.
16.02. Owner agrees that as between Owner and Highwoods, Owner shall be
liable for all liabilities, loss, cost and/or damage (including attorney fees)
which are asserted as claims by third parties and which relate to the Property,
but only if such claims arise out of acts or omissions of Owner, its agents,
employees, licensees or invitees, which occurred prior to Closing and are
related to the Property (including acts or omissions relating to any Lease or
other contracts and breaches thereof and defaults thereunder, concerning such
Property or the operation thereof which occurred prior to Closing), including
but not limited to: (i) obligations Owner had a duty to perform prior to
Closing, (ii) liabilities for expenses incurred in the ordinary course of
business or any other money owed by Owner on the date of Closing, subject to
proration and adjustment as herein set forth, (iii) tort liabilities resulting
from acts or omissions related to any of the Property occurring prior to
Closing, and (iv) breaches of any contracts by Owner related to the Property if
such breaches occurred prior to Closing, but not including (i) obligations Owner
has a duty to perform after Closing, but which were not required to be performed
before Closing, (ii) liabilities incurred for expenses incurred in the ordinary
course of business after Closing or any other money owed by Owner after the
Closing, the liability for which was incurred after Closing or before Closing
with consent of Highwoods, (iii) tort liabilities resulting from acts or
omissions related to the Property occurring after the Closing, and (iv) breaches
of any contracts related to the Property if such breach occurred after the
Closing. The claims by third parties for loss or damage for which Owner shall be
responsible as set forth above are hereinafter referred to as "Claims Against
Owners."
In this regard, Owner agrees to indemnify and hold harmless Highwoods
from and against all loss and damage (including costs and attorney fees)
incurred by Highwoods as a result of Claims Against Owners.
16.03. Any party entitled to indemnification under this Agreement (the
"Indemnified Party") shall, within ten (10) days after the receipt of notice of
the assertion or imposition of any claim (but in no event later than ten (10)
days prior to the date any response or answer is due in any proceeding) in
respect of which indemnity may be sought from the party against whom an
indemnity obligation is asserted pursuant to this Agreement (the "Indemnifying
Party"), notify the Indemnifying Party in writing of the receipt of existence of
such claim. The omission of the Indemnified Party to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability in respect of
such
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<PAGE> 33
claim which it may have to the Indemnified Party on account of this Agreement,
except, however, the Indemnifying Party shall be relieved of liability to the
extent that the failure to so notify (a) shall have caused prejudice to the
defense of such claim, or (b) shall have increased the costs or liability of the
Indemnifying Party by reason of the inability or failure of the Indemnifying
Party (because of the lack of prompt notice from the Indemnified Party) to be
involved in any investigations or negotiations regarding any such claim, nor
shall it relieve the Indemnifying Party from any other liability which it may
have to the Indemnified Party. In case any such claim shall be asserted or
commenced against an Indemnified Party and it shall notify the Indemnifying
Party thereof, the Indemnifying Party shall be entitled to participate in the
negotiation or administration thereof and, to the extent it may wish, to assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party, and, after notice from the Indemnifying Party to the Indemnified of its
election so to assume the defense thereof, which notice shall be given within
thirty (30) days of its receipt of such notice from such Indemnified Party, the
Indemnifying Party will not be liable to the Indemnified Party hereunder for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation. In the event that the Indemnifying Party does not wish to assume
the defense, or conduct settlement of any claim, the Indemnified Party shall not
settle such claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. Nothing in this paragraph
shall be construed to mean that Highwoods shall be responsible for any
obligations, acts or omissions of Owner prior to Closing, except for those
obligations and liabilities expressly assumed by Highwoods pursuant to this
Agreement.
17. OTHER PROVISIONS.
17.01. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which, taken together,
shall constitute one and the same instrument.
17.02. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties, and supersedes all prior and contemporaneous understandings
and agreements, whether oral or in writing, between the parties respecting the
subject matter hereof. There are no representations, agreements, arrangements or
understandings, oral or in writing, between or among the parties to this
Agreement relating to the subject matter of this Agreement which are not fully
expressed in this Agreement.
17.03. CONSTRUCTION. The provisions of this Agreement shall be
construed as to their fair meaning, and not for or against any party as the
source of the language in question. Headings used in this Agreement are for
convenience of reference only and shall not be used on construing this
Agreement.
17.04. APPLICABLE LAW. This Agreement shall be governed by the laws of
the State of North Carolina. Time is of the essence in the Closing of this
transaction.
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17.05. SEVERABILITY. If any term, covenant, condition or provision of
this Agreement, or the application thereof to any person or circumstance, shall
to any extent be held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, covenants, conditions or
provisions of this Agreement, or the application thereof to any person or
circumstance, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby.
17.06. WAIVER OF COVENANTS, CONDITIONS AND REMEDIES. The waiver by one
party of the performance of any covenant, condition or promise under this
Agreement shall not invalidate this Agreement nor shall it be considered a
waiver by it of any other covenant, condition or promise under this Agreement.
The waiver by either or both parties of the time for performing any act under
this Agreement shall not constitute a waiver of the time for performing any
other act or an identical act required to be performed at a later time.
17.07. EXHIBIT. All schedules or exhibits to which reference is made in
this Agreement are deemed incorporated into this Agreement and made a part
hereof, whether or not actually attached.
17.08. AMENDMENT AND ASSIGNMENT. This Agreement may be amended at any
time by the written agreement of Highwoods and Owner. All amendments, changes,
revisions and discharges of this Agreement, in whole or in part, and from time
to time, shall be binding upon the parties despite any lack of legal
consideration, so long as the same shall be in writing and executed by the
parties hereto. No party may assign this Agreement or any interest herein
without the prior written approval of the other party, provided Highwoods may
assign its rights and obligations under this Agreement to an entity controlled
by Highwoods or its general partner.
17.09. RELATIONSHIP OF PARTIES. The parties agree nothing contained
herein shall constitute either party the agent or legal representation of the
other for any purpose whatsoever, nor shall this Agreement be deemed to create
any form of business organization between the parties hereto, nor is either
party granted any right or authority to assume or create any obligations or
responsibility on behalf of the other party, nor shall either party be in any
way liable for any debt of the other.
17.10. FURTHER ACTS. Each party agrees to perform any further acts and
to execute, acknowledge and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
17.11. CONFIDENTIALITY. Notwithstanding anything to the contrary
contained elsewhere herein, Highwoods and Owner each hereby acknowledge that
this transaction shall be treated as confidential. In connection therewith,
Highwoods and Owner further acknowledge that neither will disclose any of the
contents or information contained in or obtained as a result of any
investigation, financial or otherwise, undertaken or done pursuant to this
Agreement, to the public or any third party (except advisors to Highwoods and
Owner in this transaction) without a bona fide interest in any transaction
contemplated by this Agreement.
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17.12. BROKER COMMISSIONS. Owner shall pay all real estate commissions
which are due Tribek Properties as a result of the transaction contemplated by
this Agreement. Other than amounts owed by Owner to Tribek Properties, each
party warrants to the other that no person, firm or individual is entitled to or
has a claim for a commission or fee arising out of this transaction.
Accordingly, each party shall and does hereby indemnify and hold harmless the
other from and against any claim for any consulting fee, finder's fee,
commission, or like compensation, including reasonable attorney's fees in
defense thereof, payment in connection with any transaction contemplated hereby
and asserted by any party arising out of any act or agreement of such party.
17.13. NOTICE. All notices and demands which either party is required
or desires to give to the other shall be given in writing by personal delivery,
express courier service, certified mail, return receipt requested, or by
telecopy to the address or telecopy number set forth below for the respective
parties. All notices and demands so given shall be effective upon the delivery
of the same to the party to whom notice or demand is given, if personally
delivered, or if sent by telecopy, and on the day following the deposit in U.S.
Mail or with an express courier service or upon receipt, whichever is earlier,
if sent by express courier service or certified mail, return receipt requested.
OWNER: Yager/Kuester Public Fund Limited Partnership
12201 Steele Creek Road
P. O. Box 412080
Charlotte, NC 28241-8834
Attention: Jerry Haynes
Telephone: (704/588-4074)
Telecopy: (704/588-2570)
With copy to: Philip S. Chubb, Esquire
Shumaker Loop & Kendrick, LLP
227 West Trade Street, Suite 2150
Charlotte, NC 28202
Telephone: (704/375-0057)
Fax: (704/332-1197)
HIGHWOODS: Highwoods/Forsyth Limited Partnership
4944 Parkway Plaza Boulevard, Suite 250
Charlotte, NC 28217
Attention: Tom Cochran
Telephone: (704/357-8873)
Telecopier: (704/357-1342)
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With copy to: Thomas T. Crumpler
Allman Spry Leggett & Crumpler, P.A.
380 Knollwood Street
P. O. Drawer 5129
Winston-Salem, NC 27113-5129
Telephone: 910/722-2300
Telecopier: 910/721-0414
17.14. PRESS RELEASES. Owner and Highwoods agree that they will not
make any public statement, including without limitation, any press release, or
any private statement with respect to this Agreement and the transactions
contemplated hereby without first allowing the other party an opportunity to
review such statement and render an approval thereof. It is the intention of
this subparagraph that Highwoods and Owner must agree as to the timing and
content of any information contained in any public statement or press release
regarding the transaction contemplated hereby. The parties agree to exercise
reasonableness when asked to consent to the content of any such press release or
other public or private statement regarding this transaction. Notwithstanding
the above, Highwoods may make, without the consent of Owner, any public
disclosure related to this transaction required by the federal securities laws
(such as the filing as a Form 8-K); however, Highwoods shall furnish Owner a
copy of any such disclosure prior to the dissemination.
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their hands and under seal affixed hereto as of the date and year first above
written.
[The Remainder of Page is Intentionally Left Blank -
The Next Page is the Signature Page]
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SIGNATURE PAGE TO
CONTRACT OF SALE AND PURCHASE
BETWEEN
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP AND
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
YAGER/KUESTER PUBLIC FUND LIMITED (SEAL)
PARTNERSHIP, A NORTH CAROLINA LIMITED PARTNERSHIP
By: FSK LIMITED PARTNERSHIP (SEAL)
GENERAL PARTNER
By: /s/ Faison S. Kuester (SEAL)
-----------------------------------
Faison S. Kuester, General Partner
of FSK Limited Partnership
By: DRY LIMITED PARTNERSHIP, (SEAL)
GENERAL PARTNER
By: /s/ Dexter R. Yager, Sr. (SEAL)
-----------------------------------
Dexter R. Yager, Sr., General Partner
of DRY Limited Partnership
HIGHWOODS/FORSYTH LIMITED (SEAL)
PARTNERSHIP, A NORTH CAROLINA LIMITED PARTNERSHIP
By: HIGHWOODS PROPERTIES, INC., A SEAL)
MARYLAND CORPORATION, GENERAL PARTNER
By: /s/ Thomas F. Cochran (SEAL)
----------------------------------
Thomas F. Cochran
Senior Vice President
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<PAGE> 38
EXHIBITS LIST
A Description
B Personal Property Schedule
C Leases to be Assigned to Highwoods
C-1 Prospective Leases
C-2 Terms of Prospective New Leases
D Service Contracts to be Assumed by Highwoods
E Intentionally Left Blank
F Upfittings, Construction, Decoration and Alteration Work Not
Finished by Owner
F-1 Owner's Obligation(s) to Pay Brokerage or Leasing Commissions
or Agency or Management Fees
G List of Agreements Entered into by Owner which Affect Title
H Form Tenant Estoppel Certificate
H-1 Form of BB&T Lease
I Form Bill of Sale
J Form Assignment of Leases
K Form Assignment and Assumption of Service Contracts
K-1 Form Assignment of Owner's Interest in Miscellaneous Contracts
and Intangibles
Any exhibits not attached to this Agreement at the time of the
execution hereof shall be attached within ten (10) days after its execution, and
when attached, shall be considered a part hereof as if it were attached on the
date this Agreement was executed. Additionally, any documents required to be
delivered upon the execution of this Agreement may be delivered within ten (10)
days of the execution hereof and upon such delivery, shall be deemed to have
been delivered in accordance with the terms of this Agreement.
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<PAGE> 39
AMENDMENT TO CONTRACT
OF SALE AND PURCHASE
This Amendment to Contract of Sale and Purchase is made this 9th day of
March, 1998 between Yager/Kuester Public Fund Limited Partnership, a North
Carolina limited partnership, and Highwoods/Forsyth Limited Partnership, a North
Carolina limited partnership.
W I T N E S S E T H:
WHEREAS, the above partnerships are parties to that Contract of Sale
and Purchase dated January 23, 1998 (the "Purchase Agreement") regarding the
purchase and sale of certain real property located in Greenville, South
Carolina, as more particularly described therein.
WHEREAS, the parties desire to amend Section 7 of the Purchase
Agreement to permit Purchaser additional time to complete its inspections
regarding the physical condition of the improvements at the Premises.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, conditions herein contained and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto intending to be legally bound hereby agree as follows:
1. Section 7 of the Purchase Agreement is hereby amended to provide
that Purchaser shall have up to and including March 31, 1998 to complete its
inspection as to the physical condition of the property. All other inspections,
investigations and due diligence matters shall terminate as of today in
accordance with said Section 7, and the closing shall take place on April 9,
1998. Purchaser also agrees to provide Owner with written notice of any adverse
findings resulting from its due diligence review of the Premises no later than
the close of business on Wednesday, March 25, 1998.
2. Except as otherwise expressly modified by the terms of this
amendment, the Purchase Agreement shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, Owner and Purchaser have executed this Amendment as
of the date first above written.
YAGER/KUESTER PUBLIC FUND LIMITED (SEAL)
PARTNERSHIP, a North Carolina limited
partnership
By: FSK Limited Partnership (SEAL)
General Partner
By: /s/ Faison s. Kuester, Jr. (SEAL)
---------------------------
Faison S. Kuester, Jr., General Partner of
FSK Limited Partnership
<PAGE> 40
HIGHWOODS/FORSYTH LIMITED (SEAL)
PARTNERSHIP, a North Carolina limited partnership
By: HIGHWOODS PROPERTIES, INC., a (SEAL)
Maryland corporation, general partner
By: /s/ Thomas E. Cochran (SEAL)
--------------------------
Senior Vice President
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EXHIBIT 10.5
STATE OF SOUTH CAROLINA )
)
COUNTY OF GREENVILLE )
FIRST AMENDMENT TO LEASE AND SUBLEASE
THIS FIRST AMENDMENT TO LEASE is dated as of March 18, 1998 and is
by and between YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP, a North Carolina
limited partnership ("Landlord"), Branch Banking and Trust Company, a North
Carolina corporation ("Sublandlord"), and BB&T Insurance Services, Inc., a North
Carolina corporation ("Tenant").
W I T N E S S E T H:
WHEREAS, by Lease Agreement dated July 19, 1989 (the "Lease
Agreement"), United Carolina Bank, the precedessor in interest to Landlord,
leased the premises of approximately 9,789 square feet known as Suite 100 in the
United Carolina Bank Building, 770 Pelham Road, Greenville, South Carolina (the
"Premises") to United Carolina Bank of South Carolina ("UCB of SC"); and
WHEREAS, pursuant to a Sublease Agreement dated April 1, 1997 (the
"Sublease Agreement"), UCB of SC subleased to Tenant a portion of the Premises;
and
WHEREAS, Landlord, Sublandlord and Tenant now desire to amend the terms
and conditions of the Lease Agreement and Sublease Agreement to provide, among
other things, that Tenant will sublease the entire premises covered by the Lease
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, conditions herein contained and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto intending to be legally bound hereby agree as follows:
1. Definitions. All capitalized terms set forth herein that are not
otherwise defined shall have the meanings given them by the Lease Agreement and
Sublease Agreement.
2. Terms. The terms of the Lease Agreement and Sublease Agreement shall
be extended to July 31, 2005.
3. Subleased Premises. Landlord hereby leases to Sublandlord, and
Sublandlord hereby leases to Tenant the Premises for the extended term described
above upon the terms and conditions herein described. The subleased Premises may
be used for banking or office purposes.
4. Monthly Rent. The monthly base rent for the Premises (hereinafter
referred to as "Monthly Rent") under the Lease Agreement and Sublease Agreement,
which Tenant hereby agrees to pay directly to Landlord in advance on the first
day of each calendar month during the term of the Lease Agreement and Sublease
Agreement, as extended, shall be Twelve Thousand Six Hundred Forty Four and
Thirteen One Hundredths Dollars ($12,644.13). The first day of the first full
month subsequent to the execution of
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this Agreement shall be referred to herein as the "Commencement Date of the
Extended Term." On the first anniversary date of the Commencement Date of the
Extended Term and on each anniversary date thereof during the remainder of the
term of the Lease Agreement and the Sublease Agreement as extended hereby, the
Monthly Rent shall be increased by an amount equal to two percent (2%) of the
base Monthly Rent paid for the immediately preceding 12 month period; provided
however, that prior to the computation of the two percent (2%) increase, the
amount of Monthly Rent shall be decreased by Tenant's proportionate share of
Operating Expenses.
5. Options to Extend. Landlord grants to Sublandlord and Sublandlord
hereby grants to Tenant two (2) consecutive options to extend the term of the
Lease Agreement and Sublease Agreement, respectively, each such option being for
a period of five (5) years and (hereinafter referred to as the "First Extension
Period" and the "Second Extension Period" respectively, and also generally
referred to as an "Extension Period"), provided Tenant exercises each such
option as set forth below. Tenant may exercise each such option to extend only
by serving on Landlord and Sublandlord written notice of its intent to exercise
the extension option to extend no later than one hundred and eighty (180) days
prior to the date of expiration of the term of the Lease Agreement and Sublease
Agreement, as hereby extended, or the First Extension Period, as applicable.
Additional rent for increases in Operating Expenses shall continue to be paid by
Sublandlord and Tenant, provided that the base amount for such expenses as set
forth in Section 4 of the Lease Agreement shall be established at Five and
Fifteen One Hundredths Dollars ($5.15) per square foot.
Any properly exercised renewal shall be governed by the same provisions
set forth herein except that monthly base rent at the commencement of each such
renewal period shall be at the then existing fair market rental for the
premises. "Fair Market Rental" shall mean the Fair Market Rental applicable to
commercial space of size and quality similar to the premises in the downtown
Greenville, South Carolina area, in the proximity of the building. Fair Market
Rental shall be determined as follows: upon Landlord's receipt of Tenant's
notice of exercise of a renewal option, the parties shall attempt to agree on
the rent to be applicable during said renewal period in question, but if the
parties cannot agree on the rent to be applicable during said renewal period
within thirty (30) days after Tenant's notice, then within twenty (20) days
after the expiration of said 30-day period, Landlord and Tenant shall each
appoint an appraiser and the two appraisers so appointed shall attempt to agree
upon the fair market rental of the Premises. If within thirty (30) days after
the appointment of the last appraiser appointed hereunder the two appraisers
cannot agree upon the fair market rental then within five (5) days after the
expiration of such 30-day period both appraisers shall submit their written
opinion of such fair market rental to Landlord and Tenant, and the two
appraisers shall then select a third appraiser. The third appraiser shall submit
his opinion as to fair market rental for the Premises to both Landlord and
Tenant within thirty (30) days following his appointment. If the rental as set
by the third appraiser is an amount between the rental as set by the two other
appraisers, then his opinion shall be final and binding on the parties hereto.
If the rental as set by the third appraiser is lower than the lower rental as
set by the other two appraisers, or higher than the higher rental as set by the
other two appraisers, then the rentals as set by the third appraiser shall be
disregarded totally, and the applicable rent shall be the amount computed by
averaging the rental as set by the first two appraisers. If the two appraisers
fail to agree upon the third appraiser within five (5) days after the expiration
of the 30-day period they have to agree upon the rental, then the third
appraiser shall be selected by the highest ranking officer of the American
Arbitration Association's Office in Greenville, South Carolina. All appraisals
shall be expressed as a rental per square foot. Each appraiser shall have an
M.A.I. and/or S.R.P.A. designation, be licensed in the State of South Carolina,
be
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disinterested and be experienced with the appraisal of rental property in the
uptown Greenville, South Carolina area. Each party shall bear the fees and
expenses of the appraiser appointed by it, and the parties shall equally share
the fees and expenses of the third appraiser.
6. Right of First Refusal. It is understood and agreed that the Lessor
will not lease any space on the first floor in the building which becomes
available to any other person or entity without first offering such space to
Tenant. Tenant shall have thirty (30) days from the date of notification by
Landlord to accept/reject such space, with any failure by Tenant to respond
being deemed a rejection. In the event Tenant does the reject the space which is
so offered, Landlord shall have six (6) months from the date of such rejection
to lease the space to third parties before again offering such space to Tenant
in accordance herewith.
7. Parking. Landlord guarantees it shall assure the availability to
Sublandlord and Tenant of an allocation of forty-two (42) parking space in the
parking facility serving the building for use by Tenant and its employees during
the term of the Lease.
8. Assignment and Subletting. Tenant may assign, hypothecate or
otherwise transfer its rights hereunder to any parent, subsidiary, affiliate or
successor by merger, acquisition or consolidation of Sublandlord and Tenant,
without the consent of Landlord, and such entity may engage in nonbanking
services. However, such assignment, hypothecation or transfer of the Lease
Agreement or Sublease Agreement shall not be construed as a waiver or release of
Sublandlord and Tenant from the terms of any covenant or obligation under the
Lease Agreement or Sublease Agreement, as herein amended.
9. Tenant's Insurance.
a. Tenant, at its sole cost, shall obtain and maintain in full
force and effect at all times during the term of the Lease Agreement
and Sublease Agreement, including during any extension periods,
Property Hazard Insurance (written on an "All Risk" and a full
replacement value basis with an extended coverage endorsement) insuring
against damage to and loss of Alternations, Initial Tenant
Improvements, fixtures, equipment, furniture, and all other personal
property in and about the Premises.
b. Tenant, at its sole cost, shall obtain and maintain in full
force and effect at all times during the term of the Lease Agreement
and Sublease Agreement, including during any extension periods, a
comprehensive general liability policy insuring against personal
injury, death and property damage with a single limit of at least Two
Million Dollars ($2,000,000.00) per person and Five Million Dollars
($5,000,000.00) per occurrence for personal injury and death, and Five
Hundred Thousand Dollars ($500,000.00) for property damage.
c. Tenant, at its sole cost, shall obtain and maintain in full
force and effect at all times during the term of the Lease Agreement
and Sublease Agreement, including during any extension periods,
worker's compensation or similar insurance in form and amounts required
by law.
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10. Landlord's Insurance.
a. Landlord, at its sole cost, shall obtain and maintain in
full force and effect at all times during the term of the Lease Agreement and
Sublease Agreement, including during any extension periods, Property Hazard
Insurance (written on an "All Risk" and a full replacement value basis with an
extended coverage endorsement) insuring against damage to the Building and all
other personal property in and about the common areas of the Building.
b. Landlord, at its sole cost, shall obtain and maintain in
full force and effect at all times during the term of the Lease Agreement and
Sublease Agreement, including during any extension periods, a comprehensive
general liability policy insuring against personal injury, death and property
damaged with a single limit of at least Two Million Dollars ($2,000,000.00) per
person and Five Million Dollars ($5,000,000.00) per occurrence for personal
injury and death, and Five Hundred Thousand Dollars ($500,000.00) for property
damage.
c. Landlord, at its sole cost, shall obtain and maintain in
full force and effect at all times during the term of the Lease Agreement and
Sublease Agreement, including during any extension periods, worker's
compensation or similar insurance in form and amounts required by law.
11. Estoppel Certificates. Sublandlord and Tenant each agrees, upon not
less than twenty (20) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing (i) certifying that
the Lease Agreement and Sublease Agreement are in full force and effect as
modified herein, (ii) stating the dates to which rent and other charges
hereunder have been paid by Tenant, (iii) stating the address to which notices
to Tenant should be sent, and (iv) agreeing not to pay Monthly Rent more than
thirty (30) days in advance or to amend the Lease Agreement or Sublease
Agreement without the consent of any mortgage lender having a security interest
in the Building.
Landlord agrees, upon not less than twenty (20) days prior written
notice by either Sublandlord or Tenant, to execute, acknowledge and deliver to
Tenant a statement in writing (i) certifying that the Lease Agreement is in full
force and effect as modified herein, (ii) stating the dates to which rent and
other charges hereunder have been paid by Tenant, (iii) stating whether or not,
to the best knowledge of Landlord, Tenant is in default in the performance of
any covenant, agreement or condition contained in the Lease Agreement and
Sublease Agreement, and, if so, specifying each such default of which Landlord
may have knowledge, and (iv) stating the address to which notices to Landlord
should be sent. Any such statement delivered pursuant hereto may be relied upon
by Tenant any lender or creditor of Tenant, any prospective purchaser of Tenant,
or any prospective assignee of any such lender, creditor or purchaser.
12. Notices To Tenant. The notice addresses to be used for Tenant under
the Lease Agreement and Sublease Agreement shall be as follows:
Mail: Hand Delivery:
Attn: Real Estate Services Attn: Real Estate Services
BB&T BB&T
P.O. Box 1220 1100 Reynolds Boulevard
Winston-Salem, North Carolina 27102 Winston-Salem, North Carolina 27101
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13. Default by Landlord. The occurrence of any one or more of the
following events shall constitute a default by Landlord ("Landlord Default"):
(i) The failure by Landlord to make any payment required to be
made by Landlord hereunder, as and when due, where such failure shall
continue for a period of ten (10) days after receipt of written notice
thereof from Tenant to Landlord; and
(ii) The failure by Landlord to observe or perform any of the
covenants, conditions or provisions of this Lease where such failure
shall continue for a period of thirty (30) days after receipt of
written notice thereof from Tenant to Landlord; provided, however, that
if the nature of Landlord's Default is such that it cannot be cured
solely by payment of money and that more than thirty (30) days may be
reasonably required for such cure, then Landlord shall not be deemed to
be in default if Landlord shall commence such cure within such thirty
(30) day period and shall thereafter diligently prosecute such cure to
completion.
In the event of a Landlord Default, Landlord shall be liable for
damages sustained by Tenant on account of such Landlord Default, including, if
Tenant is required to vacate the Premises due to such default, rental increases
sustained by Tenant, attorneys' fees, brokerage fees, and expenses of relocation
such as moving expenses and the costs of placing a new rental location in the
same condition as the Premises on the date of the Landlord Default. In the event
of a Landlord Default, then Tenant in addition to other rights or remedies it
may have, at Tenant's sole option, may perform such obligations of Landlord.
Tenant shall have the right to set off any expense incurred thereby against any
rent or other payment due or to become due hereunder from Tenant.
Except as otherwise expressly modified by the terms of this Amendment,
the Lease Agreement and Sublease Agreement shall remain unchanged and in full
force and effect.
IT WITNESS WHEREOF, Landlord, Sublandlord, and Tenant have executed
this Amendment as of the date first written above.
LANDLORD: SUBLANDLORD:
YAGER/KUESTER PUBLIC FUND BRANCH BANKING AND
LIMITED PARTNERSHIP, A NORTH CAROLINA TRUST COMPANY
LIMITED PARTNERSHIP
BY: FSK LIMITED PARTNERSHIP By: /s/ Marcia Comts
GENERAL PARTNER Title: Assistant Vice President
By: /s/ Faison S. Kuester, Jr. TENANT:
Faison S. Kuester, Jr., General Partner
of FSK Limited Partnership BB&T INSURANCE SERVICES, INC.
By: /s/ Paula Jean Farrell
Title: Senior Vice President
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<PAGE> 1
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in the December 1, 1987
Prospectus (Registration No. 33-07056-A) of our report, dated February 13, 1998,
on the financial statements of Yager/Kuester Public Fund Limited Partnership,
which appears on page 6 of this annual report on Form 10-K for the year ended
December 31, 1997 and to the reference to our Firm under the caption "Experts"
in such Prospectus.
/s/ McGladrey & Pullen, LLP
Charlotte, North Carolina
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF YAGER KUESTER PUBLIC FUND 1986 LIMITED PARTNERSHIP FOR
THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 92,544
<SECURITIES> 267,629
<RECEIVABLES> 38,196
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 405,422
<PP&E> 8,638,497
<DEPRECIATION> 1,482,902
<TOTAL-ASSETS> 7,633,602
<CURRENT-LIABILITIES> 3,986,965
<BONDS> 0
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0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 7,633,602
<SALES> 0
<TOTAL-REVENUES> 1,178,129
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<TOTAL-COSTS> 803,069
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